PROSPECTUS SUPPLEMENT Subject to Completion
(To Prospectus dated December 13, 1996) January 7, 1997
1,750,000 Shares
MGI Properties
Common Shares
-------------
MGI Properties (the "Trust" or "MGI") is a self-administered equity real
estate investment trust ("REIT") that owns and operates a diversified portfolio
of income producing real estate consisting of 55 commercial properties and five
multifamily residential properties. Approximately 50% of MGI's properties are
located in New England.
To ensure that the Trust maintains its qualification as a REIT, ownership
by any person, with certain exceptions, is limited to 9.0% of the Trust's
outstanding shares of beneficial interest. See "Description of Capital Stock" in
the accompanying Prospectus.
The Trust's common shares (the "Common Shares") are listed on the New York
Stock Exchange (the "NYSE") under the symbol "MGI." On January 6, 1997, the last
reported sale price of the Common Shares on the NYSE was $22.00 per share. See
"Market Prices of Common Shares and Dividends to Shareholders."
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
Price Underwriting Proceeds
to Discounts and to
Public Commissions the Trust (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- --------------------------------------------------------------------------------
Total (2) $ $ $
================================================================================
</TABLE>
(1) Before deducting expenses of the offering estimated at $.
(2) The Trust has granted the Underwriters a 30-day option to purchase up to
262,500 additional Common Shares solely to cover over-allotments, if any.
To the extent the option is exercised, the Underwriters will offer the
additional Common Shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to the Trust will be $ ,
$ and $ , respectively. See "Underwriting."
-------------
The Common Shares are offered by the several Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to the
right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the Common Shares will be made at the offices of Alex.
Brown & Sons Incorporated, Baltimore, Maryland, on or about January , 1997.
Alex. Brown & Sons
Incorporated
Davenport & Co. of Virginia, Inc.
Sutro & Co. Incorporated
Tucker Anthony
Incorporated
The date of this Prospectus Supplement is January , 1997
<PAGE>
M G I P R O P E R T I E S
[Photos Depicting MGI Properties]
[PHOTO: Office: One Winthrop Square, Boston, Massachusetts]
[PHOTO: Office: One Portland Square, Portland, Maine]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON SHARES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus Supplement or the accompanying Prospectus or incorporated herein
or therein by reference. Unless the context otherwise requires, all references
in this Prospectus Supplement to the "Trust," "MGI" or "MGI Properties" shall
mean MGI Properties and its consolidated subsidiaries. MGI's fiscal year ends on
November 30. Unless otherwise indicated, all references to quarters and years in
this Prospectus Supplement or the accompanying Prospectus or incorporated herein
or therein by reference are to MGI's fiscal quarters and years, respectively.
Information in this Prospectus Supplement assumes no exercise of the
Underwriters' over-allotment option.
The Trust
Overview
MGI Properties is a self-administered equity REIT, organized in 1971, that
owns and operates a diversified portfolio consisting of 55 commercial properties
and five multifamily residential properties. Currently, approximately 50% of
MGI's real estate assets are located in New England. At November 30, 1996, the
Trust's commercial properties aggregated 5,091,000 square feet and its
multifamily properties aggregated 1,335 units.
Occupancy and rental information for 1995 and 1996 for the Trust's
properties is as follows:
<TABLE>
<CAPTION>
Weighted Average
Base Rent Per Sq.
Ft./Unit Percent Leased
at November 30, at November 30,
------------------ -----------------
Percent of Portfolio
Property Type Based on Cost(1) 1995 1996 1995 1996
------------- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Industrial 18.4% $ 4.28 $ 4.60 100.0% 97.9%
Office/Research and Development 14.4 5.58 6.16 100.0 100.0
Office 31.3 15.51 16.46 90.2 95.7
Retail 18.1 6.67 7.81 96.4 88.3
Multifamily 17.0 645.00 674.00 96.3 96.8
</TABLE>
- -------------
(1) Cost represents historic cost, including capital and tenant improvements
and excluding depreciation and amortization.
MGI's primary business objective is to increase funds from operations by
enhancing the value of its real estate investments through income growth and
capital appreciation. The Trust seeks to achieve this objective by actively
managing its real estate and acquiring high quality properties. Through active
management, the Trust seeks to maintain the value of and demand for its
properties in order to attract quality tenants, support high occupancy rates and
increase rental rates. The Trust's acquisition strategy is designed to take
advantage of MGI's management expertise, local market knowledge and ability to
close transactions quickly. Recently, the Trust has focused on acquisitions of
general purpose industrial, office/research and development and office
properties in New England. Since 1992, MGI has increased its investments in New
England from one industrial property to 32 commercial properties aggregating 3.1
million square feet. At the same time, MGI has selectively sold properties that
the Trust believes have reached their potential market value or are located in
markets in which the Trust does not have a significant presence. MGI has
generally reinvested the proceeds from these sales in New England properties
offering attractive yields and strong growth prospects.
The Trust's principal operating and financial characteristics include:
(bullet) A core group of high quality commercial properties in New
England, purchased at or below replacement cost, with the
potential to produce rising rental income and capital
appreciation;
(bullet) A significant number of leases believed to be below current
market rates, particularly in the metropolitan Boston area,
providing the potential for rental income increases as leases
expire;
(bullet) A highly capable management team, including four executives
having an aggregate of 57 years of operating experience at MGI,
with special expertise in the metropolitan Boston area;
S-3
<PAGE>
(bullet) A conservative debt to total capitalization ratio of 32.0% as of
November 30, 1996 after giving effect to this offering, with over
90% of the debt bearing a fixed interest rate;
(bullet) A policy of retaining capital through a low dividend payout ratio
(51.0% of funds from operations in 1996), which the Trust
believes to be among the most conservative in the REIT industry;
and
(bullet) A practice of selling mature or nonstrategic properties and
reinvesting funds in properties located in attractive markets.
Recent Developments
Operating Performance. The success of MGI's business strategy is reflected
in a 21.4% increase in rental and other income from $44.9 million in 1995 to
$54.5 million in 1996, and a 13.8% increase in funds from operations from $19.5
million in 1995 to $22.2 million in 1996. The growth in rental and other income
was the result of an increase in both the square footage of real estate owned,
particularly in the New England market, and higher rental rates. As a result of
this performance and other factors, the dividend paid in 1996 of $0.98 per
Common Share was 8.9% higher than the dividend paid in 1995. In December 1996,
MGI increased its quarterly dividend to an annualized rate of $1.08 per Common
Share, which represents a 12.5% increase from the annualized quarterly dividend
in effect in December 1995.
Leasing. During 1996, the Trust entered into new leases or extended or
renewed leases relating to an aggregate of 795,000 square feet of space. Of this
amount: (i) aggregate base rents relating to approximately 648,500 square feet
increased 7.9%, or approximately $320,000, from the aggregate base rents
previously in place for the same properties; (ii) approximately 46,000 square
feet represented previously vacant space that was leased at an average rent of
approximately $13.55 per square foot; and (iii) approximately 100,500 square
feet represented space that was leased to an office tenant in Somerset, New
Jersey, which lease was extended for three years, effective July 1, 1997, at a
rental rate of $17.00 per square foot, a decrease from $20.67 per square foot.
The renewal rate reflects a prior softness in the Northern New Jersey market,
which the Trust believes is in a period of recovery.
Acquisition Activity. During 1996, MGI acquired, for a total cost of $59.4
million, nine properties in New England comprising 778,000 square feet. Of the
778,000 square feet acquired, 41.6% was industrial space, 25.8% was
office/research and development space and 32.6% was office space. The acquired
properties were 95.9% leased at November 30, 1996. MGI expects the weighted
average unleveraged initial return on cost of these properties to be 11.9%,
assuming continuation of the existing leases and no additional leasing. Included
in these acquisitions was the $31.4 million investment in One Portland Square
and Two Portland Square, plus adjacent land, in Portland, Maine (the "Portland
Square Acquisition"). Management believes that the Portland Square Acquisition
constitutes the premier office complex in Portland, Maine.
Property Sales. Through the active management of its real estate portfolio,
MGI recognized gains of $11.5 million from the sale of four properties in 1996.
Three of the properties sold were located in markets that were no longer part of
the Trust's strategic focus. The fourth disposition was the sale of a
Massachusetts property that was purchased in 1993 for approximately $1.5 million
and sold in 1996 for $3.0 million. These dispositions furthered the Trust's
strategy of selectively selling properties that it believes have reached a
mature value or are not located in MGI's core markets.
Property Renovations. MGI periodically renovates both existing and newly
acquired properties in order to improve its competitive position in the
market. In 1996, the Trust commenced phased upgrades of 33 Broad Street in
Boston, Massachusetts and the Beachwood Apartments in Harrison Township,
Michigan, at a budgeted cost of $0.7 million and $1.5 million, respectively.
Additionally, the first phase of an approximately $6.0 million renovation of
1925 Andover Street, Tewksbury, Massachusetts was placed in service in
November 1995.
Fiscal 1997 First Quarter Activity. On December 23, 1996, MGI acquired, for
$6.6 million, two single-story brick flex buildings located in Methuen,
Massachusetts, totaling 145,000 square feet. MGI anticipates the weighted
average unleveraged initial return on cost of these properties to be
approximately 11%, assuming continuation of the existing leases and no
additional leasing. The buildings are 100.0% leased to five tenants, with
MicroTouch
S-4
<PAGE>
Systems Inc., a Nasdaq-traded company, occupying approximately 61% of the
space. Both buildings are located within Griffin Brook Park, a 68.0 acre
master-planned business park situated one mile west of the Route 110 and
Interstate 93 interchange in Methuen, Massachusetts. This acquisition was
part of an MGI tax deferred exchange with $5.0 million of the purchase price
funded by the net proceeds of two 1996 fourth quarter property sales. In
addition, MGI entered into an agreement to refinance the existing $12.3
million, 9.3% loan secured by its investment in One Portland Square and the
adjacent parking lot with an $11.0 million, non-recourse loan bearing
interest at a fixed rate of 8.1% and having a term of 10 years.
Dividends
In December 1996, MGI increased its quarterly dividend to an annualized
rate of $1.08 per Common Share, representing an increase of 12.5% from the
annualized quarterly dividend in effect in December 1995. The Trust's payout
ratio (representing dividends paid as a percentage of funds from operations)
was 51.0% in 1996. The Trust believes this to be among the most conservative
payout ratios in the REIT industry.
The Offering
<TABLE>
<CAPTION>
<S> <C>
Common Shares offered hereby 1,750,000 shares
Common Shares outstanding after the offering 13,313,199
Use of Proceeds To repay certain outstanding indebtedness,
effect property acquisitions and for working
capital and general corporate purposes.
NYSE Symbol MGI
</TABLE>
-------------
This Prospectus Supplement and documents incorporated herein by reference
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such
forward- looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
MGI to be materially different from the results of operations or plans expressed
or implied by such forward looking statements. Such factors include, among other
things, adverse changes in the real estate markets; risk of default under the
Trust's outstanding indebtedness; financial condition and bankruptcy of tenants;
environmental/safety requirements; adequacy of insurance coverage; and general
and local economic and business conditions. Investors should review the more
detailed risks and uncertainties set forth under the caption Risk Factors in the
Trust's Form 10-K for the year ended November 30, 1996, incorporated herein by
reference (the "Form 10-K"). Although the Trust believes that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and therefore, there can be no assurance
that the forward-looking statements included or incorporated by reference in
this Prospectus Supplement will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included or
incorporated herein, the inclusion of such information should not be regarded as
a representation by the Trust or any other person that the objectives and plans
of the Trust will be achieved.
S-5
<PAGE>
Summary Financial Information
The following table sets forth summary historical financial information for
the Trust and should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes
incorporated by reference or included herein.
<TABLE>
<CAPTION>
Year Ended November 30,
----------------------------------------------------------------
1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------
(In thousands, except per share and property data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Rental and other income $ 27,987 $ 36,185 $ 43,486 $ 44,875 $ 54,507
Property operating expenses and real
estate taxes 11,123 14,284 17,392 17,423 20,589
--------- --------- --------- --------- ---------
Property operating income 16,864 21,901 26,094 27,452 33,918
Income before net gains 5,604 7,957 10,011 11,169 12,805
Net gains 1,644 -- 4,480 3,150 11,500
--------- --------- --------- --------- ---------
Net income $ 7,248 $ 7,957 $ 14,491 $ 14,319 $ 24,305
Net income per share $ 0.77 $ 0.75 $ 1.26 $ 1.25 $ 2.11
Dividends per share $ 0.80 $ 0.81 $ 0.86 $ 0.90 $ 0.98
Weighted average shares outstanding 9,402 10,574 11,450 11,488 11,541
BALANCE SHEET DATA (at end of period):
Gross real estate investments $ 209,905 $ 258,663 $ 267,530 $ 293,469 $ 356,024
Total mortgage loans payable 60,571 66,949 70,954 84,506 138,547
Shareholders' equity $ 145,748 $ 171,039 $ 176,095 $ 180,540 $ 194,435
PROPERTY DATA (at end of period):
Total commercial properties 30 42 40 49 55
Square feet--commercial 2,646,000 3,811,000 3,879,000 4,474,000 5,091,000
Percentage leased--commercial 91.8% 97.7% 95.4% 97.5% 96.3%
Total multifamily properties 7 7 6 5 5
Total multifamily units 2,059 2,059 1,851 1,335 1,335
Percentage leased--multifamily 97.0% 96.0% 96.7% 96.3% 96.8%
SUPPLEMENTAL DATA:
Funds from operations (1) $ 11,899 $ 15,346 $ 18,111 $ 19,492 $ 22,169
</TABLE>
- -------------
(1) See footnote one to "Selected Financial Data."
S-6
<PAGE>
THE TRUST
General
MGI Properties is a self-administered equity REIT, organized in 1971, that
owns and operates a diversified portfolio consisting of 55 commercial properties
and five multifamily residential properties. Currently, approximately 50% of
MGI's real estate assets are located in New England. As of November 30, 1996,
the Trust's commercial properties aggregated 5,091,000 square feet and its
multifamily properties aggregated 1,335 units. At November 30, 1996, the Trust's
commercial and residential properties were 96.3% and 96.8% leased, respectively.
Strategy
Overview. MGI's primary business objective is to increase funds from
operations by enhancing the value of its real estate investments through income
growth and capital appreciation. The Trust seeks to achieve this objective by
actively managing its real estate and acquiring high quality properties. Through
active management, the Trust seeks to maintain the value of and demand for its
properties in order to attract quality tenants, support high occupancy rates and
increase rental rates. The Trust's acquisition strategy is designed to take
advantage of MGI's management expertise, local market knowledge and ability to
close transactions quickly. The Trust currently expects to continue to focus
primarily on the commercial segment of the New England market, particularly
industrial and office properties. Although MGI expects the percentage of its
real estate portfolio represented by New England properties to increase, it also
intends to retain modest geographic diversification of its properties as well as
diversification by property type.
To maximize occupancy and rental rates, MGI intends to continue to actively
manage its existing real estate portfolio through aggressive leasing to a
diverse tenant base and by effecting capital improvements and administering
ongoing maintenance programs. The Trust will also seek to acquire properties at
prices below estimated replacement costs that are perceived to provide
attractive current yields and have potential for rental increases and capital
appreciation. The successful execution of this strategy to date has permitted
MGI to profitably dispose of assets from time to time and increase funds from
operations.
Active Management. MGI's leasing, maintenance and tenant and capital
improvement activities are designed to attract and retain quality tenants and
maintain high occupancy rates. Generally, MGI is directly involved in
establishing the strategic direction for each property, identifying new tenants,
negotiating leases, budgeting and monitoring operating performance and
implementing significant renovations and rehabilitations. MGI's officers
typically work directly with local property managers to actively manage its real
estate portfolio and provide on-site management and leasing services, often with
a staff that works solely on MGI's properties. MGI believes that using local
property management companies provides cost effective management, access to
detailed market information and improved tenant satisfaction through personnel
dedicated solely to MGI's properties. In the future, the Trust may internalize
property management with respect to its New England properties if it determines
that such management will improve service, reduce operating costs or provide a
strategic competitive advantage.
Base Rent Increases as Current Leases Expire. MGI believes that many
tenants under leases relating to its Massachusetts properties are paying rents
that are lower than current market rents. Leases relating to Massachusetts
properties expiring in the near-term are expected to provide the opportunity to
increase rental income, although there can be no assurance that this will occur.
At November 30, 1996, approximately 479,000 square feet of leased space, or 9.4%
of the Trust's real estate portfolio, was subject to leases scheduled to expire
in 1997, of which 152,000 square feet involves properties located in
Massachusetts. At such date, approximately 1,014,000 square feet of leased
space, or 19.9% of the Trust's real estate portfolio, was subject to leases
scheduled to expire in 1998, of which 458,000 square feet involves properties
located in Massachusetts.
Acquisitions. MGI's philosophy has been to seek value-creating
opportunities by acquiring quality properties that have not met their full
potential, frequently at prices believed to be below replacement cost.
Management believes that its investments can be actively managed to maximize
total returns, which include current income and capital appreciation. The Trust
generally seeks to acquire properties with acquisition
S-7
<PAGE>
costs below $20 million, but has exceeded and may exceed this cost level in
the future. The Trust has recently focused on individual properties with
acquisition costs below $10 million. MGI believes that, relative to
properties in higher price ranges, the market to acquire properties with
acquisition costs below $10 million currently tends to be less efficient,
particularly with respect to pricing, and provides greater liquidity for
disposition purposes.
MGI's acquisition criteria generally include: (i) a purchase price
believed to represent a significant discount from estimated replacement cost;
(ii) well located, high quality general purpose properties; (iii) locations
in market areas that allow MGI to build upon its market presence and
knowledge; (iv) sellers, frequently institutions, with an objective to
liquidate, not operate, real estate; (v) properties believed capable of
strong total return performance; (vi) existing leases at below market rents
that may enable MGI to increase rental rates as lease terms expire; (vii)
vacancies or leases with near-term expirations that may enable MGI to enhance
revenue through the leasing of available space; and (viii) transactions where
the ability to close quickly and offer an all cash purchase price is
significant to the seller.
When acquiring properties, MGI seeks general purpose, functional buildings
rather than properties limited to a specific type and size of tenant. Most of
the Trust's properties are easily divisible so as to accommodate users of
various amounts of space. Management believes the general purpose and
flexible nature of its properties enable the Trust to maintain an overall
high average occupancy rate, control operating expenses and limit capital and
tenant improvement expenditures.
MGI focuses on owning and acquiring properties located in recognized
business parks or at nodes with easy access to highways, commercial areas and
population centers. When practicable, MGI seeks to increase its presence
within business parks or submarket locations where it owns property because
of the potential operating and tenant retention benefits.
Dispositions. MGI will continue to consider the selective sale of
properties that it believes have reached a mature value or are not located in
MGI's core markets. 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 returns
and reinvestment alternatives.
S-8
<PAGE>
Properties
Overview. The Trust's real estate investments can be classified by type of
property and geographic location. As of November 30, 1996, the Trust's real
estate investments were diversified by type as follows:
<TABLE>
<CAPTION>
Percent of
Number Percent of Portfolio Based on
of Square Feet/ Portfolio Based 1996 Property Percent
Property Type Properties Units on Cost(1) Operating Income Leased
- -------------------------------- ------------- -------------- --------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Industrial 19 2,000,000 18.4% 22.8% 97.9%
Office/Research and Development 12 1,089,000 14.4 17.9 100.0
Office 14 1,195,000 31.3 26.7 95.7
Retail 6 807,000 18.1 15.4 88.3
Other (Land and Partnership) 4 -- 0.8 0.6 100.0
---- ----------- ------ ------
Total Commercial 55 5,091,000 83.0% 83.4% 96.3%
Multifamily 5 1,335 17.0 16.6 96.8%
---- ------ ------
Total Portfolio 60 100.0% 100.0% 96.4%
==== ====== ======
</TABLE>
- -------------
(1) Cost represents historic cost, including capital and tenant improvements
and excluding depreciation and amortization.
As of November 30, 1996, the Trust's real estate investments were
diversified by geographic region as follows:
<TABLE>
<CAPTION>
Percent of
Number Square Feet Percent of Portfolio Based on
of of Commercial Apartment Portfolio Based 1996 Property Percent
Location Properties Property Units on Cost Operating Income Leased
------------------ ------------- --------------- ----------- --------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
New England 32 3,104,000 -- 48.2% 50.9% 98.1%
Midwest 13 996,000 722 25.5 24.3 92.9
Southeast 10 637,000 376 14.9 11.7 95.9
Mid-Atlantic 5 354,000 237 11.4 13.1 97.3
---- ----------- ------ ------ ------ ------
Total Portfolio 60 5,091,000 1,335 100.0% 100.0% 96.4%
==== =========== ====== ====== ====== ======
</TABLE>
Lease terms relating to the Trust's properties range from tenancies-at-will
to up to 25 years. The Trust leases commercial space to 307 tenants, comprised
of 47 industrial tenants, 21 office/research and development tenants, 173 office
tenants and 66 retail tenants. At November 30, 1996, the Trust's ten largest
tenants accounted for 23.6% of its commercial portfolio's square feet and 32.3%
of its annual commercial base rents, with the largest tenant accounting for 6.5%
of its commercial portfolio's square feet and 7.2% of its annual commercial base
rents. The following tables relating to lease expirations set forth such
information without regard to any rights of renewal or rights of termination
that exist in certain of the leases.
Industrial. As of November 30, 1996, the Trust owned 19 industrial
properties aggregating approximately 2.0 million square feet, consisting of nine
distribution and manufacturing facilities (aggregating 1,113,108 square feet)
and 10 flex buildings (aggregating 886,522 square feet). These properties are
typically located in business or industrial parks near major freeways. Although
a number of the industrial properties are occupied by a single tenant, the Trust
believes all of the properties can be divided and leased to multiple tenants.
Currently, 63.6% of the industrial square footage is located in Massachusetts.
The distribution properties are designed for tenants requiring bulk storage
and distribution of materials and goods in buildings generally with interior
heights of 20 feet or more. The Trust's distribution and manufacturing buildings
typically have dock facilities for trucks and several have rail access.
Generally, distribution buildings are used for storage and contain a minimal
amount of office space.
The flex space buildings, also known as service center facilities,
generally offer users 14 to 18 foot ceiling heights, air conditioning, varying
amounts of office space (minimal to 100%), dock loading access and in certain
instances, grade level loading doors. The Trust's flex space buildings range
from 35,600 to 189,200 square feet.
S-9
<PAGE>
The following tables set forth certain financial, operating and lease
information at November 30, 1996 with respect to the Trust's industrial
properties:
<TABLE>
<CAPTION>
Base Rent
Per Sq. Ft. Leased
Date Number at November 30, at November 30,
Completed/ Cost Square of ---------------------- ------------------
Property Location Renovated (000) Footage Tenants 1995 1996 1995 1996
- ----------------------- ------------------------------- -------- ----------- --------- --------------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
326 Ballardvale Street Wilmington, MA 1968/1974/1987 $ 7,237 293,980 4 $3.67 $3.71 100.0% 100.0%
4142 Rider Trail St. Louis, MO 1986 4,143 200,600 1 3.15 3.20 100.0 100.0
Trident Warehouse N. Charleston, SC 1977/1982 3,090 191,899 1 2.25 2.35 100.0 100.0
1925 Andover Street Tewksbury, MA 1974 10,734 189,191 1 8.51 8.51 100.0 100.0
400 Research Drive Wilmington, MA 1987 4,675 109,442 3 5.12 5.12 100.0 100.0
450 Whitney Avenue Northborough, MA 1974 2,346 102,286 3 2.94 3.40 100.0 100.0
234 Ballardvale Street Wilmington, MA 1980 2,575 100,225 2 3.81 3.94 100.0 100.0
8 Forge Park Franklin, MA 1987 5,092 100,000 1 --(1) 5.94 --(1) 100.0
11608 Fairgrove St. Louis, MO 1972 2,303 95,600 2 3.26 3.31 100.0 100.0
55 Middlesex Turnpike Bedford, MA 1971/1985 2,610 93,206 3 5.74 6.20 100.0 100.0
9 Forge Park Franklin, MA 1989 3,855 83,547 2 --(1) 5.17 --(1) 100.0
753 Forest Street Marlborough, MA 1986 2,842 75,000 3 --(1) 5.68 --(1) 62.5
15 Forge Park Franklin, MA 1991 3,229 65,300 1 --(1) 7.16 --(1) 100.0
2392 Grissom Drive St. Louis, MO 1971 1,800 61,293 2 3.63 3.63 100.0 100.0
7351 Hazelwood St. Louis, MO 1971 1,621 61,200 1 3.25 3.25 100.0 100.0
261 Cedar Hill Street Marlborough, MA 1987 2,350 59,404 4 5.16 5.16 100.0 100.0
2285 Grissom Drive St. Louis, MO 1973 1,208 40,950 2 3.95 4.01 100.0 100.0
Metro Business Center St. Louis, MO 1978 1,641 40,920 8 4.74 4.94 100.0 100.0
2258 Weldon Parkway St. Louis, MO 1970 2,052 35,587 3 7.08 7.14 100.0 60.5
------- --------- --
Total/Weighted average $65,403 1,999,630 47 $4.28 $4.60 100.0% 97.9%
======== ======== ==
</TABLE>
- -------------
(1) Property was acquired in 1996.
<TABLE>
<CAPTION>
Square
Number of Footage Annual Base Average Rent Percentage of Percentage
Year of Lease Leases of Expiring Rent of Per Square Expiring Annual Base
Expiration Expiring Leases Expiring Leases Foot Square Feet Rent Expiring
------------------------------------------- ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1997 8 333,440 $1,128,769 $3.39 17.0% 12.2%
1998 20 528,385 1,749,952 3.31 27.0 18.9
1999 3 93,443 385,313 4.12 4.8 4.2
2000 6 241,378 976,319 4.04 12.3 10.6
2001 6 202,914 1,448,385 7.14 10.4 15.7
2002 3 156,184 868,638 5.56 8.0 9.4
2003 2 112,539 476,757 4.24 5.7 5.2
2004 -- -- -- -- -- --
2005 -- -- -- -- -- --
2006 and thereafter 2 289,191 2,204,015 7.62 14.8 23.8
--- ----------- ----------- ------ ------
Total/Average 50 1,957,474 $9,238,148 $4.72 100.0% 100.0%
=== =========== =========== ====== ======
</TABLE>
S-10
<PAGE>
Office/Research and Development. The Trust owns 12 office/research and
development properties located in suburban Boston, frequently in business
parks or established business areas near major freeways. Although a majority
of the office/research and development properties are occupied by a single
tenant, the Trust believes all of the properties can be divided and leased to
multiple tenants. The office/research and development properties are
typically two or three stories and primarily leased to "high technology"
firms. The buildings are designed for flexible tenant configuration,
including up to 100% office usage and generally have full air conditioning, a
higher level of office finishes, dock loading, high ceiling heights (12 to 18
feet) and parking in excess of zoning requirements.
The following tables set forth certain financial, operating and lease
information at November 30, 1996 with respect to the Trust's office/research
and development properties:
<TABLE>
<CAPTION>
Base Rent Per
Sq. Ft.
at November Leased
30, at November 30,
-------------- ------------------
Number
Date Cost Square of
Property Location Completed (000) Footage Tenants 1995 1996 1995 1996
---------------------- -------------- --------- ------------------ -------- ----- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One Park West Tewksbury, MA 1987 $ 8,943 140,000 1 $ --(1) $ 9.30 --(1) 100.0%
Four Andover Tech Andover, MA 1984 6,492 128,400 1 5.00 5.00 100.0% 100.0
805 Middlesex Turnpike Billerica, MA 1987 4,806 122,342 1 4.68 4.68 100.0 100.0
One Executive Drive Chelmsford, MA 1985 4,630 108,500 1 4.75 4.75 100.0 100.0
Two Andover Tech Andover, MA 1986 7,245 105,537 1 11.60 11.60 100.0 100.0
Two Federal Street Billerica, MA 1986 4,363 100,000 1 5.09 5.09 100.0 100.0
321 Billerica Road Chelmsford, MA 1985 2,040 70,892 6 5.18 5.47 100.0 100.0
15 Crosby Drive Bedford, MA 1984 2,247 70,580 1 3.50 3.50 100.0 100.0
25 Porter Road Littleton, MA 1988 2,376 66,491 4 4.53 4.59 100.0 100.0
One Riverside Drive Andover, MA 1988 3,990 60,646 1 --(1) 7.01 --(1) 100.0
One Federal Street Billerica, MA 1983 2,193 60,000 2 6.17 6.17 100.0 100.0
Five Federal Street Billerica, MA 1986 2,072 56,250 1 3.84 3.84 100.0 100.0
------- --------- --
Total/Weighted
average $51,397 1,089,638 21 $5.58 $ 6.16 100.0% 100.0%
====== ========= ===
</TABLE>
- -------------
(1) Property was acquired in 1996.
<TABLE>
<CAPTION>
Square
Number of Footage Annual Base Rent Average Rent Percentage of Percentage
Year of Lease Leases of Expiring of Per Square Expiring Annual Base
Expiration Expiring Leases Expiring Leases Foot Square Feet Rent Expiring
- ------------------- ------------- ------------- ----------------------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1997 2 6,617 $ 41,999 $6.35 0.6% 0.6%
1998 11 283,586 1,337,110 4.72 26.1 20.0
1999 3 248,293 1,941,598 7.82 22.8 28.9
2000 5 228,154 1,042,245 4.57 20.9 15.6
2001 2 182,988 1,027,406 5.61 16.8 15.4
2002 -- -- -- -- -- --
2003 -- -- -- -- -- --
2004 -- -- -- -- -- --
2005 -- -- -- -- -- --
2006 and thereafter 1 140,000 1,302,000 9.30 12.8 19.5
---- -------- --------- ------ ------
Total/Average 24 1,089,638 $6,692,358 $6.14 100.0% 100.0%
==== ======== ========= ====== ======
</TABLE>
S-11
<PAGE>
Office. The Trust owns 14 office properties, including: (i) eight suburban
office buildings which range from single-story to mid-rise and are located in
either developed business parks or established business centers with
interstate access and visibility; and (ii) six downtown office buildings
which range from three to 11 stories. The Trust's office properties are
primarily full-service, high quality assets occupied by a diverse mix of
tenants. Many of the office properties have been significantly renovated or
placed in service during the last decade. A phased renovation of 33 Broad
Street, Boston, Massachusetts commenced in 1996. All of the suburban office
properties have sufficient on-site parking. All of the downtown buildings are
conveniently located near public parking facilities or public transportation.
The following tables set forth certain financial, operating and lease
information at November 30, 1996 with respect to the Trust's office
properties:
<TABLE>
<CAPTION>
Base Rent Per
Sq. Ft. Leased
at November 30, at November 30,
---------------- ---------------
Date Number
Completed/ Cost Square of
Property Location Renovated (000) Footage Tenants 1995 1996 1995 1996
---------------------- ------------- ------------- ------- ----------------- -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
265 Davidson Avenue Somerset, NJ 1985 $ 18,002 178,478 14 $19.16 $19.66 96.0% 94.8%
Two Portland Square Portland, ME 1989 17,031 149,227 14 --(1) 19.74 --(1) 98.8
Carrollwood Crossings Tampa, FL 1985 11,993 122,368 17 11.39 10.72 83.2 92.8
One Winthrop Square Boston, MA 1874/1974/1991 10,955 110,979 7 21.02 21.67 90.4 93.5
Point West Place Framingham, MA 1985 7,638 108,993 26 15.49 15.66 98.4 93.4
One Portland Square Portland, ME 1987 12,232 104,641 10 --(1) 18.54 --(1) 98.0
One Andover Tech Andover, MA 1981 7,900 97,741 11 15.60 15.66 95.4 95.5
555 Briarwood Circle Ann Arbor, MI 1985 8,185 81,238 3 12.63 12.94 100.0 100.0
Atrium Building Naperville, IL 1979 6,287 65,273 15 15.20 15.57 96.3 99.6
Century Plaza Greenville, SC 1973 3,214 48,726 25 8.77 9.79 89.6 94.1
300 Building Greenville, SC 1972 2,568 46,339 6 10.88 11.16 53.5 100.0
33 Broad Street Boston, MA 1905/1980 2,652 37,637 13 13.56 15.05 86.3 80.8
Ten Winthrop Square Boston, MA 1874/1981 1,606 27,110 10 14.09 16.41 83.0 97.7
Latrobe Drive Building Charlotte, NC 1980 1,352 16,300 2 15.00 14.51 100.0 100.0
-------- -------- ---
Total/Weighted
average $111,615 1,195,050 173 $15.51 $16.46 90.2% 95.7%
======== ========= ===
</TABLE>
- -------------
(1) Property was acquired in 1996.
<TABLE>
<CAPTION>
Square
Number of Footage Annual Base Rent Average Rent Percentage of Percentage
Year of Lease Leases of Expiring of Per Square Expiring Annual Base
Expiration Expiring Leases Expiring Leases Foot Square Feet Rent Expiring
- ------------------- ------------- ------------- ------------------------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1997 50 127,603 $ 1,842,645 $14.44 11.2% 9.9%
1998 44 121,237 1,858,482 15.33 10.6 10.0
1999 40 148,729 2,487,940 16.73 13.0 13.4
2000 23 285,966 4,440,635 15.53 25.0 23.9
2001 26 153,980 2,901,703 18.84 13.5 15.6
2002 2 19,312 224,084 11.60 1.7 1.2
2003 6 62,156 1,091,210 17.56 5.4 5.9
2004 8 76,903 1,346,278 17.51 6.7 7.2
2005 5 74,620 909,782 12.19 6.5 4.9
2006 and thereafter 9 72,690 1,479,852 20.36 6.4 8.0
---- --------- --------- ------ ------
Total/Average 213 1,143,196 $18,582,611 $16.25 100.0% 100.0%
==== ========= ========= ====== ======
</TABLE>
S-12
<PAGE>
Retail. MGI's three community shopping centers, two neighborhood centers
and one free-standing single-tenant building serve a variety of retail
markets. The Trust's retail tenants include a mix of national, regional and
local retailers. The shopping centers typically have well known anchor
tenants such as Publix Supermarket, Kmart, Best Buy, Burlington Coat Factory,
Bradlees and Sportsmart.
The following tables set forth certain financial, operating and lease
information at November 30, 1996 with respect to the Trust's retail
properties:
<TABLE>
<CAPTION>
Base Rent Per
Sq. Ft.
at November Leased
30, at November 30,
-------------- ---------------
Number
Date Cost Square of
Property Location Completed (000) Footage Tenants 1995 1996 1995 1996
- -------------------- -------------------------- ---------------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Yorkshire Plaza Aurora, IL 1986 $29,858 313,120 24 $7.27 $ 8.20 93.3% 74.5%
Fullerton Plaza Baltimore, MD 1979 7,800 134,842 14 6.02 6.04 100.0 100.0
Hickory Hollow Nashville, TN 1979 4,759 111,400 8 4.61 4.66 94.8 94.8
Bradlees Peabody, MA 1995 10,328 106,886 1 5.88 11.75 100.0 100.0
Terrace Ridge Plaza Temple Terrace, FL 1986 9,706 100,491 18 9.44 9.59 97.8 90.9
Longmeadow Road Hagerstown, MD 1978 1,823 40,200 1 5.16 5.16 100.0 100.0
------- ------- ---
Total/Weighted
average $64,274 806,939 66 $6.67 $ 7.81 96.4% 88.3%
======== ======== ===
</TABLE>
<TABLE>
<CAPTION>
Square
Number of Footage Annual Base Rent Average Rent Percentage of Percentage
Year of Lease Leases of Expiring of Per Square Expiring Annual Base
Expiration Expiring Leases Expiring Leases Foot Square Feet Rent Expiring
- ------------------- ------------- ------------- ------------------------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1997 4 11,315 $ 167,495 $14.80 1.6% 2.7%
1998 12 81,231 576,291 7.09 11.4 9.4
1999 11 33,179 356,182 10.74 4.7 5.8
2000 12 25,365 334,732 13.20 3.6 5.5
2001 9 80,762 669,184 8.29 11.3 11.0
2002 9 33,510 428,729 12.79 4.7 7.0
2003 -- -- -- -- -- --
2004 -- -- -- -- -- --
2005 3 56,930 406,272 7.14 8.0 6.7
2006 and thereafter 7 389,923 3,166,156 8.12 54.7 51.9
--- -------- -------- ------ ------
Total/Average 67 712,215 $6,105,041 $ 8.57 100.0% 100.0%
=== ======== ======== ====== ======
</TABLE>
Multifamily. MGI owns five multifamily communities located mainly in
suburban areas with above- average-income residents. The properties include
garden or townhouse units, with the exception of the Maryland property which
is an 11 story high-rise building. Each of the multifamily properties
provides tenants with attractive amenities, including a swimming pool. Many
also include jacuzzis and saunas, clubhouses, exercise rooms, tennis and/or
sports courts, washers and dryers and cable television.
The following table sets forth certain financial and operating data at
November 30, 1996 with respect to the Trust's multifamily properties:
<TABLE>
<CAPTION>
Base Rent Per
Unit
at November Leased
30, at November 30,
-------------- ----------------
Date Average
Completed/ Cost Unit Sq.
Property Location Renovated (000) Units Ft. 1995 1996 1995 1996
----------------------- ----------------------------- -------- ------- -------- ------ ------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beachwood Harrison Township, MI 1973/1980 $12,894 376 859 $574 $609 96.3% 96.8%
Fox Hills Bloomfield Hills, MI 1967 18,727 346 1,085 776 823 100.0 97.4
St. James Crossings Tampa, FL 1986 9,796 264 752 503 515 93.6 94.7
Avondale Laurel, MD 1987 13,112 237 718 729 754 92.8 97.5
South Pointe Tampa, FL 1986 6,017 112 868 617 628 98.2 98.2
------- -----
Total/Weighted average $60,546 1,335 $645 $674 96.3% 96.8%
======== ======
</TABLE>
S-13
<PAGE>
Other. The Trust's other real estate investments, which cost an aggregate
of $2.8 million, include 8.7 acres of land and a 4.0% partnership interest in
a Washington, D.C. high rise apartment building. All of the land investments
are located adjacent to other properties owned by the Trust. Additionally,
all of these investments are revenue producing with the exception of a
$25,000, 1.8 acre parcel adjacent to the Beachwood Apartments in Harrison
Township, Michigan. The largest investment in this category is a 4.5 acre
parcel of land acquired for $2.3 million as part of the Portland Square
Acquisition which is currently utilized as a 523 space surface parking lot.
Commercial Markets
A significant portion of MGI's commercial properties are located in the
Boston metropolitan area. Management believes the following table includes
market information relevant to its existing and future property investments
in the Boston market.
Suburban Submarkets (1) Downtown Boston
--------------------------------- ----------------
Office/Research
and
Office Development Office
Date Vacancy Vacancy Vacancy
- -------- -------------- ------------------ ----------------
12/91 20.8% 22.9% 18.1%
12/92 18.5 24.5 17.0
12/93 12.6 24.9 15.6
12/94 10.9 21.7 11.4
12/95 9.1 15.9 9.5
9/96 4.4 9.3 6.7
- -------------
(1) For purposes of this table, Suburban Submarkets include the Route
128/Mass Pike, Route 128 Northwest, Route 495 North and Route 495 West
Submarkets (collectively, the "Suburban Office and Office/Research and
Development Submarket") as defined by Meredith & Grew Incorporated*ONCOR
International ("Meredith & Grew").
Source: Meredith & Grew Greater Boston Market Reports 1991 through
October 1, 1996
Meredith & Grew reported that net absorption for the Suburban Office and
Office/Research and Development Submarket was 3,456,000, 2,680,000 and 2,270,000
square feet in the nine months ended September 30, 1996 and the years ended
December 31, 1995 and 1994, respectively. Net absorption for the Downtown Boston
Office market, as defined by Meredith & Grew, was approximately 560,000, 600,000
and 1,238,000 square feet in the nine months ended September 30, 1996 and the
years ended December 31, 1995 and 1994, respectively.
S-14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Trust from the sale of the Common Shares offered
hereby are estimated at approximately $ million ($ million if the
Underwriters' over-allotment option is exercised in full). The Trust intends
to use the net proceeds from this offering: (i) to repay $28.0 million of
indebtedness outstanding under the Trust's lines of credit, which currently
bear interest at a weighted average rate of 7.4%; (ii) to repay approximately
$1.2 million of the loan secured by One Portland Square and the adjacent
parking lot; (iii) to effect property acquisitions; and (iv) for working
capital and general corporate purposes.
MARKET PRICES OF COMMON SHARES AND DIVIDENDS TO SHAREHOLDERS
The Common Shares are traded on the NYSE under the symbol "MGI." The
following table sets forth the reported high and low sales prices of the
Common Shares on the NYSE and the cash dividends declared per Common Share
for the periods indicated:
Dividends
Fiscal Year High Low Declared
----------------------------------------- ------ ------------------
1995
First Quarter $14-7/8 $13-3/8 $.22
Second Quarter 15-1/2 14-1/8 .22
Third Quarter 15-1/8 14 .23
Fourth Quarter 16-1/8 14-7/8 .23
1996
First Quarter 17-1/4 15-7/8 .24
Second Quarter 17-1/2 16-1/4 .24
Third Quarter 18-5/8 16-5/8 .25
Fourth Quarter 20-3/8 18-1/8 .25
1997
First Quarter (through January 6, 1997) 22-1/4 20-3/8 .27
On January 6, 1997, the last reported sale price was $22.00 per share.
On January 6, 1997, there were approximately 2,600 shareholders of record.
Based upon information furnished by persons known to be nominees, MGI
estimates that at such date there were approximately 15,500 beneficial owners
of Common Shares.
In December 1996, MGI increased its quarterly dividend to an annualized
rate of $1.08 per Common Share, representing an increase of 12.5% from the
annualized quarterly dividend in effect in December 1995. Purchasers of
Common Shares in this offering will not receive this recently declared
quarterly dividend. The Trust's payout ratio was 51.0% in 1996. The Trust
believes this to be among the most conservative payout ratios in the REIT
industry. For Federal income tax purposes, MGI has determined that of the
$0.98 per share distributed in 1996, $0.56 of such distribution was taxable
as ordinary income and $0.42 was capital gain and that, of the $0.90 per
share distributed in 1995, $0.69 was ordinary income and $0.21 was capital
gain. Since 1972, MGI has made 99 consecutive quarterly cash distributions.
Dividend Reinvestment and Share Purchase Plan
The Trust has adopted a Dividend Reinvestment and Share Purchase Plan (the
"Plan") under which holders of record of 100 shares or more of Common Shares
may reinvest cash dividends and/or make optional cash payments of a minimum
of $100 to a maximum of $2,500 in any calendar quarter to purchase additional
Common Shares from the Trust. The purchase price of such Common Shares is at
a 3.0% discount from the market price in the case of newly issued shares. All
holders of Common Shares are eligible to join the Plan, subject to certain
conditions.
S-15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Trust as of
November 30, 1996 and as adjusted to reflect the receipt and application of
net proceeds from the sale of 1,750,000 Common Shares pursuant to this
offering.
November 30, 1996
--------------------------
Actual As Adjusted
----------- --------------
(In thousands)
Mortgage loans payable:
Mortgage loans payable $110,547 $109,347
Lines of credit 28,000 --
-------- --------
Total mortgage loans payable 138,547 109,347
-------- --------
Shareholders' equity:
Preferred shares--$1.00 par value, 6,000,000
shares authorized; none issued -- --
Common shares--$1.00 par value, 17,500,000
shares authorized; 11,563,199 issued;
13,313,199 issued as adjusted 11,563 13,313
Additional paid-in capital 167,185
Undistributed net income 15,687 15,687
-------- --------
Total shareholders' equity 194,435
-------- --------
Total capitalization $332,982 $
======== ========
S-16
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Trust and
should be read in conjunction with the financial statements and notes thereto
incorporated by reference herein.
<TABLE>
<CAPTION>
Year Ended November 30,
----------------------------------------------------------------
1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------
(In thousands, except per share and property data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Rental and other income $ 27,987 $ 36,185 $ 43,486 $ 44,875 $ 54,507
Property operating expenses and real
estate taxes 11,123 14,284 17,392 17,423 20,589
--------- --------- --------- --------- ---------
Property operating income 16,864 21,901 26,094 27,452 33,918
Interest income 2,602 713 394 514 421
Expenses:
Depreciation and amortization 6,315 7,407 8,116 8,339 9,463
Interest 5,511 5,059 5,781 5,807 9,198
General and administrative 2,036 2,191 2,580 2,651 2,873
--------- --------- --------- --------- ---------
13,862 14,657 16,477 16,797 21,534
Income before net gains 5,604 7,957 10,011 11,169 12,805
Net gains 1,644 -- 4,480 3,150 11,500
--------- --------- --------- --------- ---------
Net income $ 7,248 $ 7,957 $ 14,491 $ 14,319 $ 24,305
========= ========= ========= ========= =========
Net income per share $ 0.77 $ 0.75 $ 1.26 $ 1.25 $ 2.11
Dividends per share $ 0.80 $ 0.81 $ 0.86 $ 0.90 $ 0.98
Weighted average shares outstanding 9,402 10,574 11,450 11,488 11,541
BALANCE SHEET DATA (AT END OF PERIOD):
Gross real estate investments $ 209,905 $ 258,663 $ 267,530 $ 293,469 $ 356,024
Accumulated depreciation and
amortization (24,583) (29,992) (32,029) (36,375) (44,810)
--------- --------- --------- --------- ---------
Net investment in real estate 185,322 228,671 235,501 257,094 311,214
Cash and cash equivalents 16,131 11,816 12,892 7,045 15,140
Total assets 214,161 246,700 255,971 274,651 339,664
Mortgage loans payable 60,571 66,949 70,954 84,506 138,547
Shareholders' equity $ 145,748 $ 171,039 $ 176,095 $ 180,540 $ 194,435
PROPERTY DATA (AT END OF PERIOD):
Total commercial properties 30 42 40 49 55
Square feet--commercial 2,646,000 3,811,000 3,879,000 4,474,000 5,091,000
Percentage leased--commercial 91.8% 97.7% 95.4% 97.5% 96.3%
Total multifamily properties 7 7 6 5 5
Total multifamily units 2,059 2,059 1,851 1,335 1,335
Percentage leased--multifamily 97.0% 96.0% 96.7% 96.3% 96.8%
SUPPLEMENTAL DATA:
Funds from operations (1) $ 11,899 $ 15,346 $ 18,111 $ 19,492 $ 22,169
Cash flow information:
Operating 12,593 15,792 17,421 19,306 21,037
Investing 10,841 (43,019) (20,497) (27,690) (34,813)
Financing (14,635) 22,912 4,152 2,537 21,871
- -------------
</TABLE>
(1) In 1996, MGI implemented the National Association of Real Estate
Investment Trusts ("NAREIT") recommended changes in the calculation of
funds from operations. MGI calculates funds from operations in conformity
with the NAREIT definition which is net income (computed in accordance
with generally accepted accounting principles ("GAAP")), excluding gains
(or losses) from debt restructuring and sales of property, plus
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Funds from operations for years prior to
1996 has been recalculated in conformity with the new NAREIT definition.
MGI believes funds from operations is an important supplemental measure
of operating performance. Funds from operations do not represent cash
flows from operations as defined by GAAP and should not be considered as
an alternative to net income or as a measure of the Trust's liquidity.
S-17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
MGI is a self-administered equity REIT that owns and operates a diversified
portfolio of income producing real estate consisting of 55 commercial properties
and five multifamily residential properties. Since 1992, the Trust has focused
on the commercial segment of the real estate market, specifically industrial and
office properties located in New England. At November 30, 1996, the commercial
and residential properties were 96.3% and 96.8% leased, respectively.
During 1996, the Trust acquired six Massachusetts properties and, as part
of the Portland Square Acquisition, a Portland, Maine office complex. The
Portland Square Acquisition consists of 253,900 square feet of leasable space
located in two buildings and a 523 space surface parking lot. With the exception
of the Portland Square Acquisition which was made subject to existing mortgages
aggregating $21.3 million, the 1996 acquisitions were purchased with cash
generated from Trust operations, new borrowings and proceeds from the sale of
real estate investments. A summary of the 1996 real estate acquisitions is as
follows:
Date Square
Property Type Location Acquired Feet Cost
----------------- -------------------------- --------- --------- -------------
Industrial Franklin, Massachusetts 12/95 83,500 $ 3,855,000
Marlborough, Massachusetts 12/95 75,000 2,823,000
Franklin, Massachusetts 12/95 65,300 3,229,000
Franklin, Massachusetts 8/96 100,000 5,092,000
Office/Research Tewksbury, Massachusetts 3/96 140,000 8,929,000
and Development Andover, Massachusetts 7/96 60,600 3,989,000
Office Portland, Maine 7/96 149,200 16,946,000
Portland, Maine 7/96 104,700 12,178,000
Other (Land) Portland, Maine 7/96 -- 2,321,000
Other 12/95 -- 427,000
-------- -----------
Total 778,300 $59,789,000
======== ===========
During 1995, MGI invested an aggregate of $38.3 million to acquire eight
properties, including three office and five industrial buildings, and completed
the acquisition of a retail building. These properties aggregated 795,300 square
feet and are all located in Massachusetts.
At November 30, 1996, the Trust's portfolio of New England investments
totaled 32 properties having an aggregate cost of $171.6 million, which
represents 48.2% of the Trust's investment in real estate based upon cost, and
3.1 million square feet, or 60.9% of the Trust's total commercial space.
Results of Operations
1996 Compared to 1995
Net income for 1996 of $24.3 million, or $2.11 per share, included net
gains of $11.5 million, which resulted from (i) the sale of three industrial
buildings, one located in Massachusetts and two located in Ohio, and (ii) the
sale of the Trust's partnership interest in a San Bruno, California apartment
complex. The sale of the partnership interest resulted in a gain of $9.4
million, which included a previously deferred gain of $3.7 million. Net income
for 1995 was $14.3 million, or $1.25 per share, which included net gains from
property sales of $3.2 million. Income before net gains increased from $11.2
million in 1995 to $12.8 million in 1996.
Funds from operations in 1996 totaled $22.2 million, compared to $19.5
million in 1995. In 1996, MGI implemented NAREIT's recommended changes in the
calculation of funds from operations. MGI calculates funds from operations in
conformity with the NAREIT definition, which is net income (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. The
S-18
<PAGE>
NAREIT definition stipulates, among other things, that in calculating funds
from operations, leasing costs should be capitalized and not deducted as an
expense. This had the effect of increasing the Trust's funds from operations
by approximately $0.6 million in 1996 and $0.5 million in 1995. MGI believes
funds from operations is an appropriate supplemental measure of operating
performance.
The following is a reconciliation of net income to funds from operations:
Year Ended November 30,
------------------------------
1995 1996
-------------- ---------------
Net income $14,319,000 $ 24,305,000
Less net gains (3,150,000) (11,500,000)
Plus building depreciation 6,840,000 7,337,000
Plus tenant improvement and
commission amortization 1,483,000 2,027,000
------------ ------------
Funds from operations $19,492,000 $ 22,169,000
============ ============
The increase in income before net gains from 1995 to 1996 resulted
principally from a $6.5 million increase in property operating income (which is
defined as rental and other income less property operating expenses and real
estate taxes) offset by increases in interest and depreciation expense. The
increase in interest expense of $3.4 million was due primarily to debt incurred
in connection with the acquisition of properties. Depreciation and amortization
increased by $1.1 million, reflecting the greater number of properties owned.
Additionally, general and administrative costs increased by $0.2 million,
primarily reflecting higher personnel costs. The change in 1996 funds from
operations, when compared to 1995, is attributable to the same factors that
affected income before net gains in such periods, excluding the effect of
changes in depreciation and amortization expense.
The change in property operating income from 1995 to 1996 reflects improved
results from comparable properties (which is defined as properties owned
throughout both 1995 and 1996), as well as the effect of the sale and
acquisition of properties, as detailed below. Income growth from comparable
properties is largely due to improved performance from the Trust's comparable
office properties, which generally experienced lower vacancy and slightly higher
rental rates, offset in part by increased operating expenses.
Net Change
--------------
1996 and 1995 comparable properties $ 615,000
1996 and 1995 acquisitions 7,346,000
1996 and 1995 sales (1,495,000)
-----------
Total $ 6,466,000
===========
The following table describes the changes in property operating income from
1995 to 1996 attributable to the Trust's different property types, including a
breakdown of New England and non-New England properties:
Non-
New England New England
Property Type Properties Properties Net Change
--------------------------------- ------------- -------------- --------------
Industrial $2,478,000 $ (174,000) $ 2,304,000
Office/Research and Development 1,767,000 -- 1,767,000
Office 1,820,000 675,000 2,495,000
Multifamily -- (1,055,000) (1,055,000)
Retail 1,048,000 26,000 1,074,000
Other (Land and Partnership) 149,000 (268,000) (119,000)
----------- ----------- -----------
Total $7,262,000 $ (796,000) $ 6,466,000
New England properties represented approximately 50% of total operating
income for the year ended November 30, 1996. The changes in industrial and
office/research and development property operating income relating to New
England properties was primarily due to the increase in the number of properties
owned in New England. The increase in office property operating income relating
to New England properties
S-19
<PAGE>
was primarily due to the Portland Square Acquisition, which contributed $1.4
million to the net change. The increase in the retail segment was largely due
to the contribution of Bradlees Inc.'s store in Peabody, Massachusetts, which
began paying rent in November 1995 following the affirmation of its lease
under Chapter 11 of the Federal Bankruptcy Code.
The primary factor in the decline in property operating income from
industrial properties located outside New England was a decrease from an overall
100.0% leased rate at November 30, 1995 to an overall 98.0% leased rate at
November 30, 1996. Higher revenues from the non-New England office buildings
contributed to the increase in office properties operating income. The decrease
in operating income from 1995 to 1996 in the multifamily segment is largely due
to the sale of the Posada del Rey Apartments in Metairie, Louisiana in September
1995. The decrease in property operating income from the non-New England other
properties was directly related to the sale of a partnership interest in a San
Bruno, California apartment complex.
Commercial leases signed in 1996, the percentage of the commercial
properties leased and scheduled commercial lease expirations in 1997 and 1998
(in square feet) are as follows:
Scheduled Expirations
---------------------
1996 Leased at
Property Type Leasing November 30, 1996 1997 1998
------------------------------ ------- ----------------- --------- ----------
Industrial 473,600 97.9% 333,400 528,400
Office/Research and Development 18,500 100.0 6,600 283,600
Office 252,100 95.7 127,600 121,200
Retail 50,800 88.3 11,300 81,200
------- ---- ------- ---------
Total 795,000 96.3% 478,900 1,014,400
======= ==== ======= =========
Scheduled expirations in 1997 represent 9.4% of the Trust's total
commercial square feet at November 30, 1996 compared to scheduled expirations in
1996 of 525,400 square feet, which represented 11.7% of the Trust's total
commercial square feet at November 30, 1995. The Massachusetts and Maine
properties were approximately 98% and 99% leased at November 30, 1996. There are
no significant leases relating to the Maine properties scheduled to expire
during 1997 and 1998. In the Trust's Massachusetts portfolio, leases relating to
152,000 and 458,000 square feet are scheduled to expire in 1997 and 1998,
respectively, which management believes are subject to rents that are generally
below the current market. In the St. Louis market, the Trust has 242,000 square
feet under leases that are scheduled to expire in 1997, of which 200,600 square
feet pertains to a single lease that contains a one-year extension option at a
rate which management believes to be slightly below the current market rent for
the area.
1995 Compared to 1994
Net income for 1995 of $14.3 million, or $1.25 per share, included a net
gain of $3.2 million, which resulted from the sale of real estate investments.
Net income for 1994 was $14.5 million, or $1.26 per share, which included a net
gain of $4.5 million, resulting from the sale of real estate investments. Income
before net gains increased by $1.2 million to $11.2 million in 1995, compared to
$10.0 million in 1994. Funds from operations in 1995 totaled $19.5 million,
compared to $18.1 million in 1994. Funds from operations for 1995 and 1994 have
been restated to conform with NAREIT's recommended changes in the calculations
of funds from operations previously described.
The increase in income before net gains and funds from operations from 1994
to 1995 resulted principally from an increase in property operating income. The
change in property operating income reflects improved results from properties
owned throughout both 1994 and 1995, as well as the effect of the sale and
acquisition of properties as detailed below:
Net Change
--------------
1995 and 1994 comparable properties $ 900,000
1995 and 1994 acquisitions 3,200,000
1995 and 1994 sales (2,700,000)
----------
Total $ 1,400,000
==========
S-20
<PAGE>
The change in operating income with respect to each of the property types
generally derives from the Trust's pattern of acquisitions and sales, as
detailed below:
Property Type Net Change
- ----------------------------------- -------------
Industrial $ (100,000)
Office/Research and Development 1,300,000
Office 660,000
Multifamily (490,000)
Retail (150,000)
Other (Land and Partnership) 180,000
----------
Total $1,400,000
==========
The income growth in the office/research and development segment was
primarily due to acquisitions completed during 1995 and 1994. These properties
were near or at 100% occupancy throughout 1995. The increase in the property
income in the office segment reflects $0.3 million from the 1995 acquisitions
and a $0.3 million increase generated from comparable properties. The 1995
acquisitions of office properties totaled 162,500 square feet and brought the
Trust's office portfolio to 932,600 square feet at November 30, 1995. The
increase in operating income from comparable office properties was due to an
improvement in occupancy and, to a lesser extent, rental rates.
The change in the multifamily segment reflects improved results from
comparable properties offset by the effect of property sales in 1995 and 1994.
The comparable properties experienced a 4.5% increase in revenue, principally
from an increase in rental rates, while operating expenses were relatively
unchanged from 1994. This resulted in an increase in operating income of $0.4
million from 1994 to 1995 which was offset by the loss of income of $0.9 million
from properties sold. The Trust's interest in a Metairie, Louisiana apartment
complex, which was sold in September 1995 for $12.0 million, had generated $1.1
million of operating income for the ten months it was owned during 1995.
Operating income in the retail segment decreased slightly in 1995 due to charges
associated with tenant terminations. The Trust executed leases relating to
657,500 square feet of commercial space during 1995.
Also contributing to the change in income before net gains and funds from
operations is an increase in interest income from 1994 to 1995, which was due
generally to higher interest rates on short-term investments during 1995.
Depreciation expense increased due to the increase in the number of properties
owned.
Liquidity
Shareholders' equity at November 30, 1996 was $194.4 million, compared to
$180.5 million at November 30, 1995. The increase primarily reflects net income
in excess of dividends. At November 30, 1996, financial liquidity was provided
by $15.1 million in cash and cash equivalents and by $17.0 million available
under lines of credit aggregating $45.0 million. The principal sources and uses
of cash in 1996 are summarized as follows. The Portland Square Acquisition was
acquired subject to $21.3 million of existing mortgage debt which is not
included in the following table.
SOURCES OF CASH
Trust operations $21,000,000
Sales of real estate, net 11,100,000
New borrowings, net of fees, prepayments
and amortization 32,500,000
----------
Total $64,600,000
==========
USES OF CASH
Real estate acquisitions $38,700,000
Dividends 11,300,000
Additions to real estate 5,900,000
Other 600,000
----------
Total $56,500,000
==========
S-21
<PAGE>
Mortgage loans payable totaled $138.5 million at November 30, 1996, a net
increase of $54.0 million from $84.5 million at November 30, 1995. The change
represents a combination of the addition of three mortgage loans totaling $19.0
million, the $21.3 million of debt associated with the Portland Square
Acquisition and additional net draws totaling $16.0 million under lines of
credit which, in the aggregate, were offset by scheduled loan repayments
totaling $2.3 million. Scheduled loan repayments due during 1997 total $3.1
million. MGI believes it will continue to be able to extend or refinance
maturing mortgage loans upon satisfactory terms.
Additional cash requirements in 1997 will include distributions to
shareholders, capital and tenant improvements and leasing expenditures. During
1996, expenditures for capital and tenant improvements totaled $3.2 million and
$2.7 million, respectively. Included in the amount for capital improvements are
$1.9 million of costs associated with building renovations. During 1997,
budgeted renovation costs are anticipated to aggregate $1.8 million.
Additionally, the Trust has estimated that recurring capital expenditures in
1997 will total $2.0 million, including $0.9 million which pertains to interior
and exterior improvements of its multifamily complexes and $1.1 million for its
commercial properties. Tenant improvements relating to anticipated leasing
activity are budgeted at $4.0 million in 1997.
In December 1996, MGI acquired for $6.6 million two flex buildings, which
are 100.0% leased. The acquisition completed a tax-deferred exchange. In
addition, MGI entered into an agreement to refinance the existing $12.3 million,
9.3% loan secured by its investment in One Portland Square and an adjacent
parking lot in Portland, Maine with an $11.0 million, fixed rate non-recourse
loan bearing interest at a rate of 8.1% and having a term of 10 years. In
connection with the repayment of the existing loan, a prepayment fee of $0.3
million will be incurred upon completion of the refinancing.
Sources of funds in the future are expected to be from property operations,
mortgaging or refinancing of existing mortgages on properties, borrowing under
MGI's lines of credit and MGI's portfolio of investment securities. Other
potential sources of funds include the proceeds of public or private offerings
of additional equity or debt securities or the sale of real estate investments.
It is presently anticipated that the purchase of additional properties in 1997
will be primarily financed by the proceeds of this offering, debt and, to a
lesser extent, by cash flow from operations, short-term investments and the
proceeds, if any, from the sale of real estate. MGI believes the combination of
the proceeds of this offering, available cash and cash equivalents, the value of
MGI's unencumbered properties and other resources are sufficient to meet its
short- and long-term liquidity requirements.
Other
During the past three fiscal years, the impact of inflation on MGI's
operations and investment activity has not been significant.
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 or 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, in the past, 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 modest diversification by region and property type and its diverse
tenant base somewhat reduce the risks associated with these factors and enhances
opportunities for cash flow growth and capital gains potential, although there
can be no assurance thereof.
New Accounting Pronouncements
Effective December 1, 1996, the Trust will adopt SFAS No. 121 and 123,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of and Accounting for Stock-Based Compensation. Management does not
expect implementation of either statement to have a material effect on the
financial statements of the Trust.
S-22
<PAGE>
MANAGEMENT
The executive officers and Trustees of the Trust are:
Name Age Position
- ------------------------ ----- -------------------------------------------
W. Pearce Coues 55 Chairman of the Board of Trustees and
Chief Executive Officer
Phillip C. Vitali 46 Executive Vice President, Chief Financial
Officer and Treasurer
Robert Ware 58 Executive Vice President
Karl W. Weller 39 Senior Vice President
George S. Bissell 67 Trustee
Herbert D. Conant 72 Trustee
Francis P. Gunning 73 Trustee
Colin C. Hampton 74 Trustee
George M. Lovejoy, Jr 66 Trustee
William F. Murdoch, Jr 65 Trustee
Rodger P. Nordblom 69 Trustee
The following is a biographical summary of experience for the executive
officers and Trustees of the Trust.
W. Pearce Coues has been Chairman of the Board of Trustees and Chief
Executive Officer of the Trust since 1982. Mr. Coues is a past President of
NAREIT and has been with the Trust since 1973.
Phillip C. Vitali has been Executive Vice President of the Trust since
December 1989 and Treasurer and Chief Financial Officer of the Trust since March
1986. Mr. Vitali has been with the Trust since 1981.
Robert Ware has been Executive Vice President of the Trust since December
1989. Mr. Ware has been with the Trust since 1982.
Karl W. Weller has been Senior Vice President of the Trust since March 1993
and was a Vice President, Aetna Life & Casualty Company and Managing Director,
real estate investment group from 1981 to February 1993.
George S. Bissell has been a Trustee since 1995. Mr. Bissell is the
Chairman of the Funds Board of Keystone Investments, Inc. ("Keystone") and a
director of Keystone Mutual Funds, an investment management firm based in
Boston, Massachusetts. He was formerly the Chairman of the Board and Chief
Executive Officer of Keystone.
Herbert D. Conant has been a Trustee since 1988. Mr. Conant formerly was
the Chairman of the Board and Chief Executive Officer of The Turner Corporation,
a NYSE-listed general construction and construction management firm based in New
York, New York.
Francis P. Gunning has been a Trustee since 1971. Mr. Gunning formerly was
the Executive Vice President and General Counsel of Teachers Insurance and
Annuity Association of America and College Retirement Equities Fund based in New
York, New York.
Colin C. Hampton has been a Trustee since 1984. Mr. Hampton formerly was
the Chairman of the Board and Chief Executive Officer of UNUM Corporation, a
NYSE-listed provider of disability and employee benefits insurance and special
risks reinsurance based in Portland, Maine.
George M. Lovejoy, Jr. has been a Trustee since 1993. Mr. Lovejoy has been
the President since 1994 and a director since 1972 of Fifty Associates, a REIT.
Currently, Mr. Lovejoy is (i) a trustee of Scudder Cash Investment Trust,
Scudder GNMA Fund, Scudder Municipal Trust, Scudder Investment Trust, Scudder
Portfolio Trust and Scudder Tax Free Money Fund; (ii) a director of The Latin
American Dollar Income Fund, Inc. and Scudder World Income Opportunities Fund;
and (iii) the Shared Investment Committee Chairman of Copley Investors Limited
Partnership. Mr. Lovejoy formerly was the Chairman of the Board and Chairman
Emeritus of Meredith & Grew a Boston, Massachusetts based real estate brokerage
and management firm.
William F. Murdoch, Jr. has been a Trustee since 1996. Mr. Murdoch has been
a principal of Murdoch Associates, a real estate firm based in Princeton, New
Jersey, since 1990. Mr. Murdoch is a past President of NAREIT and the former
Chief Executive Officer of HRE Properties, a NYSE-listed REIT.
Rodger P. Nordblom has been a Trustee since 1984. Mr. Nordblom is the
Chairman of the Board of Nordblom Company, a real estate development and
management firm based in Burlington, Massachusetts.
S-23
<PAGE>
TAXATION
The Trust believes that it has operated, and the Trust intends to continue
to operate, in such manner as to qualify as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), but no assurance can be given that it
will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and very general summary of certain provisions
which currently govern the federal income tax treatment of the Trust and its
shareholders. For the particular provisions which govern the federal income tax
treatment of the Trust and its shareholders, reference is made to Sections 856
through 860 of the Code and the Income Tax Regulations promulgated thereunder.
The following summary is qualified in its entirety by such reference. This
discussion does not address any state, local or foreign tax considerations or
issues that arise as a result of an investor's special circumstances or special
status under the Code (including the status of a person who is not a U.S.
shareholder as defined below).
Under the Code, if certain requirements are met in a taxable year, a REIT
will generally not be subject to federal income tax with respect to income which
it distributes to its shareholders. However, the Trust may be subject to federal
income tax under certain circumstances, including taxes at regular corporate
rates on any undistributed REIT taxable income, the "alternative minimum tax" on
its items of tax preference, and adjustments and taxes imposed on income and
gain generated by certain extraordinary transactions. If the Trust fails to
qualify during any taxable year as a REIT, unless certain relief provisions are
available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which would have
a material adverse effect upon its shareholders.
As long as the Trust qualifies as a REIT, distributions made to the Trust's
taxable U.S. shareholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will be taken into account by
such U.S. shareholders as ordinary income and will not be eligible for the
dividends received deduction generally available to corporations. As used
herein, the term "U.S. shareholder" means a holder of Common Shares that for
U.S. federal income tax purposes is: (a) (i) a citizen or resident of the United
States; (ii) a corporation, partnership, or other entity created or organized in
or under the laws of the United States or any political subdivision thereof;
(iii) an estate the income of which is subject to U. S. federal income taxation
regardless of its source; or (iv) a trust (x) over the administration of which a
court within the United States is able to exercise primary supervision and (y)
all substantial decisions of which one or more United States fiduciaries have
the authority to control, and (b) does not have special status under the Code,
such as a tax-exempt organization. Distributions that are designated as capital
gain dividends will be taxed as long-term capital gains (to the extent they do
not exceed the Trust's actual net capital gain for the taxable year) without
regard to the period for which the shareholder has held his Common Shares.
However, corporate shareholders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. If a shareholder realizes a loss on
the disposition of Common Shares held for not more than six months, the loss
will be treated as a long term capital loss to the extent of any prior
distributions with respect to such Common Shares that the shareholder received
as capital gain dividends. Distributions in excess of current and accumulated
earnings and profits will not be taxable to a shareholder to the extent that
they do not exceed the adjusted basis of the shareholder's Common Shares, but
rather will reduce the adjusted basis of such shares. To the extent that
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a shareholder's Common Shares, the distributions will be
included in income as long-term capital gain (or short-term capital gain if the
Common Shares have been held for one year or less) assuming the Common Shares
are a capital asset in the hands of the shareholder. In addition, any dividend
declared by the Trust in October, November or December of any year and payable
to a shareholder of record on a specified date in any such month shall be
treated as both paid by the Trust and received by the shareholder on December 31
of such year, provided that the distribution is actually paid by the Trust
during January of the following calendar year.
Investors are urged to consult their own tax advisors with respect to the
tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction. Foreign investors should consult
their own tax advisors concerning the tax consequences of an investment in the
Trust including the possibility of United States income tax withholding on Trust
distributions.
S-24
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") have severally agreed to purchase
from the Trust the following respective numbers of Common Shares at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus Supplement:
Underwriter Number of Shares
- ----------- ----------------
Alex. Brown & Sons Incorporated
Davenport & Co. of Virginia, Inc.
Sutro & Co. Incorporated
Tucker Anthony Incorporated
Total 1,750,000
==========
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all Common Shares offered hereby if any of such
shares are purchased.
The Trust has been advised by the Underwriters that the Underwriters
propose to offer the Common Shares to the public at the public offering price
set forth on the cover page of this Prospectus Supplement and to certain dealers
at such price less a concession not in excess of $ per Common Share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per Common Share to certain other dealers. After the offering, the public
offering price and other selling terms may be changed by the Underwriters.
The Trust has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus Supplement, to purchase up to
262,500 additional Common Shares at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus Supplement. To the extent that the Underwriters exercise such option,
each of the Underwriters will have a firm commitment to purchase approximately
the same percentage thereof that the number of Common Shares to be purchased by
it shown in the above table bears to 1,750,000, and the Trust will be obligated,
pursuant to the option, to sell such Common Shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Shares offered hereby. If purchased, the
Underwriters will offer such additional Common Shares on the same terms as those
on which the 1,750,000 Common Shares are being offered.
The Trust has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Trust and each of its executive officers and trustees have agreed with
the Underwriters not to directly or indirectly offer, sell, offer to sell,
contract to sell or otherwise dispose of any of the Common Shares for a period
of 90 days after the date of this Prospectus Supplement without the prior
consent of Alex. Brown & Sons Incorporated, except that the Company may issue
new Common Shares under MGI's 1982 Incentive Stock Option Plan for Key
Employees, 1982 Stock Option Plan for Trustees, 1988 Stock Option and Stock
Appreciation Rights Plan for Key Employees, 1988 Stock Option Plan for Trustees,
1994 Stock Option and Stock Appreciation Rights Plan, for Key Employees, 1994
Stock Option Plan for Trustees and Dividend Reinvestment and Share Purchase
Plan, each as amended.
LEGAL MATTERS
Certain legal matters, including the legality of the Common Shares, will be
passed upon for the Trust by Olshan Grundman Frome & Rosenzweig LLP, 505 Park
Avenue, New York, New York 10022. Members of Olshan Grundman Frome & Rosenzweig
LLP own an aggregate of 15,015 Common Shares and hold options to purchase an
aggregate of 23,400 Common Shares. Certain legal matters for the Underwriters
will be passed upon by Piper & Marbury L.L.P.
S-25
<PAGE>
EXPERTS
The financial statements and schedule of the Trust as of November 30, 1996
and 1995, and for each of the years in the three-year period ended November 30,
1996, have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
In addition to the documents incorporated by reference pursuant to the
accompanying Prospectus dated December 13, 1996, there is incorporated by
reference herein the Trust's Current Reports on Form 8-K dated July 2, 1996, as
amended and August 30, 1996, as amended; and the Trust's Annual Report on Form
10-K for the year ended November 30, 1996.
S-26
<PAGE>
PROSPECTUS
$100,000,000
MGI Properties
Common Shares, Preferred Shares, Debt Securities,
Warrants or Rights and Units
MGI Properties (together with its consolidated subsidiaries, "MGI" or the
"Trust") may offer from time to time in one or more series (i) its common
shares of beneficial interest, par value $1.00 per share ("Common Shares"),
(ii) its preferred shares of beneficial interest, par value $1.00 per share
("Preferred Shares" and, together with the Common Shares, the "Capital
Stock"), (iii) its unsecured debt securities consisting of bonds, debentures,
notes and/or other evidences of indebtedness ("Debt Securities"), (iv)
warrants or rights ("Warrants") to purchase Common Shares, Preferred Shares
and/or Debt Securities and (v) units ("Units") consisting of two or more of
the foregoing securities, with an aggregate public offering price of up to
$100,000,000 in amount, at prices and on terms to be determined at the time
of offering. The Common Shares, Preferred Shares, Debt Securities, Warrants
and Units (collectively, the "Securities") may be offered separately or
together, in separate series, in amounts, at prices and on terms to be set
forth in one or more supplements to this Prospectus (each a "Prospectus
Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Common Shares, the offering
price; (ii) in the case of Preferred Shares, the specific designation and
stated value per share, any dividend, liquidation, redemption, conversion,
voting and other rights, and the offering price; (iii) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking,
currency, form (which may be registered or bearer, or certificated or
global), authorized denominations, maturity, rate (or manner of calculation
thereof) and time of payment of interest, terms for redemption at the option
of the Trust or repayment at the option of the holder, terms for sinking fund
payments, terms for conversion into Preferred Shares or Common Shares,
covenants and the offering price; (iv) in the case of Warrants, the number
and terms thereof, any applicable designation thereof, and the designation
and the number of securities issuable upon their exercise, the exercise
price, the terms of the offering and sale thereof and, where applicable, the
duration, detachability and transferability thereof and (v) in the case of
Units, a description of the securities comprising such Units and the offering
price thereof. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the
Securities, in each case as may be consistent with the Trust's Second Amended
and Restated Declaration of Trust, as amended (the "Declaration of Trust") or
otherwise appropriate to preserve the status of the Trust as a real estate
investment trust ("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered directly by the Trust, through agents
designated from time to time by the Trust or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Securities, their names, and any applicable purchase price, fee, commission
or discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Securities.
The Common Shares are traded on the New York Stock Exchange (the "NYSE")
under the symbol "MGI." On October 31, 1996, the last sale price for the
Common Shares on the NYSE was $19-1/8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December 13, 1996.
<PAGE>
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549; 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Such material may also be
accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov. The Common Shares are listed on the NYSE and
such reports and other information may also be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
The Trust has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. The Registration Statement,
including exhibits thereto, may be inspected and copied at the locations
described above. Statements contained in this Prospectus as to the contents
of any contract or other document referred to are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Trust are incorporated by
reference in this Prospectus and shall be deemed to be a part hereof: (i) the
Trust's Annual Report on Form 10-K for the fiscal year ended November 30,
1995, (ii) the Trust's Reports on Form 10-Q for the fiscal quarters ended
February 29, 1996, May 31, 1996 and August 31, 1996, (iii) the Trust's
Definitive Proxy Statement with respect to its Annual Meeting of Shareholders
on March 21, 1996 and (iv) Reports on Form 8-K dated July 2, 1996, as
amended, and August 30, 1996, as amended, each reporting Acquisition of
Assets. All documents filed by the Trust pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of all Securities shall also be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in an applicable Prospectus Supplement) or in any
subsequently filed document that is incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed to constitute a part of this Prospectus or any Prospectus
Supplement, except as so modified or superseded.
The Trust hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents. Written requests for such copies
should be directed to MGI Properties at One Winthrop Square, Boston,
Massachusetts 02110, Attention: Ms. Jean Harrington, Vice President and
Secretary. Oral requests should be directed to such individual (telephone
number (617) 422-6000).
-------------
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Trust. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, the securities offered hereby to
any person in any state or other jurisdiction in which such offer or
solicitation is unlawful. The delivery of this Prospectus at any time does
not imply that information contained herein is correct as of any time
subsequent to its date.
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THE TRUST
MGI Properties is a self-advised REIT that owns and operates a diversified
portfolio of income producing real estate, which as of August 31, 1996
consisted of 57 commercial properties (83% of real estate investments, at
cost) and interests in six multifamily residential properties (17% of real
estate investments, at cost). Since 1992, the Trust has focused on the
commercial segment of the real estate market, specifically industrial and
office properties located in New England. At August 31, 1996, 48% of MGI's
real estate assets were located in New England. As of such date, the Trust's
commercial portfolio was leased to 303 tenants and aggregated 5,260,000
square feet (3,258,000 industrial, 1,195,000 office and 807,000 retail). The
multifamily properties consist of five wholly owned residential complexes
aggregating 1,335 units and a 4% partnership investment. At August 31, 1996,
the commercial and residential properties were 97% and 95% leased,
respectively.
The Common Shares are listed on the NYSE under the symbol "MGI."
The Trust, formerly known as Mortgage Growth Investors, was organized in
1971 as a Massachusetts common law business trust. MGI initially operated as
a hybrid REIT with a significant portion of its assets invested in mortgage
loans. In 1985, the Trust began the conversion to an equity REIT, which has
direct ownership of income producing properties. The conversion was completed
by January 1993. The conversion to an equity REIT has enabled the Trust to
assume control and management of its investments. Management believes that
the conversion has proven beneficial to the shareholders.
The Trust's offices are located at One Winthrop Square, Boston,
Massachusetts 02110 and its telephone number is (617) 422-6000.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Trust intends to use the net proceeds from the sale of Securities primarily
for general business purposes, including the acquisition, leasing, management
of industrial, office, multifamily or other properties or the acquisition of
interests in partnerships or other entities owning industrial, office,
multifamily or other properties as suitable opportunities arise, the
acquisition of real estate service entities, the repayment of certain
outstanding debt, selective development and effecting improvements to certain
properties in the Trust's portfolio.
Pending their use as described above, the net proceeds from the sale of
any Securities may be used for other general corporate purposes of the Trust
or invested in short-term securities, interest-bearing time or demand
deposits issued by financial institutions, cash items or qualified government
securities.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Trust for the periods indicated:
Quarter Ended
Year Ended November 30, August 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
- --------- -------- -------- -------- -------- ----------------
1.96:1 2.32:1 2.57:1 3.48:1 3.29:1 3.08:1 2.34:1
To date, the Trust has not issued any Preferred Shares. Accordingly, the
ratios of earnings to combined fixed charges and Preferred Shares dividends
are unchanged from the ratios shown above. For purposes of computing these
ratios, earnings have been calculated by adding fixed charges (excluding
capitalized interest) to net income (loss) before income taxes and
extraordinary items. Fixed charges consist of interest costs, whether
expensed or capitalized, the interest component of rental expense, if any,
and amortization of debt discounts and issue costs, whether expensed or
capitalized.
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under an
Indenture (the "Indenture") which may be supplemented by supplemental
indentures (each, an "Indenture Supplement") between the Trust and a bank
trustee (the "Trustee") to be named prior to the issuance of any Debt
Securities. The terms of the Debt Securities include those stated in the
Indenture and those made part of the Indenture (before any Indenture
Supplements) by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"). A copy of the form of the Indenture is filed as an exhibit to the
Registration Statement and is incorporated herein by reference. The following
is a summary of the Indenture, which summary does not purport to be complete,
and is qualified in its entirety by reference to the detailed provisions of
the Indenture, including the definitions of certain terms. Parenthetical
references to Sections are references to the corresponding section of the
Indenture unless otherwise indicated.
General
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provides that Debt Securities
may be issued from time to time in one or more series. All Debt Securities of
one series need not be issued at the same time and, unless otherwise
provided, a series may be reopened without the consent of the holders of the
Debt Securities of such series, for issuance of additional Debt Securities of
such series. Debt Securities will be unsecured general obligations of the
Trust, which may be convertible into Common Shares or Preferred Shares. Debt
Securities of any series may bear interest from the date of delivery at the
rate shown on the cover page of the applicable Prospectus Supplement. The
indebtedness represented by the Debt Securities of any series may be
subordinated in right of payment to the prior payment in full of the Senior
Indebtedness of the Trust, as described under "Subordination of Debt
Securities." The particular terms of the Debt Securities of any series will
be set forth in the applicable Indenture Supplement and described in the
applicable Prospectus Supplement. Such description will include any
applicable modifications of, or additions to, the general terms of the Debt
Securities as described herein or in the Indenture, as modified by any
applicable Indenture Supplement. Accordingly, for a description of the Debt
Securities of any series, reference must be made to both the Prospectus
Supplement relating thereto and the description of the Debt Securities set
forth in this Prospectus.
The Indenture will provide that the Trust may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under the Indenture may resign or be removed
with respect to one or more series of Debt Securities and a successor Trustee
may be appointed to act with respect to such series. In the event that two or
more persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the
Indenture separate and apart from the trust administered by any other
Trustee, and, except as otherwise indicated herein, any action described
herein to be taken by each Trustee may be taken by each such Trustee with
respect to, and only with respect to, the one or more series of Debt
Securities for which it is Trustee under the Indenture.
Prospectus Supplement
The applicable Prospectus Supplement will describe the following terms of
the series of Debt Securities offered in connection therewith:
(a) the title of such Debt Securities (which shall distinguish such Debt
Securities from all other series thereof);
(b) the currency or currencies, including composite currencies, in which
payment of the principal of (and premium, if any) and/or interest on such
Debt Securities shall be payable (if other than U.S. Dollars) and the manner
of determining the equivalent thereof in U.S. Dollars;
(c) any limit upon the aggregate principal amount of such Debt Securities
which may be authenticated and delivered under the Indenture;
(d) the manner in which the amount of payments of principal of (and
premium, if any) and/or interest on such Debt Securities may be determined
with reference to an index;
(e) the dates, or the method for determining such dates, on which the
principal of such Debt Securities will be payable;
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(f) the rate or rates, or the method by which such rate or rates shall be
determined, at which such Debt Securities will bear interest, if any, and the
basis upon which interest will be calculated if other than that of a 360-day
year of twelve 30-day months;
(g) the place or places where the principal of (and premium, if any)
and/or interest, if any, on such Debt Securities of the series will be
payable, where such Debt Securities may be surrendered for conversion or
registration of transfer or exchange and where notices or demands to or upon
the Trust in respect of such Debt Securities and the Indenture may be served;
(h) the period or periods within which, the price or prices at which, the
currency or currencies, currency unit or units or composite currency or
currencies in which, and any other terms and conditions upon which such Debt
Securities may, pursuant to any optional or mandatory redemption provisions,
be redeemed, in whole or in part, at the option of the Trust, if the Trust is
to have the option;
(i) any mandatory or optional sinking fund or analogous provision;
(j) the period or periods within which and the price or prices at which
such Debt Securities may, pursuant to any optional or mandatory redemption
provisions (including any provisions for redemption at the option of the
holder thereof), be redeemed and other terms and conditions of any such
optional or mandatory redemption;
(k) whether such Debt Securities will be in registered or bearer form and,
if in registered form, the terms and conditions relating thereto;
(l) whether such Debt Securities shall be issued in the form of one or
more Global Securities (as defined below), and, if so, the identity of the
Depositary of such series;
(m) the currency or currencies, including composite currencies, in which
payment of the principal of (and premium, if any) and/or interest of such
Securities will be payable if other than the currency of the United States;
(n) whether such Debt Securities are to be issued upon the exercise of
warrants or rights, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(o) any deletions from, modifications of, or additions to, the Events of
Default or covenants of the Trust with respect to such Securities of such
series, whether or not such Events of Default or covenants are consistent
with the Events of Default or covenants set forth in the general provisions
of the applicable Indenture;
(p) if other than the Trustee, the identity of each Security Registrar
and/or Paying Agent;
(q) the applicability, if any, of the defeasance and covenant defeasance
provisions described in the general provisions of the applicable Indenture
and any applicable Indenture Supplement thereto;
(r) the circumstances, if any, under which the Trust will pay any
additional amounts on such Debt Securities in respect of any tax, assessment
or governmental charge and, if so, whether the Trust will have the option to
redeem such Debt Securities in lieu of making such payment;
(s) if such Debt Securities are to be issued at an original issue
discount, as described below, the amount of principal, if any, payable upon
acceleration of such Debt Securities following an Event of Default; and
(t) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture.
If so provided in the applicable Indenture Supplement, Debt Securities may
be issued at a substantial discount below their principal amount and provide
for less than the entire principal amount thereof to be payable upon
declaration of acceleration of the maturity thereof (collectively the
"Original Issue Discount Securities"). In such cases, special U.S. federal
income tax, accounting and other considerations applicable to Original Issue
Discount Securities will be described in the applicable Prospectus
Supplement.
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Denomination, Interest, Registration and Transfer
Unless otherwise provided in any applicable Indenture Supplement, Debt
Securities will be issued only in fully registered form in denominations of
$1,000 principal amount or any integral multiple thereof (Section 3.2). Debt
Securities are exchangeable and transfers thereof will be registrable without
charge therefor, except that the Trust may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith (Section 3.5).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee,
the address of which will be stated in the applicable Prospectus Supplement;
provided that, at the option of the Trust, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in
the applicable register for such Debt Securities or by wire transfer of funds
to such person at an account maintained within the United States.
All monies paid by the Trust to a paying agent or a Trustee for the
payment of the principal of or any premium, if any, or interest on any Debt
Security which remain unclaimed at the end of three years after the same has
become due and payable shall, unless otherwise required by applicable law, be
repaid to the Trust, and the holder of such Debt Security thereafter may look
only to the Trust for payment thereof.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
any authorized denomination of other Debt Securities of the same series and
of a like aggregate principal amount and tenor upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee or at the
office of any transfer agent designated by the Trust for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer or exchange thereof at the corporate
trust office of the applicable Trustee or at the office of any transfer agent
designated by the Trust for such purpose. Every Debt Security surrendered for
conversion, registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer, and the person requesting
such action must provide evidence of title and identity satisfactory to the
applicable Trustee or transfer agent. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Trust
may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the
applicable Trustee) initially designated by the Trust with respect to any
series of Debt Securities, the Trust may at any time rescind the designation
of any such transfer agent or approve a change in the location through which
any such transfer agent acts, except that the Trust will be required to
maintain a transfer agent in each place of payment for such series. The Trust
may at any time designate additional transfer agents with respect to any
series of Debt Securities.
Consolidation, Merger, Sale or Conveyance
The Indenture will provide that the Trust, without the consent of the
holders of the then outstanding Debt Securities may merge or consolidate
with, or sell or convey all or substantially all of its assets to, any other
entity, provided that (i) either the Trust shall be the continuing entity, or
the successor entity (if other than the Trust) shall be an entity organized
and existing under the laws of the United States or a state thereof or the
District of Columbia (although it may, in turn, be owned by a foreign entity)
and such entity shall expressly assume by the applicable Indenture Supplement
all of the obligations of the Trust under the Debt Securities and the
Indenture; (ii) immediately after giving effect to such transactions no
default or Event of Default shall have occurred and be continuing, and (iii)
the Trust shall have delivered to the Trustee an officers' certificate and
opinion of counsel, stating that the transaction and the applicable Indenture
Supplement comply with the Indenture (Section 8.1).
Reorganization and Other Transactions
The Indenture will not afford the holders of Debt Securities any
protection from a decline of credit quality, nor will it give any protection
in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction ("Leveraged Transaction")
involving the Trust that may adversely affect holders of Debt
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Securities, except to the limited extent described above. The Indenture will
not contain any provision requiring the Trust to repurchase any of Debt
Securities in the event of a Leveraged Transaction, even though the Trust's
creditworthiness and the market value of Debt Securities may decline
significantly as a result of any such transaction.
Conversion Rights
If and to the extent set forth in the Indenture and the applicable
Indenture Supplement and described in the applicable Prospectus Supplement,
any portion of the principal amount of any Debt Securities of any series
which is $1,000 or an integral multiple thereof may be converted into Common
Shares and/or Preferred Shares at any time prior to redemption or maturity,
following the date set forth in the applicable Prospectus Supplement. The
conversion price and the specific class of Capital Stock of the Trust into
which Debt Securities are convertible will be set forth on the cover page of
the applicable Prospectus Supplement (subject to adjustments as described
below), except that the right to convert Debt Securities of a series called
for redemption will terminate at the close of business on the specific
redemption date and will be lost if not exercised prior to that time (Section
16.1).
To protect the Trust's status as a REIT, the holder may not convert any
Debt Security if as a result of such conversion any person would then be
deemed to beneficially own in excess of 9% in value of all outstanding shares
of Capital Stock (Section 16.1).
The conversion price will be subject to adjustment under certain
conditions, including in connection with (i) the payment of dividends or
other distributions in respect of any class of Capital Stock in shares of
Capital Stock; (ii) subdivisions, combinations, reorganizations and
reclassifications of any class of Capital Stock; (iii) the issuance to all or
substantially all holders of shares of any class of Capital Stock of rights
or warrants entitling them to subscribe for, or purchase shares of, Capital
Stock at a price per share (or having a conversion price per share) at less
than the current market price per share (Paragraph 2 of Section 16.4) of such
holders' respective class of Capital Stock (subject to the limitation that
under certain circumstances shares of Capital Stock issued under the Trust's
dividend reinvestment plan will not be deemed to be issued pursuant to rights
or warrants for purposes of this clause (iii)); and (iv) distributions to all
or substantially all of the holders of any class of Capital Stock of
evidences of indebtedness or assets (including any securities, other than
those rights, warrants, dividends or other distributions referred to in
clause (iii) above and dividends or other distributions not otherwise
prohibited under the terms of the Indenture, including certain purchase
rights relating to the dividend reinvestment plan) of the Trust; subject to
the limitation that all adjustments by reason of any of the foregoing would
not be made until they result in a cumulative change in the applicable
conversion price of at least 1% (Section 16.4).
A conversion price adjustment made according to the provisions of any
series of Debt Securities (or the absence of a provision for such an
adjustment) might result in a constructive distribution to the holders of
Debt Securities of such series or of shares of a class of Capital Stock. The
Trust may, at its option, but shall not be required to, make any adjustment
to the conversion price, in addition to those adjustments described above, to
avoid or diminish any income tax to any holders of any shares of any class of
Capital Stock resulting from any dividend or other distribution thereof (or
rights to acquire such shares) or from any event treated as such for income
tax purposes or for any other reason. The Board of Trustees of the Trust (the
"Board of Trustees") will have the power to resolve any ambiguity or correct
any error in the provision relating to the adjustment of the conversion price
of any series of Debt Securities. Its actions shall be final and conclusive
(Section 16.4).
In the event the Trust shall (i) effect any capital reorganization or
reclassification of any class of its shares of Capital Stock, (ii)
consolidate or merge with or into any trust or corporation (other than a
consolidation or merger in which the Trust is the surviving entity), or (iii)
sell or transfer substantially all of its assets, the holders of any series
of Debt Securities shall have the right, if entitled to convert such Debt
Securities, to receive upon conversion thereof, the same kind and amount of
Capital Stock and other securities, cash or property as shall have been
issuable or distributable prior to such consolidation, merger, sale or
transfer (Sections 16.4(5) and 16.10).
Fractional shares will not be issued upon conversion, but, in lieu
thereof, the Trust will pay on the applicable conversion date a cash
adjustment based upon market price (Section 16.8).
The record holders of Debt Securities at the close of business on an
interest payment record date shall be entitled to receive the interest
payable on such Debt Securities on the corresponding interest payment date
notwithstanding the conversion thereof. However, Debt Securities surrendered
for conversion during the period from the close of business on any record
date to the opening of business on the corresponding interest payment date
must be
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accompanied by payment of an amount equal to the interest payable on such
interest payment date. Holders of Debt Securities who convert Debt Securities
on an interest payment date will receive the interest payable on such date
and need not include payment of such interest upon surrender of Debt
Securities for conversion. Except as aforesaid, no payment or adjustment is
to be made on conversion for interest accrued on Debt Securities or for
dividends on shares of any class of Capital Stock (Sections 3.7 and 16.3).
Subordination of Debt Securities
The indebtedness evidenced by Debt Securities of any series may be
subordinated and junior in rights of payment, to the extent set forth in the
Indenture and the applicable Indenture Supplement, to the prior payment in
full of amounts then due on all Senior Indebtedness (as hereinafter defined).
No payment shall be made by the Trust on account of principal of (or premium,
if any) or interest on Debt Securities of any series or on account of the
purchase or other acquisition of Debt Securities of any series, if there
shall have occurred and be continuing a default with respect to any Senior
Indebtedness permitting the holders to accelerate the maturity thereof or
with respect to the payment of any Senior Indebtedness, and such default
shall be the subject of a judicial proceeding or the Trust shall have
received notice of such default from any holder of Senior Indebtedness,
unless and until such default or event of default shall have been cured or
waived or shall have ceased to exist. By reason of these provisions, in the
event of default on any Senior Indebtedness, whether now outstanding or
hereafter issued, payments of principal of (and premium, if any) and interest
on Debt Securities of any series may not be permitted to be made until such
Senior Indebtedness is paid in full, or the event of default on such Senior
Indebtedness is cured or waived (Section 15.2).
Upon any acceleration of the principal of Debt Securities or any
distribution of assets of the Trust upon any receivership, dissolution,
winding-up, liquidation, reorganization, or similar proceedings of the Trust,
whether voluntary or involuntary, or in bankruptcy or insolvency, all amounts
due or to become due upon all Senior Indebtedness must be paid in full before
the holders of Debt Securities of any series or the Trustee are entitled to
receive or retain any assets so distributed in respect of Debt Securities
(Section 15.2). By reason of this provision, in the event of insolvency,
holders of Debt Securities of any series may recover less, ratably, than
holders of Senior Indebtedness.
"Senior Indebtedness" is defined to mean the principal of and interest on,
or substantially similar payments to be made by the Trust in respect of, the
following, whether outstanding at the date of execution of the Indenture or
thereafter incurred, created or assumed: (a) indebtedness of the Trust for
money borrowed or represented by purchase-money obligations, (b) indebtedness
of the Trust evidenced by notes, debentures, or bonds, or other securities
issued under the provisions of an indenture, fiscal agency agreement or other
instrument, (c) obligations of the Trust as lessee under leases of property
either made as part of any sale and lease-back transaction to which the Trust
is a party or otherwise, (d) indebtedness of partnerships and joint ventures
which is included in the Trust's consolidated financial statements, (e)
indebtedness, obligations and liabilities of others in respect of which the
Trust is liable contingently or otherwise to pay or advance money or property
or as guarantor, endorser or otherwise or which the Trust has agreed to
purchase or otherwise acquire, and (f) any binding commitment of the Trust to
fund any real estate investment or to fund any investment in any entity
making such real estate investment; but excluding, however, (1) any such
indebtedness, obligation or liability referred to in clauses (a) through (f)
above as to which, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such
indebtedness, obligation or liability is not superior in right of payment to
the Securities, or ranks pari passu with the Securities, (2) any such
indebtedness, obligation or liability which is subordinated to indebtedness
of the Trust to substantially the same extent as or to a greater extent than
the Securities are subordinated and (3) the Securities. As used in the
preceding sentence the term "purchase-money obligations" shall mean
indebtedness or obligations evidenced by a note, debenture, bond or other
instrument (whether or not secured by any lien or other security interest but
excluding indebtedness or obligations for which recourse is limited to the
property purchased) issued or assumed as all or a part of the consideration
for the acquisition of property, whether by purchase, merger, consolidation
or otherwise, but shall not include any trade accounts payable. A
distribution may consist of cash, securities or other property.
"Indebtedness" with respect to any person means (a) all indebtedness for
borrowed money whether or not evidenced by bonds, notes, debentures or a
similar instrument, (b) that portion of obligations with respect to leases
that is properly classified as a liability on a balance sheet in accordance
with generally accepted accounting
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principles, (c) notes payable and drafts accepted representing extensions of
credit, (d) any balance owed for all or any part of the deferred purchase
price of property or services, which purchase price is due more than six
months from the date of incurrence of the obligation in respect thereof
(except any such balance that constitutes (i) a trade payable or an accrued
liability arising in the ordinary course of business or (ii) a trade draft or
note payable issued in the ordinary course of business in connection with the
purchase of goods or services), if and to the extent such debt would appear
as a liability upon a balance sheet of such person prepared in accordance
with generally accepted accounting principles, (e) all indebtedness for
letters of credit or bankers acceptances issued for the account of such
person or performance, surety or similar bonds, (f) all indebtedness under
interest rate swaps, caps or similar agreements and foreign exchange
contracts, currency swaps or similar agreements, (g) any liability of others
of the kind described in the preceding clauses (a) through (f), which such
person has guaranteed or which is otherwise its legal liability, and (h) any
and all deferrals, renewals, extensions and refunding of, or amendments,
modifications or supplements to, any liability of the kind described in any
of the preceding clauses (a) through (f); provided, however, that, in
computing the "Indebtedness" of any person, there shall be excluded any
particular indebtedness if, upon or prior to the maturity thereof and at the
time of determination of such indebtedness, there shall have been deposited
with a depositary in trust money (or evidences of indebtedness if permitted
by the instrument creating such indebtedness) in the necessary amount to pay,
redeem or satisfy such indebtedness as it becomes due, and the amount so
deposited shall not be included in any computation of the assets of such
person.
Discharge, Defeasance and Covenant Defeasance
As indicated in the applicable Prospectus Supplement, the Trust may be
permitted, at its option, to discharge certain obligations to holders of any
series of Debt Securities issued under any Indenture that have not already
been delivered to the applicable Trustee for cancellation and that either
have become due and payable or will become due and payable within one year
(or scheduled for redemption within one year) by irrevocably depositing with
the applicable Trustee in trust, money, U.S. Government Obligations or a
combination thereof in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium, if any) and
interest to the date of such deposit (if such Debt Securities have become due
and payable) or to the stated maturity or redemption date, as the case may be
(Section 4.1).
Optional Redemption
Debt Securities of any series will be subject to redemption, in whole or
in part, or on any date subsequent to the date set forth in the Prospectus
Supplement, at the option of the Trust on at least 60 days prior notice (45
days prior notice in the case of redemption of all Securities of any series)
by mail or by guaranteed overnight courier, at a redemption price equal to
100% (or such greater price as is set forth in the Prospectus Supplement
relating to such series of Debt Securities) of the principal amount plus
interest accrued to the date of redemption (Section 11.2). The Trust may
exercise its redemption powers over a holder's Debt Securities at any time to
the extent deemed sufficient by the Trust to prevent the holder of such
securities or any other person having an interest therein, if such securities
were converted into Capital Stock, from being deemed to own Excess Shares
(See "Description of Capital Stock-- Repurchase and Transferability of
Shares"). The Indenture does not contain any provision requiring the Trust to
repurchase Debt Securities at the option of the holders in the event of a
Leveraged Transaction, even though the Trust's creditworthiness and the
market value of Debt Securities may decline significantly as a result of such
transaction. Nor does the Indenture protect holders thereof against any
decline in credit quality.
Certain Covenants
The applicable Prospectus Supplement will describe any material covenants
in respect of the Debt Securities of any particular series. Unless otherwise
indicated in the applicable Prospectus Supplement, the Debt Securities will
include the following covenants:
Maintenance of Existence. Except as permitted under "Consolidation,
Merger, Sale or Conveyance," the Trust will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
Massachusetts business trust, all material rights (as provided in the
Declaration of Trust and under Massachusetts law) and material franchises;
provided, however, that the Trust shall not be required to preserve any right
or franchise if it determines that the preservation thereof is no longer
desirable in the conduct of its business (Section 10.4).
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Maintenance of Office or Agency. The Trust will maintain in each location
where Debt Securities of any series shall be paid an office or agency where
such Debt Securities may be presented or surrendered for payment,
registration of transfer or exchange, or conversion and where notices and
demands in respect of such Debt Securities, the Indenture and/or the Trust
may be served. The Trust will give prompt written notice to the Trustee of
each location, and any change thereto, of such office or agency (Section
10.2).
Maintenance of Properties and Insurance. The Trust will cause all of its
properties used and material to the conduct of its business or the business
of any subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Trust may be reasonably
necessary so that the business carried on in connection therewith may be
properly and conducted at all times (Section 10.5). In addition, the Trust
will and will cause each subsidiary to keep all of its insurable properties
insured against loss or damage at least equal to their then full insurable
value with insurers of recognized responsibility (Section 10.6). There is,
however, no prohibition against the Trust selling or otherwise disposing for
value of its properties in the ordinary course of business or discontinuing
the operation or maintenance of any such properties, if the Trust determines
that their preservation is no longer desirable in the conduct of its business
and not disadvantageous in any material respect to the holders of Debt
Securities.
Money for Securities Payments to Be Held in Trust. If the Trust shall at
any time act as its own Paying Agent with respect to any series of Debt
Securities, it will, on or before each due date of the principal of (and
premium, if any) or interest on any of the Debt Securities of that series,
segregate and hold in trust for the benefit of the persons entitled thereto a
sum sufficient to pay such amounts until such sums shall be paid to such
persons or otherwise disposed of as provided in the Indenture. If the Trust
shall have one or more Paying Agents for any series of Securities, it will,
on or before each due date of any payment of principal, premium, if any or
interest on any Debt Securities of that series, deposit with a Paying Agent a
sum sufficient to pay any such sum which sum will be held in trust for the
benefit of the persons entitled thereto and will cause each Paying Agent for
any series of Debt Securities to execute and deliver to the Trustee a paying
agency agreement setting forth the terms and conditions of such agency
(Section 10.3).
Payment of Taxes and Other Claims. The Trust will pay or discharge or
cause to be paid or discharged, within 30 days after the Trust shall have
received notice that the same has become delinquent, (i) all material taxes,
assessments and governmental charges levied or imposed upon it or any
subsidiary or upon the income, profits or property of the Trust or any
subsidiary, and (ii) all material lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of
the Trust or any subsidiary, unless such lien would not have a material
adverse effect upon such property; provided, however, that the Trust shall
not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings (Section 10.10).
Payment of Debt Securities and Reports to the Trustee. The Trust will be
obligated to pay the principal of, premium, if any, and interest on, Debt
Securities when due in accordance with their terms (Section 10.1). The Trust
also covenants to file with the Trustee copies of all reports filed with the
Commission promptly after making such filings with the Commission (Sections
7.4 and 10.7), and also to deliver to the Trustee within 120 days after the
end of each fiscal year a certificate as to the Trust's compliance with the
terms of the Indenture during such fiscal year (Section 10.8).
Limitation on Distributions and Acquisitions of Shares. The Indenture may
provide that the Trust will not (i) declare or pay any dividend or make any
distribution to holders of its Capital Stock (other than dividends or
distributions payable in its shares or other than as the Trust determines is
necessary to maintain its REIT status) or (ii) purchase, redeem or otherwise
acquire or retire for value any of its Capital Stock or permit any subsidiary
to do so, if at the time of such action an Event of Default (as defined in
the Indenture) has occurred and is continuing or would exist immediately
after giving effect to such action (Section 10.9).
Further Covenants. The Prospectus Supplement with respect to any series of
Debt Securities will describe any further covenants to the Trust set forth in
the Indenture Supplement relating to such series, which may include any
limitations on incurrence of additional debt.
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Modification of the Indenture
With certain exceptions, the rights and obligations of the Trust and the
rights of holders of any series of Debt Securities may only be modified by
the Trust and the Trustee with the consent of the holders of at least a
majority in principal amount of each series of affected Debt Securities.
Without the consent of each affected Debt Security holder, no amendment or
waiver or supplement may (i) reduce the principal of, or rate of interest on,
any Debt Security; (ii) change the stated maturity date of the principal of,
premium, if any, on, or any installment of interest on, any Debt Security;
(iii) change the currency for payment of the principal of, or premium, if
any, or interest on, any Debt Security; (iv) impair the right to institute
suit for the enforcement of any such payment when due; (v) reduce the amount
of outstanding Debt Securities necessary to consent to an amendment or waiver
provided for in the Indenture; or (vi) modify any provisions of the Indenture
relating to the modification, supplement and amendment of the Indenture or
waivers of past defaults, except as otherwise specified (Section 9.2 and
Section 316(b) of the TIA).
Events of Default, Notice and Waiver
The following events will be Events of Default under the Indenture in
respect of any applicable series of Debt Securities: (i) default in the
payment of interest on Debt Securities of such series when due and payable,
which continues for 30 days; (ii) default in the payment of principal of (and
premium, if any) on such Debt Securities when due, at maturity, upon
redemption or otherwise, or failure to deposit any sinking fund payment when
due; (iii) failure to perform any other covenant of the Trust contained in
the Indenture or such Debt Securities which continues for 60 days after
written notice is given as provided in the Indenture; (iv) default under any
bond, debenture or other Indebtedness of the Trust or any subsidiary, if (a)
either (x) such event of default results from the failure to pay any such
Indebtedness at maturity or (y) as a result of such event of default, the
maturity of such Indebtedness has been accelerated prior to its expressed
maturity and such acceleration shall not be rescinded or annulled or the
accelerated amount paid within ten days after notice to the Trust of such
acceleration, or such Indebtedness having been discharged, and (b) the
principal amount of such Indebtedness, together with the principal amount of
any other Indebtedness in default for failure to pay principal or interest
thereon, or the maturity of which has been so accelerated, aggregates
$10,000,000 or more; (v) certain events of bankruptcy, insolvency or
reorganization relating to the Trust, and (vi) any other Event of Default
provided with respect to Debt Securities of such series (Section 5.1). The
Indenture Supplement with respect to any series of Debt Securities may
provide for additional or modified Events of Default for the Debt Securities
of such series. If an Event of Default shall occur and be continuing, the
Trustee or the holders of a majority in aggregate principal amount of the
applicable series of Debt Securities may declare such Debt Securities due and
payable (Section 5.2).
The Indenture will provide that the Trustee shall, within 90 days after
the occurrence of any default or Event of Default with respect to Debt
Securities of any series, give to the holders of Debt Securities notice of
all uncured defaults or Events of Default known to it. The Trustee shall be
protected if in good faith it determines that the withholding of such notice
is in the interest of the holders of Debt Securities of any series (Section
6.5).
The Indenture will provide that the holders of a majority in aggregate
principal amount of the outstanding Debt Securities of any series may direct
the time, method and place of conducting any proceedings for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to Debt Securities of such series (Section 5.12). The
right of a holder to institute a proceeding with respect to the Indenture is
subject to certain conditions including notice and indemnity to the Trustee,
but the holder has an absolute right to receipt of principal of (and premium,
if any) and interest on such holder's Debt Security on or after the
respective due dates expressed in Debt Securities and to institute suit for
the enforcement of any such payments (Section 5.8).
The holders of a majority in principal amount of the outstanding Debt
Securities of any series may on behalf of the holders of all Debt Securities
of such series waive certain past defaults, except a default in payment of
the principal of (and premium, if any) or interest on any Debt Securities of
such series or in respect of certain provisions of the Indenture which cannot
be modified or amended without the consent of the holder of each Debt
Security affected thereby (Section 5.13).
The Trust will be required to furnish the Trustee annually a statement of
certain officers of the Trust stating whether or not they know of any Default
or Events of Default (as defined in the Indenture) and, if they have such
knowledge, a description of the efforts to remedy the same (Section 10.8).
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Global Securities
Debt Securities of a series may be issued in whole or in part in the form
of one or more global or book-entry securities ("Global Securities") that
will be deposited with, or on behalf of, a depositary identified in the
applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect
to a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
DESCRIPTION OF CAPITAL STOCK
The description of the Capital Stock set forth below does not purport to
be complete and is qualified in its entirety by reference to the Declaration
of Trust and the Trust's Bylaw, as amended (the "Bylaw"), copies of which are
exhibits to the Registration Statement of which this Prospectus is a part.
General
Under the Declaration of Trust, the Trust has authority to issue up to
23.5 million shares of Capital Stock, consisting of 17.5 million Common
Shares, par value $1.00 per share, and six million Preferred Shares, par
value $1.00 per share. At October 16, 1996, there were approximately
11,563,199 Common Shares issued and outstanding and no Preferred Shares
issued or outstanding.
Common Shares
All Common Shares offered hereby have been duly authorized and will, when
issued and paid for as described in the applicable Prospectus Supplement, be
fully paid and non-assessable. All outstanding Common Shares participate
equally in distributions when and as declared by the Board of Trustees and in
the assets available for distribution after payment of liabilities and of the
preferential amounts, if any, as to which holders of any Preferred Shares
then outstanding may be entitled upon the termination of the Trust.
Shareholders of the Trust do not have any preemptive rights. Shareholders of
record are entitled to cast one vote for each Common Share held on all
matters presented for a vote of the shareholders. Except as set forth below,
in meetings where a quorum is present, shareholder action requires approval
of a majority of the votes cast.
The Declaration of Trust provides that, subject to the provisions of any
series of Preferred Shares then outstanding, the affirmative vote of the
holders of Common Shares representing not less than 66-2/3% of the total
votes authorized to be cast by shares of all classes which are present in
person or by proxy and entitled to vote and voting in the election of
Trustees at such meeting is required for the election of each of the nominees
for Trustee (i.e., 66-2/3% of the votes cast). The Board of Trustees is
divided into three classes. Each class to be elected is generally voted upon
every three years. In the event that no nominee for a particular trusteeship
receives the requisite number of votes for election to such trusteeship at
the annual meeting of shareholders at which such nominee is standing for
election, the incumbent Trustee would remain in such office until the next
annual meeting and until a successor is elected and qualified. At that
meeting, such nominee would stand for election for the remainder of such
term, together with the nominees for the class whose term then expires.
Cumulative voting for the election of Trustees is not permitted. Except as
provided in the provisions of any series of Preferred Shares at the time
outstanding, the provisions of the Declaration of Trust may be amended or
repealed, without the approval of the Board of Trustees, by the affirmative
vote of the holders of not less than 80% of each class of outstanding voting
shares of Capital Stock. In addition, the approval of not less than 66-2/3%
of the whole Board of Trustees (the "whole Board" being the number of
Trustees theretofore established by Board resolution), together with the
approval of the holders of a majority of the outstanding voting shares of
Capital Stock, is required to amend the Declaration of Trust or to terminate
the Trust or for a merger or sale of all or substantially all of the assets
of the Trust.
The Declaration of Trust also provides that special meetings of
shareholders may be called by a majority of the Trustees and, subject to the
provisions of any series of Preferred Shares then outstanding, shall be
called by any Trustee upon the written request of shareholders holding not
less than 50% of the total outstanding shares of Capital Stock of all classes
entitled to vote at such a meeting.
Shareholders are entitled to receive distributions when and as declared by
the Board of Trustees out of funds legally available therefor. In the event
of termination, shareholders are entitled to share ratably in the assets
available for distribution after payment of liabilities and of such
preferential amounts, if any, as the holders of any Preferred
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Shares at the time outstanding shall be entitled. There are no conversion,
redemption (except as may be necessary for REIT qualification), exchange,
sinking fund, or similar provisions regarding the Common Shares.
The transfer agent and registrar for the Common Shares is BostonEquiServe,
L.P.
Preferred Shares
General. Preferred Shares may be issued from time to time, in one or more
series, as authorized by the Board of Trustees. The Trustees are authorized
to issue the Preferred Shares in series and to establish from time to time
the number of Preferred Shares to be included in such series and to fix the
designation and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Preferred Shares of each series.
Terms. The following description of the Preferred Shares sets forth
certain general terms and provisions of the Preferred Shares to which any
Prospectus Supplement may relate. The statements below describing the
Preferred Shares are in all respects subject to and qualified in their
entirety by reference to the applicable provisions of the Declaration of
Trust and Bylaw and any applicable additional amendment to the Declaration of
Trust designating terms of a series of Preferred Shares (a "Designating
Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(a) The title and stated value of such Preferred Shares;
(b) The number of such Preferred Shares offered, the liquidation
preference per share and the offering price of such Preferred Shares;
(c) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Shares;
(d) The date from which dividends on such Preferred Shares shall
accumulate, if applicable;
(e) The voting rights, if any, of such Preferred Shares;
(f) The procedures for any auction and remarketing, if any, for such
Preferred Shares;
(g) The provision for a sinking fund, if any, for such Preferred Shares;
(h) The provision for redemption, if applicable, of such Preferred Shares;
(i) Any listing of such Preferred Shares on any securities exchange;
(j) If convertible, the terms and conditions upon which such Preferred
Shares will be convertible into Common Shares, including the initial
conversion price (or manner of calculation thereof) and the conversion
period;
(k) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(l) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(m) The relative ranking and preference of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of the
affairs of the Trust;
(n) Any limitations on issuance of any series of Preferred Shares ranking
senior to or on a parity with such series of Preferred Shares as to dividend
rights and rights upon liquidation, dissolution or winding up of the affairs
of the Trust; and
(o) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of the
Trust as a REIT.
Rank. Unless otherwise specified in the Prospectus Supplement, the
Preferred Shares will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the Trust, rank (i) senior to all
classes or series of Common Shares, and to all equity securities ranking
junior to such Preferred Shares; (ii) on a parity with all equity securities
issued by the Trust the terms of which specifically provide that such equity
securities rank on a parity with the Preferred Shares; and (iii) junior to
all equity securities issued by the Trust the terms of which
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specifically provide that such equity securities rank senior to the Preferred
Shares. The term "equity securities" does not include convertible debt
securities.
Dividends. Holders of the Preferred Shares of each series will be entitled
to receive, when, as and if declared by the Board of Trustees, out of assets
of the Trust legally available for payment, dividends in such form, at such
rates and on such dates as will be set forth in the applicable Prospectus
Supplement. Each such dividend shall be payable to holders of record as they
appear on the share transfer books of the Trust on such record dates as shall
be fixed by the Board of Trustees.
Dividends on any series of the Preferred Shares may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set
forth in the applicable Prospectus Supplement. If the Board of Trustees fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Shares for which dividends are non-cumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend
in respect of the dividend period ending on such dividend payment date, and
the Trust will have no obligation to pay the dividend accrued for such
period, whether or not dividends on such series are declared payable on any
future dividend payment date.
If Preferred Shares of any series are outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Trust
of any other series ranking, as to dividends, on a parity with or junior to
the Preferred Shares of such series for any period unless (i) if such series
of Preferred Shares has a cumulative dividend, full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof is set apart for such payment on the
Preferred Shares of such series for all past unpaid dividend periods and the
then current dividend period or (ii) if such series of Preferred Shares does
not have a cumulative dividend, full dividends for the then current dividend
period have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof is set apart for such payment on the
Preferred Shares of such series. When dividends are not paid in full (or a
sum sufficient for such full payment is not so set apart) upon Preferred
Shares of any series and the shares of any other series of Preferred Shares
ranking on a parity as to dividends with the Preferred Shares of such series,
all dividends declared upon Preferred Shares of such series and any other
series of Preferred Shares ranking on a parity as to dividends with such
Preferred Shares shall be declared pro rata so that the amount of dividends
declared per share of Preferred Shares of such series and such other series
of Preferred Shares shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Shares of such series (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such Preferred Shares does not have a cumulative
dividend) and such other series of Preferred Shares bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on Preferred Shares of such series which may
be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for payment for all past unpaid dividend
periods and the then current dividend period, and (ii) if such series of
Preferred Shares does not have a cumulative dividend, full dividends on the
Preferred Shares of such series have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof is set
apart for payment for the then current dividend period, no dividends (other
than in Common Shares or other shares of capital stock ranking junior to the
Preferred Shares of such series as to dividends and upon liquidation) shall
be declared or paid or set aside for payment nor shall any other distribution
be declared or made upon the Common Shares, or any other capital stock of the
Trust ranking junior to or on a parity with the Preferred Shares of such
series as to dividends or upon liquidation, nor shall any Common Shares, or
any other shares of capital stock of the Trust ranking junior to or on a
parity with the Preferred Shares of such series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any such shares) by the Trust (except by conversion
into or exchange for other capital stock of the Trust ranking junior to the
Preferred Shares of such series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
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Redemption. If so provided in the applicable Prospectus Supplement, the
Preferred Shares shall be subject to mandatory redemption or redemption at
the option of the Trust, as a whole or in part, in each case upon the terms,
at the times and at the redemption prices set forth in such Prospectus
Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by the Trust in each year commencing after a
date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Shares do not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Shares of any series is payable only
from the net proceeds of the issuance of shares of capital stock of the
Trust, the terms of such Preferred Shares may provide that, if no such shares
of capital stock shall have been issued or to the extent the net proceeds
from any issuance are insufficient to pay in full the aggregate redemption
price then due, such Preferred Shares shall automatically and mandatorily be
converted into the applicable shares of capital stock of the Trust pursuant
to conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Shares shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart
for payment for all past dividend periods and the then current dividend
period, and (ii) if a series of Preferred Shares does not have a cumulative
dividend, full dividends on all of the Preferred Shares of such series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, no shares of such series of Preferred Shares shall be
redeemed unless all outstanding shares of Preferred Shares of such series are
simultaneously redeemed; provided, however, that the foregoing shall not
prevent the purchase or acquisition of Preferred Shares of such series to
preserve the REIT status of the Trust or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Shares
of such series. In addition, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all outstanding
shares of such series of Preferred Shares have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of such series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, the Trust shall not purchase or otherwise acquire directly
or indirectly any Preferred Shares of such series (except by conversion into
or exchange for capital stock of the Trust ranking junior to the Preferred
Shares of such series as to dividends and upon liquidation); provided,
however, that the foregoing shall not prevent the purchase or acquisition of
Preferred Shares of such series to preserve the REIT status of the Trust or
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Shares of such series.
If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by the
Trust and such shares may be redeemed pro rata from the holders of record of
such shares in proportion to the number of such shares held or for which
redemption is requested by such holder (with adjustments to avoid redemption
of fractional shares) or by lot in a manner determined by the Trust.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares
of any series to be redeemed at the address shown on the share transfer books
of the Trust. Each notice shall state: (i) the redemption date; (ii) the
number and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Shares are to be surrendered for payment of the redemption price;
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the Preferred
Shares of any series are to be redeemed, the notice mailed to each such
holder thereof shall also specify the number of Preferred Shares to be
redeemed from each such holder. If notice of redemption of any Preferred
Shares has been given and if the funds necessary for such redemption have
been set aside by the Trust in trust for the benefit of the holders of any
Preferred Shares so called for redemption, then from and after the redemption
date dividends will cease to accrue on such Preferred Shares, and all rights
of the holders of such shares will terminate, except the right to receive the
redemption price.
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Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Trust, then, before any
distribution or payment shall be made to the holders of any Common Shares or
any other class or series of Capital Stock ranking junior to the Preferred
Shares in the distribution of assets upon any liquidation, dissolution or
winding up of the Trust, the holders of each series of Preferred Shares shall
be entitled to receive out of assets of the Trust legally available for
distribution to shareholders liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable Prospectus
Supplement), plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid noncumulative
dividends for prior dividend periods). After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of
Preferred Shares will have no right or claim to any of the remaining assets
of the Trust. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Trust are
insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Shares and the corresponding amounts payable on all
shares of other classes or series of Capital Stock ranking on a parity with
the Preferred Shares in the distribution of assets, then the holders of the
Preferred Shares and all other such classes or series of Capital Stock shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders
of Preferred Shares, the remaining assets of the Trust shall be distributed
among the holders of any other classes or series of Capital Stock ranking
junior to the Preferred Shares upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
consolidation or merger of the Trust with or into any other corporation,
trust or entity, or the sale, lease or conveyance of all or substantially all
of the property or business of the Trust, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Trust.
Voting Rights. Holders of the Preferred Shares will not have any voting
rights, except as set forth below or as indicated in the applicable
Prospectus Supplement.
Whenever dividends on any Preferred Shares shall be in arrears for six or
more consecutive quarterly periods, the holders of such Preferred Shares
(voting separately as a class with all other series of Preferred Shares upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional trustees of the Trust at
a special meeting called by the holders of record of at least twenty-five
percent (25%) of any series of Preferred Shares so in arrears (unless such
request is received less than 90 days before the date fixed for the next
annual or special meeting of the shareholders) or at the next annual meeting
of shareholders, and at each subsequent annual meeting until (i) if such
series of Preferred Shares has a cumulative dividend, all dividends
accumulated on such Preferred Shares for the past dividend periods and the
then current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment or (ii) if such
series of Preferred Shares does not have a cumulative dividend, four
consecutive quarterly dividends shall have been fully paid or declared and a
sum sufficient for the payment thereof set aside for payment. In such case,
the entire Board of Trustees will be increased by two trustees.
Unless provided otherwise for any series of Preferred Shares, so long as
any Preferred Shares of a series remain outstanding, the Trust will not,
without the affirmative vote or consent of the holders of at least a majority
of such series of Preferred Shares outstanding at the time, given in person
or by proxy, either in writing or at a meeting (such series voting separately
as a class), (i) authorize or create, or increase the authorized or issued
amount of, any class or series of capital stock ranking prior to such series
of Preferred Shares with respect to payment of dividends or the distribution
of assets upon liquidation, dissolution or winding up or reclassify any
authorized capital stock of the Trust into such shares, or create, authorize
or issue any obligation or security convertible into or evidencing the right
to purchase any such shares; or (ii) amend, alter or repeal the provisions of
the Declaration of Trust or the Designating Amendment for such series of
Preferred Shares, whether by merger, consolidation or otherwise (an "Event"),
so as to materially and adversely affect any right, preference, privilege or
voting power of such series of Preferred Shares or the holders thereof;
provided, however, with respect to the occurrence of any of the Events set
forth in (ii) above, so long as the Preferred Shares remains outstanding with
the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event the Trust may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of holders of
Preferred Shares and provided further that (x) any increase in the amount of
the authorized Preferred Shares or the creation or issuance of any other
series of Preferred Shares,
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or (y) any increase in the amount of authorized shares of such series or any
other series of Preferred Shares, in each case ranking on a parity with or
junior to the Preferred Shares of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding Preferred Shares of such series shall have
been redeemed or called for redemption and sufficient funds shall have been
set aside by the Trust in trust for the benefit of the holders of such shares
to effect such redemption.
Conversion Rights. The terms and conditions, if any, upon which any series
of Preferred Shares is convertible into Common Shares will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will
include the number of Common Shares into which the Preferred Shares are
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders of the Preferred Shares or the Trust, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Shares.
Restrictions on Ownership. As discussed below under "Description of
Capital Stock--Repurchase and Transferability of Shares," for the Trust to
qualify as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code"), not more than 50% in value of its outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities) during the last half of a taxable year.
To assist the Trust in meeting this requirement, the Trust may take certain
actions to limit the beneficial ownership, directly or indirectly, by a
single person of the Trust's outstanding equity securities, including any
Preferred Shares. Therefore, the Designating Amendment for each series of
Preferred Shares may contain provisions restricting the ownership and
transfer of the Preferred Shares. The applicable Prospectus Supplement will
specify any additional ownership limitation relating to a series of Preferred
Shares.
Transfer Agent and Registrar. The transfer agent and registrar for the
Preferred Shares will be set forth in the applicable Prospectus Supplement.
Shareholder Liability to Third Persons and Indemnification by Trust
The Declaration of Trust provides that shareholders shall not be
personally liable in connection with the property or affairs of the Trust.
The Declaration of Trust further provides that the Trust shall indemnify and
hold harmless each shareholder from all claims and liabilities to which the
shareholders may become subject by reason of his being or having been a
shareholder, and that the Trust shall reimburse each shareholder for all
legal and other expenses reasonably incurred by him in connection with such
claim or liability. In addition, the Trust is required to, and as a matter of
practice does, insert a recital in every written instrument creating any
obligation of the Trust that such obligation is not binding upon any of the
Trustees or shareholders personally. However, with respect to tort claims and
contractual claims where shareholder liability is not disavowed as provided
above, claims for taxes and certain statutory liabilities, the shareholders
may, in some jurisdictions, be personally liable to the extent that such
claims are not satisfied by the Trust. The Declaration of Trust provides that
upon payment of any such claim the shareholders will be entitled to
reimbursement from the Trust. Inasmuch as the Trust carries public liability
insurance, any risk of personal liability to shareholders is limited to
situations in which the Trust's assets plus its insurance coverage would be
insufficient to satisfy the claims against the Trust and its shareholders.
The Trust intends, as a matter of general policy, to make investments with a
view to avoiding, to the extent possible, shareholder liability for
obligations of the Trust by making such investments based on advice of
counsel, or with due consideration as to the availability of indemnification
or insurance coverage, as well as other considerations. Since the
organization of the Trust as a REIT in 1971, no claim has ever been asserted
against any shareholder personally for any obligation of the Trust by virtue
of his status as a shareholder.
Repurchase and Transferability of Shares
In order for the Trust to qualify as a REIT under the Code, not more than
50% in value of its outstanding shares of Capital Stock may be owned,
directly or constructively, by five or fewer individuals during the last half
of the taxable year, and the shares of Capital Stock must be beneficially
owned by 100 or more persons during at least 335 days of a taxable year of 12
months or during a proportionate part of a shorter taxable year. Shares
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of Capital Stock are not redeemable except that, under the Declaration of
Trust, if, in the good faith opinion of the Trustees, ownership of the shares
of Capital Stock has or may become concentrated to an extent which may
prevent the Trust from qualifying as a REIT, the Trustees have the power, by
lot or other means deemed equitable to them, to prevent the transfer of
and/or call for redemption the number of shares of Capital Stock sufficient,
in the opinion of the Trustees, to maintain or bring the direct or
constructive ownership thereof into conformity with the requirements for
qualification as a REIT. Concentrated ownership is restricted under the
Declaration of Trust and the Bylaw so that where a shareholder acquires
shares of Capital Stock which together with shares of Capital Stock owned as
of such date would aggregate in excess of 9% of the shares of Capital Stock
outstanding. Such excess shares of Capital Stock will be deemed to be Excess
Shares ("Excess Shares"). The Excess Shares will be deemed to be issued and
outstanding shares of stock of the Trust and will be freely transferable by
the owner thereof. Holders of Excess Shares will not be entitled to exercise
any voting rights with respect to such Excess Shares and will not be entitled
to receive any dividends or other distributions with respect to such Excess
Shares (other than distributions in additional shares of Capital Stock). All
dividends and other distributions that would otherwise be payable with
respect to Excess Shares will be accumulated by the Trust (or an agent
thereof) and deposited in a savings account in a Massachusetts bank or with
the Trust's dividend disbursing agent bank, for the benefit of, and be
payable to, the holder of such Excess Shares at such time as such Excess
Shares shall cease to be Excess Shares.
The Declaration of Trust requires that each person who becomes the owner
of Excess Shares immediately give notice or cause to be given notice to the
Trust thereof and such other information as the Trust may reasonably require
of such person with respect to identifying all owners and amount of ownership
of its outstanding capital stock.
The Excess Shares provisions may have the effect of delaying, deferring or
preventing the acquisition of control of the Trust. However, the Declaration
of Trust provides that such Excess Shares provisions shall not apply to
shares of capital stock acquired by an underwriter in a public offering of
Securities of the Trust, or in any transaction involving the issuance of
Securities by the Trust, in which a majority of the Trustees determine that
such underwriter will timely distribute such Securities to or among others
such that following such distribution none of such Securities will be Excess
Shares.
Amendment of Declaration of Trust by Trustees
The Trustees may, by a 66-2/3% vote of the Trustees then in office, amend
provisions of the Declaration of Trust from time to time without a vote of
Shareholders to the extent deemed by the Trustees in good faith to be
necessary, among other things, (a) to meet the requirements for qualification
as a REIT under the Code or (b) to increase or decrease the number of
authorized shares of Capital Stock.
Shareholder Rights and Certain Other Plans
On June 21, 1989, the Board of Trustees adopted a shareholder rights plan
(the "Shareholder Rights Plan"). Under such plan, one right was attached to
each outstanding Common Share on July 5, 1989, and one right will be attached
to each Common Share thereafter issued. 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, 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). 150,000 of such Preferred
Shares have been designated as Series A participating Preferred Shares and
are reserved for issuance under the Shareholder Rights Plan. The rights are
redeemable by the Trust at a price of $.01 per right. If not exercised or
redeemed, all rights expire on July 5, 1999. The Board of Trustees has
reserved the right to extend the Plan. The description and terms of the
rights are set forth in a Shareholder Rights Agreement between the Trust and
The First National Bank of Boston, as Rights Agent.
The Board of Trustees also adopted a severance compensation plan (the
"Severance Compensation Plan") for officers in the event of a "hostile
takeover," which includes the following events, if not approved by two-thirds
of the members of the Board of Trustees in office immediately prior to the
occurrence of any such event: (i) the election as Trustee(s) in any year of
one or more persons not nominated by at least two-thirds of the Board of
Trustees in office prior to such election; (ii) a business combination such
as a merger; (iii) the acquisition of 15% or more of the voting power of the
Trust's securities by any person or entity; or (iv) the failure of the Trust
to qualify as a REIT for tax purposes by reason of more than 50% in value of
the Trust's voting securities outstanding being held by five or fewer
individuals. All full time officers who have completed a minimum of 36 months
of continuous
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employment with the Trust are eligible under the Severance Compensation Plan
and will be entitled to severance compensation equal to three months
compensation for each 12 months of employment based on the highest total
annual compensation rate earned prior to the hostile takeover, subject to
certain maximum payment limitations.
The Shareholder Rights Plan, the Severance Compensation Plan and certain
provisions of the Declaration of Trust and the Bylaw may have the effect of
perpetuating the existing management of the Trust or discouraging any attempt
by a third party to gain control of the Board of Trustees in the future.
DESCRIPTION OF WARRANTS
The Trust may issue warrants or rights (collectively, the "Warrants") for
the purchase of any series of Debt Securities or Common Shares of the Trust.
Warrants may be issued independently or together with any other Securities
and may be attached to or separate from such Securities.
Each series of Warrants will be issued under a separate warrant agreement
or rights agreement (each, a "Warrant Agreement") to be entered into between
the Trust and a warrant agent or rights agent ("Warrant Agent"). The Warrant
Agent will act solely as an agent of the Trust in connection with the
Warrants of such series and will not assume any obligation or relationship of
agency or trust for or with any holders or beneficial owners of Warrants.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is
being delivered: (a) the title of such Warrants; (b) the aggregate number of
such Warrants; (c) the price or prices at which such Warrants will be issued;
(d) the designation, aggregate principal amount and terms of the Securities
purchasable upon exercise of such Warrants; (e) the designation and terms of
the Securities, if any, with which such Warrants are issued and the number of
such Warrants issued with each such Security; (f) if applicable, the date on
and after which such Warrants and the related Securities will be separately
transferable; (g) the price at which the Securities purchasable upon exercise
of such Warrants may be purchased; (h) the date on which the right to
exercise such Warrants shall commence and the date on which such right shall
expire; (i) the minimum or maximum amount of such Warrants that may be
exercised at any one time; (j) information with respect to book-entry
procedures, if any; (k) a discussion of certain federal income tax
considerations; and (l) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
DESCRIPTION OF UNITS OF SECURITIES
The Trust may issue Units consisting of two or more other constituent
Securities, which Units may be issuable as, and for the period of time
specified therein may be transferable as, a single Security only, as
distinguished from the separate constituent Securities comprising such Units.
Any such Units will be offered pursuant to a Prospectus Supplement which will
(a) identify and designate the title of any series of Units; (b) identify and
describe the separate constituent Securities comprising such Units; (c) set
forth the price or prices at which such Units will be issued; (d) describe,
if applicable, the date on and after which the constituent Securities
comprising the Units will become separately transferable; (e) provide
information with respect to book-entry procedures, if any; (f) discuss
applicable federal income tax considerations relating to the Units; and (g)
any other terms of the Units and their constituent Securities.
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PLAN OF DISTRIBUTION
The Trust may sell Securities through underwriters or dealers, directly to
one or more purchasers, or through agents. Direct sales to investors may be
accomplished through subscription offerings or through subscription rights
distributed to the Trust's shareholders directly or through agents.
The distribution of the Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale or at prices related to such
prevailing market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Trust or from purchasers of Securities for whom
they may act as agents, in the form of discounts, concessions, or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions, or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers, and agents that
participate in the distribution of Securities may be deemed to be
underwriters, and any discounts or commissions they receive from the Trust,
and any profit on the resale of Securities they realize may be deemed to be
underwriting discounts and commissions, under the Securities Act. Any such
underwriter or agent will be identified, and any such compensation received
from the Trust will be described, in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Shares which are listed on the NYSE. Any Common Shares
sold pursuant to a Prospectus Supplement will be listed on the NYSE, subject
to official notice of issuance. The Trust may elect to list any series of
Debt Securities or Preferred Shares on an exchange, but is not obligated to
do so. It is possible that one or more underwriters may make a market in a
series of Securities, but will not be obligated to do so and may discontinue
any market making at any time without notice. Therefore, no assurance can be
given as to the liquidity of, or the trading market for, the Securities.
Under agreements into which the Trust may enter, underwriters will be, and
dealers and agents who participate in the distribution of Securities may be,
entitled to indemnification by the Trust against certain liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Trust in the ordinary course of
business.
If so indicated in the applicable Prospectus Supplement, the Trust may
itself, or may authorize underwriters or other persons acting as the Trust's
agents to solicit offers by certain institutions to purchase Securities from
the Trust pursuant to contracts providing for payment and delivery on a
future date. Institutions with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all
cases such institutions must be approved by the Trust. The obligations of any
purchaser under any such contract will be subject to the condition that the
purchase of the Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in
respect of the validity or performance of such contracts.
In the event the Trust acquires real estate properties through an
affiliated operating partnership (or similar acquisition vehicle) which may
be organized for such purpose (an "Operating Partnership"), interests in such
Operating Partnership (collectively, the "Interests") would be issued in
exchange for such property. If applicable, a Prospectus Supplement may cover
the issuance by the Trust of Common Shares in exchange for Interests, in
accordance with the terms of any applicable agreements relating to the
acquisition of such properties.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition,
Securities may not be sold in certain states unless they have been registered
or qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities offered hereby may not
simultaneously engage in market making activities with respect to the
Securities for a period of two business days prior to the commencement of
such distribution.
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LEGAL MATTERS
Certain legal matters, including the legality of the Securities, will be
passed upon for the Trust by Olshan Grundman Frome & Rosenzweig LLP. Members
of Olshan Grundman Frome & Rosenzweig LLP own an aggregate of 15,015 Common
Shares and hold options to purchase an aggregate of 23,400 Common Shares.
EXPERTS
The financial statements and schedules of the Trust as of November 30,
1995 and 1994, and for each of the years in the three-year period ended
November 30, 1995, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. To
the extent that KPMG Peat Marwick LLP audits and reports on financial
statements of the Trust issued at future dates, and consents to the use of
their report thereon, such financial statements also will be incorporated by
reference in the registration statement in reliance upon their report and
said authority.
The Historical Summary of Gross Income and Direct Operating Expenses of
Two Portland Square, One Portland Square and One Portland Square Parking Lot
for the year ended December 31, 1995 appearing in MGI Properties' current
report on Form 8-K dated July 2, 1996 as amended, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such Historical
Summary of Gross Income and Direct Operating Expenses are incorporated herein
by reference in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
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M G I P R O P E R T I E S
[PHOTO: Industrial: 1925 Andover Street, Tewksbury, Massachusetts]
[PHOTO: Multi-family: Beachwood Apartments, Harrison Township, Michigan]
[PHOTO: Office/R&D: One Executive Drive, Chelmsford, Massachusetts]
[PHOTO: Office/R&D: Two Federal Street, Billerica, Massachusetts]
"MGI Properties"(R) and "MGI"(R) are registered trademarks of MGI Properties.
<PAGE>
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and Prospectus in
connection with the offer made by this Prospectus Supplement and the
Prospectus and, if given or made, such information or representation must not
be relied upon as having been authorized by the Trust or the Underwriters.
Neither the delivery of this Prospectus Supplement or the Prospectus nor any
sale made hereunder shall, under any circumstance, create any implication
that there has been no change in the facts set forth in this Prospectus
Supplement or in the Prospectus or in the affairs of the Trust since the date
hereof. This Prospectus Supplement and the Prospectus do not constitute an
offer to sell or the solicitation of an offer to buy any of the securities
offered hereby by anyone in any state in which such offer or solicitation is
not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer
or solicitation.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT Page
Prospectus Supplement Summary S-3
The Trust S-7
Use of Proceeds S-15
Market Prices of Common Shares and Dividends
to Shareholders S-15
Capitalization S-16
Selected Financial Data S-17
Management's Discussion and Analysis of
Financial Condition and Results of Operations S-18
Management S-23
Taxation S-24
Underwriting S-25
Legal Matters S-25
Experts S-26
Incorporation of Certain Documents By
Reference S-26
PROSPECTUS
Available Information 2
Incorporation of Certain Documents by
Reference 2
The Trust 3
Use of Proceeds 3
Ratio of Earnings to Fixed Charges 3
Description of Debt Securities 4
Description of Capital Stock 12
Description of Warrants 19
Description of Units of Securities 19
Plan of Distribution 20
Legal Matters 21
Experts 21
1,750,000 Shares
MGI Properties
Common Shares
---------------------
PROSPECTUS SUPPLEMENT
---------------------
Alex. Brown & Sons
Incorporated
Davenport & Co. of Virginia, Inc.
Sutro & Co. Incorporated
Tucker Anthony
Incorporated
January , 1997
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