UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: May 31, 1999 Commission File Number: 1-6833
------------- ------
MGI PROPERTIES
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-6268740
- --------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
One Winthrop Square, Boston, Massachusetts 02110
- ---------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 422-6000
------------------------------------
N/A
- ---------------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report.
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ---------
Common shares outstanding as of July 6, 1999: 13,774,221
Page 1 of 16 pages
Exhibit Index appears on Page 14
<PAGE>
MGI PROPERTIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flow 5
Consolidated Statements of Changes in Shareholders' Equity 6
Notes to Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II: OTHER INFORMATION
Items 1 - 6 14
Signatures 15
Exhibit 11: Computation of Earnings Per Share 16
</TABLE>
-2-
<PAGE>
MGI PROPERTIES
PART I -- FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
May 31, 1999 November 30, 1998
(unaudited)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate:
Properties held for sale $365,881,000 $365,543,000
Cash and cash equivalents 7,418,000 12,265,000
Accounts receivable 3,720,000 5,040,000
Other assets 11,340,000 11,655,000
- ------------------------------------------------------------------------------------------
$388,359,000 $394,503,000
==========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Loans payable $117,621,000 $130,517,000
Other liabilities 8,678,000 7,164,000
- ------------------------------------------------------------------------------------------
Total liabilities 126,299,000 137,681,000
Shareholders' equity:
Common shares -- $1 par value; 17,500,000 shares authorized;
13,774,221 issued (13,764,221 at November 30, 1998) 13,774,000 13,764,000
Additional paid-in capital 208,363,000 208,278,000
Undistributed net income 39,923,000 34,780,000
- ------------------------------------------------------------------------------------------
Total shareholders' equity 262,060,000 256,822,000
- ------------------------------------------------------------------------------------------
$388,359,000 $394,503,000
==========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
MGI PROPERTIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
---------------------------- ---------------------------------
May 31, 1999 May 31, 1998 May 31, 1999 May 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Rental $18,787,000 $17,447,000 $37,454,000 $33,725,000
Interest 139,000 137,000 283,000 347,000
- -----------------------------------------------------------------------------------------------------------------------
Total income 18,926,000 17,584,000 37,737,000 34,072,000
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating expenses 4,080,000 4,000,000 8,186,000 7,926,000
Real estate taxes 2,212,000 2,054,000 4,427,000 3,992,000
Depreciation and amortization 376,000 2,902,000 735,000 5,568,000
Unrealized loss on property held for sale 1,200,000 -- 1,200,000 --
Interest 2,330,000 2,644,000 4,890,000 4,993,000
General and administrative 1,026,000 859,000 1,853,000 1,715,000
Liquidation plan 905,000 -- 1,783,000 --
- -----------------------------------------------------------------------------------------------------------------------
Total expenses 12,129,000 12,459,000 23,074,000 24,194,000
- -----------------------------------------------------------------------------------------------------------------------
Income before net gains 6,797,000 5,125,000 14,663,000 9,878,000
Net gains (loss) -- 1,950,000 (143,000) 8,025,000
- -----------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 6,797,000 7,075,000 14,520,000 17,903,000
Extraordinary item - prepayment of debt -- -- (286,000) --
- -----------------------------------------------------------------------------------------------------------------------
Net income $6,797,000 $7,075,000 $14,234,000 $17,903,000
=======================================================================================================================
PER SHARE DATA
Basic earnings per share $0.49 $0.51 $1.03 $1.31
=======================================================================================================================
Diluted earnings per share $0.48 $0.50 $1.00 $1.28
=======================================================================================================================
Weighted average shares outstanding 13,774,221 13,756,217 13,772,628 13,711,816
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
MGI PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
May 31, 1999 May 31, 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 14,234,000 $17,903,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 735,000 5,568,000
Unrealized loss on property held for sale 1,200,000 -
Net (gain) loss 143,000 (8,025,000)
Extraordinary item 286,000 -
Other 3,756,000 (1,083,000)
- ---------------------------------------------------------------------------------------
Net cash provided by operating activities 20,354,000 14,363,000
- ---------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of real estate (339,000) (57,127,000)
Additions to real estate (912,000) (1,937,000)
Tenant improvements (1,621,000) (2,020,000)
Deferred tenant charges (974,000) (1,118,000)
Net proceeds from sales of real estate 1,190,000 17,979,000
Other (367,000) 877,000
- ---------------------------------------------------------------------------------------
Net cash used in investing activities (3,023,000) (43,346,000)
- ---------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to loans payable, net 1,000,000 46,550,000
Repayment of loans payable (13,896,000) (16,932,000)
Mortgage prepayment penalty (286,000) -
Cash distributions (9,091,000) (7,960,000)
Proceeds from issuance of common shares 95,000 985,000
- ---------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (22,178,000) 22,643,000
- ---------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (4,847,000) (6,340,000)
- ---------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Beginning of period 12,265,000 13,964,000
- ---------------------------------------------------------------------------------------
End of period $7,418,000 $7,624,000
=======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
MGI PROPERTIES
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Additional
Common Paid-In Undistributed
Shares Capital Net Income
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at November 30, 1998 $13,764,000 $208,278,000 $34,780,000
Net income -- -- 14,234,000
Cash liquidating distributions -- -- (9,091,000)
Options exercised 10,000 85,000 --
- --------------------------------------------------------------------------------
Balance at May 31, 1999 $13,774,000 $208,363,000 $39,923,000
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
MGI PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1: The results of the interim period are not necessarily
- ------ indicative of results to be expected for the entire fiscal
year. The figures contained in this interim report are
unaudited and may be subject to year-end adjustments. Certain
prior year amounts have been reclassified to conform with the
current year presentation. In the opinion of management, all
adjustments necessary for a fair presentation of financial
position and results of operations have been included and such
adjustments include only the normal accruals.
Note 2: The shareholders of the Trust approved a Plan of Complete
- ------ Liquidation and Termination of the Trust (the "Plan") at a
special meeting held on October 14, 1998. The Plan calls for
the sale of all of the Trust's assets. Net sales proceeds and
available cash will be used to satisfy existing debts and
obligations with remaining funds to be distributed to
shareholders. Although it is expected that the Trust will
continue to qualify as a REIT for the period prior to the
distribution of MGI's assets to shareholders, no assurance can
be given that the Trust will not lose or terminate its status
as a REIT as a result of unforeseen circumstances.
Note 3: On June 22, 1999, the Board of Trustees declared a
- ------ distribution of $19.00 per share. The distribution is payable
July 30, 1999 to shareholders of record at the close of
business on July 16, 1999. This distribution will aggregate
$265 million. Since the October 14, 1998 liquidation vote,
liquidating distributions, inclusive of the $19.00, will total
$19.66 per share. Under the provisions of the Internal
Revenue Code, distributions made within 24 months of the
adoption of the Plan are considered liquidating distributions
and will not be dividend income when received by
shareholders. Distributions in liquidation are first used to
reduce a shareholder's tax basis in his or her shares of MGI
with the excess, if any, generally constituting a capital
gain, short or long term, as applicable.
Note 4: With shareholder approval of the Plan on October 14, 1998,
- ------ the Trust reclassified its real estate assets to "properties
held for sale" and on that date ceased depreciation of the
assets and reclassified accumulated depreciation and
amortization to the appropriate categories. On June 22,
1999, the Trust completed the sale of 53 New England
properties totaling 4.4 million square feet and on July 1,
1999 the Trust completed the $18 million sale of a 178,600
square foot Somerset, New Jersey office building. Subsequent
to the close of the quarter, the Trust entered into
agreements to sell four additional properties. The sales are
subject to the customary terms and conditions for
transactions of this size, including the respective
purchasers' satisfactory completion of due diligence,
engineering and environmental inspections, and approval of
titles and surveys. These sales are expected to close later
in MGI's third quarter or in the fourth quarter, although
there can be no assurance that any or all of them will be
successfully completed.
-7-
<PAGE>
MGI PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 5: Cash applied to interest payments amounted to $2.3 million and $2.6
- ------- million for the three-month periods ended May 31, 1999 and May 31,
1998, respectively. In connection with the June 22, 1999 sale of 53 New
England properties, MGI repaid all $36.0 million outstanding on its
line of credit, and $46.8 million of mortgage debt was repaid or
assumed by the buyer of the New England properties.
Note 6: Following shareholder approval of the Plan on October 14,
- ------ 1998, option holders, in accordance with their option
agreements, have elected, as an alternative to exercising
their options, to receive in cash the difference between the
per share option exercise price and the aggregate per share
net liquidation proceeds to be distributed to shareholders.
The estimated expense associated with these elections, which
is the difference between the per share option exercise price
and the aggregate per share net liquidation proceeds expected
to be distributed to shareholders, will be recognized upon
declaration of the related liquidating distributions. Holders
of approximately 1.5 million options, having an aggregate
average exercise price of approximately $19.84, have made this
election.
Note 7: MGI intends to qualify for the year ended November 30, 1999 as a
- ------- real estate investment trust under the provisions of Sections 856-860
of the Internal Revenue Code of 1986, as amended. Accordingly, no
provision has been made for Federal
income taxes.
-8-
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
MGI is a self-administered equity REIT that is operating under a Plan of
Complete Liquidation and Termination of the Trust (the "Plan"). The shareholders
of the Trust approved the Plan at a special meeting held on October 14, 1998.
The Plan is discussed in the Trust's Form 10-K for the year ended November 30,
1998, and in the definitive Proxy Statement dated September 10, 1998, including
risk factors, income tax consequences and certain other considerations. As part
of that discussion, management estimated that substantially all of the
properties would be sold within 12 to 15 months of shareholder adoption of the
Plan. On June 22, 1999, the Trust completed the sale of 53 New England
properties totaling 4.4 million square feet and the Board of Trustees declared a
distribution of $19.00 per share. The distribution is payable July 30, 1999 to
shareholders of record at the close of business on July 16, 1999. Since the
October 14, 1998 liquidation vote, liquidating distributions, inclusive of the
$19.00, will total $19.66 per share. On July 1, 1999, the Trust completed the
sale of a Somerset, New Jersey office building for a price of $18 million prior
to selling costs.
Following the completion of these two sales, MGI owns 13 properties, which
aggregate 1.1 million square feet of commercial space and 959 residential
apartments. The sales have eliminated $46.8 million of debt secured by several
of the New England properties and MGI repaid all $36 million outstanding on its
line of credit. Debt now totals $34.8 million and is secured by certain of these
remaining properties. As of May 31, 1999, these 13 properties had a net carrying
value that approximates 26% of MGI's real estate at depreciated cost and
represented approximately 28% of MGI's property operating income. The 13
properties are being actively marketed with four properties currently under
agreement. The sales are subject to the customary terms and conditions,
including the respective purchasers' satisfactory completion of due diligence,
engineering and environmental inspections, and approval of titles and surveys.
These sales are expected to close later in MGI's third quarter or in the fourth
quarter, although there can be no assurance that all or any of them will be
successfully completed.
The current estimate of pricing with respect to the remaining properties,
when added to the net proceeds of the June sales, is expected to result in
aggregate net liquidation proceeds of between $29 and $30 per share after all
fees and liquidation costs; however, no assurance can be given that per share
net cash distributions will be within this range or will reach this range and no
assurances can be made as to the timing of remaining future distributions.
Following payout of the $19.00 per share distribution, MGI expects that short
term investments, primarily in Government securities, will approximate $60
million.
Liquidity and Capital Resources
- -------------------------------
Shareholders' equity at May 31, 1999 was $262.1 million, compared to
$256.8 million at November 30, 1998. The increase primarily reflects the excess
of net income over distributions paid. At May 31, 1999, financial liquidity was
provided by $7.4 million in cash and cash equivalents and by an unused line of
credit aggregating $39.0 million. Subsequent to the completion of the June 22,
1999 sale, MGI terminated its line of credit.
-9-
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Loans payable totaled $117.6 million at May 31, 1999, a net decrease of
$12.9 million compared to $130.5 million at November 30, 1998. During the first
quarter, the Trust repaid a $12.3 million mortgage loan that was secured by an
Aurora, Illinois retail center and incurred a $0.3 million penalty which was
recorded as an extraordinary item. In addition, the Trust increased its
borrowing from its line of credit by a net of $1.0 million and made scheduled
principal payments totaling $1.6 million. Scheduled loan principal payments
associated with the remaining unsold properties due within 12 months of May 31,
1999 total $.8 million. MGI has no debt which is scheduled to mature prior to
the anticipated completion of the Plan.
Cash requirements during the balance of fiscal 1999 include distributions
to shareholders, capital and tenant improvements and other leasing expenditures
required to maintain MGI's occupancy levels and other investment undertakings.
Currently, the Trust anticipates funding approximately $.7 million of capital
and tenant improvement projects associated with the remaining unsold properties.
In connection with the Plan, MGI anticipates incurring a variety of costs
and fees including costs related to sales, fees to advisors and other
professionals, severance compensation, payments to holders of stock options, and
other expenses related to liquidation. Among the costs is an estimated $4.2
million of employee severance compensation, which includes base and incentive
components. The Trust has entered into agreements with a financial advisor and
an exclusive property sales agent. Each agreement provides for a fee of $1.5
million to be paid in the event of a complete liquidation or merger. In
connection with sale of the New England properties the Trust paid $990,000 to
each with the remaining fees to be paid proportionately as the Trust completes
the sale of the remaining properties. In addition, the Trust has agreed to
reimburse out-of-pocket expenses of these advisors up to $650,000 in the
aggregate, of which $626,000 has been paid to date.
Results of Operations
- ---------------------
Net income for the fiscal quarter ended May 31, 1999, was $6.8 million, or
$.49 per share (basic), as compared to $7.1 million, or $.51 per share (basic),
in the corresponding quarter of 1998. Included in the 1999 second quarter net
income was a $1.2 million unrealized loss on properties held for sale which was
recognized with the Trust's decision to sell certain of the remaining properties
in single property sales transactions. Included in the 1998 second quarter net
income was $2.0 million of gain recognized from the sale of an industrial
building located in South Carolina. Income before net gain and extraordinary
item was $6.8 million and $5.1 million for the quarters ended May 31, 1999 and
May 31, 1998, respectively.
-10-
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Net income for the six months ended May 31, 1999, was $14.2 million, or
$1.03 per share (basic), as compared to $17.9 million, or $1.31 per share
(basic), a year ago. Income before net gain and extraordinary item was $14.7
million and $9.9 million for the six months ended May 31, 1999 and May 31, 1998,
respectively. Included in the 1999 year-to-date net income was a $.1 million
loss from the sale of one property, a $.3 million loan prepayment fee,
liquidation-related expenses of $1.8 million and a $1.2 million unrealized loss
on properties held for sale. Included in 1998 year-to-date net income were net
gains of $8.0 million from the sale of five properties.
Funds from operations ("FFO") totaled $9.3 million in the second quarter
of fiscal 1999, compared to $8.0 million in the corresponding quarter of 1998.
Funds from operations for the six months ended May 31, 1999 and 1998 were $18.3
million and $15.3 million, respectively. MGI calculates FFO in conformity with
the NAREIT definition which is net income (computed in accordance with generally
accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures, and for
significant non-recurring events (such as Liquidation Plan expenses). MGI
believes FFO is an appropriate supplemental measure of operating performance.
The following is a reconciliation of net income to FFO:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
May 31, 1999 May 31, 1998 May 31, 1999 May 31, 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $6,797,000 $7,075,000 $14,234,000 $17,903,000
Plus net loss/(less net gain) -- (1,950,000) 429,000 (8,025,000)
and extraordinary item
Plus unrealized loss on property 1,200,000 -- 1,200,000 --
held for sale
Plus building depreciation -- 2,249,000 -- 4,285,000
Plus tenant improvement and 350,000 612,000 684,000 1,200,000
commission amortization
Plus liquidation plan expenses 905,000 -- 1,783,000 --
---------- ---------- ----------- -----------
FFO $9,252,000 $7,986,000 $18,330,000 $15,363,000
========== ========== =========== ===========
</TABLE>
-11-
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The $1.7 million increase in income before net gains, when 1999 is
compared to 1998, resulted in part from a $1.1 million increase ($12.5 million
versus $11.4 million, respectively) in property operating income (which is
defined as rental income less property operating expenses and real estate
taxes), offset by liquidation plan expenses and increased general and
administrative expenses. Moreover, depreciation and amortization decreased by
$2.5 million, as the Trust stopped depreciating its real estate assets on
October 14, 1998, the date shareholders approved the Plan. In the second quarter
of 1999, the Trust recognized an unrealized loss of $1.2 million, the amount
which management determined that the carrying value of a property exceeded its
estimated fair value. The decrease in interest expense of $0.3 million was due
primarily to a lower average interest rate on outstanding debt. The increase in
general and administrative expense is primarily due to the recognition of long
term incentive compensation. Liquidation plan expenses of $905,000 primarily
reflects employee severance costs.
The change in property operating income reflects an 8.3%, or $0.9 million
increase in income from "same store" properties owned throughout the second
quarters of both fiscal 1999 and 1998, the additional income of $.4 million from
the 1998 acquisition of properties, offset by the income effect of $.2 million
due to the sale of properties. With respect to the comparable properties, the
increase in property operating income is primarily due to increased revenues
reflecting the adjustment to market rents as leases rolled over.
<TABLE>
<CAPTION>
Change in Property Operating Income for Quarter Ended May 31, 1999 versus May 31, 1998
- --------------------------------------------------------------------------------------
Properties Held 1999 and 1998 1999 and 1998
Both Fiscal Years Acquisitions Sales Net Change
----------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Office $207,000 $260,000 $ (45,000) $ 422,000
Industrial 120,000 9,000 (90,000) 39,000
Office R&D 90,000 145,000 -- 235,000
Apartment (15,000) -- -- (15,000)
Retail 360,000 -- (52,000) 308,000
Land and Partnership 95,000 -- 18,000 113,000
-------- -------- ---------- ----------
$857,000 $414,000 $(169,000) $1,102,000
======== ======== ========= ==========
</TABLE>
The increase in property operating income of $2.0 million, or 10.2%, from
properties held in both the six months ended May 31, 1999 and 1998, was
primarily due to leasing completed in the second half of fiscal 1998 and during
the current six-month period. Average occupancy for both six-month periods was
at approximately 95%.
-12-
<PAGE>
MGI PROPERTIES
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Schedule of portfolio leasing as of May 31, 1999 is as follows:
<TABLE>
<CAPTION>
Property Total Percentage 1999
Type Square Feet Leased Leasing
---- ----------- ------ -------
<S> <C> <C> <C>
Office 1,814,500 95.0% 89,800
Industrial 1,684,000 96.9% 86,800
Office/R&D 1,394,200 92.4% 74,600
Retail 715,200 99.1% 26,800
---------- ----- ------
Total 5,608,800 95.5% 278,000
========= ===== =======
</TABLE>
The are no significant fiscal 1999 lease expirations associated with the
Trust's group of unsold properties.
Forward Looking Statements
- --------------------------
Statements made or incorporated in this Report may contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are dependent on a number of factors which
could cause actual results to differ materially from those expressed or implied
in the forward-looking statements. Such factors include, among other things, the
risks of future action or inaction by the Board of Trustees with respect to the
Plan of Liquidation (and the actual results thereof), including the possibility
of litigation pertaining thereto; the net realizable value and the timing of the
sale of the Trust's remaining properties during the course of the liquidation;
the amount and timing of liquidating distributions; changes in national and
local economic and financial market conditions; the successful completion of the
pending sales described in this Report, as well as those factors set forth in
MGI's Form 10-K for the year ended November 30, 1998, including those set forth
under "Forward-Looking Statements," "Other" and Item 1 - "Adoption of
Liquidation Plan".
-13-
<PAGE>
MGI PROPERTIES
PART II - OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 1: Legal Proceedings: Not applicable.
Item 2: Changes in Securities and Use of Proceeds: Not applicable.
Item 3: Defaults upon Senior Securities: Not applicable.
Item 4: Submission of Matters to a Vote of Security Holders:
The following was submitted to a vote of shareholders at the March
26, 1999 Annual Meeting of Shareholders:
(a) The election of two Trustees to serve for a term of three
years expiring on the date of the Trust's Annual Meeting of
Shareholders in 2002. The vote on this was George M. Lovejoy,
Jr. - 12,518,670 affirmative and 55,236 withheld; and, Robert
M. Melzer - 12,510,520 affirmative and 63,386 withheld.
Item 5: Other Information: Not applicable.
Item 6: Exhibits and Reports on Form 8-K:
a) Exhibits:
Part I - Exhibit 11 -- Computation of Earnings Per Share (see
page 16).
b) Reports on Form 8-K: Dated March 12, 1999
Dated March 26, 1999
Dated June 22, 1999
Dated June 22, 1999
</TABLE>
-14-
<PAGE>
MGI PROPERTIES
PART I - EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Three Months Ended May 31, Six Months Ended May 31,
-------------------------- ------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BASIC
Net income $ 6,797,000 $ 7,075,000 $14,234,000 $17,903,000
==============================================================================================================================
Weighted average number of shares outstanding during the period 13,774,221 13,756,217 13,772,628 13,711,816
==============================================================================================================================
Basic earnings per share $0.49 $0.51 $1.03 $1.31
==============================================================================================================================
DILUTED EARNINGS PER SHARE
Net income $ 6,797,000 $ 7,075,000 $14,234,000 $17,903,000
Weighted average number of shares outstanding assuming full dilution 14,189,075 14,059,877 14,200,040 14,019,953
==============================================================================================================================
Diluted earnings per share $0.48 $0.50 $1.00 $1.28
==============================================================================================================================
</TABLE>
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> MAY-31-1999
<CASH> 7,418
<SECURITIES> 000
<RECEIVABLES> 3,720
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 11,340
<PP&E> 365,881
<DEPRECIATION> 000
<TOTAL-ASSETS> 388,359
<CURRENT-LIABILITIES> 8,678
<BONDS> 117,621
<COMMON> 13,774
000
000
<OTHER-SE> 248,286
<TOTAL-LIABILITY-AND-EQUITY> 388,359
<SALES> 18,787
<TOTAL-REVENUES> 18,926
<CGS> 000
<TOTAL-COSTS> 9,799
<OTHER-EXPENSES> 000
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 2,330
<INCOME-PRETAX> 6,797
<INCOME-TAX> 000
<INCOME-CONTINUING> 6,797
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 6,797
<EPS-BASIC> .49
<EPS-DILUTED> .48
</TABLE>
