2017 ANNUAL REPORT
The background on the front and back covers is 215 International Drive, the approximately 277,000
square foot industrial/warehouse building in the Charlotte, North Carolina area, that Griffin acquired
in fiscal 2017.
GRIFFIN INDUSTRIAL REALTY, INC.
641 Lexington Avenue
26th Floor
New York, NY 10022
April 5, 2018
To Our Stockholders:
In fiscal 2017, Griffin continued the significant growth in its industrial/warehouse business,
entered into a new geographic market and remained well-capitalized to support future investment in new
developments and acquisitions as well as in its current portfolio. Griffin’s property portfolio grew 12.5%
from approximately 3,297,000 square feet at the end of fiscal 2016 to approximately 3,710,000 square
feet at the end of fiscal 2017 and its profit from leasing activities* increased 15.6%, from approximately
$18.2 million in fiscal 2016 to approximately $21.1 million in fiscal 2017. The increase in Griffin’s
profit from leasing activities was due to the lease-up of substantially all of its existing
industrial/warehouse space and the growth of its industrial/warehouse portfolio, which now comprises
88% of the Company’s total square footage. The growth of the industrial/warehouse portfolio was due to
the acquisition of an industrial/warehouse building in the Charlotte, North Carolina market and the
development, on speculation, of an industrial/warehouse building in Connecticut.
In fiscal 2017, Griffin acquired an approximately 277,000 square foot industrial/warehouse
building (“215 International”) in Concord, North Carolina, an area northeast of Charlotte. The greater
Charlotte industrial/warehouse market has experienced strong growth over the past several years due to its
strategic location near key infrastructure and increases in population and economic activity. Griffin
acquired 215 International in an off-market transaction, paying a portion of the purchase price with the
proceeds from a land sale in Connecticut (discussed below) under a Section 1031 Like-Kind Exchange
(“1031 Like-Kind Exchange”). 215 International was 61% leased when the purchase agreement was
signed and became fully leased shortly after Griffin closed on the acquisition when an existing tenant
expanded and leased the balance of the building. Subsequent to the acquisition of 215 International,
Griffin reached an agreement to purchase a 22 acre parcel of land located directly across the street from
215 International. Griffin is currently seeking approvals to develop two industrial/warehouse buildings
totaling approximately 283,000 square feet on this land, which, if the acquisition closes, would provide
Griffin a development pipeline to support its growth in the Charlotte market.
Leasing of Griffin’s industrial/warehouse properties remained strong in 2017, and as of fiscal
year end, 98% of Griffin’s approximately 3,277,000 square foot industrial/warehouse portfolio was
leased. As of the end of the first quarter of fiscal 2018, Griffin’s Lehigh Valley industrial/warehouse
portfolio, totaling approximately 1,183,000 square feet, was fully leased and the only significant vacancy
in Griffin’s approximately 1,817,000 square feet of Connecticut industrial/warehouse portfolio was
approximately 63,000 square feet in the recently completed approximately 137,000 square foot building
(“330 Stone Road”) in New England Tradeport (“NE Tradeport”).
Currently, Griffin has two new industrial/warehouse development projects underway. The first is
an approximately 234,000 square foot build-to-suit facility in NE Tradeport for an investment-grade
company that signed a twelve year, six month lease for the building, which is expected to be completed in
Griffin’s fiscal 2018 fourth quarter. The second project is an industrial/warehouse facility of
approximately 134,000 square feet (“6975 Ambassador Drive”), being built on speculation, in the Lehigh
Valley of Pennsylvania. Upon completion of 6975 Ambassador Drive, estimated to be in the fiscal 2018
third quarter, Griffin’s Lehigh Valley portfolio will total approximately 1,317,000 square feet. To
maintain its recent growth trend, Griffin is engaged in negotiations to expand its presence in the Lehigh
Valley through the acquisition of developable land, and is also actively seeking to acquire buildings or
developable land in other geographies.
Leasing of Griffin’s office/flex portfolio continues to be difficult as vacancy rates in the market
near the Griffin Center office park remain high with few substantial potential tenants seeking space.
Griffin’s office/flex portfolio, which comprises approximately 12% of the Company’s total square
footage, has a current occupancy of approximately 74%. Griffin leased approximately 23,000 square feet
of single story office space in fiscal 2017 and completed an additional lease of approximately 11,000
square feet during the first quarter of fiscal 2018, with the tenants in both of those leases replacing tenants
that recently had vacated that space. As Griffin has previously communicated, the Company does not
intend to grow its office/flex portfolio but will continue to make the necessary investments to best
position its properties in a competitive market for tenants.
In fiscal 2017, Griffin had a successful year monetizing certain of its land holdings, completing
several transactions that generated cash of approximately $13.0 million. The most significant of these
was the sale of approximately 67 acres of undeveloped land in Phoenix Crossing for approximately $10.3
million. The buyer of this land is nearing completion of its construction of approximately 780,000 square
feet of warehouse/distribution space, further demonstrating the attractiveness of the greater Hartford
market for this use of space. The proceeds from this sale were subsequently used in the acquisition of 215
International as part of a 1031 Like-Kind Exchange, allowing Griffin to defer, for income tax purposes,
the gain on the sale of the Phoenix Crossing land. During the 2017 fiscal year, Griffin also sold
approximately 76 acres of undeveloped land in Southwick, Massachusetts for $2.1 million to a utility that
intends to develop a solar farm on the site. These proceeds were subsequently used in a 1031 Like-Kind
Exchange for the purchase of approximately 14 acres of undeveloped land in the Lehigh Valley of
Pennsylvania on which Griffin is currently constructing 6975 Ambassador Drive. Additionally, Griffin
has an agreement to sell an approximately 280 acre parcel of undeveloped land in Simsbury, Connecticut
for $7.7 million to a purchaser that intends to use the land to generate solar electricity. Although the
purchaser has received approval from the state’s regulatory authority to use the land as a solar farm, the
project currently is being contested which is expected to delay the potential closing date for this sale.
There is no guarantee that the foregoing transaction will be completed under its current terms, or at all.
Griffin’s available capital, including a cash balance of approximately $33.3 million as of
February 28, 2018 and a $15 million revolving credit line, positions the Company well for future growth.
Since the start of fiscal 2017, through the end of the fiscal 2018 first quarter, new borrowings under
nonrecourse mortgage loans, net of refinancings of existing mortgage loans, aggregated approximately
$30.1 million, reflecting new mortgages on 215 International and three previously unleveraged NE
Tradeport buildings, including the recently completed 330 Stone Road. As a result of these financings,
Griffin’s weighted average interest rate on its debt outstanding was approximately 4.29% at February 28,
2018. The recent increase in short-term U.S. Treasury rates and the increase in U.S. Government ten-year
bond yields from 2.40% at the start of this calendar year to 2.74% as of March 30, 2018 will not impact
the debt service on Griffin’s mortgage loans as all of its mortgages are at fixed rates or are effectively at
fixed rates through interest rate swap agreements. As of February 28, 2018, only approximately $7.8
million (out of a total of approximately $137.1 million) of the Company’s mortgage debt is due before the
end of fiscal 2024.
Griffin currently intends to file, in the near future, a universal shelf registration statement (the
“Universal Shelf”) with the Securities and Exchange Commission (the “SEC”) that once declared
effective by the SEC, will allow Griffin to register offerings of equity and/or debt securities up to
$50 million. The Universal Shelf is expected to provide Griffin with financial flexibility and access to
additional capital to help support Griffin’s future growth and other business activities. As noted above,
Griffin has a significant cash balance and availability under its $15 million revolving line of credit and,
therefore, does not expect to obtain proceeds from an offering under the Universal Shelf in the near term.
Griffin is optimistic that it will have opportunities to invest its capital in the future. However, the market
for acquisitions in the industrial real estate sector remains competitive with sales prices and valuations at
historic high levels, and increases in construction costs and interest rates may also impact returns on
investment. As such, Griffin is committed to remaining disciplined in its approach and will pursue only
those developments and acquisitions that are believed to have strategic merit and would generate an
acceptable return on capital over the long term.
The following table shows the growth of Griffin’s real estate business over the past ten years:
Total industrial/warehouse space square footage . . . . . . . . . . . . . .
Percentage of industrial/warehouse space leased at year end . . . . .
Total office/flex space square footage . . . . . . . . . . . . . . . . . . . . . . .
Total office/flex space leased at year end . . . . . . . . . . . . . . . . . . . .
Profit from leasing activities * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Debt service on mortgages (including amortization) . . . . . . . . . . . $
Real estate assets at carrying cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Real estate assets at carrying cost less mortgage debt . . . . . . . . . . . $
2007
1,583,000
67 % (a)
433,000
60 %
7.9 million $
3.3 million $
5.3 million $
109.6 million $
60.4 million $
2017
3,277,000
98 %
433,000
71 %
21.1 million
5.4 million
8.7 million
198.7 million
67.7 million
(a) Excluding two industrial/warehouse buildings completed and partially leased in 2007, the percentage
leased was 74%.
Griffin’s employees continue to be critical to its success and we greatly appreciate their efforts.
We are excited by Griffin’s fiscal 2017 results and look forward to the continued growth of our real estate
business.
Frederick M. Danziger
Executive Chairman
Michael S. Gamzon
President and Chief Executive Officer
* Profit from leasing activities, which Griffin defines as rental revenue ($29.9 million in fiscal 2017, $26.5 million in
fiscal 2016, and $14.2 million in fiscal 2007) less operating expenses of rental properties ($8.8 million in fiscal
2017, $8.3 million in fiscal 2016 and $6.3 million in fiscal 2007) is not a financial measure in conformity with U.S.
GAAP. It is presented because Griffin believes it is a useful financial indicator for measuring results of its real
estate leasing activities. However, it should not be considered as an alternative to operating income as a measure of
operating results in accordance with U.S. GAAP.
The information in this Letter to Stockholders includes “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 include, but are not limited to, statements about
Griffin’s opportunities for growth, plans with regard to Griffin’s office/flex portfolio, intended uses of
certain properties contemplated for sale, leasing currently vacant space and re-leasing space that
becomes vacant, the expected impact of leasing vacant space on profits and cash flows from leasing
operations, conditions in the real estate industry and their impact on returns on investment, the timing of
completion of construction projects, Griffin’s plans and strategies with regard to its investments,
developments, expansion and property acquisitions, completion of land sales, Griffin’s financial position
and anticipated future liquidity and capital expenditures, recent increase in the U.S. Government bond
yield and its expected impact on Griffin’s debt service, the filing of a shelf registration statement with the
SEC and offerings to be made pursuant to such shelf registration statement, and other statements that are
not historical facts. Although Griffin believes that its plans, intentions and expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such plans, intentions or
expectations will be achieved. The projected information disclosed herein is based on assumptions and
estimates that, while considered reasonable by Griffin as of the date hereof, are inherently subject to
significant business, economic, competitive and regulatory uncertainties and contingencies and other
important factors, many of which are beyond the control of Griffin and which could cause actual results
to differ materially from those expressed or implied in the forward-looking statements. Important factors
that could affect the outcome of the events set forth in these statements include the risk that Griffin may
not be able to complete the filing of the Universal Shelf or offerings under the Universal Shelf on
favorable terms, or at all, and the important factors described in Griffin’s SEC filings, including the
“Business,” “Risk Factors” and “Forward-Looking Information” sections in Griffin’s Annual Report on
Form 10-K for the fiscal year ended November 30, 2017. Griffin disclaims any obligation to update any
forward-looking statements as a result of developments occurring after the date of this letter except as
required by law.
(cid:95)
(cid:134)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2017
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-12879
GRIFFIN INDUSTRIAL REALTY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
641 Lexington Avenue
New York, New York
(Address of principal executive offices)
06-0868496
(I.R.S. Employer
Identification No.)
10022 (Zip Code)
(212) 218-7910
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
Title of Each Class
Common Stock $0.01 par value per share
Name of Each Exchange on Which Registered
The Nasdaq Stock Market LLC
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes (cid:134) No (cid:95)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:134) No (cid:95)
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 (cid:95) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes (cid:95) No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. (cid:95)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:134)
Non-accelerated filer (cid:134)
Accelerated filer (cid:95)
Smaller reporting company (cid:134)
Emerging growth company (cid:134)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134) No (cid:95)
The aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $81,533,000 based on the
closing sales price on The Nasdaq Stock Market LLC on May 31, 2017, the last business day of the registrant’s most recently completed second
quarter. Shares of Common Stock held by each executive officer, director and persons or entities known to the registrant to be affiliates of the
foregoing have been excluded in that such persons may be deemed to be affiliates. This assumption regarding affiliate status is not necessarily a
conclusive determination for other purposes.
As of January 31, 2018, 5,001,006 shares of common stock were outstanding.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (the “Annual Report”) contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose,
any statements contained in this Annual Report that relate to future events or conditions, including without limitation, the
statements in Part I, Item 1. “Business” and Item 1A. “Risk Factors” and in Part II Item 7. “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” as well as located elsewhere in this Annual Report
regarding industry prospects or Griffin Industrial Realty, Inc.’s (“Griffin”) plans, expectations, or prospective results of
operations or financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the
words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking
statements. Such forward-looking statements represent management’s current expectations and are inherently uncertain.
There are a number of important factors that could materially impact the value of Griffin’s common stock or cause actual
results to differ materially from those indicated by such forward-looking statements. Such factors include: adverse
economic conditions and credit markets; a downturn in the commercial and residential real estate markets; risks
associated with concentration of real estate holdings; risks associated with entering new real estate markets; risks
associated with competition with other parties for acquisition of properties; risks associated with the use of third-party
managers for day-to-day property management; risks relating to reliance on lease revenues; risks associated with
nonrecourse mortgage loans; risks of financing arrangements that include balloon payment obligations; risks associated
with failure to effectively hedge against interest rate changes; risks associated with volatility in the capital markets; risks
associated with increased operating expenses; potential environmental liabilities; governmental regulations; inadequate
insurance coverage; risks of environmental factors; risks associated with the cost of raw materials or energy costs; risks
associated with deficiencies in disclosure controls and procedures or internal control over financial reporting; risks
associated with information technology security breaches; litigation risks; and the concentrated ownership of Griffin
common stock by members of the Cullman and Ernst families. These and the important factors discussed under the
caption “Risk Factors” in Part I, Item 1A of this Annual Report for the fiscal year ended November 30, 2017, among
others, could cause actual results to differ materially from those indicated by forward-looking statements made in this
Annual Report and presented elsewhere by management from time to time. Any such forward-looking statements
represent management’s estimates as of the date of this Annual Report. While Griffin may elect to update such
forward-looking statements at some point in the future, Griffin disclaims any obligation to do so, even if subsequent
events cause Griffin’s views to change. These forward-looking statements should not be relied upon as representing
Griffin’s views as of any date subsequent to the date of this Annual Report.
2
GRIFFIN INDUSTRIAL REALTY, INC.
FORM 10-K
Index
PART I
PART II
ITEM 1
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1A RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1B UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2
ITEM 3
ITEM 4
ITEM 5
ITEM 6
ITEM 7
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . .
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income (Loss). . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9A CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9B OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . .
ITEM 11
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 12
ITEM 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . .
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 14
PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
13
22
23
25
25
26
28
29
44
45
46
47
48
49
50
78
78
79
80
83
96
98
99
100
101
106
3
ITEM 1. BUSINESS.
PART I
Griffin Industrial Realty, Inc. (“Griffin”) is a real estate business principally engaged in developing, managing
and leasing industrial/warehouse properties, and to a lesser extent, office/flex properties. Griffin seeks to add to its
property portfolio through the acquisition and development of land or the purchase of buildings in select markets
targeted by Griffin. Periodically, Griffin may sell certain portions of its undeveloped land that it has owned for an
extended time period and the use of which is not consistent with Griffin’s core development and leasing strategy. Prior to
May 13, 2015, Griffin was known as Griffin Land & Nurseries, Inc. On May 13, 2015, Griffin changed its name to better
reflect its ongoing real estate business and focus on industrial/warehouse properties after the sale in fiscal 2014 of the
landscape nursery business that Griffin had operated through its wholly owned subsidiary, Imperial Nurseries, Inc.
As of November 30, 2017, Griffin owned thirty-five buildings comprising approximately 3,710,000 square feet
that was 95% leased. Approximately 88% of Griffin’s currently owned square footage is industrial/warehouse space,
with the balance principally being office/flex space. As of November 30, 2017, approximately 98% of Griffin’s
industrial/warehouse space was leased and approximately 71% of Griffin’s office/flex space was leased. As stated in
“Item 2. Properties” below, Griffin uses nonrecourse mortgage loans to finance some of its real estate development
activities, and as of November 30, 2017, approximately $131.0 million was outstanding under such loans. In fiscal 2017,
profit from leasing activities (which Griffin defines as rental revenue less operating expenses of rental properties)1 was
approximately $21.1 million, while debt service on nonrecourse mortgage loans was approximately $8.7 million.
Through fiscal 2009, all of Griffin’s buildings were located in the north submarket of Hartford, Connecticut. In
fiscal 2010, Griffin started the expansion of its real estate holdings to areas outside of Hartford by purchasing an
industrial/warehouse building and undeveloped land in the Lehigh Valley of Pennsylvania (see “Lehigh Valley,
Pennsylvania” on page 8). In fiscal 2017, Griffin expanded its real estate holdings into the southeast United States by
acquiring 215 International Drive (“215 International”), an approximately 277,000 square foot industrial/warehouse
building in Concord, North Carolina, which is in the greater Charlotte area (see “Charlotte, North Carolina” on page 9).
215 International was 74% leased at the time of acquisition. Subsequently, an existing tenant in that building leased all of
the remaining vacant space. Griffin expects to continue to seek to acquire and develop properties that are consistent with
its core strategy of developing and leasing industrial/warehouse properties. Griffin targets properties that are in close
proximity to transportation infrastructure (highways, airports, railways and sea ports) that can accommodate single and
multiple tenants in flexible layouts. Griffin expects that most of such potential acquisitions of either undeveloped land or
land and buildings will likely be located outside of the Hartford area in select markets targeted by Griffin.
The Q4 2017 CBRE|New England Marketview Report (the “Q4 2017 CBRE|New England Report”) from
CBRE Group, Inc. (“CBRE”), a national real estate services company, stated that as of December 31, 2017, the overall
vacancy rate in the greater Hartford industrial market decreased to 8.8% at the end of 2017 from 12.3% at the end of
2014, with approximately 0.8 million square feet of net absorption in the greater Hartford industrial market in 2017. The
greater Hartford industrial market had been stagnant in the years 2012 through 2014, but improved during the past three
years. Griffin believes that it benefits from its reputation as a stable landlord with sufficient resources to meet its
obligations and deliver space to tenants timely and in accordance with the terms of their lease agreements.
CBRE’s Q4 2017 Market Snapshot Report on Lehigh Valley PA Industrial stated that as of December 31, 2017,
the vacancy rate in that market was 6.9%, with a net absorption of approximately 2.2 million square feet in 2017.
CBRE’s Q4 2017 Marketview Charlotte Industrial Report stated a vacancy rate of 4.6% for warehouse space at the end
of 2017, with absorption of 3.1 million square feet of warehouse space in 2017.
All of Griffin’s office/flex space is in the north submarket of Hartford. The Q4 2017 CBRE|New England
Report stated that as of December 31, 2017, the overall vacancy rate in the greater Hartford office market was
approximately 17.9%, as compared to 16% at the end of the two previous years, and the vacancy rate for office space in
the north submarket increased to 30.9% at December 31, 2017 from 21% a year earlier. As of November 30, 2017,
square footage of office/flex buildings comprised approximately 12% of Griffin’s total square footage. Griffin expects
1 Profit from leasing activities is not a financial measure in conformity with U.S. GAAP. It is presented because Griffin believes it is a
useful financial indicator for measuring results of its real estate leasing activities. However, it should not be considered as an
alternative to operating income as a measure of operating results in accordance with U.S. GAAP.
4
that its office/flex space will continue to become a smaller percentage of its total space as Griffin expects to focus on the
growth of its industrial/warehouse building portfolio either through the acquisition of fully or partially leased buildings,
development of buildings on land currently owned or to be acquired, or both.
Additional capacity or an increase in vacancies in either the industrial or office markets could adversely affect
Griffin’s operating results by potentially resulting in longer times to lease vacant space, eroding lease rates in Griffin’s
properties or hindering renewals by existing tenants. There can be no assurances as to the directions of the Hartford,
Lehigh Valley or Charlotte real estate markets in the near future.
In fiscal 2017, in addition to the acquisition of 215 International, Griffin completed construction, on
speculation, of an approximately 137,000 square foot industrial/warehouse building (“330 Stone”) in New England
Tradeport (“NE Tradeport”), Griffin’s master-planned industrial park near Bradley International Airport and
Interstate 91, located in Windsor and East Granby, Connecticut. As of November 30, 2017, Griffin had leased
approximately 74,000 square feet of 330 Stone to a tenant that relocated from approximately 39,000 square feet in
another of Griffin’s NE Tradeport industrial/warehouse buildings. Griffin was able to backfill the vacated space with a
new tenant that is expected to take occupancy in the fiscal 2018 first quarter. In fiscal 2017, Griffin also leased
approximately 104,000 square feet of previously vacant NE Tradeport industrial/warehouse space, including a ten and
one-half year lease for approximately 89,000 square feet. Griffin extended leases aggregating approximately 387,000
square feet in fiscal 2017, including a full building lease of 100 International Drive (“100 International”) an
approximately 304,000 square foot industrial/warehouse building in NE Tradeport. That lease extension, done in
connection with refinancing the mortgage loan on 100 International, resulted in an additional six years of lease term
beyond the original lease expiration date of July 31, 2019. Also in fiscal 2017, Griffin completed a full building lease of
approximately 23,000 square feet of office/flex space, replacing the tenant that did not extend its lease of that building.
The net effect of Griffin’s construction, acquisition and leasing transactions in fiscal 2017 was an increase of
approximately 461,000 square feet of industrial/warehouse space under lease as of November 30, 2017 as compared to
November 30, 2016 and a decrease of approximately 11,000 square feet in office/flex space under lease as of
November 30, 2017 as compared to November 30, 2016. A lease of approximately 11,000 square feet of office/flex
space was entered into subsequent to November 30, 2017.
In fiscal 2016, Griffin completed and placed in service an approximately 252,000 square foot industrial building
(“5210 Jaindl”) in the Lehigh Valley of Pennsylvania, thus completing the development of an approximately 50 acre
parcel of undeveloped land acquired in December 2013. As of November 30, 2016, Griffin had entered into two leases
for 5210 Jaindl resulting in that building being fully leased. Both of those leases became effective in the fiscal 2017 first
quarter. In addition to the two leases at 5210 Jaindl, Griffin entered into several other leases aggregating approximately
240,000 square feet in fiscal 2016, all but approximately 21,000 square feet of which was for industrial/warehouse space.
Included in the fiscal 2016 leasing activity was a lease for approximately 101,000 square feet in 4270 Fritch Drive
(“4270 Fritch”), an approximately 303,000 square foot industrial/warehouse building in the Lehigh Valley built in fiscal
2014. As of November 30, 2016, Griffin’s five Lehigh Valley industrial/warehouse buildings aggregating approximately
1,183,000 square feet were fully leased. In addition to the Lehigh Valley leasing, Griffin completed several leases
aggregating approximately 139,000 square feet for its Connecticut properties, including approximately 118,000 square
feet of industrial/warehouse space, mostly in NE Tradeport. In fiscal 2016, Griffin also extended leases aggregating
approximately 248,000 square feet, most of which was NE Tradeport industrial/warehouse space. Also in fiscal 2016,
leases for approximately 132,000 square feet expired, which included a lease for an entire approximately 57,000 square
foot NE Tradeport industrial/warehouse building that was subsequently re-leased during the year. The net effect of these
transactions was an increase of approximately 410,000 square feet in industrial/warehouse space under lease as of
November 30, 2016 as compared to November 30, 2015 and a decrease of approximately 51,000 square feet in
office/flex space under lease as of November 30, 2016 as compared to November 30, 2015.
In fiscal 2015, Griffin completed and placed in service an approximately 280,000 square foot industrial building
(“5220 Jaindl”) in the Lehigh Valley of Pennsylvania. The tenant that initially leased approximately 196,000 square feet
in 5220 Jaindl when the building was placed in service subsequently exercised its option under the lease to lease the
balance of the building. Rental revenue on the additional space commenced in fiscal 2016. In addition to fully leasing
5220 Jaindl in fiscal 2015, Griffin completed several other leases aggregating approximately 191,000 square feet, of
which approximately 90% was for industrial/warehouse space and approximately 10% was for office/flex space. In fiscal
2015, several leases aggregating approximately 52,000 square feet of office/flex space expired and were not renewed and
5
a lease of approximately 31,000 square feet of industrial/warehouse space was terminated early for which Griffin
received a lease termination fee.
Periodically, Griffin may sell certain portions of its undeveloped land that it has owned for an extended time
period and the use of which does not fit into Griffin’s core strategy of developing and leasing industrial and commercial
properties. Such sale transactions may take place either before or after obtaining development approvals and building
basic infrastructure.
In fiscal 2017, Griffin completed several land sales, the largest being the sale of approximately 67 acres of
undeveloped land in Phoenix Crossing (the “2017 Phoenix Crossing Land Sale”) for approximately $10.3 million. The
land sold under the 2017 Phoenix Crossing Land Sale is part of an approximately 268 acre parcel of land in Bloomfield
and Windsor, Connecticut known as Phoenix Crossing. The proceeds from the 2017 Phoenix Crossing Land Sale were
placed in escrow at closing and subsequently used in the acquisition of 215 International as part of a like-kind exchange
(a “1031 Like-Kind Exchange”) under Section 1031 of the Internal Revenue Code of 1986, as amended. The Like-Kind
Exchange enables Griffin to defer the gain on the 2017 Phoenix Crossing Land Sale for income tax purposes. In addition
to the 2017 Phoenix Crossing Land Sale, Griffin also sold approximately 76 acres of undeveloped land in Southwick,
Massachusetts (the “Southwick Land Sale”) for approximately $2.1 million. The proceeds from the Southwick Land Sale
were also placed in escrow at closing and subsequently used for the purchase of approximately 14 acres of undeveloped
land in the Lehigh Valley under a 1031 Like-Kind Exchange. In the fiscal 2017 fourth quarter, Griffin started site work
for an approximately 134,000 square foot industrial building to be built on the Lehigh Valley land acquired. Construction
is expected to begin in the fiscal 2018 first quarter, with completion anticipated during the fiscal 2018 third quarter.
In fiscal 2017, Griffin also completed two smaller sales of undeveloped land in Phoenix Crossing for a total of
approximately $1.3 million and the sale of two small residential lots for a total of approximately $0.2 million. Griffin
also recognized the remaining $0.1 million of revenue from the fiscal 2013 sale of approximately 90 acres of
undeveloped land in Phoenix Crossing (the “2013 Phoenix Crossing Land Sale”). Under the terms of the 2013 Phoenix
Crossing Land Sale, Griffin and the buyer each were required to construct roadways connecting the land parcel that was
sold to existing town roads. As a result of Griffin’s continuing involvement with the land sold, the 2013 Phoenix
Crossing Land Sale was accounted for under the percentage of completion method, whereby revenue and gain were
recognized as costs related to the 2013 Phoenix Crossing Land Sale were incurred. From the closing of the 2013 Phoenix
Crossing Land Sale through fiscal 2017, when Griffin completed its required roadwork, Griffin recognized total revenue
of approximately $9.0 million and a total pretax gain of approximately $6.7 million from the 2013 Phoenix Crossing
Land Sale.
In fiscal 2016, Griffin completed one land sale for approximately $3.8 million and recognized revenue of
approximately $0.6 million related to the 2103 Phoenix Crossing Land Sale. In fiscal 2015, Griffin completed one land
sale for approximately $0.6 million and recognized revenue of $2.5 million related to the 2013 Phoenix Crossing Land
Sale.
A portion of Griffin’s landholdings in Connecticut is zoned for residential use. The weakness in the residential
real estate market has adversely affected Griffin’s residential real estate development activities. The continued weakness
of the residential real estate market could result in lower selling prices for Griffin’s land intended for residential use or
delay the sale of such land.
Griffin’s development of its land is affected by regulatory and other constraints. Subdivision and other
residential development may also be affected by the potential adoption of initiatives meant to limit or concentrate
residential growth. Industrial/warehouse development activities on Griffin’s undeveloped land may also be affected by
traffic considerations, potential environmental issues, community opposition and other restrictions to development
imposed by governmental agencies.
Industrial/Warehouse Properties
Connecticut
A significant portion of Griffin’s industrial development in Connecticut has been focused on NE Tradeport,
where Griffin has built and currently owns fourteen industrial/warehouse buildings aggregating approximately 1,603,000
square feet. NE Tradeport was approximately 96% leased as of November 30, 2017. Griffin’s total portfolio of
approximately 1,818,000 square feet of industrial/warehouse space in Connecticut was 96% leased as of November 30,
2017. In NE Tradeport, Griffin holds the rights to 658,000 square feet available for development under the State Traffic
6
Certificate (“STC”) which relates to three approved building sites on approximately 70 acres and an approved addition to
one of Griffin’s existing buildings. Construction of 220 Tradeport Drive (see below) would use two of the three
approved building sites on the 70 acre parcel and reduce the square footage available for development under the STC in
NE Tradeport by approximately 234,000 square feet. Griffin owns an additional 95 acres of undeveloped land within NE
Tradeport, 60 acres of which are located in Windsor and the abutting 35 acres of which are located in East Granby. There
are no STC or other approvals currently in place (other than zoning in the case of Windsor) for the development of this
remaining land for industrial use. Griffin believes that additional infrastructure improvements, which may be significant,
may be required to obtain approvals to develop portions of this land, particularly the portions in East Granby. Griffin
expects to continue to direct much of its real estate efforts in Connecticut on the construction and leasing of its
industrial/warehouse facilities at NE Tradeport.
On October 18, 2017, Griffin entered into a full building lease (the “220 Tradeport Lease”) for an
approximately 234,000 square foot industrial/warehouse building (“220 Tradeport Drive”) to be built on two of the
remaining three approved building sites in NE Tradeport. Construction of 220 Tradeport Drive would reduce the square
feet available for development rights in NE Tradeport to approximately 370,000 square feet. The tenant is an investment
grade company that intends to use 220 Tradeport Drive for the distribution of automotive parts. The 220 Tradeport
Lease, which would commence upon completion of construction of 220 Tradeport Drive, has a term of twelve years and
six months with the tenant having several five year renewal options. Provided the tenant meets certain conditions, the
tenant has an option (the “Expansion Option”) to cause Griffin to construct an approximately 54,000 square foot addition
to 220 Tradeport Drive. If the tenant exercises the Expansion Option, the term for the 220 Tradeport Lease would be
extended for at least ten years upon the tenant occupying the additional space. Griffin expects to commence construction
of 220 Tradeport Drive in the fiscal 2018 first quarter and complete 220 Tradeport Drive in the second half of fiscal
2018. Griffin expects to spend approximately $17.5 million related to development of 220 Tradeport Drive, including all
related site work, building construction, tenant improvements, leasing and financing costs. Griffin has agreed to terms
with State Farm Life Insurance Company (“State Farm”) on a construction to permanent mortgage loan for up to
$13.8 million. The loan would provide financing during the construction period and, if 220 Tradeport Drive is completed
and rent payments under the 220 Tradeport Lease commence, would convert to a fifteen year nonrecourse permanent
mortgage loan. There is no guarantee that the construction to permanent mortgage loan with State Farm will be
completed under its current terms, or at all.
In fiscal 2017, Griffin leased approximately 216,000 square feet in NE Tradeport, including approximately
74,000 square feet in 330 Stone, a new industrial/warehouse building that was completed and placed in service in the
fiscal 2017 fourth quarter. The approximately 74,000 square feet in 330 Stone was leased to a tenant that relocated from
approximately 39,000 square feet in another of Griffin’s NE Tradeport industrial/warehouse buildings. The space
vacated was subsequently leased to a new tenant in fiscal 2017. Also in fiscal 2017, Griffin renewed several leases
aggregating approximately 361,000 square feet, including the approximately 304,000 square feet at 100 International.
The rental rates for leases in NE Tradeport that were renewed in fiscal 2017 were, on average, essentially unchanged
from the rental rates of the expiring leases. Management believes that the rental rates on three of the four NE Tradeport
leases aggregating approximately 58,000 square feet that are scheduled to expire in fiscal 2018 are essentially at the
market rates for similar space, and one lease of approximately 48,000 square feet (see below) that is scheduled to expire
in fiscal 2018 is above market rates due to the significant amount of tenant improvement work done to that space to meet
the tenant’s requirements. Griffin has entered into an agreement with the tenant that will be vacating the approximately
48,000 square feet whereby the tenant has agreed to pay Griffin approximately $0.2 million in connection with a
termination of the lease earlier than the original lease expiration.
In addition to its industrial/warehouse buildings in NE Tradeport, Griffin owns a 165,000 square foot industrial
building (“1985 Blue Hills”) in Griffin Center, Griffin’s office park in Windsor and Bloomfield, Connecticut, that is
being used principally as a data center and call center, an approximately 31,000 square foot industrial/warehouse
building (“131 Phoenix”) in Bloomfield, Connecticut that is being used principally as a research and development
facility and an approximately 18,000 square foot industrial/warehouse building (“210 West Newberry”) in Griffin Center
South, Griffin’s office/flex park in Bloomfield, Connecticut. 131 Phoenix is on an approximately 5 acre site that is part
of Phoenix Crossing. As of November 30, 2017, Griffin owns approximately 76 acres of undeveloped land in Phoenix
Crossing that is zoned for industrial and commercial development.
As of November 30, 2017, approximately $74.1 million was invested (net book value) by Griffin in its
Connecticut industrial/warehouse buildings, approximately $3.7 million was invested (net book value) by Griffin in the
7
undeveloped NE Tradeport land and approximately $1.5 million was invested in the undeveloped Phoenix Crossing land.
As of November 30, 2017, fourteen of Griffin’s Connecticut industrial/warehouse buildings were mortgaged for an
aggregate of approximately $64.7 million and 210 West Newberry was included in the collateral for Griffin’s $15.0
million revolving line of credit. Subsequent to November 30, 2017, a subsidiary of Griffin closed on the refinancing of
an existing mortgage loan that was collateralized by two NE Tradeport industrial/warehouse buildings. The refinancing
generated additional mortgage proceeds of $7.0 million and added 330 Stone to the collateral.
A summary of Griffin’s Connecticut industrial/warehouse square footage owned and leased at the end of each
of the past three fiscal years and leases in Griffin’s Connecticut industrial/warehouse buildings scheduled to expire
during each of the next three fiscal years are as follows:
Connecticut industrial/warehouse space
November 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
Square footage of leases expiring . . . . . . . . . . . .
Percentage of total leased space at
Square
Footage
Owned
1,681,000
1,681,000
1,817,000
Square
Footage
Leased
1,507,000
1,564,000
1,748,000
Percentage
Leased
90 %
93 %
96 %
2018
106,000
2019
172,000
2020
66,000
3 %
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . .
Number of tenants with leases expiring . . . . . . . .
4
Annual rental revenue of expiring leases . . . . . . . $ 1,003,000
Annual rental revenue of expiring leases as a
5 %
4
$ 1,336,000
2 %
2
$ 530,000
percentage of Griffin’s total fiscal 2017 rental
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 %
4 %
2 %
Lehigh Valley, Pennsylvania
In fiscal 2010, Griffin completed its first acquisitions of property outside of the Hartford, Connecticut area,
when it acquired a fully leased approximately 120,000 square foot industrial building and approximately 51 acres of
undeveloped land in the Lehigh Valley of Pennsylvania. Subsequently, Griffin acquired an approximately 49 acre parcel
of undeveloped land in the Lehigh Valley. Over the past five years, Griffin has built, on speculation, four additional
industrial/warehouse buildings aggregating approximately 1,063,000 square feet on those two land parcels. As of
November 30, 2017, Griffin owned five fully leased industrial/warehouse buildings in the Lehigh Valley aggregating
approximately 1,183,000 square feet. Approximately $65.2 million was invested (net book value) in these buildings as of
November 30, 2017. All five Lehigh Valley industrial/warehouse buildings are mortgaged under three separate
nonrecourse mortgage loans for a total of approximately $49.8 million as of November 30, 2017.
In the fiscal 2017 fourth quarter, Griffin purchased approximately 14 acres of undeveloped land in the Lehigh
Valley that had been under agreement. The closing on this purchase took place after Griffin received all governmental
approvals for its planned development, on speculation, of an approximately 134,000 square foot industrial/warehouse
building on the land acquired. Griffin started site work in the fiscal 2017 fourth quarter with building construction
anticipated to begin in the fiscal 2018 first quarter. Griffin expects to spend approximately $7.8 million for site work and
construction of the building shell and complete construction in the fiscal 2018 third quarter.
On January 11, 2018, Griffin entered into an agreement to purchase an approximately 14 acre parcel of
undeveloped land in the Lehigh Valley for $3.6 million in cash. If the transaction closes, Griffin plans to construct an
industrial/warehouse building on the land to be purchased, the size of which will be based upon findings during due
diligence. The closing of this purchase, anticipated to take place in late fiscal 2018 or early fiscal 2019, is subject to
several conditions, including the satisfactory outcome of due diligence and obtaining all governmental approvals for
8
Griffin’s development plans for the land to be purchased. There is no guarantee that this transaction will be completed
under its current terms, or at all.
A summary of Griffin’s Lehigh Valley industrial/warehouse square footage owned and leased at the end of each
of the past three fiscal years and leases in Griffin’s Lehigh Valley industrial/warehouse buildings scheduled to expire
during each of the next three fiscal years are as follows:
Lehigh Valley industrial/warehouse space
November 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
Square
Footage
Owned
931,000
1,183,000
1,183,000
Square
Footage
Leased
829,000
1,183,000
1,183,000
Percentage
Leased
89 %
100 %
100 %
Square footage of leases expiring . . . . . . . . . . . . . .
Percentage of total leased space at
2018
228,000
2019
—
2020
201,000
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . .
Number of tenants with leases expiring . . . . . . . . . .
Annual rental revenue of expiring leases . . . . . . . . . $ 1,501,000 $
Annual rental revenue of expiring leases as a
6 %
1
6 %
— %
—
1
— $ 1,330,000
percentage of Griffin’s total fiscal 2017 rental
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 %
— %
4 %
Charlotte, North Carolina
On June 9, 2017, Griffin closed on the acquisition of 215 International, Griffin’s first property in the Charlotte
area. 215 International was constructed in 2015 and was 74% leased at the time it was acquired. Subsequent to the
closing, one of the tenants in 215 International leased all of the remaining approximately 73,000 square feet that had
been vacant at the time the building was acquired. None of the leases for 215 International expire within the next three
years. On August 30, 2017, Griffin closed on a $12.15 million nonrecourse mortgage loan collateralized by
215 International.
On October 4, 2017, Griffin entered into an agreement to purchase an approximately 22 acre parcel of
undeveloped land in Concord, North Carolina (the “Concord Land”) for $2.6 million in cash. If the transaction closes,
Griffin plans to construct an industrial/warehouse development on the Concord Land, which is located near 215
International. The amount of industrial/warehouse space to be developed there will be based upon findings during due
diligence. The closing of this purchase, anticipated to take place in fiscal 2018, is subject to several conditions, including
the satisfactory outcome of due diligence and obtaining all governmental approvals for Griffin’s development plans for
the Concord Land. There is no guarantee that this transaction will be completed under its current terms, or at all.
Griffin may seek to acquire additional properties and/or undeveloped land parcels to expand the
industrial/warehouse portion of its real estate business. Griffin continues to examine potential properties for acquisition
in the Middle Atlantic, Northeast and Southeast states and selected markets targeted by Griffin.
Office/Flex Properties
Griffin’s office/flex properties are located in Griffin Center in Windsor and Bloomfield, Connecticut and
Griffin Center South in Bloomfield. In Griffin Center, Griffin currently owns two multi-story office buildings that have
an aggregate of approximately 161,000 square feet, a single story office building of approximately 48,000 square feet
and a small restaurant building of approximately 7,000 square feet. In Griffin Center South, Griffin currently owns eight
office/flex buildings with an aggregate of approximately 217,000 square feet of single story office/flex space. As of
November 30, 2017, Griffin’s total office/flex space of approximately 433,000 square feet comprised approximately
12% of Griffin’s total real estate portfolio. Griffin’s office/flex square footage was approximately 71% leased as of
November 30, 2017.
In fiscal 2017, Griffin entered into a ten year full building lease for the approximately 23,000 square feet at 206
West Newberry Road in Griffin Center South to replace the tenant in that building that did not renew its lease. The full
9
building tenant there had previously informed Griffin that it would not be renewing its lease when it expired in fiscal
2017. In addition, Griffin renewed two leases aggregating approximately 25,000 square feet of office/flex space in fiscal
2017 and a lease for approximately 12,000 square feet of office/flex space expired and was not renewed.
In fiscal 2016, Griffin entered into two new leases for office/flex space aggregating approximately 21,000
square feet, including a lease for approximately 16,000 square feet in the single story Griffin Center office building that
resulted in that building becoming fully leased. Also in fiscal 2016, two leases of office/flex space aggregating
approximately 26,000 square feet were renewed, while leases aggregating approximately 72,000 square feet of
office/flex space expired. The tenant of one of the expired office/flex leases (approximately 21,000 square feet) did not
renew because they entered into a full building lease for 131 Phoenix, Griffin’s approximately 31,000 square foot
industrial/warehouse building in Phoenix Crossing. The rental rates for office/flex leases that were renewed in fiscal
2016 were, on average, approximately 5% lower than the rental rates of the expiring leases. Currently there are
approximately 156 acres of undeveloped land in Griffin Center and approximately 75 acres of undeveloped land in
Griffin Center South that are owned by Griffin. As of November 30, 2017, approximately $18.7 million was invested
(net book value) in Griffin’s office/flex buildings and approximately $1.6 million was invested by Griffin in the
undeveloped land in Griffin Center and Griffin Center South. Griffin’s two multi-story office buildings in Griffin Center
are mortgaged for approximately $4.4 million as of November 30, 2017, and Griffin’s single story office building in
Griffin Center and the eight single-story office/flex buildings and industrial/warehouse building in Griffin Center South
are the collateral for Griffin’s $15.0 million revolving line of credit. There were no borrowings under the revolving line
of credit as of November 30, 2017.
A summary of Griffin’s office/flex square footage owned and leased at the end of each of the past three fiscal
years and leases in Griffin’s office/flex buildings scheduled to expire (excluding the space where a replacement lease has
been secured) during each of the next three fiscal years are as follows:
Connecticut office/flex space
November 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
Square
Footage
Owned
433,000
433,000
433,000
Square
Footage
Leased
370,000
319,000
308,000
Percentage
Leased
85 %
74 %
71 %
Square footage of leases expiring . . . . . . . . . . . . .
Percentage of total leased space at
2018
15,000
2019
62,000
2020
62,000
— %
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . .
2
Number of tenants with leases expiring . . . . . . . . .
Annual rental revenue of expiring leases . . . . . . . . $ 316,000
Annual rental revenue of expiring leases as a
2 %
4
$ 1,003,000
2 %
5
$ 1,083,000
percentage of Griffin’s total fiscal 2017 rental
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 %
3 %
4 %
Residential Developments
Simsbury, Connecticut
Several years ago, Griffin filed plans for the creation of a residential community, called Meadowood, on a 363
acre site in the Town of Simsbury, Connecticut (“Simsbury”). After several years of litigation with the town regarding
this proposed residential development, a settlement was reached. The settlement terms included, among other things,
approval for up to 296 homes, certain remediation measures and offsite road improvements to be performed by Griffin
and the purchase by Simsbury of a portion of the Meadowood land for open space. The sale of land to Simsbury closed
in fiscal 2008. In fiscal 2012, Griffin performed a portion of the required remediation work on the site and completed the
required offsite road improvements. In fiscal 2014, Griffin completed the required remediation work. As of
November 30, 2017, the book value of the land for this development, including design, development and legal costs, was
approximately $8.5 million. Griffin is continuing to evaluate its plans for Meadowood.
10
Suffield, Connecticut
In fiscal 2006, Griffin completed the infrastructure for a fifty lot residential subdivision in Suffield, Connecticut
called Stratton Farms. Griffin sold twenty-five residential lots in Stratton Farms to a local homebuilder in fiscal 2006 and
fiscal 2007. Griffin subsequently sold five additional lots. As of November 30, 2017, Griffin held twenty Stratton Farms
residential lots. The book value for Griffin’s Stratton Farms holdings was approximately $1.1 million at November 30,
2017. Subsequent to November 30, 2017, Griffin sold an additional Stratton Farms residential lot.
Other
Concurrently with the sale of the landscape nursery business in fiscal 2014, Imperial Nurseries, Inc.
(“Imperial”), Griffin and Monrovia Connecticut LLC (“Monrovia”) entered into a Lease and Option Agreement, which
was amended in fiscal 2016 (as amended, the “Imperial Lease”) pursuant to which Monrovia leased Imperial’s
production nursery located in Granby and East Granby, Connecticut (the “Connecticut Farm”) for a ten year period, with
options to extend for up to an additional fifteen years exercisable by Monrovia. The Imperial Lease also grants Monrovia
an option to purchase the land, land improvements and other operating assets that were used by Imperial on the
Connecticut Farm during the first thirteen years of the lease period for $9.5 million, or $7.0 million if only a certain
portion of the Connecticut Farm is purchased, subject in each case to certain adjustments as provided for in the Imperial
Lease.
Prior to the fiscal 2009 third quarter, Imperial operated a production nursery in Quincy, Florida (the “Florida
Farm”). In fiscal 2009, Imperial shut down its growing operations on the Florida Farm and leased that facility to a
grower of landscape nursery plants. In fiscal 2015, the tenant exercised its option to acquire the Florida Farm, but
subsequently informed Imperial that it would not close on the acquisition. As a result, Griffin retained the tenant’s
deposit of $400,000 and the Florida Farm lease was extended through April 30, 2016. After the expiration of that lease,
Griffin then entered into a new lease of the Florida Farm with another grower of landscape nursery plants that started
July 1, 2016. The new lease of the Florida Farm has a three year term and contains an option for the tenant to purchase
the Florida Farm at any time during the lease period for a purchase price between $3.4 million and $3.9 million
depending upon the date of sale. On December 18, 2017, the tenant leasing the Florida Farm declared bankruptcy under
Chapter 11 of the U.S. Bankruptcy Code. Griffin has yet to determine the impact, if any, this will have on their lease of
the Florida Farm, which expires on June 30, 2019.
In fiscal 2017, Griffin leased approximately 560 acres of undeveloped land in Connecticut and Massachusetts to
local farmers. Approximately 650 acres and 550 acres were leased to local farmers in fiscal 2016 and fiscal 2015,
respectively. The revenue generated from the leasing of farmland is not material to Griffin’s total revenue.
On January 25, 2016, Griffin entered into an Option Purchase Agreement (the “Simsbury Option Agreement”)
whereby Griffin granted the buyer an exclusive three month option, in exchange for a nominal fee, to purchase
approximately 280 acres of undeveloped land in Simsbury, Connecticut for approximately $7.7 million. The buyer may
extend the option period for up to three years upon payment of additional option fees. Through November 30, 2017, the
buyer paid approximately $0.1 million of additional option fees, and subsequent to November 30, 2017 the buyer paid an
additional $0.1 million to extend its option period through January 2019. Subsequent to November 30, 2017, the buyer
received approval from the state regulatory authority for the buyer’s planned use of the land, which is to generate solar
electricity. A closing on the land sale contemplated by the Simsbury Option Agreement is subject to several significant
contingencies, including the potential appeal of the approvals recently granted by the state regulatory authority. Griffin
expects the decision of the state regulatory authority to be appealed. There is no guarantee that the sale of land as
contemplated under the Simsbury Option Agreement will be completed under its current terms, or at all.
On May 5, 2017, Griffin entered into an Option Purchase Agreement (the “EGW Option Agreement”) whereby
Griffin granted the buyer an exclusive three month option, in exchange for a nominal fee, to purchase approximately 288
acres of undeveloped land in East Granby and Windsor, Connecticut for approximately $7.8 million. The buyer may
extend the option period for up to three years upon payment of additional option fees. The land subject to the EGW
Option Agreement does not have any of the approvals that would be required for the buyer’s planned use of the land,
which is to generate solar electricity. A closing on the land sale contemplated by the EGW Option Agreement is subject
to several significant contingencies, including the buyer procuring electrical utility supply contracts, approval by the
state public utility regulatory authorities and governmental approvals for the planned use of the land. There is no
11
guarantee that the sale of land as contemplated under the EGW Option Agreement will be completed under its current
terms, or at all.
Griffin is evaluating its other land holdings for development or sale in the future. Griffin anticipates that
obtaining subdivision approvals for residential development in many of the towns where it owns residentially-zoned land
will be an extended process.
Investments
Centaur Media plc
In fiscal 2017, Griffin sold all of its 1,952,462 shares of Centaur Media plc (“Centaur Media”), a publicly traded
company listed on the London Stock Exchange, for cash proceeds of approximately $1.2 million and a pretax gain of
approximately $0.3 million. Griffin had reflected its investment in Centaur Media as an available-for-sale security.
Accordingly, prior to the sale of the shares of Centaur Media, changes in the fair value of Griffin’s investment in Centaur
Media, including both changes in the stock price and changes in the foreign currency exchange rate, were not included in
Griffin’s net income but were included in Griffin’s other comprehensive income. Upon the sale of its investment in
Centaur, all amounts that had been reflected in other comprehensive income were reclassified into net income on
Griffin’s consolidated statement of operations.
Employees
As of November 30, 2017, Griffin employed 30 people on a full-time basis and two employees on a part-time
basis. Presently, none of Griffin’s employees are represented by a union. Griffin believes that relations with its
employees are satisfactory.
Competition
The market for leasing industrial/warehouse space and office/flex space is highly competitive. Griffin competes
for tenants with owners of numerous properties located in the portions of Connecticut, Massachusetts, the Lehigh Valley
of Pennsylvania and Charlotte, North Carolina in which Griffin’s real estate holdings are located. Some of these
competitors have greater financial resources than Griffin. Griffin’s real estate business competes on the bases of location,
price, availability of space, convenience and amenities.
There is a great amount of competition for the acquisition of industrial/warehouse buildings and for the
acquisition of undeveloped land for construction of such buildings. Griffin competes for the acquisition of
industrial/warehouse properties with real estate investment trusts (“REITs”) and institutional investors, such as pension
funds, private real estate investment funds, insurance company investment accounts, public and private investment
companies, individuals and other entities engaged in real estate investment activities. Some of these competitors have
greater financial resources than Griffin, and may be able to accept more risk, including risk related to the
creditworthiness of tenants or the degree of leverage they may be willing to take on. Competitors for acquisitions may
also have advantages from a lower cost of capital or greater operating efficiencies associated with being a larger entity.
Regulation: Environmental Matters
Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may
be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property and
may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup
costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of
such substances may be substantial, and the presence of such substances, or the failure to remediate properly such
substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as
collateral. In connection with the ownership (direct or indirect), operation, management and development of real estate
properties, Griffin may be considered an owner or operator of such properties or as having arranged for the disposal or
treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental fines and injuries to persons and property. The value of Griffin’s land
may be affected by the presence of residual chemicals from the prior use of the land for farming, principally on a portion
of the land that is intended for residential use. In the event that Griffin is unable to remediate adequately any of its land
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intended for residential use, Griffin’s ability to develop such property for its intended purposes would be materially
affected.
Griffin periodically reviews its properties for the purpose of evaluating such properties’ compliance with
applicable state and federal environmental laws. In connection with the sale of Imperial, Griffin has incurred a small
amount of costs to remediate a small area of the Connecticut Farm that is leased to Monrovia under the Imperial Lease.
As of the date of this Annual Report on Form 10-K, Griffin is in discussions with the Connecticut Department of Energy
and Environmental Protection (“DEEP”) regarding the recent findings of exceedances of certain residual pesticides on a
limited portion of the Connecticut Farm being leased to Monrovia. At this time, Griffin does not anticipate experiencing,
in the next twelve months, any material expense in complying with such laws. Griffin may incur remediation costs in the
future in connection with its development operations. Such costs are not expected to be significant as compared to
expected proceeds from development projects or property sales.
Griffin maintains a corporate website at www.griffinindustrial.com. Griffin’s Annual Report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and the proxy statement for Griffin’s Annual Meeting of
Stockholders can be accessed through Griffin’s website or through the SEC website at www.sec.gov. Griffin will provide
electronic or paper copies of its foregoing filings free of charge upon request. Griffin was incorporated in 1970.
ITEM 1A. RISK FACTORS.
Griffin’s real estate business is subject to a number of risks. The risk factors discussed below are those that
management deems to be material, but they may not be the only risks facing Griffin. Additional risks not currently
known or currently deemed not to be material may also impact Griffin. If any of the following risks occur, Griffin’s
business, financial condition, operating results and cash flows could be adversely affected. Investors should also refer to
Griffin’s quarterly reports on Form 10-Q for any material updates to these risk factors.
Risks Related to Griffin’s Business and Properties
Griffin’s real estate portfolio is concentrated in the industrial real estate sector, and its business would be
adversely affected by an economic downturn in that sector.
88% of Griffin’s buildings are warehouse/distribution facilities and light manufacturing facilities in the industrial
real estate sector. This level of concentration exposes Griffin to the risk of economic downturns in the industrial real
estate sector to a greater extent than if its properties were more diversified across other sectors of the real estate industry.
In particular, an economic downturn affecting the leasing market for industrial properties could have a material adverse
effect on Griffin’s results of operations, cash flows, financial condition, ability to satisfy debt obligations and ability to
pay dividends to stockholders.
Griffin’s real estate portfolio is geographically concentrated, which causes it to be especially susceptible to
adverse developments in those markets.
In addition to general, regional, national and international economic conditions, Griffin’s operating performance
is impacted by the economic conditions of the specific geographic markets in which it has concentrations of properties.
The portfolio includes holdings in Connecticut, the Lehigh Valley of Pennsylvania and Concord, North Carolina, which
represented 61%, 32% and 7% of Griffin’s portfolio by square footage, respectively, as of November 30, 2017. This
geographic concentration could adversely affect Griffin’s operating performance if conditions become less favorable in
any of the states or regions in which it has a concentration of properties. Griffin cannot assure that any of its markets will
grow or that underlying real estate fundamentals will be favorable to owners and operators of properties. Griffin’s
operations may also be adversely affected if competing properties are built in its target markets. The construction of new
facilities by competitors would increase capacity in the marketplace, and an increase in the amount of vacancies in
competitors’ properties and negative absorption of space could result in Griffin experiencing longer times to lease vacant
space, eroding lease rates or hindering renewals by existing tenants. Any adverse economic or real estate developments
in Griffin’s target markets, or any decrease in demand for industrial space resulting from the regulatory environment,
business climate or energy or fiscal problems in these markets, could materially and adversely impact Griffin’s results of
operations, cash flows, financial condition, ability to satisfy debt obligations and ability to pay dividends to stockholders.
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Griffin’s ability to grow its portfolio partially depends on its ability to develop properties, which may suffer
under certain circumstances.
Griffin intends to continue to develop properties when warranted by its assessment of market conditions. Griffin’s
general construction and development activities include the risks that:
(cid:131)
(cid:131)
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(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
Griffin’s assessment of market conditions may be inaccurate;
development activities may require the acquisition of undeveloped land. Competition from other real estate
investors may significantly increase the purchase price of that land;
Griffin may be unable to obtain, or may face delays in obtaining required zoning, land-use, building, occupancy,
and other governmental permits and authorizations, which could result in increased costs and could require
Griffin to abandon its activities entirely with respect to a project;
construction and leasing of a property may not be completed on schedule, which could result in increased
expenses and construction costs, and would result in reduced profitability;
construction costs (including required offsite infrastructure costs) may exceed Griffin’s original estimates due
to increases in interest rates and increased materials, labor or other costs, possibly making the property less
profitable than projected or unprofitable because Griffin may not be able to increase rents to compensate for the
increase in construction costs;
Griffin may abandon development opportunities after it begins to explore them and as a result, Griffin may fail
to recover costs already incurred. If Griffin alters or discontinues its development efforts, costs of the investment
may need to be expensed rather than capitalized and Griffin may determine the investment is impaired, resulting
in a loss;
Griffin may expend funds on and devote management's time to projects that it does not complete;
occupancy rates and rents at newly completed properties may not meet Griffin’s expectations. This may result
in lower than projected occupancy and rental rates resulting in an investment that is less profitable than projected
or unprofitable; and
Griffin may incur losses under construction warranties, guaranties and delay damages under Griffin’s contracts
with tenants and other customers.
Griffin’s ability to achieve growth in its portfolio partially depends in part on Griffin’s ability to acquire
properties, which may suffer under certain circumstances.
Griffin acquires individual properties and in the future, may acquire portfolios of properties. Griffin’s acquisition
activities and their success are generally subject to the following risks:
(cid:131)
(cid:131)
(cid:131)
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when Griffin is able to locate a desirable property, competition from other real estate investors may significantly
increase the purchase price;
acquired properties may fail to perform as expected;
the actual costs of repositioning or redeveloping acquired properties may be higher than Griffin’s estimates;
acquired properties may be located in new markets where Griffin faces risks associated with an incomplete
knowledge or understanding of the local market, a limited number of established business relationships in the
area and a relative unfamiliarity with local governmental and permitting procedures; and
Griffin may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of
portfolios of properties and operating entities, into its existing operations, and as a result, Griffin’s results of
operations and financial condition could be adversely affected.
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Griffin may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with
respect to unknown liabilities. As a result, if a liability were asserted against Griffin based upon ownership of those
properties, Griffin might have to pay substantial sums to settle it, which could adversely affect its cash flow.
Weakness in Griffin’s office/flex portfolio could negatively impact its business.
Griffin’s office/flex portfolio, which comprises 12% of its total square footage and was 71% occupied as of
November 30, 2017, is concentrated in the north submarket of Hartford. The demand for office/flex space in this market
is weak and competitive, with market vacancy in excess of 30% as of December 31, 2017, according to the Q4 2017
CBRE|New England Report. There is no certainty that Griffin will retain existing tenants or attract new tenants to its
office/flex buildings. Re-leasing Griffin’s office/flex properties typically requires greater investment per square foot
than for Griffin’s industrial/warehouse properties and could negatively impact Griffin’s results of operations and cash
flow.
Griffin may experience increased operating costs, which could adversely affect Griffin’s results of
operations.
Griffin’s properties are subject to increases in operating expenses such as real estate taxes, fuel, utilities, labor,
repairs and maintenance, building materials and insurance. While many of Griffin’s current tenants generally are
obligated to pay a significant portion of these costs, there are no assurances that existing or new tenants will agree to or
make such payments. If operating expenses increase, Griffin may not be able to pass these costs on to its tenants and,
therefore, any such increases could have an adverse effect on Griffin’s results of operations and cash flow.
Griffin relies on third party managers for day-to-day property management of certain of its properties.
Griffin relies on local third party managers for the day-to-day management of its Lehigh Valley and Concord,
North Carolina properties. To the extent that Griffin uses a third party manager, the cash flows from its Lehigh Valley
and Concord properties may be adversely affected if the property manager fails to provide quality services. These third
party managers may fail to manage Griffin’s properties effectively or in accordance with their agreements with Griffin,
may be negligent in their performance and may engage in criminal or fraudulent activity. If any of these events occur,
Griffin could incur losses or face liabilities from the loss or injury to its property or to persons at its properties. In
addition, disputes may arise between Griffin and these third party managers, and Griffin may incur significant expenses
to resolve those disputes or terminate the relevant agreement with these third parties and locate and engage competent
and cost-effective alternative service providers to manage the relevant properties. Additionally, third party managers may
manage and own other properties that may compete with Griffin’s properties, which may result in conflicts of interest
and decisions regarding the operation of Griffin’s properties that are not in Griffin’s best interests. Griffin likely would
rely on third-party managers in any new markets it enters through its acquisition activities.
Unfavorable events affecting Griffin’s existing and potential tenants and its properties, or negative market
conditions that may affect Griffin’s existing and potential tenants, could have an adverse impact on Griffin’s ability to
attract new tenants, re-let space, collect rent and renew leases, and thus could have a negative effect on Griffin’s results
of operations and cash flow.
The substantial majority of Griffin’s revenue is derived from lease revenue from its industrial/warehouse and
office/flex buildings. Griffin’s results of operations and cash flows depend on its ability to lease space to tenants on
economically favorable terms. Therefore, Griffin could be adversely affected by various factors and events over which
Griffin has limited control, such as:
•
•
•
•
•
inability to retain existing tenants and attract new tenants;
oversupply of or reduced demand for space and changes in market rental rates in the areas where Griffin’s
properties are located;
defaults by Griffin’s tenants due to bankruptcy or other factors or their failure to pay rent on a timely basis;
physical damage to Griffin’s properties and the need to repair such damage;
economic or physical decline of the areas where Griffin’s properties are located; and
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•
potential risk of functional obsolescence of Griffin’s properties over time.
If a tenant is unable to pay rent due to Griffin, Griffin may be forced to evict the tenant, or engage in other
remedies, which may be expensive and time consuming and may adversely affect Griffin’s results of operation and cash
flows.
If Griffin’s tenants do not renew their leases as they expire, Griffin may not be able to re-lease the space.
Furthermore, leases that are renewed, or new leases for space that is re-let, may have terms that are less economically
favorable to Griffin than current lease terms, or may require Griffin to incur significant costs, such as for renovations,
tenant improvements or lease transaction costs.
Any of these events could adversely affect Griffin’s results of operations and cash flows and its ability to make
dividend payments and service its indebtedness.
A significant portion of Griffin’s costs, such as real estate taxes, insurance costs, and debt service payments, are
fixed, which means that they generally are not reduced when circumstances cause a decrease in cash flow from its
properties.
Declining real estate valuations and any related impairment charges could materially adversely affect
Griffin’s financial condition, results of operations, cash flows, ability to satisfy debt obligations and ability to pay
dividends on, and the per share trading price of, its common stock.
Griffin reviews the carrying value of its properties when circumstances, such as adverse market conditions,
indicate a potential impairment may exist. Griffin bases its review on an estimate of the future cash flows (excluding
interest charges) expected to result from the property’s use and eventual disposition on an undiscounted basis. Griffin
considers factors such as future operating income, trends and prospects, as well as the effects of leasing demand,
competition and other factors. With respect to undeveloped land, Griffin evaluates the cash flow to be generated from the
potential use or sale of such land as compared to the costs, including entitlement and infrastructure costs for the intended
use or costs required to prepare the land for sale. If Griffin’s evaluation indicates that it may be unable to recover the
carrying value of a real estate investment, an impairment loss would be recorded to the extent that the carrying value
exceeds the estimated fair value of the property.
Impairment losses have a direct impact on Griffin’s results of operations because recording an impairment loss
results in an immediate negative adjustment to Griffin’s operating results. The evaluation of anticipated cash flows is
highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements
that could differ materially from actual results in future periods. A worsening real estate market may cause Griffin to
reevaluate the assumptions used in its impairment analysis. Impairment charges could materially adversely affect
Griffin’s financial condition, results of operations, cash flows and ability to pay dividends on, and the per share trading
price of, its common stock.
Griffin’s use of nonrecourse mortgage loans could have a material adverse effect on its financial condition.
As of November 30, 2017, Griffin had indebtedness under nonrecourse mortgage loans of approximately
$131.0 million, collateralized by approximately 88% of the total square footage of its industrial/warehouse and
office/flex buildings. If a significant number of Griffin’s tenants were unable to meet their obligations to Griffin or if
Griffin were unable to lease a significant amount of space in its properties on economically favorable lease terms, there
would be a risk that Griffin would not have sufficient cash flow from operations for payments of required principal and
interest on these loans. If Griffin was unable to make such payments and was to default, the property collateralizing the
mortgage loan could be foreclosed upon, and Griffin’s financial condition and results of operations would be adversely
affected. In addition, two of Griffin’s nonrecourse mortgage loans contain cross default provisions. A default under a
mortgage loan that has cross default provisions may cause Griffin to automatically default on another loan.
Griffin’s use of financing arrangements that include balloon payment obligations could have a material
adverse effect on its financial condition.
Approximately 91% of Griffin’s nonrecourse mortgage loans as of November 30, 2017 require a lump-sum or
“balloon” payment at maturity. Griffin’s ability to make a balloon payment at maturity may be uncertain and may
depend upon its ability to obtain additional financing. At the time the balloon payment is due, Griffin may or may not be
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able to refinance the balloon payment on terms as favorable as the original mortgage terms. If Griffin were to be unable
to refinance the balloon payment, then it may be forced to sell the property or pay the balloon payment using its existing
cash on hand or other liquidity sources, or the property could be foreclosed. Any balloon payments that Griffin makes
out of its existing cash or liquidity may have a material adverse effect on its financial condition and leave it with
insufficient cash to invest in other properties, pay dividends to stockholders or meet its other obligations.
Griffin’s failure to effectively hedge against interest rate fluctuation could have a material adverse effect on
its financial condition.
Griffin has entered into several interest rate swap agreements to hedge its interest rate exposures related to its
variable rate nonrecourse mortgages on certain of its industrial/warehouse and office/flex buildings. These agreements
have costs and involve the risks that these arrangements may not be effective in reducing Griffin’s exposure to interest
rate fluctuations and that a court could rule that such agreements are not legally enforceable. The failure to hedge
effectively against interest rate fluctuations may materially adversely affect Griffin’s results of operations if interest rates
were to rise materially. Additionally, any settlement charges incurred to terminate an interest rate swap agreement may
result in increased interest expense, which may also have an adverse effect on Griffin’s results of operations.
Griffin may suffer adverse effects as a result of the terms of and covenants relating to its revolving credit
facility.
Griffin’s continued ability to borrow under its $15 million revolving credit facility is subject to compliance with
financial and other covenants. Griffin’s failure to comply with such covenants could cause a default under this credit
facility, and Griffin may then be required to repay amounts outstanding, if any, under the facility with capital from other
sources. Under those circumstances, other sources of capital may not be available to Griffin, or may be available only on
unattractive terms.
Griffin relies on key personnel.
Griffin’s success depends to a significant degree upon the contribution of certain key personnel, including but not
limited to Griffin’s Executive Chairman, President and Chief Executive Officer, Griffin Industrial, LLC’s Senior Vice
President and Griffin Industrial, LLC’s Vice President of Construction. If any of Griffin’s key personnel were to cease
employment, Griffin’s operating results could suffer. Griffin’s ability to retain its senior management group or attract
suitable replacements should any members of the senior management group leave is dependent on the competitive nature
of the employment market. The loss of services from key members of the management group or a limitation on their
availability could adversely affect Griffin’s results of operations and cash flows. Griffin has not obtained and does not
expect to obtain key man life insurance on any of its key personnel.
Risks Related to the Real Estate Industry
Changing or adverse political and economic conditions and credit markets may impact Griffin’s results of
operations and financial condition.
Griffin’s real estate business may be affected by market conditions and political and economic uncertainty
experienced by the U.S. economy as a whole, conditions in the credit markets or by local economic conditions in the
markets in which its properties are located. Such conditions may impact Griffin’s results of operations, financial
condition or ability to expand its operations and pay dividends to stockholders as a result of the following:
• The financial condition of Griffin’s tenants may be adversely affected, which may result in tenant defaults
under leases due to bankruptcy, lack of liquidity, operational failures or for other reasons;
• A decrease in investment spending, the curtailment of expansion plans or significant job losses may
decrease demand for Griffin’s industrial/warehouse and office/flex space, causing market rental rates and
property values to be negatively impacted;
• Griffin’s ability to borrow on terms and conditions that it finds acceptable, or at all, may be limited, which
could reduce its ability to pursue acquisition and development opportunities, refinance existing debt, and/or
increase future interest expense;
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• Reduced values of Griffin’s properties may limit its ability to obtain debt financing collateralized by its
properties or may limit the proceeds from such potential financings;
• A weak economy may limit sales of land intended for commercial, industrial and residential use;
• Changes in supply or demand for similar or competing properties in an area where Griffin’s properties are
located may adversely affect Griffin’s competitive position and market rental rates in that area; and
• Long periods of time may elapse between the commencement and the completion of Griffin’s projects.
An increase in interest rates could adversely impact Griffin’s ability to refinance existing debt or to finance
new developments and acquisitions.
Rising interest rates could limit Griffin’s ability to refinance existing debt on favorable terms, or at all, when it
matures. Interest rates have been in recent years, and currently remain, low by historical standards. However, the Federal
Reserve raised its benchmark interest rate multiple times in 2017, and further interest rate increases may occur. If interest
rates increase, so will Griffin’s interest costs, which would adversely affect Griffin’s cash flow and ability to pay principal
and interest on its debt.
From time to time, Griffin enters into interest rate swap agreements and other interest rate hedging contracts,
including swaps, caps and floors. These agreements, which are intended to lessen the impact of rising interest rates on
Griffin, expose Griffin to the risks that the other parties to the agreements might not perform, or that Griffin could incur
significant costs associated with the settlement of the agreements, or that the agreements might be unenforceable and the
underlying transactions would fail to qualify as highly-effective cash flow hedges under relevant accounting guidance.
In addition, an increase in interest rates could decrease the amounts third parties are willing to lend to Griffin for
use towards potential acquisitions or development costs, thereby limiting its ability to grow its property portfolio.
Griffin may not be able to compete successfully with other entities that operate in its industry.
Griffin experiences a great amount of competition for the acquisition of industrial/warehouse buildings, for the
acquisition of undeveloped land for construction of such buildings and for attracting tenants for its properties. Griffin
competes with well-capitalized real estate investors such as pension funds and their advisors, private real estate
investment funds, bank and insurance company investment accounts, public and private investment companies, including
REITs, individuals and other entities engaged in real estate investment activities. Some of these competitors have greater
financial resources than Griffin, and may be able to accept more risk, including risk related to the creditworthiness of
tenants or the degree of leverage they may be willing to take on. Competitors for acquisitions may also have advantages
from a lower cost of capital or greater operating efficiencies associated with being a larger entity. Some of these
competitors may be able to offer prospective tenants more attractive financial or other terms than Griffin is able to offer.
Griffin may experience increased costs of raw materials and energy, which could adversely affect its
operations.
Griffin’s construction activities and maintenance of its current portfolio could be adversely affected by
increases in raw materials or energy costs. As petroleum and other energy costs increase, products used in the
construction of Griffin’s facilities, such as steel, masonry, asphalt, cement and building products may increase. An
increase in the cost of building new facilities could negatively impact Griffin’s future operating results through increased
depreciation expense. An increase in construction costs would also require increased investment in Griffin’s real estate
assets, which may lower the return on investment in new facilities. An increase in energy costs could increase Griffin’s
building operating expenses and thereby lower Griffin’s operating results.
Real estate investments are illiquid, and Griffin may not be able to sell its properties when Griffin determines
it is appropriate to do so.
Real estate properties are not as liquid as other types of investments and this lack of liquidity could limit
Griffin’s ability to react promptly to changes in economic, financial, investment or other conditions. In addition,
provisions of the Internal Revenue Code of 1986, as amended, provide for the ability to exchange “like-kind” property to
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defer income taxes related to a gain on sale. The illiquidity of real estate properties may limit Griffin’s ability to find a
replacement property to effectuate such an exchange.
Potential environmental liabilities could result in substantial costs.
Griffin has properties in Connecticut, the Lehigh Valley of Pennsylvania and Concord, North Carolina in
addition to extensive land holdings in Connecticut, Massachusetts and Florida. Under federal, state and local
environmental laws, ordinances and regulations, Griffin may be required to investigate and clean up the effects of
releases of hazardous substances or petroleum products at its properties because of its current or past ownership or
operation of the real estate. If previously unidentified environmental problems arise, Griffin may have to make
substantial payments, which could adversely affect its cash flow. As an owner or operator of properties, Griffin may
have to pay for property damage and for investigation and clean-up costs incurred in connection with a contamination.
The law typically imposes cleanup responsibility and liability regardless of whether the owner or operator knew of or
caused the contamination. Changes in environmental regulations may impact the development potential of Griffin’s
undeveloped land or could increase operating costs due to the cost of complying with new regulations.
Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require Griffin
to make expenditures that adversely impact Griffin’s operating results.
All of Griffin’s properties are required to comply with the Americans with Disabilities Act ("ADA"). The ADA
generally requires that places of public accommodation comply with federal requirements related to access and use by
people with disabilities. Compliance with the ADA requirements could require removal of access barriers, and non-
compliance could result in imposition of fines by the United States government or an award of damages to private litigants,
or both. Expenditures related to complying with the provisions of the ADA could adversely affect Griffin’s results of
operations and financial condition. In addition, Griffin is required to operate its properties in compliance with fire and
safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and
bodies and become applicable to Griffin’s properties. Griffin may be required to make substantial capital expenditures to
comply with those requirements and these expenditures could have a material adverse effect on Griffin’s operating results
and financial condition and Griffin’s ability to satisfy debt obligations and issue dividends to stockholders.
Governmental regulations and control could adversely affect Griffin’s real estate development activities.
Griffin’s operations are subject to governmental regulations that affect real estate development, such as local
zoning ordinances. Any changes in such regulations may impact the ability of Griffin to develop its properties or
increase Griffin’s costs of development. Subdivision and other residential development may also be affected by the
potential adoption of initiatives meant to limit or concentrate residential growth. Commercial and industrial development
activities of Griffin’s undeveloped land may also be affected by traffic considerations, potential environmental issues,
community opposition and other restrictions to development imposed by governmental agencies.
Uninsured losses or a loss in excess of insured limits could adversely affect Griffin’s business, results of
operations and financial condition.
Griffin carries comprehensive insurance coverage, including property, fire, terrorism and loss of rental revenue.
The insurance coverage contains policy specifications and insured limits. However, there are certain losses that are not
generally insured against or that are not fully insured against. If an uninsured loss or a loss in excess of insured limits
occurs with respect to one or more of Griffin’s properties, Griffin could experience a significant loss of capital invested
and potential revenue from the properties affected.
Volatility in the capital and credit markets could materially adversely impact Griffin.
Volatility and disruption in the capital and credit markets could make it more difficult to borrow money. Market
volatility could hinder Griffin’s ability to obtain new debt financing or refinance maturing debt on favorable terms, or at
all. Any financing or refinancing issues could materially adversely affect Griffin. Market turmoil and the tightening of
credit can lead to an increased lack of consumer confidence and widespread reduction of business activity in general,
which also could materially adversely impact Griffin, including its ability to acquire and dispose of assets on favorable
terms, or at all.
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If Griffin fails to maintain appropriate internal controls in the future, it may not be able to report its
financial results accurately, which may adversely affect the per share trading price of its common stock and its
business.
Griffin’s efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the related
regulations regarding its required assessment of internal control over financial reporting and its external auditors’ audit
of that assessment requires the commitment of significant financial and managerial resources. Griffin’s system of
internal controls may not prevent all errors, misstatements or misrepresentations, and there can be no guarantee that its
internal control over financial reporting will be effective in accomplishing all control objectives all of the time.
Deficiencies, including any material weakness or significant deficiency, in Griffin’s internal control over financial
reporting that may occur in the future could result in misstatements of its results of operations, restatements of its
financial statements and a decline in its stock price, or otherwise materially adversely affect Griffin’s business,
reputation, results of operations, financial condition or liquidity.
Information technology (“IT”) security breaches and other incidents could disrupt Griffin’s operations,
compromise confidential information maintained by Griffin, and damage Griffin’s reputation, all of which could
negatively impact Griffin’s business, results of operations and the per share trading price of its common stock.
As part of Griffin’s normal business activities, it uses information technology and other computer resources to
carry out important operational activities and to maintain its business records. Griffin’s computer systems, including its
backup systems, are subject to interruption or damage from power outages, computer and telecommunications failures,
computer viruses, security breaches (including through cyber-attack and data theft), usage errors and catastrophic events,
such as fires, floods, tornadoes and hurricanes. If Griffin’s computer systems and its backup systems are compromised,
degraded, damaged or breached, or otherwise cease to function properly, Griffin could suffer interruptions in its
operations or unintentionally allow misappropriation of proprietary or confidential information, which could damage its
reputation and require Griffin to incur significant costs to remediate or otherwise resolve these issues. There can be no
assurance that the security efforts and measures Griffin has implemented will be effective or that attempted security
breaches or disruptions would not be successful or damaging.
Griffin is subject to litigation that may adversely impact operating results.
From time to time, Griffin may be a party to legal proceedings and claims arising in the ordinary course of
business which could become significant. Given the inherent uncertainty of litigation, Griffin can offer no assurance that
a future adverse development related to existing litigation or any future litigation will not have a material adverse impact
on its business, consolidated financial position, results of operations or cash flows.
Griffin is exposed to the potential impacts of future climate change and climate-change related risks.
Griffin is exposed to potential physical risks from possible future changes in climate. Griffin’s properties may
be exposed to rare catastrophic weather events, such as severe storms and/or floods. If the frequency of extreme weather
events increases due to climate change, Griffin’s exposure to these events could increase.
As a real estate owner and developer, Griffin may be adversely impacted in the future by stricter energy
efficiency standards for buildings. Griffin may be required to make improvements to its existing properties to meet such
standards and the costs to meet these standards may increase Griffin’s costs for new construction.
Griffin’s properties may contain or develop harmful mold or suffer from other air quality issues, which could
lead to liability for adverse health effects and costs of remediation.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur,
particularly if the moisture problem remains undiscovered or is not addressed. Some molds may produce airborne toxins
or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or
outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne
toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including
allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of Griffin’s
properties could require Griffin to undertake a costly remediation program to contain or remove the mold or other
airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of significant
20
mold or other airborne contaminants could expose Griffin to liability from its tenants, employees of its tenants or others
if property damage or personal injury is alleged to have occurred.
Risks Related to Griffin’s Organization and Structure
The concentrated ownership of Griffin common stock by members of the Cullman and Ernst families may
limit other Griffin stockholders’ ability to influence Griffin’s corporate and management policies.
Members of the Cullman and Ernst families (the “Cullman and Ernst Group”), which include Frederick M.
Danziger, Griffin’s Executive Chairman, Michael S. Gamzon, a director and Griffin’s President and Chief Executive
Officer and Edgar M. Cullman, Jr., a director of Griffin, members of their families and trusts for their benefit,
partnerships in which they own substantial interests and charitable foundations on whose boards of directors they sit,
owned, directly or indirectly, approximately 45.6% of the outstanding common stock of Griffin as of November 30,
2017. There is an informal understanding that the persons and entities included in the Cullman and Ernst Group will vote
together the shares owned by each of them. As a result, the Cullman and Ernst Group may effectively control the
determination of Griffin’s corporate and management policies and may limit other Griffin stockholders’ ability to
influence Griffin’s corporate and management policies.
Griffin’s board of directors may change its investment and financing policies without stockholder approval
and Griffin may become more highly leveraged, which may increase Griffin’s risk of default under its debt
obligations.
Griffin’s investment and financing policies are exclusively determined by its board of directors. Accordingly,
Griffin’s stockholders do not control these policies. Further, Griffin’s charter and bylaws do not limit the amount or
percentage of indebtedness, funded or otherwise, that Griffin may incur. Griffin’s board of directors may alter or
eliminate its current policy on borrowing at any time without stockholder approval. If this policy changed, Griffin could
become more highly leveraged which could result in an increase in its debt service. Higher leverage also increases the
risk of default on Griffin’s obligations. In addition, a change in Griffin’s investment policies, including the manner in
which Griffin allocates its resources across the portfolio or the types of assets in which Griffin seeks to invest, may
increase its exposure to interest rate risk, real estate market fluctuations and liquidity risk. Changes to Griffin’s policies
with regard to the foregoing could adversely affect Griffin’s financial condition, results of operations, cash flows and its
ability to pay dividends on, and the per share trading price of, its common stock.
Changes to the U.S. federal income tax laws, including the recent comprehensive tax reform legislation,
could have an adverse impact on Griffin’s business and financial results.
The United States recently enacted the Tax Cuts and Jobs Act (“TCJA”) that includes significant changes to the
U.S. federal income taxation of business entities. These changes include, among others, a permanent reduction to the
corporate income tax rate, an expansion of the bonus depreciation provisions relating to the deductibility of certain
eligible capital expenses, a limitation on the utilization of net operating losses to offset taxable income, and a partial
limitation on the deductibility of business interest expense. Griffin is currently evaluating the potential impact of the
TCJA on its operations. The impact of the TCJA could be material to Griffin’s results of operations in future periods.
Risks Related to Griffin’s Common Stock
Issuances of Griffin’s common stock or the perception that such issuances might occur could adversely affect
the per share trading price of Griffin’s common stock.
The issuance of Griffin common stock in connection with future property, portfolio or business acquisitions, to
repay indebtedness or for general corporate purposes could have an adverse effect on the per share trading price of
Griffin’s common stock and would be dilutive to existing stockholders. Griffin’s Board of Directors can authorize the
issuance of additional securities without stockholder approval. Griffin’s ability to develop and acquire proprieties in part
depends on Griffin’s access to capital which may in the future include the issuance of common equity.
The market price and trading volume of Griffin’s common stock may be volatile.
The trading volume in Griffin’s common stock may fluctuate and cause significant price variations to occur. If
the per share trading price of Griffin’s common stock declines significantly, stockholders may be unable to resell their
21
shares at or above the price paid for them. Griffin cannot assure stockholders that the per share trading price of its
common stock will not fluctuate or decline significantly in the future.
Some of the factors that could negatively affect Griffin’s share price or result in fluctuations in the price or
trading volume of its common stock include:
• actual or anticipated variations in Griffin’s quarterly operating results or dividends;
• changes in Griffin’s results of operations or cash flows;
• publication of research reports about Griffin or the real estate industry;
• changes in market valuations of similar companies;
• adverse market reaction to any additional debt Griffin incurs in the future;
• additions or departures of key management personnel;
• actions by institutional stockholders;
• speculation in the press or investment community;
•
•
• Griffin’s underlying asset value;
•
• changes in tax laws;
•
• general market and economic conditions.
the realization of any of the other risk factors presented in this annual report;
the extent of investor interest in Griffin’s securities;
investor confidence in the stock and bond markets, generally;
future equity issuances; and
In the past, securities class action litigation has often been instituted against companies following periods of
volatility in the price of their common stock. This type of litigation could result in substantial costs and divert Griffin’s
management’s attention and resources, which could have an adverse effect on Griffin’s financial condition, results of
operations, cash flows and Griffin’s ability to pay dividends on, and the per share trading price of, its common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
22
ITEM 2. PROPERTIES.
Land Holdings
Griffin is a major landholder in the state of Connecticut, owning approximately 2,791 acres. Griffin also owns
approximately 346 acres of land in Massachusetts, approximately 131 acres of land in Pennsylvania, approximately 18
acres in North Carolina and approximately 1,066 acres in northern Florida. Griffin believes the fair market value of its
land in Connecticut and Massachusetts is substantially in excess of its book value.
Listings of the locations of Griffin’s land holdings, a portion of which, principally in Bloomfield, East Granby
and Windsor, Connecticut, Breinigsville, Lower Nazareth Township and Hanover Township, Pennsylvania and Concord,
North Carolina have been developed, are as follows:
Location
Connecticut
Land Area
(in acres)
Bloomfield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East Granby . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East Windsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granby. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Simsbury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Suffield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Windsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
185
540
116
333
774
34
809
(a) (b)
(b)
(a)
(a)
Florida
Quincy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,066 (c)
Massachusetts
Southwick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
346
North Carolina
Concord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Pennsylvania
Lower Nazareth Township . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hanover Township . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Breinigsville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lehigh Valley Township . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
49
17
14
(a) Includes approximately 280 acres of land in Simsbury under the Simsbury Option Agreement and approximately
288 acres in East Granby and Windsor under the EGW Option Agreement.
(b) Includes approximately 424 acres of land in East Granby and 305 acres of land in Granby being leased to Monrovia
under the Imperial Lease.
(c) The acreage in Florida was used in Imperial’s landscape nursery business prior to fiscal 2009. Imperial shut down
that facility in fiscal 2009 and now leases that facility to another grower of containerized nursery plants.
23
Developed Properties
As of November 30, 2017, Griffin owned thirty-five buildings, comprised of twenty-three industrial/warehouse
buildings, eleven office/flex buildings and a small restaurant building. A listing of those facilities is as follows:
Connecticut Industrial/Warehouse Properties
100 International Drive, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1985 Blue Hills Avenue, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
755 Rainbow Road, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
758 Rainbow Road, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
754 Rainbow Road, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
330 Stone Road, Windsor, CT** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
759 Rainbow Road, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75 International Drive, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 International Drive, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40 International Drive, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35 International Drive, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16 International Drive, East Granby, CT* . . . . . . . . . . . . . . . . . . . . . . . . . .
25 International Drive, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15 International Drive, East Granby, CT* . . . . . . . . . . . . . . . . . . . . . . . . . .
14 International Drive, East Granby, CT* . . . . . . . . . . . . . . . . . . . . . . . . . .
131 Phoenix Crossing, Bloomfield, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . .
210 West Newberry Road, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . . .
304,200 sq. ft.
165,000 sq. ft.
148,500 sq. ft.
138,400 sq. ft.
136,900 sq. ft.
136,600 sq. ft.
126,900 sq. ft.
117,000 sq. ft.
99,800 sq. ft.
99,800 sq. ft.
97,600 sq. ft.
58,400 sq. ft.
57,200 sq. ft.
41,600 sq. ft.
40,100 sq. ft.
31,200 sq. ft.
18,400 sq. ft.
Pennsylvania Industrial/Warehouse Properties
4270 Fritch Drive, Lower Nazareth, PA* . . . . . . . . . . . . . . . . . . . . . . . . . . .
5220 Jaindl Blvd., Hanover Township, PA* . . . . . . . . . . . . . . . . . . . . . . . .
5210 Jaindl Blvd., Hanover Township, PA* . . . . . . . . . . . . . . . . . . . . . . . .
4275 Fritch Drive, Lower Nazareth, PA* . . . . . . . . . . . . . . . . . . . . . . . . . . .
871 Nestle Way, Breinigsville, PA* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
302,600 sq. ft.
280,000 sq. ft.
252,000 sq. ft.
228,000 sq. ft.
119,900 sq. ft.
North Carolina Industrial/Warehouse Property
215 International Drive, Concord, NC* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
277,300 sq. ft.
Connecticut Office/Flex Properties
5 Waterside Crossing, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 Waterside Crossing, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29 - 35 Griffin Road South, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . .
21 Griffin Road North, Windsor, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55 Griffin Road South, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . . . . . .
340 West Newberry Road, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . . .
206 West Newberry Road, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . . .
204 West Newberry Road, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . . .
330 West Newberry Road, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . . .
310 West Newberry Road, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . . .
320 West Newberry Road, Bloomfield, CT* . . . . . . . . . . . . . . . . . . . . . . . .
1936 Blue Hills Avenue, Windsor, CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80,500 sq. ft.
80,500 sq. ft.
57,500 sq. ft.
48,300 sq. ft.
40,300 sq. ft.
39,000 sq. ft.
22,800 sq. ft.
22,300 sq. ft.
11,900 sq. ft.
11,400 sq. ft.
11,100 sq. ft.
7,200 sq. ft.
* Included as collateral under one of Griffin’s nonrecourse mortgage loans or Griffin’s revolving line of credit as of
November 30, 2017.
** Subsequent to November 30, 2017, Griffin added this building as collateral to one of its nonrecourse mortgage
loans and received additional mortgage proceeds of $7.0 million.
24
Griffin subleases approximately 1,920 square feet in New York City for its executive offices from
Bloomingdale Properties, Inc. (“Bloomingdale Properties”), an entity that is controlled by certain members of the
Cullman and Ernst Group. The sublease with Bloomingdale Properties was approved by Griffin’s Audit Committee and
the lease rates under the sublease were at market rate at the time the sublease was signed.
As with many companies engaged in real estate investment and development, Griffin holds its real estate
portfolio subject to mortgage debt. See Note 5 to Griffin’s consolidated financial statements for information concerning
the mortgage debt associated with Griffin’s properties.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, Griffin is involved, as a defendant, in various litigation matters arising in the ordinary course
of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with
respect to these matters is not expected to be material to Griffin’s financial position, results of operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
25
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
The following are the high and low prices of Griffin’s common stock as traded on The Nasdaq Stock
Market LLC:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
Low
2017 . . . . . . . $ 32.20 $ 30.13 $ 32.13 $ 29.61 $ 34.40 $ 30.98 $ 37.16 $ 34.50
2016 . . . . . . . $ 26.99 $ 22.50 $ 32.50 $ 22.00 $ 32.60 $ 25.75 $ 32.00 $ 28.94
High
High
High
Low
Low
Low
On January 31, 2018, the number of record holders of common stock of Griffin was approximately 162 which
does not include beneficial owners whose shares are held of record in the names of brokers or nominees. The closing
market price as quoted on The Nasdaq Stock Market LLC on such date was $37.10 per share.
Dividend Policy
Griffin’s dividend policy is to consider the payment of an annual dividend at the end of its fiscal year, which
enables the Board of Directors to evaluate both Griffin’s prior full year results and its cash needs for the succeeding year
when determining whether to declare an annual dividend and the amount thereof, if any. In fiscal 2017 and fiscal 2016,
Griffin declared an annual dividend of $0.40 and $0.30 per share, respectively.
Issuer Purchases of Equity Securities
On March 31, 2016, Griffin’s Board of Directors authorized a stock repurchase program whereby Griffin could
have repurchased up to $5.0 million in outstanding shares of its common stock in privately negotiated transactions. The
stock repurchase program expired on May 10, 2017, and therefore no repurchases were made during the fiscal 2017
fourth quarter. Griffin repurchased a total of 152,173 shares for approximately $4.8 million under the stock repurchase
program.
26
Stock Performance Graph
The following graph compares the total percentage changes in the cumulative total stockholder return (assuming
the reinvestment of dividends) on Griffin’s common stock with the cumulative total return of the Russell 2000 Index and
the Russell Microcap Index from December 1, 2012 to November 30, 2017. It is assumed in the graph that the value of
each investment was $100 at December 1, 2012. Griffin has selected an index of companies with a similar market
capitalization because, for the period from December 1, 2012 to January 8, 2014, when Griffin sold its landscape nursery
business, Griffin is not aware of any other company that substantially participated in both the landscape nursery and real
estate businesses, and would therefore be suitable for comparison to Griffin as a “peer issuer” within Griffin’s lines of
business. In addition, following the sale of the landscape nursery business, Griffin has not been able to identify issuers in
the real estate business that are comparable peers, as most of those companies are significantly larger in size or have real
estate holdings that either differ geographically or by type of property from Griffin’s holdings. Accordingly, Griffin
selected an index of companies with a similar market capitalization.
$200
$180
$160
$140
$120
$100
$80
December 1, 2012
November 30, 2013
November 30, 2014
November 30, 2015
November 30, 2016
November 30, 2017
Griffin
Russell 2000
Russell Microcap Index
27
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected statement of operations data for fiscal years 2013 through 2017 and
balance sheet data as of the end of each fiscal year. The selected statement of operations data for fiscal 2015, fiscal 2016
and fiscal 2017 and the selected balance sheet data for fiscal 2016 and fiscal 2017 are derived from the audited
consolidated financial statements included in Item 8 of this Annual Report. The selected statement of operations data for
fiscal 2013 and fiscal 2014 and the balance sheet data for fiscal 2013, fiscal 2014 and fiscal 2015 were derived from the
audited consolidated financial statements for those years. This selected financial data should be read in conjunction with
the consolidated financial statements and accompanying notes, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and other financial information included elsewhere in this Annual Report.
Historical results are not necessarily indicative of future performance.
2017
2016
2015
(dollars in thousands, except per share data)
2014
2013
Statement of Operations Data:
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,884 $ 30,851 $ 28,088 $ 24,219 $ 25,526
6,673
Depreciation and amortization expense . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,436
1,910
Income (loss) from continuing operations . . . . . . . . . . . .
Income (loss) from discontinued operations (1) . . . . . . .
(7,731)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,821)
Basic income (loss) per share from continuing
10,064
12,622
4,627
—
4,627
6,729
1,809
(1,248)
144
(1,104)
8,797
5,627
576
—
576
7,668
4,314
425
—
425
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.92
0.11
0.08
(0.24)
0.37
Basic income (loss) per share from discontinued
operations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net income (loss) per share . . . . . . . . . . . . . . . . . . .
Diluted income (loss) per share from continuing
—
0.92
—
0.11
—
0.08
0.03
(0.21)
(1.50)
(1.13)
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.92
0.11
0.08
(0.24)
0.37
Diluted income (loss) per share from discontinued
operations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income (loss) per share . . . . . . . . . . . . . . . . .
Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage loans, net of debt issuance costs . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends declared per common share . . . . . . . . . .
—
0.92
—
0.11
—
0.08
0.03
(0.21)
(1.50)
(1.13)
249,037
129,203
93,053
0.40
223,623
109,697
90,803
0.30
208,050
89,185
94,809
0.30
185,690
69,481
95,879
0.20
183,958
65,939
98,115
0.20
(1) Fiscal years 2013 and 2014 include the results from the growing operations of the landscape nursery business, which
was sold on January 8, 2014.
28
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Overview
Griffin Industrial Realty, Inc. (“Griffin”) is a real estate business principally engaged in developing, managing
and leasing industrial/warehouse properties, and to a lesser extent, office/flex properties. Griffin seeks to add to its
property portfolio through the acquisition and development of land or the purchase of buildings in select markets
targeted by Griffin. Periodically, Griffin may sell certain portions of its undeveloped land that it has owned for an
extended time period and the use of which is not consistent with Griffin’s core development and leasing strategy. Prior to
May 13, 2015, Griffin was known as Griffin Land & Nurseries, Inc. On May 13, 2015, Griffin changed its name to better
reflect its ongoing real estate business and focus on industrial/warehouse properties after the sale in fiscal 2014 of the
landscape nursery business that Griffin had operated through its wholly owned subsidiary, Imperial Nurseries, Inc.
(“Imperial”).
The notes to Griffin’s consolidated financial statements included in Item 8 of this Annual Report contain a
summary of the significant accounting policies and methods used in the preparation of Griffin’s consolidated financial
statements. In the opinion of management, because of the relative magnitude of Griffin’s real estate assets, accounting
methods and estimates related to those assets are critical to the preparation of Griffin’s consolidated financial statements.
Griffin uses accounting policies and methods under accounting principles generally accepted in the United States of
America (“U.S. GAAP”). The following are the critical accounting estimates and methods used by Griffin:
Revenue and gain recognition: Revenue includes rental revenue from Griffin’s industrial and
commercial properties and proceeds from property sales. Rental revenue is accounted for on a straight-line basis
over the applicable lease term in accordance with the Financial Accounting Standards Board (“FASB”) ASC
840, “Leases.” Gains on property sales are recognized in accordance with FASB ASC 360-20 “Property, Plant
and Equipment-Real Estate Sales” based on the specific terms of each sale. When the percentage of completion
method is used to account for a sale of real estate, costs included in determining the percentage of completion
include the costs of the land sold, allocated master planning costs, selling and transaction costs and estimated
future costs related to the land sold.
Impairment of long-lived assets: Griffin reviews annually, as well as when conditions may indicate, its
long-lived assets to determine if there are any indications of impairment, such as a prolonged vacancy in one of
Griffin’s rental properties. If indications of impairment are present, Griffin evaluates the carrying value of the
assets in relation to undiscounted cash flows or the estimated fair value of the underlying assets. Development
costs that have been capitalized are reviewed periodically for future recoverability.
Stock based compensation: Griffin determines stock based compensation based on the estimated fair
values of stock options as determined on their grant dates using the Black-Scholes option-pricing model. In
determining the estimated fair values of stock options issued, Griffin makes assumptions on expected volatility,
risk free interest rates, expected option terms and dividend yields.
Derivative instruments: Griffin evaluates each interest rate swap agreement to determine if it qualifies
as an effective cash flow hedge. Changes in the fair value of each interest rate swap agreement that management
determines to be an effective cash flow hedge are recorded as a component of other comprehensive income. The
fair value of each interest rate swap agreement is determined based on observable market participant data, such
as yield curves, as of the fair value measurement date.
Income taxes: In accounting for income taxes under FASB ASC 740, “Income Taxes,” management
estimates future taxable income from operations, the sale of appreciated assets, the remaining years before the
expiration of loss credit carryforwards, future reversals of existing temporary differences and tax planning
strategies in determining if it is more likely than not that Griffin will realize the benefits of its deferred tax
assets. Deferred tax assets and deferred tax liabilities are measured using the enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and deferred tax liabilities of a change in tax rates on income is recognized in the
period that the tax rate change is enacted.
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Summary
In the fiscal year ended November 30, 2017 (“fiscal 2017”), Griffin had net income of approximately
$4.6 million as compared to net income of approximately $0.6 million in the fiscal year ended November 30, 2016
(“fiscal 2016”). The increase in net income in fiscal 2017, as compared to fiscal 2016, principally reflected an increase of
approximately $7.0 million in operating income in fiscal 2017 as compared to fiscal 2016, partially offset by increases of
approximately $1.1 million in interest expense and approximately $1.9 million in income tax expense in fiscal 2017 as
compared to fiscal 2016.
The approximately $7.0 million increase in operating income in fiscal 2017, as compared to fiscal 2016,
principally reflected increases of approximately $6.6 million in gain from property sales (revenue from property sales
less costs related to property sales) and approximately $2.8 million in profit from leasing activities (which Griffin defines
as rental revenue less operating expenses of rental properties)2, partially offset by increases in depreciation and
amortization expense and general and administrative expenses of approximately $1.3 million and approximately
$1.2 million, respectively. The higher gain from property sales in fiscal 2017, as compared to fiscal 2016, was driven by
gains of approximately $8.0 million from the sale of approximately 67 acres of undeveloped land in Phoenix Crossing,
the approximately 268 acre business park master planned by Griffin that straddles the town line between Windsor and
Bloomfield, Connecticut (the “2017 Phoenix Crossing Land Sale”) and approximately $1.9 million from the sale of
approximately 76 acres of undeveloped land in Southwick, Massachusetts (the “Southwick Land Sale”). As of
November 30, 2017, Griffin owns approximately 76 acres of undeveloped land in Phoenix Crossing that is zoned for
industrial and commercial development. The gain from property sales in fiscal 2016 principally reflected a gain of
approximately $3.2 million from the sale of approximately 29 acres of undeveloped land in Griffin Center (the “Griffin
Center Land Sale”). The increase in profit from leasing activities in fiscal 2017, as compared to fiscal 2016, was driven
by an increase in rental revenue as a result of more space leased in fiscal 2017 than fiscal 2016, including the impact of
the fiscal 2017 acquisition of 215 International Drive (“215 International”), an approximately 277,000 square foot
industrial/warehouse building in the Charlotte, North Carolina area. The increase in depreciation and amortization
expense in fiscal 2017, as compared to fiscal 2016, principally reflected depreciation and amortization expense on 215
International and a full year of depreciation expense, as compared to a partial year in fiscal 2016, on 5210 Jaindl
Boulevard (“5210 Jaindl”), an approximately 252,000 square foot industrial/warehouse building in the Lehigh Valley of
Pennsylvania that was completed and placed in service in the 2016 third quarter. The increase in general and
administrative expenses in fiscal 2017, as compared to fiscal 2016, principally reflected an increase in compensation
expense (mostly due to incentive compensation), the write-off of costs incurred for a potential purchase of undeveloped
land that was not completed and higher expenses related to Griffin’s non-qualified deferred compensation plan.
The higher interest expense in fiscal 2017, as compared to fiscal 2016, principally reflected an increase in the
amount outstanding under Griffin’s mortgage loans in fiscal 2017 as compared to fiscal 2016 and less capitalized interest
in fiscal 2017 than fiscal 2016. The higher income tax expense in fiscal 2017, as compared to fiscal 2016, principally
reflected the higher pretax income in fiscal 2017, as compared to fiscal 2016.
Results of Operations
Fiscal 2017 Compared to Fiscal 2016
Total revenue increased to approximately $43.9 million in fiscal 2017 from approximately $30.9 million in
fiscal 2016, reflecting increases of approximately $9.6 million in revenue from property sales and approximately
$3.4 million in rental revenue. Rental revenue increased to approximately $29.9 million in fiscal 2017 from
approximately $26.5 million in fiscal 2016. The approximately $3.4 million increase in rental revenue in fiscal 2017 over
fiscal 2016 was principally due to: (a) an increase of approximately $1.9 million from leasing previously vacant space;
(b) an increase of approximately $1.8 million from 5210 Jaindl, which was placed in service and fully leased in fiscal
2016 with tenants taking occupancy and generating rental revenue starting in fiscal 2017; and (c) approximately
$0.7 million of rental revenue from 215 International, the industrial/warehouse building acquired on June 9, 2017;
partially offset by (d) a decrease of approximately $1.0 million from leases that expired.
2 Profit from leasing activities is not a financial measure in conformity with U.S. GAAP. It is presented because Griffin believes it is
a useful financial indicator for measuring results of its real estate leasing activities. However, it should not be considered as an
alternative to operating income as a measure of operating results in accordance with U.S. GAAP.
30
A summary of the total square footage and leased square footage of the buildings in Griffin’s real estate
portfolio is as follows:
As of November 30, 2017 . . . . . . . . . . . . . . . . . .
As of November 30, 2016 . . . . . . . . . . . . . . . . . .
Total
Square
Footage
3,710,000
3,297,000
Square
Footage
Leased
3,515,000
3,066,000
Percentage
Leased
95%
93%
The approximately 413,000 square foot increase in total square footage as of November 30, 2017, as compared
to November 30, 2016, was due to: (a) the acquisition of 215 International, the approximately 277,000 square foot
industrial/warehouse building in Concord, North Carolina, Griffin’s first property in the greater Charlotte area; and (b)
the completion of construction and placing into service of 330 Stone Road (“330 Stone”), an approximately 137,000
square foot industrial/warehouse building in New England Tradeport (“NE Tradeport”), Griffin’s industrial park located
in Windsor and East Granby, Connecticut. 330 Stone, built on speculation and completed just prior to the end of fiscal
2017, was approximately 54% leased as of November 30, 2017.
The approximately 449,000 square foot net increase in space leased as of November 30, 2017, as compared to
November 30, 2016, was principally due to: (a) approximately 277,000 square feet at 215 International, which was 74%
leased when acquired and subsequently became fully leased; (b) approximately 74,000 square feet being leased in
330 Stone; and (c) two new leases of industrial/warehouse space aggregating approximately 104,000 square feet in
NE Tradeport; partially offset by (d) the expiration of an approximately 12,000 square foot lease of office/flex space in
Griffin Center South in Bloomfield, Connecticut.
All of Griffin’s Connecticut industrial/warehouse and office/flex buildings are located in the north submarket of
Hartford. The real estate market for industrial/warehouse space in the Hartford, Connecticut area has improved over the
last three years. The Q4 2017 CBRE|New England Marketview Report (“Q4 2017 CBRE|New England Report”) from
CBRE Group, Inc. (“CBRE”), a national real estate services company, stated that the overall vacancy rate in the greater
Hartford industrial market decreased to 8.8% at the end of 2017 from 12.3% at the end of 2014, and net absorption in the
greater Hartford industrial market in 2017 was approximately 0.8 million square feet. The Hartford office/flex market
remained weak in 2017. According to the Q4 2017 CBRE|New England Report, the overall vacancy rate of office/flex
space increased to 17.9% at the end of 2017 from 16.0% at the end of the two previous years, with vacancy in the north
submarket of Hartford at approximately 30.9% at the end of 2017. Griffin’s office/flex space was approximately 12% of
Griffin’s total square footage as of November 30, 2017. Griffin expects that its office/flex buildings will continue to
become a smaller percentage of its total real estate portfolio as Griffin intends to focus on the growth of its
industrial/warehouse building portfolio either through the acquisition of fully or partially leased buildings, development
of buildings on land currently owned or to be acquired or both.
The real estate market for industrial/warehouse space in the Lehigh Valley has experienced strong growth and
leasing activity during the past two years. The vacancy rate of Lehigh Valley industrial/warehouse properties as reported
in the Q4 2017 CBRE Market Snapshot Report on Lehigh Valley PA Industrial (the “Q4 2017 CBRE Lehigh Valley
Report”) was 6.9% at the end of 2017, with a net absorption of approximately 2.2 million square feet in 2017. The
Charlotte, North Carolina industrial real estate market is strong. CBRE’s Q4 2017 Marketview Charlotte Industrial
Report stated a vacancy rate of 4.46% for warehouse space at the end of 2017, with absorption of 3.1 million square feet
of warehouse space in 2017. There is no guarantee that an active or strong real estate market or an increase in inquiries
from prospective tenants will result in leasing space that was vacant as of November 30, 2017.
Revenue from property sales increased to approximately $14.0 million in fiscal 2017 from approximately
$4.4 million in fiscal 2016. Property sales revenue in fiscal 2017 included: (a) approximately $10.3 million from the
2017 Phoenix Crossing Land Sale; (b) approximately $2.1 million from the Southwick Land Sale; and (c) approximately
$1.3 million from the sale of two smaller parcels of undeveloped land in Phoenix Crossing. In addition, Griffin sold two
small residential lots for total revenue of approximately $0.2 million and recognized approximately $0.1 million of
revenue from a prior year land sale (see below). The costs related to the 2017 Phoenix Crossing Land Sale, the
Southwick Land Sale and the sale of two smaller Phoenix Crossing parcels of undeveloped land were approximately
$2.3 million, $0.2 million and $1.2 million, respectively, resulting in pretax gains of approximately $8.0 million,
31
$1.9 million and $0.1 million, respectively. The costs of the two smaller Phoenix Crossing parcels were relatively higher
than the costs of other Phoenix Crossing land sold because those parcels were acquired more recently than the other
Phoenix Crossing land, which had been held for many years and had a low cost basis.
Revenue from property sales in fiscal 2017 included recognition of the remaining approximately $0.1 million
from the sale of approximately 90 acres of undeveloped land in Phoenix Crossing (the “2013 Phoenix Crossing Land
Sale”) that closed in the fiscal year ended November 30, 2013 (“fiscal 2013”) and has been accounted for under the
percentage of completion method whereby revenue and gain were recognized as costs related to the 2013 Phoenix
Crossing Land Sale were incurred. Under the terms of the 2013 Phoenix Crossing Land Sale, Griffin constructed roads to
connect the land sold to existing town roads. Such construction was completed in fiscal 2017. Accordingly, because of
Griffin’s continued involvement with the land that was sold, the 2013 Phoenix Crossing Land Sale was accounted for
under the percentage of completion method. From the closing of the 2013 Phoenix Crossing Land Sale through fiscal
2017, Griffin has recognized total revenue of approximately $9.0 million and a total pretax gain of approximately
$6.7 million from the 2013 Phoenix Crossing Land Sale. Property sales occur periodically and changes in revenue from
year to year from property sales may not be indicative of any trends in Griffin’s real estate business.
Griffin’s revenue from property sales of approximately $4.4 million in fiscal 2016 reflected approximately
$3.8 million from the sale of approximately 29 acres of undeveloped land in Griffin Center (the “Griffin Center Land
Sale”) that resulted in a pretax gain of approximately $3.2 million and the recognition of approximately $0.6 million of
revenue from the 2013 Phoenix Crossing Land Sale that resulted in a pretax gain of approximately $0.4 million.
Operating expenses of rental properties increased to approximately $8.9 million in fiscal 2017 from
approximately $8.3 million in fiscal 2016. The increase of approximately $0.6 million in operating expenses of rental
properties in fiscal 2017, as compared to fiscal 2016, principally reflected: (a) an increase of approximately $0.4 million
at 5210 Jaindl, which was in service for the entire year in fiscal 2017 versus five months in fiscal 2016; (b)
approximately $0.1 million at 215 International, acquired in fiscal 2017; and (c) increases aggregating approximately
$0.1 million across all other properties.
Depreciation and amortization expense increased to approximately $10.1 million in fiscal 2017 from
approximately $8.8 million in fiscal 2016. The increase of approximately $1.3 million in depreciation and amortization
expense in fiscal 2017, as compared to fiscal 2016, principally reflected: (a) an increase of approximately $0.6 million
related to 5210 Jaindl, which was in service for the entire year in fiscal 2017 versus five months in fiscal 2016; (b)
approximately $0.5 million related to 215 International, acquired in fiscal 2017; and (c) an increase of approximately
$0.2 million related to all other properties.
Griffin’s general and administrative expenses increased to approximately $8.6 million in fiscal 2017 from
approximately $7.4 million in fiscal 2016. The increase of approximately $1.2 million in general and administrative
expenses in fiscal 2017, as compared to fiscal 2016, principally reflected: (a) an increase of approximately $0.6 million
in compensation expense, which includes increases of approximately $0.4 million of incentive compensation expense
and approximately $0.2 million of salary expense; (b) an increase of approximately $0.3 million related to Griffin’s non-
qualified deferred compensation plan; and (c) approximately $0.3 million for the write-off of costs incurred for a
potential purchase of a parcel of undeveloped land in the Lehigh Valley that was not completed. The increase in
incentive compensation expense in fiscal 2017, as compared to fiscal 2016, reflected Griffin’s improved results of
operations in fiscal 2017, as compared to fiscal 2016, that led to the achievement of certain objectives of Griffin’s
incentive compensation plan. The increase in salary expense in fiscal 2017, as compared to fiscal 2016, principally
reflected the addition of the Director of Acquisitions position in fiscal 2017. The expense increase related to the non-
qualified deferred compensation plan reflected the effect of higher stock market performance on participant balances in
fiscal 2017, as compared to fiscal 2016, which resulted in a greater increase in Griffin’s non-qualified deferred
compensation plan liability in fiscal 2017, as compared to fiscal 2016.
Griffin’s interest expense increased to approximately $5.7 million in fiscal 2017 from approximately
$4.5 million in fiscal 2016. The increase of approximately $1.2 million in interest expense in fiscal 2017, as compared to
fiscal 2016, principally reflected: (a) approximately $0.5 million from financing 5210 Jaindl, which closed just prior to
the end of fiscal 2016; (b) approximately $0.4 million from financing two previously unleveraged NE Tradeport
industrial/warehouse buildings in fiscal 2017; (c) approximately $0.2 million less interest capitalized in fiscal 2017 as
compared to fiscal 2016; and (d) approximately $0.1 million from financing 215 International in fiscal 2017.
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In fiscal 2017, Griffin sold its remaining holdings of the common stock of Centaur Media plc (“Centaur
Media”) for cash proceeds of approximately $1.2 million and a pretax gain of approximately $0.3 million. The
approximately $0.1 million gain on the sale of assets in fiscal 2016 was from the disposition of certain fully depreciated
equipment.
Griffin’s income tax provision increased to approximately $2.7 million in fiscal 2017 from approximately
$0.7 million in fiscal 2016. The income tax provision in fiscal 2017 reflected an effective tax rate of 36.7% on pretax
income of approximately $7.3 million as compared to an effective tax rate of 56.1% on pretax income of approximately
$1.3 million in fiscal 2016. The approximately $2.0 million increase in the income tax provision in fiscal 2017, as
compared to fiscal 2016, reflected approximately $2.2 million as a result of the higher pretax income in fiscal 2017 than
fiscal 2016, partially offset by the inclusion in fiscal 2016 of a charge of approximately $0.2 million related to the
reduction of the expected realization rate of tax benefits from Connecticut state net operating loss carryforwards as a
result of a change in Connecticut tax law, effective for Griffin in fiscal 2016, that limits the future usage of loss
carryforwards to 50% of taxable income. The charge for the reduction of the expected realization rate of tax benefits
from Connecticut state net operating loss carryforwards increased the fiscal 2016 effective tax rate by approximately
12%.
Fiscal 2016 Compared to Fiscal 2015
Total revenue increased to approximately $30.9 million in fiscal 2016 from approximately $28.1 million in
fiscal 2015, reflecting an increase of approximately $1.9 million in rental revenue and approximately $0.9 million in
revenue from property sales. Rental revenue increased to approximately $26.5 million in fiscal 2016 from approximately
$24.6 million in fiscal 2015 principally reflecting: (a) an increase of approximately $1.9 million from leasing previously
vacant space; and (b) an increase of approximately $1.6 million from leasing space in 5220 Jaindl Boulevard (“5220
Jaindl”), which was completed and placed in service at the start of the fiscal 2015 fourth quarter; partially offset by (c) a
decrease of approximately $1.5 million from leases that expired; and (d) a decrease of approximately $0.2 million of
rental revenue from lower expense reimbursements, as a result of lower expenses, from tenants and other changes.
A summary of the total square footage and leased square footage of the buildings in Griffin’s real estate
portfolio is as follows:
As of November 30, 2016 . . . . . . . . . . . . . . . . . .
As of November 30, 2015 . . . . . . . . . . . . . . . . . .
Total
Square
Footage
3,297,000
3,045,000
Square
Footage
Leased
3,066,000
2,706,000
Percentage
Leased
93%
89%
The approximately 252,000 square foot increase in total square footage as of November 30, 2016, as compared
to November 30, 2015, reflected the construction in fiscal 2016 of 5210 Jaindl, the approximately 252,000 square foot
industrial/warehouse building which was the second of the two buildings built on an approximately 49 acre parcel of
land known as Lehigh Valley Tradeport II. 5210 Jaindl was completed in the 2016 third quarter and Griffin entered into
two leases for that building, resulting in 5210 Jaindl being fully leased as of November 30, 2016. Both of the new leases
at 5210 Jaindl became effective in the 2017 first quarter upon completion of tenant improvements.
The approximately 360,000 square foot net increase in space leased as of November 30, 2016, as compared to
November 30, 2015, reflected the approximately 252,000 square feet leased at 5210 Jaindl and several new leases
aggregating approximately 240,000 square feet in other buildings, partially offset by several leases aggregating
approximately 132,000 square feet that expired. Included in the approximately 240,000 square feet of new leasing in
fiscal 2016 was a lease of approximately 101,000 square feet in 4270 Fritch Drive (“4270 Fritch”), one of Griffin’s other
industrial/warehouse buildings in the Lehigh Valley, a full building lease of 25 International Drive (“25 International”),
an approximately 57,000 square foot industrial/warehouse building in NE Tradeport, a full building lease of an
approximately 31,000 square foot industrial/warehouse building in Bloomfield, Connecticut, and a lease of
approximately 16,000 square feet in a single story office building in Griffin Center. The new lease of 25 International
replaced a lease that expired earlier in the year. The tenant of the expired lease had, in fiscal 2014, entered into a ten year
full building lease of 758 Rainbow Road (“758 Rainbow”), an approximately 138,000 square foot building in NE
Tradeport, while remaining in 25 International during its period of transition to the larger facility.
33
Also in the third quarter of fiscal 2016, Griffin entered into a new three year lease of its production nursery in
Quincy, Florida (the “Florida Farm”). The Florida Farm had been leased to a nursery grower since fiscal 2009, but that
lease ended in the fiscal 2016 second quarter. The new lease contains an option for the tenant to purchase the Florida
Farm for a purchase price between $3.4 million and $3.9 million depending upon the date of sale. Subsequent to
November 30, 2017, the tenant of the Florida Farm lease filed for protection under Chapter 11 of the U. S. Bankruptcy
Code. Griffin has yet to determine the impact, if any, this will have on the Florida Farm Lease, which expires on June 30,
2019.
Griffin’s revenue from property sales increased to approximately $4.4 million in fiscal 2016 from
approximately $3.5 million in fiscal 2015. In fiscal 2016, Griffin completed the Griffin Center Land Sale for
approximately $3.8 million in cash and a pretax gain of approximately $3.2 million. In fiscal 2016, in addition to the
Griffin Center Land Sale, Griffin recognized revenue of approximately $0.6 million and a gain of approximately $0.4
million from the 2013 Phoenix Crossing Land Sale. From the closing of the 2013 Phoenix Crossing Land Sale through
November 30, 2016, Griffin had recognized approximately $8.8 million of revenue from the 2013 Phoenix Crossing
Land Sale, reflecting approximately 99% of the total revenue to be recognized from such sale. The balance of the
revenue from the 2013 Phoenix Crossing Land Sale, approximately $0.1 million, was subsequently recognized in fiscal
2017.
The approximately $3.5 million of revenue from property sales in fiscal 2015 reflected: (a) approximately
$2.5 million from the recognition of revenue related to the 2013 Phoenix Crossing Land Sale; (b) approximately
$0.6 million from the sale of land that had been part of the Connecticut farm used by Imperial and (c) $0.4 million from
the retention of a deposit (the “Florida Farm Deposit”) related to the sale of the Florida Farm, which did not close.
Griffin received the Florida Farm Deposit in fiscal 2015 from the tenant that leased the Florida Farm at that time in
connection with that tenant giving notice to Griffin that it was exercising its option under the lease to purchase the
Florida Farm. The tenant subsequently notified Griffin that it would not close on the purchase and Griffin retained the
Florida Farm Deposit and entered into an agreement with the tenant to extend its lease through April 30, 2016. Property
sales occur periodically, and changes in revenue from year to year from those transactions may not be indicative of any
trends in Griffin’s real estate business.
Operating expenses of rental properties decreased to approximately $8.2 million in fiscal 2016 from
approximately $8.4 million in fiscal 2015. The slight decrease of approximately $0.2 million in operating expenses of
rental properties in fiscal 2016, as compared to fiscal 2015, principally reflected decreases of approximately $0.4 million
in snow removal expenses, due to less severe winter weather in fiscal 2016 than fiscal 2015, and approximately
$0.3 million in utility expenses, partially offset by operating expense increases of approximately $0.3 million at 5220
Jaindl, which was in service for the entire year in fiscal 2016 versus three months in fiscal 2015, approximately
$0.1 million of operating expenses at 5210 Jaindl, which was placed in service in fiscal 2016, and approximately
$0.1 million for real estate taxes.
Depreciation and amortization expense increased to approximately $8.8 million in fiscal 2016 from
approximately $7.7 million in fiscal 2015. The increase of approximately $1.1 million in depreciation and amortization
expense in fiscal 2016, as compared to fiscal 2015, reflected increases of approximately $0.6 million related to 5220
Jaindl, which was in service for the entire year in fiscal 2016 versus three months in fiscal 2015, approximately
$0.2 million related to 5210 Jaindl, which was placed in service in fiscal 2016, and approximately $0.5 million for tenant
improvements related to new leases, offset by lower depreciation expense of approximately $0.2 million due to assets
becoming fully depreciated.
Griffin’s general and administrative expenses increased to approximately $7.4 million in fiscal 2016 from
approximately $7.1 million in fiscal 2015. The increase of approximately $0.3 million in general and administrative
expenses in fiscal 2016, as compared to fiscal 2015, principally reflected an increase of approximately $0.2 million
related to Griffin’s non-qualified deferred compensation plan and approximately $0.1 million for an increase in incentive
compensation expense. The expense increase related to the non-qualified deferred compensation plan reflected the effect
of higher stock market performance on participant balances in fiscal 2016, as compared to fiscal 2015, which resulted in
a greater increase in Griffin’s non-qualified deferred compensation plan liability in fiscal 2016 as compared to fiscal
2015. The increase in incentive compensation expense reflected Griffin’s improved results in fiscal 2016 with regard to
profit from leasing activities and gain on property sales as measured under Griffin’s incentive compensation plan.
34
Griffin’s interest expense increased to approximately $4.5 million in fiscal 2016 from approximately
$3.7 million in fiscal 2015. The increase of approximately $0.8 million in interest expense in fiscal 2016, as compared to
fiscal 2015, principally reflected approximately $0.5 million less interest capitalized in fiscal 2016 than fiscal 2015 and
an increase in interest expense of approximately $0.4 million due to the increase in the amount outstanding under
mortgage loans in fiscal 2016 as compared to fiscal 2015. The lower amount of capitalized interest in fiscal 2016, as
compared to fiscal 2015, reflected the higher amount of construction activity in fiscal 2015 than fiscal 2016. The increase
in the amount outstanding under mortgage loans in fiscal 2016, as compared to fiscal 2015, reflected borrowings
completed in the fiscal 2015 fourth quarter that were outstanding for the entire year in fiscal 2016, a new borrowing in
fiscal 2016 on 5210 Jaindl, and adding a previously unleveraged NE Tradeport building to a mortgage on several other
NE Tradeport buildings in fiscal 2016.
Griffin’s income tax provision increased to approximately $0.7 million in fiscal 2016 from approximately
$0.4 million in fiscal 2015. The increase of approximately $0.3 million reflected approximately $0.2 million as a result
of the higher pretax income in fiscal 2016 than fiscal 2015 and approximately $0.1 million related to decreases in the
valuation of certain state income tax benefits in fiscal 2016. In fiscal 2016, Griffin’s income tax provision included a
charge of approximately $0.2 million for the reduction of the expected realization rate of tax benefits from Connecticut
state net operating loss carryforwards as a result of a change in Connecticut tax law, effective for Griffin beginning in
fiscal 2016, that limits the future usage of loss carryforwards to 50% of taxable income. In fiscal 2015, Griffin’s income
tax provision included a charge of approximately $0.1 million for the reduction of the expected realization rate of tax
benefits from certain state net operating loss carryforwards and other temporary differences as a result of changes in the
expected utilization of such benefits. Griffin’s effective income tax rate increased to 56.1% in fiscal 2016 from 47.2% in
fiscal 2015. The higher effective tax rate in fiscal 2016, as compared to fiscal 2015, principally reflected the effect in
fiscal 2016 of a higher charge related to the reduction of certain state tax benefits.
Off Balance Sheet Arrangements
Griffin does not have any off balance sheet arrangements.
Liquidity and Capital Resources
Net cash provided by operating activities was approximately $9.4 million in fiscal 2017 as compared to
approximately $7.2 million in fiscal 2016. The approximately $2.2 million increase in net cash provided by operating
activities in fiscal 2017, as compared to fiscal 2016, principally reflected an increase of approximately $1.6 million of
cash provided by changes in assets and liabilities in fiscal 2017, as compared to fiscal 2016, and an increase of
approximately $0.6 million of cash provided by net income as adjusted for gains on property sales and noncash expenses
and credits in fiscal 2017, as compared to fiscal 2016. The increase in net income as adjusted for gains on property sales
and noncash expenses and credits reflects the approximately $2.8 million increase in profit from leasing activities3
(which Griffin defines as rental revenue less operating expenses of rental properties) in fiscal 2017, partially offset by the
approximately $1.1 million increase in interest expense and the approximately $1.2 million increase in general and
administrative expenses, a portion of which were noncash and reflected in the favorable changes in assets and liabilities.
The approximately $1.6 million increase in cash from changes in assets and liabilities in fiscal 2017, as
compared to fiscal 2016, principally reflected: (a) an increase in deferred revenue of approximately $2.4 million in fiscal
2017 as compared to a decrease of approximately $0.7 million in fiscal 2016; and (b) an increase in other liabilities of
approximately $1.1 million in fiscal 2017 as compared to an increase of approximately $0.4 million in fiscal 2016;
partially offset by (c) an increase in other assets of approximately $2.1 million in fiscal 2017 as compared to a decrease
of approximately $0.1 million in fiscal 2016. The favorable change in deferred revenue in fiscal 2017, as compared to
fiscal 2016, principally reflected cash received from tenants for tenant and building improvements that will be
recognized as rental revenue over the tenants’ respective lease terms. The favorable change in other liabilities in fiscal
2017 principally reflected the increase of Griffin’s non-qualified deferred compensation plan liability, reflected in
general and administrative expenses, as a result of the increase in participant balances in fiscal 2017. The unfavorable
change in other assets principally reflected differences in reported rental revenue and cash received from tenants due to
the effect of rent abatements given to tenants primarily at the start of leases and an increase in amounts due from tenants,
3 Profit from leasing activities is not a financial measure in conformity with U.S. GAAP. It is presented because Griffin believes it is a useful financial
indicator for measuring results of its real estate leasing activities. However, it should not be considered as an alternative to operating income as a
measure of operating results in accordance with U.S. GAAP.
35
principally for timing of receiving payments from tenants for additional tenant and building improvements related to new
leases.
In fiscal 2016, net cash provided by operating activities decreased to approximately $7.2 million from
approximately $13.0 million in fiscal 2015. The approximately $5.8 million decrease in net cash provided by operating
activities in fiscal 2016, as compared to fiscal 2015, principally reflected a decrease of approximately $6.8 million of
cash from changes in assets and liabilities in fiscal 2016 as compared to fiscal 2015, partially offset by an increase of
approximately $1.1 million in cash generated from the increase in net income as adjusted for gains on property sales and
noncash expenses and credits in fiscal 2016, as compared to fiscal 2015, which principally reflected the increase in profit
from leasing activities in fiscal 2016, as compared to fiscal 2015, driven by the increase in rental revenue.
The decrease in cash from changes in assets and liabilities in fiscal 2016, as compared to fiscal 2015, principally
reflected: (a) fiscal 2016 having an approximately $0.7 million decrease in cash from the change in deferred revenue as
compared to an approximately $4.9 million increase in cash from the change in deferred revenue in fiscal 2015; and (b)
fiscal 2016 having an approximately $0.1 million increase in cash from the change in other assets as compared to an
approximately $1.1 million increase in cash from the change in other assets in fiscal 2015. The change in deferred
revenue of approximately $0.7 million in fiscal 2016 principally reflected the recognition of revenue from the 2013
Phoenix Crossing Land Sale. The change in deferred revenue in fiscal 2015 principally reflected approximately
$6.4 million of cash received from a tenant related to building and tenant improvements in connection with a ten year
full building lease of 758 Rainbow that is being recognized as additional rental revenue over the lease term, offset by a
reduction of deferred revenue from the recognition of approximately $2.5 million of revenue from the 2013 Phoenix
Crossing Land Sale. The increase in cash from the change in other assets in fiscal 2015 principally reflected
approximately $0.9 million from a reduction in lease receivables.
Net cash used in investing activities was approximately $19.9 million in fiscal 2017 as compared to
approximately $16.6 million in fiscal 2016 and approximately $29.7 million in fiscal 2015. The net cash used in
investing activities in fiscal 2017 reflected: (a) cash payments of approximately $18.4 million for the acquisition of
215 International; (b) cash payments of approximately $17.6 million for additions to real estate assets; and (c) cash
payments of approximately $1.6 million for deferred leasing costs and other uses; partially offset by (d) cash proceeds of
approximately $13.0 million from property sales; (e) approximately $3.4 million of net cash proceeds from property
sales returned from escrow; and (f) cash proceeds of approximately $1.2 million from the sale of Centaur Media
common stock. The approximately $13.0 million of cash proceeds from property sales reflected approximately
$9.7 million from the 2017 Phoenix Crossing Land Sale, approximately $1.9 million from the Southwick Land Sale,
approximately $1.2 million from the sale of two smaller parcels of undeveloped land in Phoenix Crossing and
approximately $0.2 million from the sale of two small residential lots. The approximately $3.4 million of net cash
proceeds from property sales returned from escrow reflects approximately $3.5 million from the Griffin Center Land
Sale, offset by approximately $0.1 million of cash that remained in escrow from the Southwick Land Sale. The cash
proceeds from the Griffin Center Land Sale were deposited into escrow at closing for the potential purchase of a
replacement property in a like-kind exchange (a “1031 Like-Kind Exchange”) under Section 1031 of the Internal
Revenue Code of 1986, as amended (the “IRC”). The net cash proceeds from the Griffin Center Land Sale were returned
to Griffin in fiscal 2017 because a replacement property was not purchased in the time period required for a 1031 Like-
Kind Exchange. The cash proceeds of approximately $1.9 million from the Southwick Land Sale were deposited into
escrow at closing and subsequently, approximately $1.8 million of such proceeds were used to purchase approximately
14 acres of undeveloped land in the Lehigh Valley of Pennsylvania (see below). The remaining approximately
$0.1 million of proceeds from the Southwick Land Sale that remained in escrow was returned to Griffin in the fiscal
2018 first quarter.
On June 9, 2017, Griffin paid cash of approximately $18.4 million (net of allowances) for the acquisition of
215 International, using the approximately $9.7 million of proceeds from the 2017 Phoenix Crossing Land Sale that were
deposited in escrow at the closing of that transaction for the purchase of a replacement property for a 1031 Like-Kind
Exchange, with the balance of approximately $8.7 million paid from cash on hand. Subsequent to the acquisition, Griffin
closed on a nonrecourse mortgage loan of $12.15 million collateralized by 215 International (see below).
36
Cash payments of approximately $17.6 million for additions to real estate assets in fiscal 2017 reflected the
following:
Tenant and building improvements related to leasing . . . . . . . . . . . . . . . . . . . . . . $ 7.9 million
New building construction (including site work) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.0 million
Purchase of undeveloped land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.4 million
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.3 million
Cash payments for tenant and building improvements in fiscal 2017 related to new leases signed in the latter
part of fiscal 2016 and fiscal 2017. Cash of approximately $2.4 million (including acquisition expenses) was paid for the
purchase of approximately 14 acres of undeveloped land in the Lehigh Valley that had been under agreement. The
closing on this purchase took place after Griffin received all governmental approvals for its planned development, on
speculation, of an approximately 134,000 square foot industrial/warehouse building on the land acquired. Griffin started
site work in the fiscal 2017 fourth quarter with building construction anticipated to begin in the fiscal 2018 first quarter.
Griffin expects to spend approximately $7.8 million for site work and construction of the building shell and expects to
complete construction in the fiscal 2018 third quarter. Cash payments for new building construction in fiscal 2017 were
for 330 Stone, the approximately 137,000 square foot industrial/warehouse building in NE Tradeport that was built on
speculation in fiscal 2017. 330 Stone was 54% leased as of November 30, 2017 as a result of a lease for approximately
74,000 square feet with a tenant that had leased approximately 39,000 square feet in one of Griffin’s other NE Tradeport
industrial/warehouse buildings.
Cash payments of approximately $1.6 million in fiscal 2017 for deferred leasing costs and other uses reflected
approximately $1.5 million for lease commissions and other costs related to new and renewed leases and approximately
$0.1 million for purchases of property and equipment.
In fiscal 2016, the net cash used in investing activities of approximately $16.6 million reflected cash payments
of approximately $15.7 million for additions to real estate assets and approximately $0.9 million for deferred leasing
costs and other uses. The cash spent on deferred leasing costs and other in fiscal 2016 principally reflected lease
commissions paid to real estate brokers for new leases. The approximately $3.5 million of proceeds, net of transaction
expenses, received from the Griffin Center Land Sale were placed in escrow for potential acquisition of a replacement
property in a like-kind exchange under a 1031 Like-Kind Exchange. As a replacement property was not purchased in the
time period required for a 1031 Like-Kind Exchange, the proceeds from the Griffin Center Land Sale were returned to
Griffin in fiscal 2017.
Cash payments for additions to real estate assets in fiscal 2016 reflected the following:
New building construction (including site work) . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.2 million
Tenant and building improvements related to leasing . . . . . . . . . . . . . . . . . . . . . $ 5.4 million
Development costs and infrastructure improvements . . . . . . . . . . . . . . . . . . . . . . $ 0.6 million
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.5 million
Cash payments in fiscal 2016 for new building construction reflected the construction, on speculation, of 5210
Jaindl, which was started in the fiscal 2015 fourth quarter and completed in fiscal 2016. Through November 30, 2016,
Griffin made total cash payments of approximately $12.0 million for the direct site work and building shell for 5210
Jaindl. Cash payments in fiscal 2016 for tenant and building improvements principally reflected tenant improvement
work related to leases signed in the latter part of fiscal 2015 and fiscal 2016. The cash spent on development costs and
infrastructure improvements in fiscal 2016 principally reflected road improvements related to the 2013 Phoenix Crossing
Land Sale.
In fiscal 2015, the net cash used in investing activities of approximately $29.7 million reflected cash payments
of approximately $31.2 million for additions to real estate assets and approximately $1.0 million for deferred leasing
costs and other uses, partially offset by $1.5 million of cash received from the second and final payment under the note
receivable from Monrovia Connecticut, LLC (“Monrovia”), the buyer of Imperial, and approximately $1.0 million of
cash proceeds from property sales.
37
Cash payments for additions to real estate assets in fiscal 2015 reflect the following:
New building construction (including site work) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14.5 million
Tenant and building improvements related to leasing . . . . . . . . . . . . . . . . . . . . . . $ 14.4 million
Development costs and infrastructure improvements . . . . . . . . . . . . . . . . . . . . . . . $ 2.1 million
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.2 million
Fiscal 2015 cash payments for new building construction, including site work, principally reflected the
construction, on speculation, of 5220 Jaindl and the start of site work for 5210 Jaindl. The fiscal 2015 cash payments for
tenant and building improvements related to leasing included approximately $7.8 million for improvements in
connection with the ten year full building lease of 758 Rainbow and approximately $2.9 million of improvements at
5220 Jaindl. The cash payments for development costs and infrastructure improvements primarily reflected ongoing road
construction and other offsite improvements required under the terms of the 2013 Phoenix Crossing Land Sale.
Proceeds from property sales in fiscal 2015 reflected approximately $0.6 million from the sale of land that had
been part of the Connecticut farm used by Imperial but not part of the long-term lease to Monrovia and approximately
$0.4 million from the deposit retained on the sale of the Florida Farm that did not close.
Net cash provided by financing activities was approximately $15.9 million in fiscal 2017 as compared to
approximately $15.8 million in fiscal 2016 and approximately $18.0 million in fiscal 2015. The net cash provided by
financing activities in fiscal 2017 reflected proceeds of approximately $39.1 million from new mortgage loans (see
below); partially offset by: (a) approximately $19.3 million of principal payments on mortgage loans; (b) a payment of
approximately $1.5 million for a dividend on Griffin’s common stock that was declared in the fiscal 2016 fourth quarter
and paid in fiscal 2017; (c) approximately $1.5 million paid for the repurchase of common stock; (d) approximately
$0.6 million of payments for debt issuance costs; and (e) a payment of approximately $0.3 million for the termination of
an interest rate swap agreement. The principal payments on mortgage loans include approximately $16.0 million for the
repayment of two mortgage loans that were refinanced (see below), and approximately $3.3 million of recurring
principal payments.
In fiscal 2016, net cash provided by financing activities of approximately $15.8 million reflected $45.5 million
of proceeds from new mortgage debt (see below) and $0.6 million of mortgage proceeds released from escrow, partially
offset by: (a) approximately $24.8 million of principal payments on mortgage loans; (b) approximately $3.4 million paid
for the repurchase of common stock (see below); (c) a payment of approximately $1.5 million for a dividend on Griffin’s
common stock that was declared in the fiscal 2015 fourth quarter and paid in fiscal 2016; and (d) approximately
$0.6 million of payments for debt issuance costs. The principal payments on mortgage loans included approximately
$21.1 million for the repayment of two mortgage loans that were refinanced (see below), approximately $2.7 million of
recurring principal payments and a $1.0 million principal repayment from mortgage proceeds that had been held in
escrow.
The net cash provided by financing activities of approximately $18.0 million in fiscal 2015 reflected net
proceeds of approximately $40.4 million from three mortgage loans (see below) and approximately $0.1 million received
from the exercise of stock options, partially offset by: (a) approximately $20.1 million of payments of principal on
Griffin’s mortgage loans; (b) a payment of approximately $1.0 million for a dividend on Griffin’s common stock that
was declared in the fiscal 2014 fourth quarter and paid in fiscal 2015; (c) approximately $0.8 million of payments for
debt issuance costs; and (d) approximately $0.6 million of mortgage proceeds placed in escrow. The principal payments
on mortgage loans included approximately $17.9 million for the repayment of a mortgage loan that was refinanced (see
below) and approximately $2.2 million of recurring principal payments.
On September 22, 2017, two subsidiaries of Griffin closed on the refinancing of a nonrecourse mortgage (the
“2012 Webster Mortgage”) with Webster Bank, N. A. (“Webster Bank”) that was collateralized by 5 and 7 Waterside
Crossing, two multi-story office buildings aggregating approximately 161,000 square feet in Griffin Center in Windsor,
Connecticut. Immediately prior to the refinancing, the 2012 Webster Mortgage had a balance of approximately
$5.9 million with a maturity date of October 2, 2017. The refinanced nonrecourse mortgage loan (the “2017 Webster
Mortgage”) was for approximately $4.4 million, has a five year term with monthly principal payments based on a
twenty-five year amortization schedule and is collateralized by the same properties that collateralized the 2012 Webster
Mortgage. The 2017 Webster Mortgage has a variable interest rate consisting of the one-month LIBOR rate plus 2.75%,
but Griffin entered into an interest rate swap agreement with Webster Bank that effectively fixes the interest rate on the
38
2017 Webster Mortgage at 4.72% over the term of the 2017 Webster Mortgage. The 2012 Webster Mortgage had a
variable interest rate that was effectively fixed at 3.86% through an interest rate swap agreement with Webster Bank.
Griffin used cash on hand of approximately $1.0 million and approximately $0.5 million of cash that had been held in
escrow by Webster Bank to repay a portion of the 2012 Webster Mortgage in connection with the refinancing.
On August 30, 2017, a subsidiary of Griffin closed on a $12.15 million nonrecourse mortgage (the “2017 40|86
Mortgage”) with 40|86 Mortgage Capital, Inc. The 2017 40|86 Mortgage is collateralized by 215 International, which
Griffin acquired on June 9, 2017. The 2017 40|86 Mortgage has an interest rate of 3.97% and a ten year term with
monthly principal payments based on a thirty year amortization schedule.
On July 14, 2017, a subsidiary of Griffin closed on a $10.6 million nonrecourse mortgage loan (the “2017
Berkshire Mortgage”) with Berkshire Bank. The 2017 Berkshire Mortgage refinanced an existing mortgage loan (the
“2009 Berkshire Mortgage”) with Berkshire Bank that was due on February 1, 2019 and was collateralized by 100
International Drive (“100 International”), an approximately 304,000 square foot industrial/warehouse building in NE
Tradeport. The 2009 Berkshire Mortgage had a balance of approximately $10.1 million at the time of the refinancing and
a variable interest rate consisting of the one month LIBOR rate plus 2.75%. At the time Griffin closed on the 2009
Berkshire Mortgage, Griffin entered into an interest rate swap agreement with Berkshire Bank (the “2009 Berkshire
Swap”) to effectively fix the interest rate on the 2009 Berkshire Mortgage at 6.35% for the term of that loan. The 2017
Berkshire Mortgage is collateralized by the same property that collateralized the 2009 Berkshire Mortgage. Just prior to
the closing on the 2017 Berkshire Mortgage, Griffin completed a lease amendment with the full building tenant in 100
International to extend the lease from its scheduled expiration date of July 31, 2019 to July 31, 2025. Under the terms of
the 2017 Berkshire Mortgage, Griffin entered into a master lease of 100 International that would become effective if the
tenant in 100 International does not renew its lease when it expires. The 2017 Berkshire Mortgage has a ten year term
with monthly principal payments based on a twenty-five year amortization schedule. The interest rate for the 2017
Berkshire Loan is a variable rate consisting of the one month LIBOR rate plus 2.05%. At the time the 2017 Berkshire
Mortgage closed, Griffin terminated the 2009 Berkshire Swap and entered into a new interest rate swap agreement with
Berkshire Bank that effectively fixes the interest rate of the 2017 Berkshire Mortgage at 4.39% over the loan term.
Griffin paid approximately $0.3 million in connection with the termination of the 2009 Berkshire Swap.
On March 15, 2017, a subsidiary of Griffin closed on a $12.0 million nonrecourse mortgage loan (the “2017
People's Mortgage”) with People’s United Bank, N.A. (“People’s Bank”). The 2017 People’s Mortgage is collateralized
by two industrial/warehouse buildings (755 and 759 Rainbow Road) in NE Tradeport aggregating approximately
275,000 square feet. The 2017 People’s Mortgage has a ten year term with monthly principal payments based on a
twenty-five year amortization schedule. The interest rate for the 2017 People’s Mortgage is a variable rate consisting of
the one month LIBOR rate plus 1.95%. At the time the 2017 People’s Mortgage closed, Griffin also entered into an
interest rate swap agreement with People’s Bank that effectively fixes the interest rate at 4.45% for the full loan term. In
accordance with the terms of the 2017 People’s Mortgage, Griffin entered into a master lease for 759 Rainbow Road that
would only become effective if the full building tenant in that building does not renew its lease, which is scheduled to
expire in fiscal 2019. The master lease would be in effect until the earlier to occur of the space being re-leased to a new
tenant or the due date of the 2017 People’s Mortgage. Subsequent to November 30, 2017, Griffin closed on the
refinancing of the 2017 People’s Mortgage, adding 330 Stone to the collateral and receiving $7.0 million of additional
mortgage proceeds (see below).
On November 17, 2016, Griffin closed on a nonrecourse mortgage (the “2016 Webster Mortgage”) for
approximately $26.7 million. The 2016 Webster Mortgage refinanced an existing mortgage with Webster Bank, which
was due on September 1, 2025 and was collateralized by 5220 Jaindl (see below). The 2016 Webster Mortgage is
collateralized by the approximately 280,000 square foot industrial/warehouse building, 5220 Jaindl, along with 5210
Jaindl, the adjacent approximately 252,000 square foot industrial/warehouse building. Griffin received net proceeds of
$13.0 million (before transaction costs), net of approximately $13.7 million used to refinance the existing mortgage with
Webster Bank. The 2016 Webster Mortgage has a ten year term with monthly principal payments based on a twenty-five
year amortization schedule. The interest rate for the 2016 Webster Mortgage is a variable rate of the one month LIBOR
rate plus 1.70%. At the time the 2016 Webster Mortgage closed, Griffin entered into an interest rate swap agreement
with Webster Bank that, combined with two existing swap agreements with Webster Bank, effectively fixes the rate of
the 2016 Webster Mortgage at 3.79% over the mortgage loan’s ten year term.
39
On September 1, 2015, Griffin closed on a $14.1 million nonrecourse mortgage loan (the “2015 Webster
Mortgage”) with Webster Bank. The 2015 Webster Mortgage was collateralized by 5220 Jaindl. At closing, Griffin
received cash proceeds from the 2015 Webster Mortgage (before transaction costs) of $11.5 million. Subsequent to the
closing of this loan, the tenant that was leasing approximately 196,000 square feet in 5220 Jaindl exercised its option to
lease the balance of the building and Webster Bank advanced the balance of the mortgage loan proceeds ($2.6 million) to
Griffin on December 10, 2015. The 2015 Webster Mortgage had a variable interest rate of the one month LIBOR rate
plus 1.65%, but Griffin entered into an interest rate swap agreement with Webster Bank at closing that effectively fixes
the interest rate at 3.77% over the loan term on the loan proceeds received at closing. At the time Griffin received the
additional proceeds of $2.6 million, Griffin entered into a second interest rate swap agreement with Webster Bank to
effectively fix the interest rate on those loan proceeds at 3.67% for the balance of the term of the loan.
On April 26, 2016, Griffin closed on a nonrecourse mortgage (the “2016 People’s Mortgage”) with People’s
Bank and received mortgage proceeds of $14.35 million, before transaction costs. The 2016 People’s Mortgage
refinanced an existing mortgage (the “2009 People’s Mortgage”) with People’s Bank that was due on August 1, 2019
and was collateralized by four of Griffin’s NE Tradeport industrial/warehouse buildings totaling approximately 240,000
square feet (14, 15, 16 and 40 International Drive). The 2009 People’s Mortgage had a balance of approximately
$7.4 million at the time of the refinancing and a variable interest rate of the one month LIBOR rate plus 3.08%. Griffin
had entered into an interest rate swap agreement with People’s Bank to effectively fix the rate on the 2009 People’s
Mortgage at 6.58% for the term of that loan. The 2016 People’s Mortgage is collateralized by the same four properties as
the 2009 People’s Mortgage along with another approximately 98,000 square foot industrial/warehouse building (35
International Drive) in NE Tradeport. At the closing of the 2016 People’s Mortgage, Griffin used a portion of the
proceeds to repay the 2009 People’s Mortgage. The 2016 People’s Mortgage has a ten year term with monthly principal
payments based on a twenty-five year amortization schedule. The interest rate for the 2016 People’s Mortgage is a
variable rate of the one month LIBOR rate plus 2.0%. At the time the 2016 People’s Mortgage closed, Griffin entered
into a second interest rate swap agreement with People’s Bank that, combined with the existing interest rate swap
agreement with People’s Bank, effectively fixes the interest rate of the 2016 People’s Mortgage at 4.17% over the loan
term. The terms of the 2016 People’s Mortgage require that if either the tenant that leases approximately 58,000 square
feet in 40 International Drive or the tenant that leases approximately 40,000 square feet in 14 International Drive does
not extend its respective lease when it expires in fiscal 2021, a subsidiary of Griffin will enter into a master lease of the
vacated space. The master lease would be guaranteed by Griffin and be in effect until either the space is re-leased to a
new tenant or the due date of the 2016 People’s Mortgage Loan, whichever occurs first.
On December 31, 2014, Griffin closed on a nonrecourse mortgage loan (the “2014 KeyBank Mortgage”) on
4275 Fritch Drive (“4275 Fritch”) with First Niagara Bank, which was subsequently acquired by KeyBank. The 2014
KeyBank Mortgage refinanced an existing mortgage loan on 4275 Fritch and added 4270 Fritch to the collateral. Griffin
received mortgage proceeds of approximately $10.9 million (before transaction costs) in addition to approximately
$8.9 million used to refinance the existing mortgage on 4275 Fritch. The 2014 KeyBank Mortgage is collateralized by
4270 Fritch, an approximately 303,000 square foot industrial/warehouse building, and 4275 Fritch, an adjacent
approximately 228,000 square foot industrial/warehouse building. At the time of the mortgage closing, approximately
201,000 square feet of 4270 Fritch was leased. On December 11, 2015, Griffin received additional mortgage proceeds of
$1.85 million (the “KeyBank Earn-Out”) when the remaining vacant space of approximately 102,000 square feet was
leased. Griffin agreed that it would enter into a master lease with its subsidiaries that own 4270 Fritch and 4275 Fritch in
order to maintain a minimum net rent equal to the debt service on the 2014 KeyBank Mortgage. The master lease would
be co-terminus with the 2014 KeyBank Mortgage. The 2014 KeyBank Mortgage has a ten year term with monthly
principal payments based on a twenty-five year amortization schedule. The interest rate for the 2014 KeyBank Mortgage
is a variable rate of the one month LIBOR rate plus 1.95%. At the time the 2014 KeyBank Mortgage closed, Griffin
entered into an interest rate swap agreement that, combined with an existing interest rate swap agreement, effectively
fixed the rate of the 2014 KeyBank Mortgage at 4.43% over the mortgage loan’s ten year term. At the time the KeyBank
Earn-Out was received, Griffin entered into another interest rate swap agreement with KeyBank for a notional principal
amount of $1.85 million to fix the interest rate on the KeyBank Earn-Out at 3.88%. The combination of the three interest
rate swap agreements effectively fixes the interest rate on the 2014 KeyBank Mortgage at 4.39% over the remainder of
the mortgage loan’s ten year term.
On July 29, 2015, a subsidiary of Griffin closed on an $18.0 million nonrecourse mortgage loan (the “2015
40|86 Mortgage”) with 40|86 Mortgage Capital, Inc. The 2015 40|86 Mortgage Loan is collateralized by three
40
industrial/warehouse buildings in NE Tradeport (75 International Drive, 754 and 758 Rainbow Road) aggregating
approximately 392,000 square feet, has a fixed interest rate of 4.33% and a fifteen year term, with payments based on a
thirty year amortization schedule. At closing, Griffin received cash proceeds from the 2015 40|86 Mortgage (before
financing costs) of approximately $14.9 million, which were used to refinance the maturing mortgage that had a
principal balance of approximately $17.9 million and an interest rate of 5.73%. The remaining approximately
$3.1 million of mortgage proceeds were deposited into escrow. As per the terms of the 2015 40|86 Mortgage,
$2.5 million of the escrowed proceeds were released to Griffin in fiscal 2015 when the tenant that was leasing
approximately 88,000 square feet on a month-to-month basis in 754 Rainbow Road entered into a long-term lease for
that space and the remaining $0.6 million of escrowed proceeds were released to Griffin in fiscal 2016 when tenant
improvements for the full building tenant in 758 Rainbow Road were completed.
On July 22, 2016, Griffin entered into a two-year extension to its revolving credit line with Webster Bank (the
“Webster Credit Line”) that was scheduled to expire on August 1, 2016. The terms of the extension increased the amount
of the credit line from $12.5 million to $15.0 million and Griffin has the option to further extend the credit line for an
additional year provided there is no default at the time such extension is requested. The interest rate on the credit line
extension remained at the one month LIBOR rate plus 2.75% and the collateral for the Webster Credit Line, Griffin’s
eight single-story office/flex buildings aggregating approximately 217,000 square feet in Griffin Center South, an
approximately 48,000 square foot single-story office building in Griffin Center, and an approximately 18,000 square foot
industrial/warehouse building in Griffin Center South also remained the same. There have been no borrowings under the
Webster Credit Line since its inception, however, the Webster Credit Line does secure certain unused standby letters of
credit aggregating approximately $2.2 million that are related to Griffin's development activities.
In fiscal 2016, Griffin’s Board of Directors authorized a stock repurchase program whereby, effective May 11,
2016, Griffin could repurchase up to $5.0 million of its outstanding common stock over a twelve month period in
privately negotiated transactions. The stock repurchase program did not obligate Griffin to repurchase any specific
amount of stock. In fiscal 2016, Griffin repurchased 105,000 shares of its common stock for approximately $3.4 million.
In fiscal 2017, Griffin repurchased 47,173 shares of its outstanding common stock for approximately $1.5 million before
the repurchase program expired on May 10, 2017. Under the stock repurchase program, Griffin repurchased a total of
152,173 shares of its outstanding common stock for approximately $4.8 million.
Griffin’s payments (including principal and interest) under contractual obligations as of November 30, 2017 are
as follows:
Total
Due Within Due From Due From Due in More
1 - 3 Years 3 - 5 Years Than 5 Years
One Year
Mortgage Loans . . . . . . . . . . . . . . . . . . $ 174.7 $
Revolving Line of Credit . . . . . . . . . .
Operating Lease Obligations . . . . . . .
Purchase Obligations (1) . . . . . . . . . . .
Other (2) . . . . . . . . . . . . . . . . . . . . . . . .
—
1.1
3.0
5.0
$ 183.8 $
(in millions)
9.3 $
—
0.1
3.0
—
12.4 $
21.3 $
—
0.2
—
—
21.5 $
21.5 $
—
0.3
—
—
21.8 $
122.6
—
0.5
—
5.0
128.1
(1) Includes obligations principally related to the development of Griffin’s real estate assets.
(2) Reflects the liability for Griffin’s non-qualified deferred compensation plan. The timing on the payment of
participant balances in the non-qualified deferred compensation plan is not determinable.
On January 25, 2016, Griffin entered into an Option Purchase Agreement (the “Simsbury Option Agreement”)
whereby Griffin granted the buyer an exclusive three month option, in exchange for a nominal fee, to purchase
approximately 280 acres of undeveloped land in Simsbury, Connecticut for approximately $7.7 million. The buyer may
extend the option period for up to three years upon payment of additional option fees. Through November 30, 2017, the
buyer paid approximately $0.1 million of option fees, and subsequent to November 30, 2017, the buyer paid an
additional approximately $0.1 million to extend its option period through January 2019. Subsequent to November 30,
2017, the buyer received approval from the state regulatory authority for the buyer’s planned use of the land, which is to
generate solar electricity. A closing on the land sale contemplated by the Simsbury Option Agreement is subject to
41
several significant contingencies, including the potential appeal of the approvals recently granted by the state regulatory
authority. Griffin expects the decision of the state regulatory authority to be appealed. There is no guarantee that the sale
of land as contemplated under the Simsbury Option Agreement will be completed under its current terms, or at all.
On May 5, 2017, Griffin entered into an Option Purchase Agreement (the “EGW Option Agreement”) whereby
Griffin granted the buyer an exclusive three month option, in exchange for a nominal fee, to purchase approximately 288
acres of undeveloped land in East Granby and Windsor, Connecticut for approximately $7.8 million. The buyer may
extend the option period for up to three years upon payment of additional option fees. The land subject to the EGW
Option Agreement does not have any of the approvals that would be required for the buyer’s planned use of the land,
which is to generate solar electricity. A closing on the land sale contemplated by the EGW Option Agreement is subject
to several significant contingencies, including the buyer procuring electrical utility supply contracts, approval by the
state public utility regulatory authorities and governmental approvals for the planned use of the land. There is no
guarantee that the sale of land as contemplated under the EGW Option Agreement will be completed under its current
terms, or at all.
On October 4, 2017, Griffin entered into an agreement to purchase an approximately 22 acre parcel of
undeveloped land in Concord, North Carolina (the “Concord Land”) for $2.6 million in cash. If the transaction closes,
Griffin plans to construct an industrial/warehouse development on the Concord Land, which is located near 215
International. The amount of industrial/warehouse space to be developed there will be based upon findings during due
diligence. The closing of this purchase, anticipated to take place in fiscal 2018, is subject to several conditions, including
the satisfactory outcome of due diligence and obtaining all governmental approvals for Griffin’s development plans for
the Concord Land. There is no guarantee that this transaction will be completed under its current terms, or at all.
On October 18, 2017, Griffin entered into a full building lease (the “220 Tradeport Lease”) for an
approximately 234,000 square foot industrial/warehouse building (“220 Tradeport Drive”) to be built in NE Tradeport.
The tenant is an investment grade company that intends to use 220 Tradeport Drive for the distribution of automotive
parts. The Lease, which would commence upon completion of construction of the 220 Tradeport Drive, has a term of
twelve years and six months with the tenant having several five year renewal options. Provided the tenant meets certain
conditions, the tenant has an option (the “Expansion Option”) to cause Griffin to construct an approximately 54,000
square foot addition to 220 Tradeport Drive. If the tenant exercises the Expansion Option, the term of the 220 Tradeport
Lease would be extended for at least ten years upon the tenant occupying the additional space. Griffin expects to
commence construction of 220 Tradeport Drive in the fiscal 2018 first quarter, with completion expected in the second
half of fiscal 2018. Griffin expects to spend approximately $17.5 million related to development of 220 Tradeport Drive,
including all related site work, building construction, tenant improvements, leasing expenses and financing costs. Griffin
has agreed to terms with State Farm Life Insurance Company (“State Farm”) on a construction to permanent mortgage
loan for up to $13.8 million. The loan would provide financing during the construction period and, upon completion of
220 Tradeport Drive and commencement of rent payments under the 220 Tradeport Lease, would convert to a fifteen
year nonrecourse permanent mortgage loan. The interest rate on the loan is 4.51%. During the construction period, only
interest payments would be made. Monthly principal payments, which will begin after conversion to a nonrecourse
permanent mortgage loan, will be based on a twenty-five year amortization schedule. There is no guarantee that the
construction to permanent mortgage loan with State Farm will be completed under its current terms, or at all.
On January 11, 2018, Griffin entered into an agreement to purchase an approximately 14 acre parcel of
undeveloped land in the Lehigh Valley of Pennsylvania (the “Lehigh Valley Land”) for $3.6 million in cash. If the
transaction closes, Griffin plans to construct an industrial/warehouse building on the Lehigh Valley Land, the size of
which will be based upon findings during due diligence. The closing of this purchase, anticipated to take place in late
fiscal 2018 or early fiscal 2019, is subject to several conditions, including the satisfactory outcome of due diligence and
obtaining all governmental approvals for Griffin’s development plans for the Lehigh Valley Land. There is no guarantee
that this transaction will be completed under its current terms, or at all.
On January 30, 2018, one of Griffin’s subsidiaries closed on the refinancing (the “Refinanced Loan”) of the
2017 People’s Mortgage with People’s Bank, adding 330 Stone to the collateral and receiving $7.0 million of additional
mortgage proceeds. The 2017 People’s Mortgage had a balance of approximately $11.8 million at the time of the
refinancing. The Refinanced Loan has a new ten year term with monthly principal payments based on a twenty-five year
amortization schedule. The Refinanced Loan has a variable interest rate based on the one month LIBOR rate plus 1.95%,
but Griffin entered into an interest rate swap agreement with People’s Bank that, combined with an existing interest rate
42
swap agreement with People’s Bank, effectively fixes the interest rate on the Refinanced Loan at 4.57% over the term of
the Refinanced Loan.
In the near-term, Griffin plans to continue to invest in its real estate business, including construction of 220
Tradeport Drive, construction, on speculation, of a building in the Lehigh Valley on land recently purchased and
construction of additional buildings on its undeveloped land, expenditures for tenant improvements as new leases are
signed, infrastructure improvements required for future development of its real estate holdings and the potential
acquisition of additional properties and/or undeveloped land parcels in the Middle Atlantic, Northeast and Southeast
regions to expand the industrial/warehouse portion of its real estate portfolio. Real estate acquisitions may or may not
occur based on many factors, including real estate pricing. Griffin may commence speculative construction projects on
its undeveloped land that is either currently owned or acquired in the future if it believes market conditions are favorable
for such development. Griffin may also construct build-to-suit facilities on its undeveloped land if lease terms are
favorable.
As of November 30, 2017, Griffin had cash and cash equivalents of approximately $30.1 million. Management
believes that its cash and cash equivalents as of November 30, 2017, proceeds from the Refinanced Loan, cash generated
from operations, and borrowing capacity under the Webster Credit Line will be sufficient to meet its working capital
requirements, the continued investment in real estate assets, construction of buildings currently planned to be built in
fiscal 2018, completion of the acquisitions of the Concord Land and the Lehigh Valley Land, and the payment of
dividends on its common stock, when and if declared by the Board of Directors, for at least the next twelve months.
Griffin may also continue to seek additional financing secured by nonrecourse mortgage loans on its properties.
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted and became effective for Grifin on
January 1, 2018. The TCJA reduces the U.S. federal corporate statutory income tax rate from 35% to 21%, which is
expected to result in a blended fiscal 2018 federal corporate statutory rate for Griffin of approximately 22.2%. The
impact of the lower statutory rate applied to Griffin’s deferred tax assets and deferred tax liabilities is expected to be
recorded as a discrete item in Griffin’s income tax expense in the fiscal 2018 first quarter. Based on the TCJA, Griffin
expects to record income tax expense of between approximately $1.0 million and $1.1 million, due to the re-
measurement of its net deferred tax assets on its consolidated balance sheet in the fiscal 2018 first quarter. Griffin is
currently evaluating the potential impact of the TCJA on its operations.
Forward-Looking Information
The above information in Management’s Discussion and Analysis of Financial Condition and Results of
Operations includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Exchange Act of 1934, as amended. These forward-looking statements include, but are
not limited to, Griffin’s expectations regarding the leasing of currently vacant space, the acquisition of additional
properties and/or undeveloped land parcels, the commencement of speculative construction, the completion of 220
Tradeport Drive, closing on the construction to permanent loan with State Farm, the ability to obtain mortgage financing
on Griffin’s unleveraged properties, completion of the acquisitions of the Concord Land and the Lehigh Valley Land,
completion of the land sales contemplated under the Simsbury Option Agreement and the EGW Option Agreement,
Griffin’s anticipated future liquidity, anticipated impacts of the Tax Cuts and Jobs Act, and other statements with the
words “believes,” “anticipates,” “plans,” “expects” or similar expressions. Although Griffin believes that its plans,
intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that
such plans, intentions or expectations will be achieved. The forward-looking statements made herein are based on
assumptions and estimates that, while considered reasonable by Griffin as of the date hereof, are inherently subject to
significant business, economic, competitive and regulatory uncertainties and contingencies, many of which are beyond
the control of Griffin. Griffin’s actual results could differ materially from those anticipated in these forward-looking
statements as a result of various important factors, including those set forth under the heading Item 1A “Risk Factors”
and elsewhere in this Annual Report.
43
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk represents the risk of changes in the value of a financial instrument, derivative or non-derivative,
caused by fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause
fluctuations in earnings and cash flows.
For fixed rate mortgage debt, changes in interest rates generally affect the fair market value of the debt
instrument, but not earnings or cash flows. Griffin does not have an obligation to prepay any fixed rate debt prior to
maturity and, therefore, interest rate risk and changes in the fair market value of fixed rate debt should not have a
significant impact on earnings or cash flows until such debt is refinanced, if necessary. Griffin’s mortgage interest rates
and related principal payment requirements are described in Note 5 to the consolidated financial statements included in
Item 8. “Financial Statements and Supplementary Data.”
For variable rate debt, changes in interest rates generally do not impact the fair market value of the debt
instrument, but do affect future earnings and cash flows. As of November 30, 2017, Griffin had a total of approximately
$90.3 million of variable rate debt outstanding, for which Griffin has entered into interest rate swap agreements which
effectively fix the interest rates on that debt. There were no other variable rate borrowings outstanding as of
November 30, 2017.
Griffin is exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the
market values of Griffin’s cash equivalents. These investments generally consist of overnight investments that are not
significantly exposed to interest rate risk.
44
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Balance Sheets
(dollars in thousands, except per share data)
ASSETS
Real estate assets at cost, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
196,740 $
30,068
1,932
1,904
18,393
249,037 $
172,260
24,689
2,992
4,984
18,698
223,623
Nov. 30, 2017
Nov. 30, 2016
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage loans, net of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and Contingencies (Note 11)
Stockholders' Equity
Common stock, par value $0.01 per share, 10,000,000 shares authorized, 5,541,029
shares issued and 5,000,535 and 5,047,708 shares outstanding, respectively . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 540,494 and 493,321 shares, respectively . . . . . . . . . . . . . . . .
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
129,203 $
11,818
4,991
2,000
7,972
155,984
109,697
9,526
4,140
1,514
7,943
132,820
55
108,770
2,806
(284)
(18,294)
93,053
249,037 $
55
108,438
179
(1,049)
(16,820)
90,803
223,623
See Notes to Consolidated Financial Statements.
45
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Statements of Operations
(dollars in thousands, except per share data)
For the Fiscal Years Ended
Nov. 30, 2017 Nov. 30, 2016 Nov. 30, 2015
Rental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue from property sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,939 $
13,945
43,884
26,487 $
4,364
30,851
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses of rental properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to property sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,064
8,866
3,780
8,552
31,262
8,797
8,250
810
7,367
25,224
24,605
3,483
28,088
7,668
8,415
634
7,057
23,774
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,622
5,627
4,314
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of common stock of Centaur Media plc . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(5,690)
275
—
93
7,300
(2,673)
4,627 $
(4,545)
—
122
107
1,311
(735)
576 $
(3,670)
—
—
161
805
(380)
425
Basic net income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.92 $
0.11 $
0.08
Diluted net income per common share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.92 $
0.11 $
0.08
See Notes to Consolidated Financial Statements.
46
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Statements of Comprehensive Income (Loss)
(dollars in thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
For the Fiscal Years Ended
Nov. 30, 2017 Nov. 30, 2016 Nov. 30, 2015
425
4,627 $
576 $
Other comprehensive income (loss), net of tax:
Reclassifications included in net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in fair value of Centaur Media plc . . . . . . . . . . . . . . . . .
Unrealized loss on cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
651
159
(45)
765
5,392 $
856
(646)
(174)
36
612 $
778
30
(1,058)
(250)
175
See Notes to Consolidated Financial Statements.
47
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Statements of Changes in Stockholders’ Equity
For the Fiscal Years Ended November 30, 2017, 2016 and 2015
(dollars in thousands)
Shares of
Additional
Common Stock Common
Issued
5,537,895 $
Stock
Paid-in Retained
Capital Earnings
Accumulated Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
55 $ 107,887 $ 2,238 $
(835) $ (13,466) $ 95,879
Balance at November 30, 2014 . . . . . . . . .
Exercise of stock options, net of reversal of
tax benefit on exercised stock options of
$9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . .
Dividend declared, $0.30 per share . . . . . .
Total other comprehensive loss, net of tax .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2015 . . . . . . . . .
Repurchase of common stock . . . . . . . . . .
Reversal of tax benefit on forfeited stock
options . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . .
Dividend declared, $0.30 per share . . . . . .
Total other comprehensive income, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2016 . . . . . . . . .
Repurchase of common stock . . . . . . . . . .
Reversal of tax benefit on forfeited stock
options . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . .
Dividend declared, $0.40 per share . . . . . .
Total other comprehensive income, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2017 . . . . . . . . .
3,134
—
—
—
—
—
—
—
—
—
71
230
—
—
—
—
—
(1,546)
—
425
—
—
—
(250)
—
—
—
—
—
—
71
230
(1,546)
(250)
425
5,541,029
—
55
—
108,188
—
1,117
—
(1,085)
—
(13,466)
(3,354)
94,809
(3,354)
—
—
—
—
—
5,541,029
—
—
—
—
—
—
5,541,029 $
—
—
—
—
—
55
—
—
—
—
(17)
267
—
—
—
(1,514)
—
—
108,438
—
—
576
179
—
(17)
349
—
—
—
(2,000)
—
—
—
—
55 $ 108,770 $ 2,806 $
—
4,627
—
—
—
—
—
—
(17)
267
(1,514)
36
—
(1,049)
—
—
—
(16,820)
(1,474)
36
576
90,803
(1,474)
—
—
—
—
—
—
(17)
349
(2,000)
765
—
765
4,627
(284) $ (18,294) $ 93,053
—
—
See Notes to Consolidated Financial Statements.
48
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Statements of Cash Flows
(dollars in thousands)
For the Fiscal Years Ended
Nov. 30, 2017 Nov. 30, 2016 Nov. 30, 2015
4,627 $
576 $
425
Operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sales of properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of common stock of Centaur Media plc . . . . . . . . . . . . . . . . . . . . . .
Amortization of terminated swap agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of discount on note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities:
Acquisition of building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of properties, net of expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from property sales returned from (deposited in) escrow, net . . . . . . . . . .
Deferred leasing costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of common stock of Centaur Media plc . . . . . . . . . . . . . . . . . .
Proceeds from collection of note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,165)
10,064
2,623
349
333
(275)
98
—
—
(2,050)
303
2,396
1,076
9,379
(18,440)
(17,605)
13,027
3,444
(1,556)
1,216
—
(19,914)
(3,554)
8,797
785
267
283
—
—
(122)
—
59
337
(656)
445
7,217
—
(15,734)
3,536
(3,536)
(890)
—
—
(16,624)
Financing activities:
Proceeds from mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for termination of interest rate swap agreement . . . . . . . . . . . . . . . . . . . . .
Mortgage proceeds returned from (deposited in) escrow . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
39,125
(19,287)
(1,514)
(1,474)
(595)
(341)
—
—
15,914
5,379
24,689
30,068 $
45,525
(24,822)
(1,546)
(3,354)
(578)
—
600
—
15,825
6,418
18,271
24,689 $
See Notes to Consolidated Financial Statements.
49
(2,849)
7,668
297
230
226
—
—
—
(49)
1,124
475
4,924
490
12,961
—
(31,188)
994
—
(1,011)
—
1,500
(29,705)
40,391
(20,123)
(1,030)
—
(762)
—
(600)
80
17,956
1,212
17,059
18,271
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements
(dollars in thousands unless otherwise noted, except per share data)
1. Summary of Significant Accounting Policies
Basis of Presentation
Griffin Industrial Realty, Inc. (“Griffin”) is a real estate business principally engaged in developing, managing
and leasing industrial/warehouse properties and, to a lesser extent, office/flex properties. Griffin also seeks to add to its
property portfolio through the acquisition and development of land or the purchase of buildings in select markets
targeted by Griffin. Periodically, Griffin may sell certain portions of its undeveloped land that it has owned for an
extended time period and the use of which is not consistent with Griffin’s core development and leasing strategy. Prior to
May 13, 2015, Griffin was known as Griffin Land & Nurseries, Inc. On May 13, 2015, Griffin changed its name to better
reflect its ongoing real estate business and focus on industrial/warehouse properties after the sale in fiscal 2014 of the
landscape nursery business that Griffin had operated through its wholly owned subsidiary, Imperial Nurseries, Inc.
(“Imperial”).
Fiscal Year
Griffin reports on a twelve month fiscal year that ends on November 30.
Real Estate Assets
Real estate assets are recorded at cost, except when real estate assets are acquired that meet the definition of a
business combination in accordance with Financial Accounting Standards Board (“FASB”) ASC 805-10, “Business
Combinations,” and are recorded at fair value. Interest, property taxes, insurance and other incremental costs directly
related to a project are capitalized during the construction period of major facilities and land improvements. The
capitalization period begins when activities to develop the parcel commence and ends when the asset constructed is
completed. The capitalized costs are recorded as part of the asset to which they relate and are amortized over the asset's
estimated useful life. Depreciation is determined on a straight-line basis over the estimated useful asset lives for financial
reporting purposes and principally on accelerated methods for tax purposes. Repair and maintenance costs are expensed
as incurred.
Griffin classifies a property as “held for sale” when all of the following criteria for a plan of sale have been met:
(1) management, having the authority to approve the action, commits to a plan to sell the property; (2) the property is
available for immediate sale in its present condition, subject only to terms that are usual and customary; (3) an active
program to locate a buyer and other actions required to complete the plan to sell, have been initiated; (4) the sale of the
property is probable and is expected to be completed within one year or the property is under a contract to be sold; (5)
the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6)
actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made
or that the plan will be withdrawn. When all of these criteria have been met, the property is classified as “held for sale.”
Depreciation of assets ceases upon designation of a property as “held for sale.”
Cash and Cash Equivalents
Griffin considers all highly liquid investments with an initial maturity of three months or less at the date of
purchase to be cash equivalents. At November 30, 2017 and 2016, $29,432 and $22,409, respectively, of the cash and
cash equivalents included on Griffin's consolidated balance sheets were held in cash equivalents.
Investments
In fiscal 2017, Griffin sold all remaining shares of its investment in the common stock of Centaur Media plc
(“Centaur Media”) (see Note 9). Centaur Media had been accounted for as an available-for-sale security under FASB
ASC 320-10, “Investments – Debt and Equity Securities,” whereby increases or decreases in its fair value, net of income
taxes, along with the effect of changes in the foreign currency exchange rate, net of income taxes, were recorded as a
50
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
component of other comprehensive income (loss). Realized gains and losses on sales of available-for-sale securities were
determined based on the average cost method.
Stock-Based Compensation
Griffin accounts for stock options at fair value in accordance with FASB ASC 718, “Compensation - Stock
Compensation” and FASB ASC 505-50, “Equity – Equity-Based Payments to Non-Employees.” For stock options that
have graded vesting features, Griffin recognizes compensation cost over the requisite service period separately for each
tranche of the award as though they were, in substance, multiple awards. Griffin determines its accumulated windfall tax
benefits using the short-cut method.
Impairment of Investments in Long-Lived Assets
Griffin reviews annually, as well as when conditions may indicate, its long-lived assets to determine if there are
indicators of impairment, such as a prolonged vacancy in one of its properties. If indicators of impairment are present,
Griffin evaluates the carrying value of the assets in relation to the operating performance and expected future
undiscounted cash flows or the estimated fair value based on expected future cash flows of the underlying assets. If the
undiscounted cash flows are less than the carrying value of an asset, Griffin would reduce the carrying value of a long-
lived asset to its fair value if that asset’s fair value is determined to be less than its carrying value.
Griffin also reviews annually, as well as when conditions may indicate, the recoverability of its development
costs, including expected remediation costs on projects that are included in real estate assets and real estate assets held
for sale. To the extent that the carrying value exceeds the fair value of a project, including development costs, an
impairment loss would be recorded.
There were no impairment losses recorded in the fiscal years ended November 30, 2017, 2016 and 2015.
Revenue and Gain Recognition
Revenue includes rental revenue from Griffin's industrial and commercial properties and proceeds from
property sales. Rental revenue is accounted for on a straight line basis over the applicable lease term in accordance with
FASB ASC 840-10, “Leases.” Gains on property sales are recognized in accordance with FASB ASC 360-20, “Property,
Plant, and Equipment – Real Estate Sales,” based on the specific terms of each sale. When the percentage of completion
method is used to account for a sale of real estate, costs included in determining the percentage of completion include the
costs of the land sold, allocated master planning costs, selling and transaction costs and estimated future costs related to
the land sold.
Income Taxes
Griffin provides for income taxes utilizing the asset and liability method, and records deferred tax assets and
liabilities based on the difference between the financial statement and tax bases of assets and liabilities as measured by
the tax rates that are anticipated to be in effect when these differences reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date.
A valuation allowance is established when it is necessary to reduce deferred tax assets to amounts for which realization
is more likely than not. Griffin and its subsidiaries file a consolidated federal income tax return.
Griffin evaluates each tax position taken in its tax returns and recognizes a liability for any tax position deemed
less likely than not to be sustained under examination by the relevant taxing authorities. Griffin has analyzed its federal
and significant state filing positions with respect to FASB ASC 740-10, “Income Taxes” (“ASC 740-10”). Griffin
believes that its income tax filing positions will be sustained on examination and does not anticipate any adjustments that
would result in a material change on its financial statements. As a result, no accrual for uncertain income tax positions
has been recorded pursuant to ASC 740-10.
51
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Griffin’s policy for recording interest and penalties, related to uncertain tax positions, is to record such items as
part of its provision for federal and state income taxes.
Intangible Assets
Griffin accounts for intangible assets in accordance with FASB ASC 350-10 “Intangibles - Goodwill and
Other.” Griffin's intangible assets consist of: (i) the value of in-place leases; and (ii) the value of the associated
relationships with tenants. These intangible assets were recorded in connection with Griffin’s acquisitions of real estate
assets. Amortization of the value of in-place leases, included in depreciation and amortization expense, is on a straight-
line basis over the lease terms. Amortization of the value of relationships with tenants, included in depreciation and
amortization expense, is on a straight-line basis over the lease terms and anticipated renewal periods.
Environmental Matters
Environmental expenditures related to land and buildings are expensed or capitalized as appropriate, depending
upon their future economic benefit. Expenditures that relate to an existing condition caused by past operations, and that
do not have future economic benefit, are expensed. Expenditures that create future benefit or contribute to future revenue
generation are capitalized. Liabilities related to future remediation costs are recorded when environmental assessments
and/or cleanups are probable, and the costs can be reasonably estimated.
Interest Rate Swap Agreements
As of November 30, 2017, Griffin was a party to several interest rate swap agreements to hedge its interest rate
exposures. Griffin does not use derivatives for speculative purposes. Griffin applies FASB ASC 815-10, “Derivatives
and Hedging,” (“ASC 815-10”) as amended, which establishes accounting and reporting standards for derivative
instruments and hedging activities. ASC 815-10 requires Griffin to recognize all derivatives as either assets or liabilities
on its consolidated balance sheet and measure those instruments at fair value. The changes in the fair values of the
interest rate swap agreements are measured in accordance with ASC 815-10 and reflected in the carrying values of the
interest rate swap agreements on Griffin’s consolidated balance sheet. The estimated fair values are based primarily on
projected future swap rates.
Griffin applies cash flow hedge accounting to its interest rate swap agreements that are designated as hedges of
the variability of future cash flows from floating rate liabilities based on benchmark interest rates. The changes in the fair
values of Griffin’s interest rate swap agreements are recorded as components of accumulated other comprehensive
income (loss) (“AOCI”) in stockholders’ equity, to the extent they are effective. Any ineffective portions of the changes
in the fair values of these instruments would be recorded as interest expense or interest income.
Conditional Asset Retirement Obligations
Griffin accounts for its conditional asset retirement obligations in accordance with FASB ASC 410-10, “Asset
Retirement and Environmental Obligations,” which requires an entity to recognize a liability for the fair value of a
conditional asset retirement obligation if the fair value can be reasonably estimated even though uncertainty exists about
the timing and/or method of settlement. The conditional asset retirement obligations relate principally to tobacco barns
and other structures on Griffin’s land holdings that contain asbestos, primarily in roofing materials. These structures
remain from the tobacco growing operations of former affiliates of Griffin, are not material to Griffin’s operations and
do not have any book value.
52
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Treasury Stock
Treasury stock is recorded at cost as a reduction of stockholders’ equity on Griffin’s consolidated balance
sheets.
Income (Loss) Per Share
Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted average
number of common shares outstanding during the year. The calculation of diluted net income (loss) per common share
reflects adjusting Griffin’s outstanding shares assuming the exercise of all potentially dilutive Griffin stock options.
Risks and Uncertainties
Griffin’s future results of operations involve a number of risks and uncertainties. Factors that could affect
Griffin’s future operating results and cause actual results to vary materially from historical results include, but are not
limited to, the geographical concentration of Griffin’s real estate holdings, credit risk and market risk.
Griffin's real estate holdings are concentrated in the Hartford, Connecticut area, the Lehigh Valley of
Pennsylvania and the greater Charlotte, North Carolina area. The market and economic challenges experienced by the
U.S. economy as a whole or the local economic conditions in the markets in which Griffin holds properties may affect
Griffin’s real estate business. Griffin’s results of operations, financial condition or ability to expand may be adversely
affected as a result of: (i) poor economic conditions or unfavorable financial changes to Griffin’s tenants, which may
lead to a curtailment of expansion plans or may result in tenant defaults under leases; (ii) significant job losses, which
could adversely affect the demand for rental space causing market rental rates and property values to be negatively
impacted; (iii) the ability of Griffin to borrow on terms and conditions that it finds acceptable; and (iv) possibly reduced
values of Griffin’s properties potentially limiting the proceeds from a sale of its properties or from debt financing
collateralized by its properties.
Griffin conducts business based on evaluations of its prospective tenants’ financial condition and generally does
not require collateral. These evaluations require significant judgment and are based on multiple sources of information.
Griffin does not use derivatives for speculative purposes. Griffin applies ASC 815-10, which established
accounting and reporting standards for derivative instruments and hedging activities. This accounting guidance requires
Griffin to recognize all derivatives as either assets or liabilities on its consolidated balance sheet and to measure those
instruments at fair value. The estimated fair value is based primarily on projected future swap rates.
Griffin applies cash flow hedge accounting to its interest rate swap agreements designated as hedges of the
variability of future cash flows from floating rate liabilities due to the benchmark interest rates. Changes in the fair value
of these interest rate swaps are recorded as a component of AOCI in stockholders’ equity to the extent they are effective.
Amounts recorded to AOCI are then reclassified to interest expense as interest on the hedged borrowing is recognized.
Any ineffective portion of the change in fair value of these instruments would be recorded to interest expense.
Griffin’s cash equivalents consist of overnight investments that are not significantly exposed to interest rate
risk.
Reclassifications
Certain prior year balances have been reclassified to conform to the current year’s presentation.
53
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and revenue
and expenses during the periods reported. Actual results could differ from those estimates. Griffin’s significant estimates
include the impairment evaluation of long-lived assets, deferred income taxes, derivative financial instruments, revenue
and gain recognition including the estimated costs to complete required offsite improvements related to land sold and
assumptions used in determining stock compensation.
Recent Accounting Pronouncements
In August 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-12, “Derivatives and
Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which is intended to improve the
financial reporting for hedging relationships to better represent the economic results of a company’s risk management
activities in its financial statements and make certain targeted improvements to simplify the application of the hedge
accounting guidance. This Update will make more financial and nonfinancial hedging strategies eligible for hedge
accounting, amend the presentation and disclosure requirements and change how entities assess effectiveness. This
Update will become effective for Griffin in fiscal 2020. Griffin is evaluating the impact that the application of this
Update will have on its consolidated financial statements.
In May 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation – Stock
Compensation: Scope of Modification Accounting,” which clarifies when to account for a change to the terms or
conditions of a share-based payment award as a modification. This Update requires modification only if the fair value,
vesting conditions or the classification of the award changes as a result of the change in terms or conditions. This Update
will become effective for Griffin in fiscal 2018 and the Update is required to be applied on a prospective basis. The
adoption of ASU No. 2017-09 is not expected to have a material impact on Griffin’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805) – Clarifying the
Definition of a Business,” which provides a more robust framework to use in determining when a set of assets and
activities is a business. This Update also provides greater consistency in applying the guidance by making the definition
of a business more operable. This Update would become effective for Griffin in fiscal 2019. Early adoption is allowed
for acquisition or deconsolidation transactions occurring before the issuance date or effective date and only when the
transactions have not been reported in financial statements that have been issued or made available for issuance. Griffin
plans to adopt this Update in the fiscal 2018 first quarter.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation: Improvements to
Employee Share-Based Payment Accounting,” which relates to the accounting for employee share-based payments. This
Update addresses several aspects of the accounting for share-based payment award transactions, including: (a) income
tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash
flows. This Update will become effective for Griffin in the first quarter of fiscal 2018 and Griffin expects to record a
deferred tax asset of approximately $900 with a corresponding increase in retained earnings upon adoption. The adoption
of this Update will not affect the classification of any current awards and will not have a retrospective impact on
Griffin’s cash flows as no tax benefit from stock options was recognized in the fiscal years presented.
In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which establishes a right-of-use (“ROU”)
model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms
longer than twelve months. The accounting applied by lessors under this Update is largely unchanged from that applied
under current U.S. GAAP. Leases will be either classified as finance or operating, with classification affecting the
pattern of expense recognition in the income statement. This Update also requires significant additional disclosures about
the amount, timing and uncertainty of cash flows from leases. This Update will become effective for Griffin in fiscal
2020 using a modified restatement approach for leases in effect as of and after the date of adoption. Early adoption and
54
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
practical expedients to measure the effect of adoption will also be allowed. Griffin is evaluating the impact that the
application of this Update will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This Update
outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with
customers. This Update is not applicable to revenue from leases. This Update supersedes most current revenue
recognition guidance, including industry specific guidance, and requires an entity to recognize the amount of revenue to
which it expects to be entitled for the transfer of promised goods or services to customers. Additionally, the Update
requires improved disclosures to help users of financial statements better understand the nature, amount, timing and
uncertainty of revenue that is recognized. The Update permits the use of either the retrospective or cumulative effect
transition method. This Update will be effective for Griffin in fiscal 2019 and early adoption is not permitted. Certain
aspects of this standard may affect Griffin’s revenue recognition relating to property sales, however, Griffin does not
anticipate a significant impact on its consolidated financial statements from the application of this Update for lease
revenue because revenue from leases are not subject to this Update. Griffin is evaluating the impact that the application
of this Update will have on its consolidated financial statements.
2. Fair Value
Griffin applies the provisions of FASB ASC 820, “Fair Value Measurement” (“ASC 820”), which establishes a
fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. An asset or liability’s categorization within the fair value hierarchy is
based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of
inputs that may be used to measure fair value, as follows:
Level 1 applies to assets or liabilities for which there are quoted market prices in active markets for identical
assets or liabilities. Griffin’s available-for-sale securities were considered Level 1 within the fair value
hierarchy prior to their sale in fiscal 2017 (see Note 9).
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1
that are observable for the asset or liability, such as quoted prices for similar assets or liabilities in active
markets; quoted prices for assets or liabilities in markets with insufficient volume or infrequent transactions
(less active markets); or model-derived valuations in which significant inputs are observable or can be derived
principally from, or corroborated by, observable market data. Level 2 assets and liabilities include Griffin's
interest rate swap agreements (see Note 5). These inputs are readily available in public markets or can be
derived from information available in publicly quoted markets, therefore, Griffin has categorized these
derivative instruments as Level 2 within the fair value hierarchy.
On June 9, 2017, Griffin closed on the acquisition of 215 International Drive (“215 International”) (see Note 3).
The acquisition was accounted for in accordance with FASB ASC 805-10, “Business Combinations,” whereby
the assets acquired were recorded at their fair values. The fair value of the real estate assets acquired was based
upon publicly available data for similar properties. Therefore, Griffin has categorized the real estate assets
acquired as Level 2 within the fair value hierarchy.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that
are significant to the measurement of the fair value of the assets or liabilities. As of November 30, 2017,
Griffin’s consolidated balance sheet includes acquired intangible assets related to the acquisition of 215
International. These intangible assets are comprised of the values of the in-place leases and the associated tenant
relationships. Griffin derived these values based on a discounted cash flow analysis using assumptions that
included the rental rate of the in-place leases, the commission percentage expected to be paid on the subsequent
leasing of the vacant space and the likelihood that tenants will renew their leases. Therefore, Griffin recognized
the acquired intangible assets related to this transaction as Level 3 within the fair value hierarchy.
55
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
During fiscal 2017, Griffin did not transfer any assets or liabilities in or out of Levels 1 and 2. The following are
Griffin’s financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:
November 30, 2017
Quoted Prices in Significant Significant
Active Markets for Observable Unobservable
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Interest rate swap assets . . . . . . . . . . . . . . . . . . . . . . . $
Interest rate swap liabilities . . . . . . . . . . . . . . . . . . . . $
— $
— $
644 $
845 $
—
—
November 30, 2016
Quoted Prices in Significant Significant
Active Markets for Observable Unobservable
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Marketable equity securities . . . . . . . . . . . . . . . . . . . . $
Interest rate swap asset . . . . . . . . . . . . . . . . . . . . . . . . $
Interest rate swap liabilities . . . . . . . . . . . . . . . . . . . . $
— $
977 $
— $
207 $
— $ 1,892 $
—
—
—
The carrying and estimated fair values of Griffin’s financial instruments are as follows:
Fair Value
Hierarchy Carrying
Level
Value
November 30, 2017
November 30, 2016
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
Financial assets:
Cash and cash equivalents . . . .
Proceeds held in escrow . . . . . .
Marketable equity securities . .
Interest rate swaps . . . . . . . . . .
Financial liabilities:
Mortgage loans, net of debt
issuance costs . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . .
1
1
1
2
2
2
$ 30,068 $ 30,068 $ 24,689 $ 24,689
91 $ 3,535 $ 3,535
$
977
977 $
— $
$
207
207 $
644 $
$
91 $
— $
644 $
$ 129,203 $ 128,999 $ 109,697 $ 111,103
845 $ 1,892 $ 1,892
$
845 $
The amounts included in the financial statements for cash and cash equivalents, proceeds held in escrow,
leasing receivables from tenants and accounts payable and accrued liabilities approximate their fair values because of the
short-term maturities of these instruments. The fair values of the available-for-sale securities were based on quoted
market prices. The fair values of the mortgage loans, net of debt issuance costs, are estimated based on current rates
offered to Griffin for similar debt of the same remaining maturities and, additionally, Griffin considers its credit
worthiness in determining the fair value of its mortgage loans. The fair values of the interest rate swaps (used for
purposes other than trading) are determined based on discounted cash flow models that incorporate the cash flows of the
derivatives as well as the current Overnight Index Swap rate and swap curve along with other market data, taking into
account current interest rates and the credit worthiness of the counterparty for assets and the credit worthiness of Griffin
for liabilities.
The fair values of Griffin’s nonfinancial assets related to the acquisition of 215 International are listed below.
There were no liabilities assumed in connection with this acquisition. These assets were initially recorded at fair value
but will not be re-measured at fair value on a recurring basis.
56
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Quoted Prices in Significant Significant
Active Markets for Observable Unobservable
Real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3. Real Estate Assets
Real estate assets consist of:
Identical Assets
(Level 1)
Inputs
(Level 2)
— $ 16,789 $
— $
— $
Inputs
(Level 3)
—
1,651
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land improvements . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . .
Tenant improvements . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . .
Development costs . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . .
Estimated
Useful Lives
10 to 30 years
10 to 40 years
Shorter of useful
life or terms of
related lease
3 to 20 years
Nov. 30, 2017 Nov. 30, 2016
17,895
$
27,592
164,353
20,403 $
30,833
187,116
27,924
10,958
486
14,132
291,852
(95,112)
21,925
11,022
1,659
14,615
259,061
(86,801)
$ 196,740 $ 172,260
Total depreciation expense and capitalized interest related to real estate assets were as follows:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . $
For the Fiscal Years Ended
Nov. 30, 2017 Nov. 30, 2016 Nov. 30, 2015
6,539
7,768 $
8,831 $
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . $
103 $
274 $
777
On April 28, 2017, Griffin closed on the sale of approximately 67 acres (the “2017 Phoenix Crossing Land
Sale”) of undeveloped land in Phoenix Crossing, the approximately 268 acre business park master planned by Griffin
that straddles the town line between Windsor and Bloomfield, Connecticut. Griffin received cash proceeds of $10,250
before transaction costs and recorded a pretax gain of $7,975 on the 2017 Phoenix Crossing Land Sale. The net cash
proceeds of $9,711 from the 2017 Phoenix Crossing Land Sale were placed in escrow and subsequently used for the
acquisition of a replacement property, 215 International, in a like-kind exchange (a “1031 Like-Kind Exchange”) under
Section 1031 of the Internal Revenue Code of 1986 (the “IRC”), as amended (see below).
On June 9, 2017, Griffin closed on the acquisition of 215 International, an approximately 277,000 square foot
industrial/warehouse building in Concord, North Carolina, for $18,440. 215 International is Griffin’s first property in the
Charlotte area. The purchase price was paid in cash at closing using the proceeds held in escrow from the 2017 Phoenix
Crossing Land Sale (see above) of $9,711 with the balance paid from Griffin’s cash on hand. Griffin incurred
approximately $71 of acquisition costs on the purchase of 215 International which are included in general and
administrative expenses on Griffin’s fiscal 2017 consolidated statement of operations. 215 International was constructed
in 2015 and was 74% leased at the time it was acquired. Subsequent to the closing, one of the tenants in 215 International
leased the approximately 73,000 square feet that had been vacant at the time the building was acquired. Rental revenue
of $722 and operating income of $112 from 215 International are included in Griffin’s fiscal 2017 consolidated
statement of operations. Griffin determined that the fair value of the assets acquired approximated the purchase price. Of
57
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
the $18,440 purchase price, $16,789 represented the fair value of the real estate assets and $1,651 represented the fair
value of the acquired intangible assets, comprised of the value of in-place leases at the time of acquisition and the tenant
relationship intangible assets (see Notes 2 and 9). The intangible assets are included in other assets on Griffin’s
consolidated balance sheet. The value of the real estate assets primarily represents the value given to the building and
land improvements that will be depreciated over forty years. Other building and tenant improvements will be
depreciated over a period of five to eighteen years. The value of the intangible assets will primarily be amortized over
five to ten years.
Consolidated unaudited pro forma results of operations for Griffin are presented below assuming that the
acquisition of 215 International had occurred at the beginning of fiscal 2017. Pro forma results are not presented for
fiscal 2016 as the lease for the first tenant did not commence until October 2016 and such pro forma results would not be
meaningful. Pro forma financial information is not necessarily indicative of Griffin’s actual results of operations if the
acquisition had been completed at the beginning of fiscal 2017, nor is it necessarily an indication of future operating
results.
For the Fiscal Year Ended November 30, 2017
As reported
Adjustments (a)
Pro forma
Rental revenue . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue from property sales . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . .
29,939 $
13,945
43,884
Operating expenses of rental properties. . . . .
Depreciation and amortization expense . . . . .
Costs related to property sales . . . . . . . . . . . .
General and administrative expenses . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . .
8,866
10,064
3,780
8,552
31,262
370 $
—
370
39
470
—
—
509
30,309
13,945
44,254
8,905
10,534
3,780
8,552
31,771
Operating income . . . . . . . . . . . . . . . . . . . . . .
12,622
(139)
12,483
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Other non-operating income . . . . . . . . . . . . . .
Income before income tax (provision) benefit
Income tax (provision) benefit . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(5,690)
368
7,300
(2,673)
4,627 $
—
—
(139)
51
(88) $
(5,690)
368
7,161
(2,622)
4,539
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.92
0.92
$
$
0.91
0.90
(a) Adjustments do not reflect revenue from leasing, subsequent to the date of acquisition, the approximately
73,000 square feet that was vacant at the time 215 International was acquired and interest expense from
financing of 215 International subsequent to the date of the acquisition (see Note 5).
On August 4, 2017, Griffin completed the sale of approximately 76 acres (the “Southwick Land Sale”) of
undeveloped land in Southwick, Massachusetts. Griffin received cash proceeds of $2,100 before transaction costs and
recorded a pretax gain of $1,890 on the Southwick Land Sale. The net cash proceeds of $1,943 from the Southwick Land
Sale were placed in escrow and subsequently used for the acquisition of a replacement property in a 1031 Like-Kind
Exchange (see below). The remaining amount of $91 in escrow was returned in the 2018 first quarter.
58
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
On August 24, 2017, Griffin closed on the purchase of approximately 14 acres of undeveloped land in the
Lehigh Valley of Pennsylvania. The purchase price of $1,800 (excluding costs related to the purchase) was paid in cash
at closing using the proceeds from the Southwick Land Sale that had been held in escrow (see above). The land acquired
had all governmental approvals in place for Griffin’s planned development of an approximately 134,000 square foot
industrial/warehouse building. Griffin began construction, on speculation, on this building in the fourth quarter of fiscal
2017 and expects to complete construction in the third quarter of fiscal 2018.
On September 22, 2016, Griffin closed on the sale of approximately 29 acres of an approximately 45 acre land
parcel in Griffin Center in Bloomfield, Connecticut for cash proceeds of $3,756 and a pretax gain of $3,174. An
additional approximately 15 acres of that land parcel, much of which is wetlands with very limited development
potential, was donated to an affiliate of the purchaser at the time of the closing. Griffin retained approximately one acre,
which is adjacent to other undeveloped land owned by Griffin. The net cash proceeds from the sale of $3,536 were
placed in escrow for the potential acquisition of a replacement property as part of a 1031 Like-Kind Exchange. A
replacement property was not purchased within the time frame required under IRC regulations regarding 1031 Like-Kind
Exchanges, therefore, the proceeds placed in escrow were returned to Griffin in fiscal 2017 (see Note 9).
The farm in Quincy, Florida (the “Florida Farm”) that had been used by Imperial prior to being shut down in
fiscal 2009 was leased to a private company grower of landscape nursery products from fiscal 2009 until April 30, 2016.
In the 2015 second quarter, that tenant gave notice of its intent to exercise the purchase option for the Florida Farm under
the terms of its lease for approximately $4,100. On June 1, 2015, Griffin received a deposit of $400 as required under the
terms of the lease agreement. In August 2015, that tenant informed Griffin that it would not close on the purchase of the
Florida Farm. Imperial and the tenant subsequently entered into a Holdover and Settlement Agreement (the
“Agreement”) which permitted the tenant to continue to lease the Florida Farm at an agreed upon rental rate through
April 30, 2016. The Agreement also stipulated that Imperial was entitled to retain the deposit against the purchase price
made by the tenant when it exercised its option to purchase the Florida Farm; therefore, the $400 deposit is reflected as
revenue from property sales in Griffin's fiscal 2015 consolidated statement of operations. Subsequent to that lease
expiration, Griffin entered into a three year lease of the Florida Farm with a new tenant that includes an option for the
new tenant to purchase the Florida Farm for a purchase price between $3,400 and $3,900 depending upon the date of
sale. Subsequent to November 30, 2017, the tenant currently leasing the Florida Farm declared bankruptcy under
Chapter 11 of the U.S. Bankruptcy Code (see Note 12). Griffin has not determined the impact, if any, this will have on
its lease, which expires in June 30, 2019.
In the 2013 fourth quarter, Griffin closed on the sale of approximately 90 acres of undeveloped land in Phoenix
Crossing for $8,968 in cash, before transaction costs (the “2013 Phoenix Crossing Land Sale”). Under the terms of the
2013 Phoenix Crossing Land Sale, Griffin and the buyer each were required to construct roadways connecting the land
parcel sold with existing town roads. Once completed, the roads constructed by the buyer and by Griffin became new
town roads, thereby providing public access to the remaining acreage in Griffin’s land parcel. As a result of Griffin's
continuing involvement with the land sold, the 2013 Phoenix Crossing Land Sale was accounted for under the percentage
of completion method. Accordingly, the revenue and pretax gain on the sale were recognized on a pro rata basis in a ratio
equal to the percentage of the total costs incurred to the total anticipated costs of sale, including the costs of the required
roadwork. Costs included in determining the percentage of completion include the cost of the land sold, allocated master
planning costs and the cost of road construction.
59
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
As of November 30, 2017, Griffin had completed the required improvements related to the 2013 Phoenix
Crossing Land Sale; accordingly, all of the remaining revenue and pretax gain on the sale were recognized in Griffin’s
fiscal 2017 consolidated statement of operations. The revenue and pretax gain recognized by Griffin from the closing of
the 2013 Phoenix Crossing Land Sale in fiscal 2013 through fiscal 2017 are as follows:
For the Fiscal Years Ended
Revenue . . . . . . . . $
Nov. 30, 2017 Nov. 30, 2016 Nov. 30, 2015 Nov. 30, 2014 Nov. 30, 2013 Total
2,668 $ 8,968
2,483 $
3,105 $
104 $
608 $
Pretax gain . . . . . . $
66 $
380 $
1,880 $
2,358 $
1,990 $ 6,674
On March 29, 2017, the full building tenant in an approximately 100,000 square foot industrial/warehouse
building in New England Tradeport (“NE Tradeport”), Griffin’s industrial park located in Windsor and East Granby,
Connecticut, filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Subsequent to the Chapter 11 filing,
Griffin entered into an Amendment to Lease (the “Amendment”) with this tenant which was approved by the U.S.
Bankruptcy Court. Under the terms of the Amendment, the tenant’s premises will be reduced to approximately 52,000
square feet prior to June 1, 2018, however, the per square foot rental rates and lease expiration date of March 31, 2024
under the existing lease remain the same. The tenant has also agreed to pay a termination fee of $243 in monthly
installments over the balance of the lease term. Rental revenue from this tenant was $1,142 in fiscal 2017.
Real estate assets held for sale consist of:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nov. 30, 2017 Nov. 30, 2016
264
504 $
—
354
2,728
1,074
2,992
1,932 $
$
In fiscal 2017, $1,757 was reclassified from real estate assets to real estate assets held for sale related to sales
agreements currently under contract (see Note 11). Real estate assets held for sale were reduced in fiscal 2017 by $2,817
for property sales that closed.
4. Income Taxes
The income tax provision for fiscal 2017, fiscal 2016 and fiscal 2015 is summarized as follows:
For the Fiscal Years Ended
Nov. 30,
Nov. 30,
2017
2016
Nov. 30,
2015
Current federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current state and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred state and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,673) $
(43) $
(7)
(2,610)
(13)
50 $
—
(580)
(205)
(735) $
(83)
—
(217)
(80)
(380)
The income tax provision for fiscal 2016 included a charge of $180 for the effect of a change in Connecticut tax
law, effective for Griffin in fiscal 2016, whereby, the usage of state net operating loss carryforwards in future years will
be limited to 50% of taxable income. Therefore, in fiscal 2016, Griffin decreased its expected realization of the tax
benefit related to its Connecticut state net operating loss carryforwards. The decrease of the realization rate is based on
management's current projections of taxable income in Connecticut in future years that would generate income taxes in
excess of capital based taxes.
60
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
In fiscal 2015, Griffin decreased its expected realization of the tax benefit related to its Connecticut state net
operating loss carryforwards and other Connecticut state temporary differences. This decrease was based on
management's projection in that year of taxable income attributable to the state of Connecticut in future years that would
generate income taxes in excess of capital based taxes. A charge of $87 is included in the fiscal 2015 tax provision for
state taxes to reflect the expected lower realization of certain state tax benefits.
Griffin did not recognize a current tax benefit in fiscal 2017, fiscal 2016 or fiscal 2015 from the exercise of
employee stock options. In fiscal 2017 and fiscal 2015, Griffin utilized net operating loss carryforwards to offset taxable
income. A benefit was not recorded in fiscal 2016 because Griffin did not have taxable income. As of November 30,
2017, Griffin had an unrecognized tax benefit of approximately $900 for the effect of employee stock options exercised
in fiscal years 2006 through 2015. In the first quarter of fiscal 2018, Griffin plans to adopt ASC 2016-09 (see Note 1),
which requires recognition on the consolidated balance sheet of the tax benefit of options exercised regardless if there is
taxable income or loss. Griffin expects to record a deferred tax asset of approximately $900 upon adoption, with a
corresponding increase to retained earnings. In fiscal 2017, fiscal 2016 and fiscal 2015, the deferred tax asset related to
non-qualified stock options was reduced by $17, $17 and $9, respectively, as a result of exercises and forfeitures of those
options.
The income tax provisions in fiscal 2017 and fiscal 2015 are net of the effect of recording benefits related to
valuation allowances on certain state deferred tax assets (principally Connecticut) of $238 and $76, respectively, less
federal income tax expense of $87 and $26, respectively. The income tax provision in fiscal 2016 is net of the effect of
recording a charge related to valuation allowances on certain state deferred tax assets (principally Connecticut) of
$1,798, less a federal income tax benefit of $629. The establishment of the valuation allowances reflects management’s
determination that it is more likely than not that Griffin will not generate sufficient taxable income in the future to fully
utilize certain state net operating loss carryforwards.
Other comprehensive loss includes deferred tax (expense) benefit as follows:
Fair value adjustment of Griffin's cash flow hedges . . . . . . . $
Mark to market adjustment on Centaur Media plc . . . . . . . .
Total income tax (expense) benefit included in other
(463) $
23
(399) $
347
164
(16)
comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . $
(440) $
(52) $
148
For the Fiscal Years Ended
Nov. 30,
Nov. 30,
2017
2016
Nov. 30,
2015
The differences between the income tax provision at the United States statutory income tax rate and the actual
income tax provision for fiscal 2017, fiscal 2016 and fiscal 2015 are as follows:
For the Fiscal Years Ended
Nov. 30,
Nov. 30,
2017
2016
Nov. 30,
2015
Tax provision at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . $ (2,555) $
State and local taxes, including valuation allowance, net of
(459) $
(282)
federal tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18)
(41)
(59)
(205)
(35)
(36)
(80)
(23)
5
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,673) $
(735) $
(380)
The state and local income tax expense, net of federal tax effect, principally reflects a decrease in the realization
of the tax benefit related to Connecticut state net operating loss carryforwards and expected Connecticut state other
temporary differences for fiscal 2016 and fiscal 2015.
61
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
The significant components of Griffin’s deferred tax assets and deferred tax liabilities are as follows:
Nov. 30,
Nov. 30,
2017
2016
Deferred tax assets:
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Federal net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . .
Non-qualified stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in Centaur Media plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,841 $
3,797
1,936
1,366
970
159
—
226
12,295
(1,363)
10,932
3,068
4,037
1,675
1,537
892
623
309
285
12,426
(1,514)
10,912
(7,199)
(1,291)
(538)
(9,028)
1,904 $
(4,244)
(1,095)
(589)
(5,928)
4,984
At November 30, 2017, Griffin had federal net operating loss carryforwards of approximately $10,850 with
expirations ranging from sixteen to nineteen years and state net operating loss carryforwards of approximately $100 with
expirations ranging from fourteen to nineteen years. Management has determined that a valuation allowance is required
for net operating loss carryforwards in Connecticut related to Griffin and Imperial and for certain other states related to
Imperial. Griffin has evaluated the likelihood that it will realize the benefits of its deferred tax assets. Based on a
significant number of appreciated assets, primarily real estate, held by Griffin and the significant length of time expected
before Griffin’s deferred tax assets would expire, Griffin believes that it is more likely than not that it will utilize the
benefit of its remaining deferred tax assets.
Griffin evaluates each tax position taken in its tax returns and recognizes a liability for any tax position deemed
less likely than not to be sustained under examination by the relevant taxing authorities. Griffin believes that its income
tax filing positions will be sustained on examination and does not anticipate any adjustments that would result in a
material change on its financial statements. As a result, no accrual for uncertain income tax positions has been recorded
pursuant to ASC 740-10.
Federal income tax returns for fiscal 2012 through fiscal 2016 are open to examination by the Internal Revenue
Service (“IRS”). An IRS examination of the fiscal 2015 federal tax return was opened subsequent to November 30, 2017.
The remaining periods subject to examination for Griffin’s significant state return, which is Connecticut, are fiscal 2008
through fiscal 2016.
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted and became effective for Griffin on
January 1, 2018 (see Note 12). The TCJA reduces the U.S. federal corporate statutory income tax rate from 35% to 21%,
which Griffin expects will result in a blended fiscal 2018 federal statutory rate for Griffin of approximately 22.2%. The
impact of the lower statutory rate applied to Griffin’s deferred tax assets and deferred tax liabilities is expected to be
included in Griffin’s income tax provision/benefit in the fiscal 2018 first quarter. Griffin expects to record income tax
expense between approximately $1,000 and $1,100, due to the re-measurement of its net deferred tax assets on its
consolidated balance sheet in the fiscal 2018 first quarter.
62
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
5. Mortgage Loans
Griffin's mortgage loans, which are nonrecourse, consist of:
Variable rate, due January 27, 2020 * . . . . . . . . . . . . . . . . . . . . . . . $
Variable rate, due October 3, 2022 * . . . . . . . . . . . . . . . . . . . . . . .
Variable rate, due January 2, 2025 * . . . . . . . . . . . . . . . . . . . . . . . .
Variable rate, due May 1, 2026 * . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable rate, due November 17, 2026 * . . . . . . . . . . . . . . . . . . . .
Variable rate, due March 1, 2027 * . . . . . . . . . . . . . . . . . . . . . . . . .
Variable rate, due August 1, 2027 * . . . . . . . . . . . . . . . . . . . . . . . .
3.97%, due September 1, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.09%, due July 1, 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.09%, due July 1, 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.33%, due August 1, 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable rate, due October 2, 2017 * . . . . . . . . . . . . . . . . . . . . . . .
Variable rate, due February 1, 2019 * . . . . . . . . . . . . . . . . . . . . . . .
Nonrecourse mortgage loans prior to debt issuance costs . . . . . . . . .
Debt issuance costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nov. 30, 2017 Nov. 30, 2016
3,606
—
20,744
14,187
26,725
—
—
—
7,001
4,905
17,624
6,034
10,313
111,139
(1,442)
Nonrecourse mortgage loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 129,203 $ 109,697
3,478 $
4,367
20,221
13,844
26,076
11,826
10,523
12,115
6,597
4,622
17,308
—
—
130,977
(1,774)
∗ Griffin entered into interest rate swap agreements to effectively fix the interest rates on these loans (see below).
The aggregate annual principal payment requirements under the terms of the nonrecourse mortgage loans for
the fiscal years 2018 through 2022 are $3,590, $3,751, $6,976, $3,945 and $7,970, respectively. The aggregate book
value of land and buildings that are collateral for the nonrecourse mortgage loans was $151,472 at November 30, 2017.
On September 22, 2017, two wholly-owned subsidiaries of Griffin entered into the Fourth Modification
Agreement (the “Modification Agreement”) to the mortgage loan previously due on October 2, 2017 with Webster Bank
N.A. (“Webster Bank”) (the “Webster Mortgage”). At the time Griffin entered into the Fourth Modification, the Webster
Mortgage had a principal balance of $5,876 and a variable interest rate of the one month LIBOR rate plus 2.75%. Griffin
had previously entered into an interest rate swap agreement to effectively fix the interest rate of the Webster Mortgage at
3.86%. The Modification Agreement reduced the principal amount of the loan to $4,375 and extended the maturity of the
Webster Mortgage to October 3, 2022 with monthly principal payments based on a twenty-five year amortization
schedule. Griffin made a payment of $1,501 against the principal balance utilizing $501 that had been held in escrow
with Webster Bank and $1,000 from its cash on hand. The Fourth Modification maintained the interest rate on the
Webster Mortgage at the one month LIBOR rate plus 2.75%. At the time Griffin completed the Fourth Modification,
Griffin entered into an interest rate swap agreement to effectively fix the Webster Mortgage at a new rate of 4.72%. The
Webster Mortgage is collateralized by Griffin’s two multi-story office buildings in Windsor, Connecticut. The
Modification Agreement did not alter the collateral for the Webster Mortgage.
On August 30, 2017, a subsidiary of Griffin closed on a $12,150 nonrecourse mortgage loan (the “2017 40|86
Mortgage”) with 40|86 Mortgage Capital, Inc. The 2017 40|86 Mortgage is collateralized by 215 International which
Griffin acquired on June 9, 2017 (see Note 3) and has a ten year term with monthly principal payments based on a thirty
year amortization schedule. The interest rate for the 2017 40|86 Mortgage is 3.97%.
On July 14, 2017, a subsidiary of Griffin closed on a $10,600 nonrecourse mortgage loan (the “2017 Berkshire
Mortgage”) with Berkshire Bank. The 2017 Berkshire Mortgage refinanced an existing mortgage loan (the “2009
Berkshire Mortgage”) with Berkshire Bank that was due on February 1, 2019 and was collateralized by 100 International
Drive (“100 International”), an approximately 304,000 square foot industrial/warehouse building in NE Tradeport. The
2009 Berkshire Mortgage had a balance of $10,120 at the time of refinancing and a variable interest rate of the one
63
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
month LIBOR rate plus 2.75%. At the time Griffin completed the 2009 Berkshire Mortgage, Griffin entered into an
interest rate swap agreement with Berkshire Bank (the “2009 Berkshire Swap”) to effectively fix the interest rate on the
2009 Berkshire Mortgage at 6.35% for the term of that loan. The 2017 Berkshire Mortgage is collateralized by the same
property that collateralized the 2009 Berkshire Mortgage. The 2017 Berkshire Mortgage has a ten year term with
monthly principal payments based on a twenty-five year amortization schedule. The interest rate for the 2017 Berkshire
Mortgage is a variable rate consisting of the one month LIBOR rate plus 2.05%. At the time the 2017 Berkshire
Mortgage closed, Griffin terminated the 2009 Berkshire Swap and entered into a new interest rate swap agreement with
Berkshire Bank that effectively fixes the interest rate of the 2017 Berkshire Mortgage at 4.39% over the loan term. The
terms of the 2017 Berkshire Mortgage require that if the full building tenant at 100 International does not extend its lease
when it expires in fiscal 2025, Griffin will enter into a master lease of the vacated space that would then be in effect until
the due date of the 2017 Berkshire Mortgage.
Griffin paid $341 in connection with the termination of the 2009 Berkshire Swap. Amounts remaining in
accumulated other comprehensive income and deferred tax assets of $218 and $123, respectively, at the time of the
termination are being amortized over the original term of that interest rate swap agreement. Accordingly, Griffin
recorded interest expense of $98 in fiscal 2017 related to the termination of the 2009 Berkshire Swap. Griffin expects to
record interest expense of approximately $211 and $32 in fiscal 2018 and fiscal 2019, respectively, related to the 2009
Berkshire Swap.
On March 15, 2017, a subsidiary of Griffin closed on a $12,000 nonrecourse mortgage loan (the “2017 People’s
Mortgage”) with People’s United Bank, N.A. (“People’s Bank”). The 2017 People’s Mortgage is collateralized by two
industrial/warehouse buildings in NE Tradeport aggregating approximately 275,000 square feet. The 2017 People’s
Mortgage has a ten year term with monthly principal payments based on a twenty-five year amortization schedule. The
interest rate for the 2017 People’s Mortgage is a variable rate consisting of the one month LIBOR rate plus 1.95%. At the
time the 2017 People’s Mortgage closed, Griffin also entered into an interest rate swap agreement with People’s Bank
for a notional principal amount of $12,000 at inception to effectively fix the interest rate at 4.45% for its full term. Under
the terms of the 2017 People’s Mortgage, Griffin entered into a master lease for 759 Rainbow Road (“759 Rainbow”),
one of two buildings that collateralize the 2017 People’s Mortgage. The master lease would only become effective if the
full building tenant in 759 Rainbow does not renew its lease when it is scheduled to expire in fiscal 2019. The master
lease would be in effect until the earlier of the space being re-leased to a new tenant or the due date of the 2017 People’s
Mortgage.
On January 30, 2018, Griffin’s subsidiary that completed the 2017 People’s Mortgage closed on the refinancing
(the “Refinanced Loan”) of the 2017 People’s Mortgage with People’s Bank, adding 330 Stone Road, an approximately
137,000 square foot industrial/warehouse building in NE Tradeport, to the collateral and received additional mortgage
proceeds of $7,000. The 2017 People’s Mortgage had a balance of $11,781 at the time of the refinancing. The
Refinanced Loan has a new ten year term with monthly principal payments based on a twenty-five year amortization
schedule. The interest rate on the Refinanced Loan has a variable interest rate based on the one month LIBOR rate plus
1.95%, but Griffin entered into an interest rate swap agreement with People’s Bank that, combined with an existing
interest rate swap agreement with People’s Bank, effectively fixes the interest rate on the Refinanced Loan at 4.57% over
the term of the Refinanced Loan.
On November 17, 2016, Griffin closed on a nonrecourse mortgage (the “2016 Webster Mortgage”) for $26,725.
The 2016 Webster Mortgage refinanced an existing mortgage with Webster Bank which was due on September 1, 2025
and was collateralized by an approximately 280,000 square foot industrial building (“5220 Jaindl”) in the Lehigh Valley
of Pennsylvania (see below). The 2016 Webster Mortgage is collateralized by 5220 Jaindl along with an adjacent
approximately 252,000 square foot industrial building (“5210 Jaindl”). Griffin received net proceeds of $13,000 (before
transaction costs), net of $13,725 used to refinance the existing mortgage with Webster Bank. The 2016 Webster
Mortgage has a ten year term with monthly principal payments based on a twenty-five year amortization schedule. The
interest rate for the 2016 Webster Mortgage is a floating rate of the one month LIBOR rate plus 1.70%. At the time the
2016 Webster Mortgage closed, Griffin entered into an interest rate swap agreement with Webster Bank that, combined
64
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
with two existing swap agreements with Webster Bank, effectively fixes the rate of the 2016 Webster Mortgage at 3.79%
over the balance of the mortgage loan’s ten year term.
On April 26, 2016, Griffin closed on a nonrecourse mortgage (“the 2016 People’s Mortgage”) with People’s
Bank for $14,350, before transaction costs. The 2016 People’s Mortgage refinanced an existing mortgage (the “2009
People’s Mortgage”) with People’s Bank that was due on August 1, 2019 and was collateralized by four
industrial/warehouse buildings totaling approximately 240,000 square feet (14, 15, 16 and 40 International Drive) in
New England Tradeport (“NE Tradeport”), Griffin’s industrial park located in Windsor and East Granby, Connecticut.
The 2009 People’s Mortgage had a balance of $7,418 at the time of the refinancing and a variable interest rate of the one
month LIBOR rate plus 3.08%. At the time Griffin completed the 2009 People’s Mortgage, Griffin entered into an
interest rate swap agreement with People’s Bank to effectively fix the rate on the 2009 People’s Mortgage at 6.58% for
the term of that loan. The 2016 People’s Mortgage is collateralized by the same four properties that collateralized the
2009 People’s Mortgage along with another approximately 98,000 square foot NE Tradeport industrial/warehouse
building. At the closing of the 2016 People’s Mortgage, Griffin received net mortgage proceeds of $6,932 (before
transaction costs), which was net of the $7,418 used to repay the 2009 People’s Mortgage. The 2016 People’s Mortgage
has a ten year term with monthly principal payments based on a twenty-five year amortization schedule. The interest rate
for the 2016 People’s Mortgage is a floating rate of the one month LIBOR rate plus 2.0%. At the time the 2016 People’s
Mortgage closed, Griffin entered into another interest rate swap agreement with People’s Bank that, combined with the
existing interest rate swap agreement with People’s Bank, effectively fixes the interest rate of the 2016 People’s
Mortgage at 4.17% over the term of the loan. The terms of the 2016 People’s Mortgage require that if either the tenant
that leases approximately 58,000 square feet in 40 International Drive or the tenant that leases approximately 40,000
square feet in 14 International Drive does not extend its respective lease when it expires in fiscal 2021, a subsidiary of
Griffin will enter into a master lease of the vacated space. The master lease would be guaranteed by Griffin and be in
effect until either the vacated space is re-leased to a new tenant or the due date of the 2016 People’s Mortgage Loan,
whichever occurs first.
On December 10, 2015, Griffin received additional mortgage proceeds of $2,600 (the “Webster Earn-Out”)
related to the mortgage (the “2015 Webster Mortgage”) obtained by one of its subsidiaries with Webster Bank on its
property at 5220 Jaindl. The 2015 Webster Mortgage closed on September 1, 2015, at which time initial proceeds of
$11,500 (before transaction costs) were received. At the time of the mortgage closing, Griffin had leased approximately
196,000 square feet of 5220 Jaindl. The Webster Earn-Out was subsequently received by Griffin when the tenant that
leased that space exercised its option to lease the balance of the building. The 2015 Webster Mortgage had a ten year
term with monthly principal payments based on a twenty-five year amortization schedule. The interest rate for the 2015
Webster Mortgage was a floating rate of the one month LIBOR rate plus 1.65%. At the time the 2015 Webster Mortgage
closed, Griffin also entered into an interest rate swap agreement with Webster Bank for a notional principal amount of
$11,500 at inception to fix the interest rate at 3.77% on the initial funds advanced under the 2015 Webster Mortgage. At
the time the Webster Earn-Out was received, Griffin entered into another interest rate swap agreement with Webster
Bank for a notional principal amount of $2,600 to fix the interest rate on the Webster Earn-Out at 3.67%.
On December 11, 2015, Griffin received additional mortgage proceeds of $1,850 (the “KeyBank Earn-Out”)
related to the mortgage obtained by two of its subsidiaries with KeyBank (formerly First Niagara Bank) (the “2014
KeyBank Mortgage”) on its properties at 4270 Fritch Drive (“4270 Fritch”) and 4275 Fritch Drive (“4275 Fritch”) in the
Lehigh Valley of Pennsylvania. The 2014 KeyBank Mortgage closed on December 31, 2014, at which time proceeds of
$10,891 (before transaction costs) were received, in addition to $8,859 used to refinance the existing mortgage on 4275
Fritch with KeyBank. The 2014 KeyBank Mortgage is collateralized by 4270 Fritch, an approximately 303,000 square
foot industrial/warehouse building, and 4275 Fritch, an adjacent approximately 228,000 square foot industrial/warehouse
building. At the time of the mortgage closing, approximately 201,000 square feet of 4270 Fritch was leased. The
KeyBank Earn-Out was subsequently received by Griffin when the remaining vacant space of approximately 102,000
square feet was leased. Griffin agreed to enter into a master lease with its subsidiaries that own 4270 Fritch and 4275
Fritch in order to maintain a minimum net rent equal to the debt service on the 2014 KeyBank Mortgage. The master
lease would be co-terminus with the 2014 KeyBank Mortgage. The 2014 KeyBank Mortgage has a ten year term with
monthly principal payments based on a twenty-five year amortization schedule. The interest rate for the 2014 KeyBank
65
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Mortgage is a floating rate of the one month LIBOR rate plus 1.95%. At the time the 2014 KeyBank Mortgage closed,
Griffin entered into an interest rate swap agreement with KeyBank that, combined with an existing interest rate swap
agreement with KeyBank, effectively fixed the rate of the 2014 KeyBank Mortgage at 4.43% over the mortgage loan’s
ten year term. At the time the KeyBank Earn-Out was received, Griffin entered into another interest rate swap agreement
with KeyBank for a notional principal amount of $1,850 to fix the interest rate on the KeyBank Earn-Out at 3.88%. The
combination of the three interest rate swap agreements effectively fixes the interest rate on the 2014 KeyBank Mortgage
at 4.39% over the remainder of the mortgage loan’s ten year term.
On July 29, 2015, a subsidiary of Griffin closed on a new nonrecourse mortgage with 40|86 Mortgage Capital,
Inc. (“the 2015 40|86 Mortgage”) for $18,000. The 2015 40|86 Mortgage refinanced an existing 5.73% nonrecourse
mortgage which was due on August 1, 2015 and was collateralized by three industrial/warehouse buildings totaling
approximately 392,000 square feet (“75 International,” “754 Rainbow” and “758 Rainbow”) in NE Tradeport. The 2015
40|86 Mortgage is collateralized by the same three properties. Griffin received proceeds of $14,875 at closing (before
transaction costs), which were used for the payoff of the maturing 5.73% nonrecourse mortgage of $17,891. The
remaining $3,125 of loan proceeds were placed in escrow at closing. In the 2015 fourth quarter, as per the terms of the
2015 40|86 Mortgage, $2,500 of the escrowed proceeds was released to Griffin when the tenant that was leasing
approximately 88,000 square feet on a month-to-month basis in 754 Rainbow extended into a long-term lease for that
space and $25 of the escrowed proceeds was also released to Griffin upon renewal of insurance coverage on the
mortgaged properties. The remaining $600 of mortgage proceeds in escrow was released to Griffin in the fiscal 2016
second quarter when tenant improvement work for the full building tenant in 758 Rainbow was completed. The 2015
40|86 Mortgage has a fifteen year term with monthly payments based on a thirty year amortization schedule. The interest
rate for the 2015 40|86 Mortgage is 4.33%.
As of November 30, 2017, Griffin was a party to several interest rate swap agreements related to its variable
rate nonrecourse mortgages on certain of its real estate assets. Griffin accounts for its interest rate swap agreements as
effective cash flow hedges (see Note 2). No ineffectiveness on the cash flow hedges was recognized as of November 30,
2017 and none is anticipated over the term of the agreements. Amounts in accumulated other comprehensive income
(loss) will be reclassified into interest expense over the term of the swap agreements to achieve fixed rates on each
mortgage. None of the interest rate swap agreements contain any credit risk related contingent features. In fiscal 2017
and fiscal 2016, Griffin recognized net gains before taxes, included in other comprehensive income, of $949 and $1,081,
respectively, on its interest rate swap agreements. In fiscal 2015, Griffin recognized a net loss before taxes, included in
other comprehensive loss, of $444 on its interest rate swap agreements.
As of November 30, 2017, $786 is expected to be reclassified over the next twelve months from accumulated
other comprehensive loss to interest expense. As of November 30, 2017, the net fair value of Griffin’s interest rate swap
agreements was $201, with $644 included in other assets and $845 included in other liabilities on Griffin’s consolidated
balance sheet. As of November 30, 2016, the fair value of Griffin’s interest rate swap agreements was $1,685, with $207
included in other assets and $1,892 included in other liabilities on Griffin’s consolidated balance sheet.
66
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
6. Revolving Credit Agreement
On July 22, 2016, Griffin entered into an amendment (the “Amendment”) to its revolving credit line (the
“Webster Credit Line”) with Webster Bank that extends the Webster Credit Line for two years through July 31, 2018.
The Amendment increased the amount of the Webster Credit Line from $12,500 to $15,000 and enables Griffin to
further extend the term of the Webster Credit Line for an additional year through July 31, 2019, provided there is no
default at the time such extension is requested. Per the terms of the Amendment, the interest rate on the Webster Credit
Line will remain at the one month LIBOR rate plus 2.75%.
The Webster Credit Line is collateralized by Griffin’s properties in Griffin Center South, aggregating
approximately 235,000 square feet, and an approximately 48,000 square foot single-story office building in Griffin
Center. The aggregate book value of land and buildings that are collateral for the Webster Credit Line was $11,064 at
November 30, 2017. There have been no borrowings under the Webster Credit Line since its inception in fiscal 2013. As
of November 30, 2017, the Webster Credit Line secured certain standby letters of credit aggregating $2,214 that are
related to Griffin's development activities.
7. Stockholders’ Equity
Per Share Results
Basic and diluted results per share were based on the following:
Nov. 30,
2017
For the Fiscal Years Ended
Nov. 30,
2016
Nov. 30,
2015
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,627 $
576 $
425
Weighted average shares outstanding for computation of basic per
share results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,010,000
28,000
Incremental shares from assumed exercise of Griffin stock options .
Adjusted weighted average shares for computation of diluted per
5,117,000
6,000
5,151,000
17,000
share results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,038,000
5,123,000
5,168,000
Griffin Stock Option Plan
The Griffin Industrial Realty, Inc. 2009 Stock Option Plan (the “2009 Stock Option Plan”) makes available
options to purchase 386,926 shares of Griffin common stock. The Compensation Committee of Griffin’s Board of
Directors administers the 2009 Stock Option Plan. Options granted under the 2009 Stock Option Plan may be either
incentive stock options or non-qualified stock options granted at fair market value on the date approved by Griffin’s
Compensation Committee. Vesting of all of Griffin’s stock options is solely based upon service requirements and does
not contain market or performance conditions.
Stock options granted expire ten years from the grant date. In accordance with the 2009 Stock Option Plan,
stock options granted to non-employee directors upon their initial election to the board of directors are fully exercisable
immediately upon the date of the option grant. Stock options granted to non-employee directors upon their reelection to
the board of directors vest on the second anniversary from the date of grant. Stock options granted to employees vest in
equal installments on the third, fourth and fifth anniversaries from the date of grant. None of the stock options
outstanding at November 30, 2017 may be exercised as stock appreciation rights.
67
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
The following options were granted by Griffin under the 2009 Stock Option Plan to employees and non-
employee directors either upon their initial election or their reelection to Griffin’s Board of Directors:
Nov. 30, 2017
For the Fiscal Years Ended
Nov. 30, 2016
Nov. 30, 2015
Employees . . . . . . .
5,000
Number of
Shares
Non-employee
directors . . . . . . . .
6,570
11,570
Fair Value per
Option at
Grant Date
$
$
11.13
13.49
Number of
Number of
Fair Value per
Fair Value per
Option at
Grant Date
$ 7.51 - 11.65
$
11.30
Shares
101,450
8,409
109,859
Option at
Grant Date
-
14.39
Shares
-
8,282
8,282
$
$
The fair values were estimated as of the date of each grant using the Black-Scholes option-pricing model. The
following assumptions were used in determining the fair value of each option:
For the Fiscal Years Ended
Nov. 30, 2017 Nov. 30, 2016
Nov. 30, 2015
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . 32.7 to 39.6 % 32.9 to 41.1 %
2.1 to 2.2 % 1.2 to 1.5 %
Risk free interest rates . . . . . . . . . . . . . . . . . . . . . .
Expected option term (in years) . . . . . . . . . . . . . .
7.5 to 8.5
Annual dividend yield . . . . . . . . . . . . . . . . . . . . . .
0.8 to 0.9 %
5 to 8.5
0.9 %
40.8 %
2.0 %
8.5
0.7 %
Number of option holders at November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
Compensation expense and related tax benefits for stock options were as follows:
For the Fiscal Years Ended
Nov. 30, 2017 Nov. 30, 2016 Nov. 30, 2015
Compensation expense . . . . . . . . . . . . . . . . . . $
349 $
267 $
230
Related tax benefit . . . . . . . . . . . . . . . . . . . . . . $
86 $
62 $
61
For all years presented, forfeiture rates used for directors were 0%, forfeiture rates used for executives ranged
from 17.9% to 22.6% and forfeiture rates used for employees ranged from 38.3% to 41.1%. These rates were utilized
based on the historical activity of the grantees.
As of November 30, 2017, the unrecognized compensation expense related to nonvested stock options that will
be recognized during future periods is as follows:
Fiscal 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
340
234
112
34
The total grant date fair value of options vested during fiscal 2017, fiscal 2016 and fiscal 2015 was $55, $457
and $492, respectively. There were no options exercised in fiscal 2017 and fiscal 2016. The intrinsic value of options
exercised in fiscal 2015 was $18.
68
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
A summary of the activity under the 2009 Griffin Stock Option Plan is as follows:
Outstanding at November 30, 2014 . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at November 30, 2015 . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at November 30, 2016 . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at November 30, 2017 . . . . . . . . . . . . . . . . . . . . .
Options
222,001
8,282
(3,134)
(1,422)
225,727
109,859
(11,040)
324,546
11,570
(2,354)
333,762
Weighted Avg.
Exercise Price
30.35
31.38
25.53
28.12
30.47
26.83
30.73
29.23
30.59
36.82
29.22
$
$
$
$
$
$
$
$
$
$
$
Weighted Avg.
Remaining
Range of Exercise Prices for
Vested and Nonvested Options
$23.00 - $28.00 . . . . . . . . . . . . .
$28.00 - $32.00 . . . . . . . . . . . . .
$32.00 - $39.00 . . . . . . . . . . . . .
Outstanding at
November 30, 2017 Exercise Price
26.67
29.07
33.40
29.22
Weighted Avg. Contractual Life Total Intrinsic
(in years)
7.9
4.1
0.9
4.7
124,543 $
128,248 $
80,971 $
333,762 $
1,225
953
251
2,429
Value
$
$
Accumulated Other Comprehensive Loss
As of November 30, 2017, Griffin no longer held any shares of Centaur Media plc (“Centaur Media”) as Griffin
sold its remaining 1,952,462 shares of Centaur Media in fiscal 2017 (see Note 9). As of November 30, 2016, Griffin held
1,952,462 shares of common stock in Centaur Media and accounted for its investment in Centaur Media as an available-
for-sale security under ASC 320-10. Accordingly, the investment in Centaur Media was carried at its fair value on
Griffin’s consolidated balance sheet, with increases or decreases recorded, net of tax, as a component of other
comprehensive income (loss). Upon the sale of shares in Centaur Media, the change, net of tax, in the value of the shares
of Centaur Media that were sold during the time Griffin held those shares was reclassified from accumulated other
comprehensive income (loss) and included in Griffin’s consolidated statement of operations. In fiscal 2017, $172 was
reclassified from accumulated other comprehensive loss as a result of the sale of the 1,952,462 shares of Centaur Media
common stock. There were no sales of Centaur Media common stock in fiscal 2016 and fiscal 2015.
69
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Accumulated other comprehensive loss, and activity for fiscal 2017, fiscal 2016 and fiscal 2015, is comprised of
the following:
Unrealized Gain Unrealized Gain
(Loss) on Cash
Flow Hedges
(Loss) on Investment
in Centaur Media Total
Balance at November 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive (loss) income before reclassifications . . . . . . . . . . .
Amounts reclassified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net activity for other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss before reclassifications . . . . . . . . . . . . . . . . . . .
Amounts reclassified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net activity for other comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income before reclassifications . . . . . . . . . . .
Amounts reclassified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net activity for other comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,464) $
(1,058)
778
(280)
(1,744)
(174)
856
682
(1,062)
(45)
823
778
(284) $
Changes in accumulated other comprehensive income (loss) are as follows:
629 $
30
—
30
659
(646)
—
(646)
13
159
(172)
(13)
— $
(835)
(1,028)
778
(250)
(1,085)
(820)
856
36
(1,049)
114
651
765
(284)
November 30, 2017
Tax
(Expense)
For the Fiscal Years Ended
November 30, 2016
Tax
(Expense)
November 30, 2015
Tax
(Expense)
Pre-Tax Benefit
Net-of-Tax Pre-Tax Benefit
Net-of-Tax Pre-Tax Benefit
Net-of-Tax
Reclassifications included in net income:
Loss on cash flow hedges (interest expense) . $ 1,299 $
Realized gain on sale of Centaur Media (gain
on sale) . . . . . . . . . . . . . . . . . . . . . . . . . .
(281)
Total reclassifications included in net income 1,018
Mark to market adjustment on Centaur Media
(476) $
823 $ 1,358 $
(502) $
856 $ 1,234 $
(456) $
778
109
(367)
—
(172)
651 1,358
—
(502)
—
—
856 1,234
—
(456)
—
778
for an increase (decrease) in fair value . . . .
220
(77)
143
(763)
267
(496)
123
(43)
80
Mark to market adjustment on Centaur Media
for an increase (decrease) in the foreign
currency exchange rate . . . . . . . . . . . . . . .
Decrease in fair value adjustment on Griffin's
25
(9)
16
(230)
80
(150)
(77)
27
(50)
(58)
cash flow hedges . . . . . . . . . . . . . . . . . . .
Total change in other comprehensive loss . . .
187
Total other comprehensive income (loss) . . . $ 1,205 $
13
(73)
(440) $
(45)
(277)
114 (1,270)
88 $
765 $
103
450
(52) $
(174) (1,678)
(820) (1,632)
(398) $
36 $
620
604
148 $
(1,058)
(1,028)
(250)
Cash Dividends
In fiscal 2017, Griffin declared an annual cash dividend of $0.40 per common share, which was paid in the first
quarter of fiscal 2018.
In fiscal 2016 and fiscal 2015, Griffin declared annual cash dividends of $0.30 per common share in each year,
which were paid in the first quarter of fiscal 2017 and fiscal 2016, respectively.
70
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Stock Repurchases
In fiscal 2016, Griffin’s Board of Directors authorized a stock repurchase program whereby, starting on
May 11, 2016, Griffin could repurchase up to $5,000 of its outstanding common stock over a twelve month period in
privately negotiated transactions. The stock repurchase program expired on May 10, 2017. In fiscal 2017, prior to the
expiration of the stock repurchase program, Griffin repurchased 47,173 shares of its outstanding common stock for
$1,474. Including the stock repurchased in fiscal 2016, Griffin repurchased a total of 152,173 shares for $4,828 under the
stock repurchase program.
8. Operating Leases
Griffin's rental revenue reflects the leasing of industrial, flex and office space and the lease of the nursery
growing facilities in Connecticut and Florida previously used by Imperial. Future minimum rental payments, including
expected tenant reimbursements, to be received under noncancelable leases as of November 30, 2017 were:
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
29,532
25,983
24,007
17,849
13,599
28,794
139,764
All future minimum rental payments, principally for Griffin’s corporate headquarters, under noncancelable
leases, as lessee, as of November 30, 2017 were:
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
126
125
121
122
131
511
1,136
Total rental expense for all operating leases, as lessee, in fiscal 2017, fiscal 2016 and fiscal 2015 was $156,
$194 and $201, respectively.
Effective October 1, 2016, Griffin entered into a ten year sublease for approximately 1,920 square feet in New
York City for its executive offices. The sublease is with Bloomingdale Properties, Inc. (“Bloomingdale Properties”), an
entity that is controlled by certain members of the Cullman and Ernst Group, which is considered a related party to
Griffin. The sublease with Bloomingdale Properties was approved by Griffin’s Audit Committee and the lease rates
under the sublease were at market rate at the time the sublease was signed. Rental expense for this lease in fiscal 2017
and fiscal 2016 was $124 and $10, respectively, which is included in general and administrative expenses.
9. Supplemental Financial Statement Information
Available-for-Sale Securities
In fiscal 2017, Griffin sold its remaining 1,952,462 shares of common stock of Centaur Media for cash proceeds
of $1,216, after transaction costs, which resulted in a pretax gain of $275. Accordingly, Griffin no longer owned any
shares of common stock in Centaur Media as of November 30, 2017. Griffin did not sell any of its Centaur Media
common stock in fiscal 2016 or fiscal 2015.
71
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Griffin’s investment in the common stock of Centaur Media was accounted for as an available-for-sale security
under ASC 320-10. Accordingly, changes in the fair value of Centaur Media, reflecting both changes in the stock price
and changes in the foreign currency exchange rate, were included, net of income taxes, in accumulated other
comprehensive income (see Note 7). Griffin's investment income includes dividend income from Centaur Media of $38,
$79 and $83 in fiscal 2017, fiscal 2016 and fiscal 2015, respectively.
Griffin’s investment in Centaur Media was included in other assets on Griffin’s consolidated balance sheet in
fiscal 2016. The fair value, cost and unrealized gain of Griffin’s investment in Centaur Media as of November 30, 2016
were as follows:
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
977
1,014
(37)
Other Assets
Griffin's other assets are comprised of the following:
$
Deferred rent receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred leasing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease receivables from tenants. . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage escrows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment, net . . . . . . . . . . . . . . . . . . . . .
Sale proceeds held in escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs related to the Webster Credit Line . . .
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nov. 30, 2017 Nov. 30, 2016
4,474
4,746
2,333
247
369
449
207
717
280
3,535
117
977
247
18,698
5,351
5,113
2,774
1,695
1,097
713
644
448
251
91
47
—
169
18,393 $
Griffin’s intangible assets relate to the fiscal 2017 acquisition of an industrial building (see Note 3) and the
fiscal 2010 acquisition of an industrial building and consist of: (i) the value of in-place leases; and (ii) the value of the
associated relationships with tenants. Intangible assets are shown net of amortization of $975 and $772 as of
November 30, 2017 and November 30, 2016, respectively.
Amortization expense of intangible assets is as follows:
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
For the Fiscal Years Ended
Nov. 30, 2017 Nov. 30, 2016 Nov. 30, 2015
201
203 $
58 $
72
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Estimated amortization expense of intangible assets over each of the next five fiscal years is:
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
378
378
378
378
104
Furniture, fixtures and equipment, net reflects accumulated depreciation of $902 and $844 as of November 30,
2017 and November 30, 2016, respectively. Total depreciation expense related to furniture, fixtures and equipment in
fiscal 2017, fiscal 2016 and fiscal 2015 was $84, $90 and $86, respectively.
Accounts Payable and Accrued Liabilities
Griffin's accounts payable and accrued liabilities are comprised of the following:
Accrued construction costs and retainage . . . . . . . . . . . . . . . . . . $
Accrued salaries, wages and other compensation . . . . . . . . . . . .
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued lease commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accounts payable and accrued liabilities . . . . . . . . . . . . . . $
Nov. 30, 2017 Nov. 30, 2016
1,252
725
390
573
487
713
4,140
1,894 $
1,154
482
432
393
636
4,991 $
Other Liabilities
Griffin's other liabilities are comprised of the following:
Deferred compensation plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prepaid rent from tenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security deposits of tenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conditional asset retirement obligations . . . . . . . . . . . . . . . . . . .
Land sale deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nov. 30, 2017 Nov. 30, 2016
4,334
938
1,892
413
288
—
78
7,943
5,005 $
1,041
845
583
204
195
99
7,972 $
Supplemental Cash Flow Information
In fiscal 2017, Griffin received $3,535 of cash, after transaction costs, from the fiscal 2016 sale of
approximately 29 acres of undeveloped land in Griffin Center (the “Griffin Center Land Sale”). The proceeds from the
Griffin Center Land Sale were deposited into escrow at the time the sale closed for the potential purchase of a
replacement property in a 1031 Like-Kind Exchange. As a replacement property was not acquired in the time period
required under the applicable tax code, the sale proceeds were returned to Griffin (see Note 3).
An increase of $245 in fiscal 2017 (prior to the sale of the remaining shares), a decrease of $993 in fiscal 2016
and an increase of $46 in fiscal 2015 in the fair value of Griffin’s Investment in Centaur Media reflects the mark to
market adjustment of this investment and did not affect Griffin’s cash. Accounts payable and accrued liabilities related to
additions to real estate assets increased by $642 in fiscal 2017 and decreased by $32 in fiscal 2016.
73
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Griffin did not receive any income tax refunds in fiscal 2017, fiscal 2016 or fiscal 2015. Interest payments in
fiscal 2017, fiscal 2016 and fiscal 2015 were $5,368, $4,507 and $4,180, respectively, including capitalized interest of
$103, $274 and $777 in fiscal 2017, fiscal 2016 and fiscal 2015, respectively.
Savings Plan
Griffin maintains the Griffin Industrial Realty, Inc. 401(k) Savings Plan (the “Griffin Savings Plan”) for its
employees, a defined contribution plan whereby Griffin matches 60% of each employee’s contribution, up to a maximum
of 5% of base salary. Griffin’s contributions to the Griffin Savings Plan in fiscal 2017, fiscal 2016 and fiscal 2015 were
$65, $64 and $60, respectively.
Deferred Compensation Plan
Griffin maintains a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for certain of
its employees who, due to IRC regulations, cannot take full advantage of the Griffin Savings Plan. Griffin’s liability
under its Deferred Compensation Plan at November 30, 2017 and 2016 was $5,005 and $4,334, respectively. These
amounts are included in other liabilities on Griffin’s consolidated balance sheets. The expense for Griffin’s matching
benefit to the Deferred Compensation Plan in fiscal 2017, fiscal 2016 and fiscal 2015 was $11, $7 and $22, respectively.
The Deferred Compensation Plan is unfunded, with benefits to be paid from Griffin’s assets. The liability for
the Deferred Compensation Plan reflects the amounts withheld from employees, Griffin’s matching benefit and any gains
or losses on participant account balances based on the assumed investment of amounts credited to participants’ accounts
in certain mutual funds. Participant balances are tracked and any gain or loss is determined based on the performance of
the mutual funds as selected by the participants and included in general and administrative expenses on Griffin’s
consolidated statement of operations.
10. Quarterly Results of Operations (Unaudited)
Summarized quarterly financial data are presented below:
Fiscal 2017 Quarters
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic net income (loss) per common share . . . . . . . . . . . . . . . . .
Diluted net income (loss) per common share . . . . . . . . . . . . . . .
1st
4th
2nd
3rd
$ 6,979 $ 18,087 $ 9,954 $ 8,864 $ 43,884
843 12,622
4,627
(490)
0.92
(0.10)
0.92
(0.10)
3,194
1,329
0.27
0.26
8,671
4,727
0.95
0.94
(86)
(939)
(0.19)
(0.19)
Total
Fiscal 2016 Quarters
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,682 $ 6,524 $ 7,265 $ 10,380 $ 30,851
5,627
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
576
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.11
Basic net income (loss) per common share . . . . . . . . . . . . . . . . .
0.11
Diluted net income (loss) per common share . . . . . . . . . . . . . . .
1,089
(49)
(0.01)
(0.01)
3,464
1,339
0.26
0.26
804
(335)
(0.07)
(0.07)
270
(379)
(0.07)
(0.07)
Total
2nd
3rd
4th
1st
Total revenue in Griffin's fiscal 2017 fourth quarter consolidated statement of operations includes revenue from
property sales of $900 from the sale of a land parcel in Bloomfield, Connecticut.
Total revenue in Griffin’s fiscal 2016 fourth quarter consolidated statement of operations includes revenue from
property sales of $3,756 from the sale of a land parcel in Bloomfield, Connecticut.
The sum of the four quarters earnings per share data may not equal the annual earnings per share data due to the
requirement that each period be calculated separately.
74
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
11. Commitments and Contingencies
As of November 30, 2017, Griffin had committed purchase obligations of approximately $3,037, principally
related to the construction of an approximately 134,000 square foot industrial/warehouse building in Lehigh County,
Pennsylvania and the development of other Griffin properties.
On October 18, 2017, Griffin entered into a full building lease (the “220 Tradeport Lease”) for an
approximately 234,000 square foot industrial/warehouse building (“220 Tradeport Drive”) to be built in NE Tradeport.
The tenant is an investment grade company that intends to use 220 Tradeport Drive for the distribution of automotive
parts. The 220 Tradeport Lease, which would commence upon completion of construction of 220 Tradeport Drive, has a
term of twelve years and six months with the tenant having several five year renewal options. Provided the tenant meets
certain conditions, the tenant has an option (the “Expansion Option”) to cause Griffin to construct an approximately
54,000 square foot addition to 220 Tradeport Drive. If the tenant exercises the Expansion Option, the term of the 220
Tradeport Lease for 220 Tradeport Drive would be extended for at least ten years upon the tenant occupying the
additional space. Griffin expects to commence construction of 220 Tradeport Drive in the fiscal 2018 first quarter with
completion expected in the second half of fiscal 2018. Griffin expects to spend approximately $17,500 for development
of 220 Tradeport Drive, including all related site work, building construction, tenant improvements, leasing expenses and
financing costs. Griffin has agreed to terms with State Farm Life Insurance Company (“State Farm”) on a construction to
permanent mortgage loan for up to $13,800. The loan would provide financing during the construction period and, upon
completion of 220 Tradeport Drive and commencement of rent payments under the 220 Tradeport Lease, would convert
to a fifteen year nonrecourse permanent mortgage loan. The interest rate on the loan is 4.51%. During the construction
period, only interest payments would be made. Monthly principal payments, which will begin after conversion to a
nonrecourse permanent mortgage loan, will be based on a twenty-five year amortization schedule. There is no guarantee
that the construction to permanent mortgage loan with State Farm will be completed under its current terms, or at all.
On October 4, 2017, Griffin entered into an agreement to purchase an approximately 22 acre parcel of
undeveloped land in Concord, North Carolina (the “Concord Land”) for $2,600 in cash. If the transaction closes, Griffin
plans to construct an industrial/warehouse development on the Concord Land, which is located near 215 International.
The amount of industrial/warehouse space to be developed there will be based upon findings during due diligence.
Closing of this purchase, anticipated to take place in fiscal 2018, is subject to several conditions, including the
satisfactory outcome of due diligence and obtaining all governmental approvals for Griffin’s development plans for the
Concord Land. There is no guarantee that this transaction will be completed under its current terms, or at all.
On May 5, 2017, Griffin entered into an Option Purchase Agreement (the “EGW Option Agreement”) whereby
Griffin granted the buyer an exclusive three month option, in exchange for a nominal fee, to purchase approximately 288
acres of undeveloped land in East Granby and Windsor, Connecticut for approximately $7,800. The buyer may extend
the option period for up to three years upon payment of additional option fees. In fiscal 2017, the buyer paid $35 of
additional option fees to extend its option period through May 2018. The land subject to the EGW Option Agreement
does not have any of the approvals that would be required for the buyer’s planned use of the land, which is to generate
solar electricity. A closing on the land sale contemplated by the EGW Option Agreement is subject to several significant
contingencies, including the buyer procuring electrical utility supply contracts, approval by the state public utility
regulatory authorities and governmental approvals for the planned use of the land. There is no guarantee that the sale of
land as contemplated under the EGW Option Agreement will be completed under its current terms, or at all.
On January 25, 2016, Griffin entered into an Option Purchase Agreement (the “Simsbury Option Agreement”)
whereby Griffin granted the buyer an exclusive three month option, in exchange for a nominal fee, to purchase
approximately 280 acres of undeveloped land in Simsbury, Connecticut for approximately $7,700. The buyer may extend
the option period for up to three years upon payment of additional option fees. Through November 30, 2017, the buyer
paid $140 of option fees, and subsequent to November 30, 2017, the buyer paid an additional $120 to extend its option
period through January 2019. Subsequent to November 30, 2017, the buyer received approval from the state regulatory
authority for the buyer’s planned use of the land, which is to generate solar electricity. A closing on the land sale
contemplated by the Simsbury Option Agreement is subject to several significant contingencies, including the potential
75
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
appeal of the approvals recently granted by the state regulatory authority. Griffin expects the decision of the state
regulatory authority to be appealed. There is no guarantee that the sale of land as contemplated under the Simsbury
Option Agreement will be completed under its current terms, or at all.
From time to time, Griffin is involved, as a defendant, in various litigation matters arising in the ordinary course
of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with
respect to these matters is not expected to be material, individually or in the aggregate, to Griffin's consolidated financial
position, results of operations or cash flows.
12. Subsequent Events
In accordance with FASB ASC 855, “Subsequent Events,” Griffin has evaluated all events or transactions
occurring after November 30, 2017, the balance sheet date, and noted that there have been no such events or transactions
which would require recognition or disclosure in the consolidated financial statements as of and for the year ended
November 30, 2017, other than the disclosures herein.
On December 18, 2017, the tenant leasing the Florida Farm declared bankruptcy under Chapter 11 of the U.S.
Bankruptcy Code (see Note 3). Griffin has yet to determine the impact, if any, this will have on its lease of the Florida
Farm, which expires on June 30, 2019.
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted and became effective for Griffin on
January 1, 2018 (see Note 4). The TCJA reduces the U.S. federal corporate statutory income tax rate from 35% to 21%,
which is expected to result in a blended fiscal 2018 federal corporate statutory rate for Griffin of approximately 22.2%.
The impact of the lower statutory rate applied to Griffin’s deferred tax assets and deferred tax liabilities is expected to be
recorded as a discrete item in Griffin’s income tax expense in the fiscal 2018 first quarter. Based on the TCJA, Griffin
expects to record income tax expense of between approximately $1,000 and $1,100, due to the re-measurement of its net
deferred tax assets on its consolidated balance sheet in the fiscal 2018 first quarter.
On January 11, 2018, Griffin entered into an agreement to purchase an approximately 14 acre parcel of
undeveloped land in the Lehigh Valley of Pennsylvania (the “Lehigh Valley Land”) for $3,600 in cash. If the transaction
closes, Griffin plans to construct an industrial/warehouse building on the Lehigh Valley Land, the size of which will be
based upon findings during due diligence. The closing of this purchase, anticipated to take place in late fiscal 2018 or
early fiscal 2019, is subject to several conditions, including the satisfactory outcome of due diligence and obtaining all
governmental approvals for Griffin’s development plans for the Lehigh Valley Land. There is no guarantee that this
transaction will be completed under its current terms, or at all.
See Note 5 for disclosure of the subsequent event related to refinancing the 2017 People’s Mortgage.
76
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Griffin Industrial Realty, Inc.
We have audited the consolidated financial statements of Griffin Industrial Realty, Inc. and subsidiaries as of
November 30, 2017 and 2016, and for each of the three fiscal years in the period ended November 30, 2017, listed in the
index appearing under Item 15(a)(1). Our audits also included the financial statement schedules of Griffin Industrial
Realty, Inc. listed in Item 15(a)(2). These financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these financial statements and schedules
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Griffin Industrial Realty, Inc. and subsidiaries as of November 30, 2017 and 2016, and the results of
their operations and their cash flows for each of the three fiscal years in the period ended November 30, 2017, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Griffin Industrial Realty, Inc. and subsidiaries’ internal control over financial reporting as of
November 30, 2017, based on criteria established in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 8, 2018, expressed an
unqualified opinion on the effectiveness of Griffin Industrial Realty, Inc.’s internal control over financial reporting.
New Haven, Connecticut
February 8, 2018
77
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Changes in Internal Control Over Financial Reporting: There have been no changes in Griffin Industrial
Realty, Inc.’s (“Griffin” or the “Company”) internal control over financial reporting that occurred during the Company’s
most recent fiscal quarter ended November 30, 2017 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
Disclosure Controls and Procedures: The Company maintains disclosure controls and procedures designed to
ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission
(“SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,
and such information is accumulated and communicated to management, as appropriate, to allow timely decisions
regarding required disclosure. The Company’s principal executive officer and principal financial officer have reviewed
and evaluated, with the participation of the Company’s management, the Company’s disclosure controls and procedures
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) as of the end of the period covered by this Annual Report (the “Evaluation Date”). Based on such evaluation, such
officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective.
Management’s Report on Internal Control Over Financial Reporting: Management of the Company is
responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). Management of the Company, including its chief executive officer and chief financial
officer, has assessed the effectiveness of its internal control over financial reporting as of November 30, 2017, based on
the criteria established in the “2013 Internal Control—Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in 2013. Based on its assessment and those criteria, management
of the Company has concluded that, as of November 30, 2017, the Company’s internal control over financial reporting
was effective.
The Company’s independent registered public accounting firm, RSM US LLP, has audited the effectiveness of
the Company’s internal control over financial reporting as of November 30, 2017, as stated in their attestation report
appearing below.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and
procedures may deteriorate.
78
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Griffin Industrial Realty, Inc.
We have audited Griffin Industrial Realty, Inc. and subsidiaries’ (the Company) internal control over financial
reporting as of November 30, 2017, based on criteria established in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission in 2013. The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over
Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the Company's internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, Griffin Industrial Realty, Inc. and subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of November 30, 2017, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements of Griffin Industrial Realty, Inc. and subsidiaries as of
November 30, 2017 and 2016, and for each of the three fiscal years in the period ended November 30, 2017, listed in the
index appearing under Item 15(a)(1) and our report dated February 8, 2018, expressed an unqualified opinion.
New Haven, Connecticut
February 8, 2018
ITEM 9B. OTHER INFORMATION.
None.
79
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth the information called for in this Item 10:
Name
Frederick M. Danziger . . . . . . . . . . . . .
Michael S. Gamzon . . . . . . . . . . . . . . . .
David R. Bechtel . . . . . . . . . . . . . . . . . .
Edgar M. Cullman, Jr. . . . . . . . . . . . . . .
Thomas C. Israel . . . . . . . . . . . . . . . . . .
Jonathan P. May . . . . . . . . . . . . . . . . . .
Albert H. Small, Jr. . . . . . . . . . . . . . . . .
Scott Bosco . . . . . . . . . . . . . . . . . . . . . .
Anthony J. Galici . . . . . . . . . . . . . . . . . .
Thomas M. Lescalleet . . . . . . . . . . . . . .
Age
77
48
50
71
73
51
61
51
60
55
Position
Executive Chairman of the Board of Directors
Director and President and Chief Executive Officer
Director
Director
Director
Director
Director
Vice President of Construction, Griffin Industrial, LLC
Vice President, Chief Financial Officer and Secretary
Senior Vice President, Griffin Industrial, LLC
Griffin’s directors are each elected for a term of one year.
Frederick M. Danziger has been the Chairman of the Board of Directors of Griffin since May 2012 and has
served in the Executive Chairman capacity since January 2016. Mr. Danziger was the Chief Executive Officer of Griffin
from April 1997 to January 2016; was a Director and the President of Griffin from April 1997 to May 2012; and was a
Director of Culbro Corporation (“Culbro’) from 1975 until 1997. He was previously involved in the real estate
operations of Griffin in the early 1980s. Mr. Danziger was Of Counsel to the law firm of Latham & Watkins LLP from
1995 until 1997. From 1974 until 1995, Mr. Danziger was a Member of the law firm of Mudge Rose Guthrie
Alexander & Ferdon. Mr. Danziger also is a Director of Monro Muffler Brake, Inc. and Bloomingdale Properties, Inc.
Mr. Danziger is the father-in-law of Michael S. Gamzon and the brother-in-law of Mr. Edgar M. Cullman, Jr. We believe
that Mr. Danziger’s background as a lawyer and his extensive experience and knowledge with respect to real estate and
real estate financing provides a unique perspective to the Board.
Michael S. Gamzon is a Director and the President and Chief Executive Officer of Griffin. Mr. Gamzon was
appointed as a Director on January 19, 2016 to replace Mr. David M. Danziger, who resigned from the Board effective
on that date. Mr. Gamzon succeeded Mr. Frederick M. Danziger as Griffin’s Chief Executive Officer effective January 1,
2016 and has been President of Griffin since May 2012. Mr. Gamzon was the Chief Operating Officer of Griffin from
September 2010 to January 2016; was Executive Vice President from September 2010 to May 2012; and was a Vice
President of Griffin from January 2008 through August 2010. Mr. Gamzon was an investment analyst with Alson Capital
Partners, LLC from April 2005 until January 2008 and an investment analyst with Cobalt Capital Management, LLC
from March 2002 until March 2005. Mr. Gamzon is the son-in-law of Frederick M. Danziger. We believe that
Mr. Gamzon’s experience and knowledge, with respect to real estate activities in his capacity as an executive of Griffin,
including leading Griffin’s efforts in expanding Griffin’s operations outside of Connecticut, provides a unique
perspective to the Board.
David R. Bechtel has been a Director of Griffin since May 2016. Mr. Bechtel has been a principal of Barrow
Street Holdings LLC since 2012; founder and managing member of Outpost Capital Management LLC since 2001; and
founder and manager of GP Management LLC since 2011. Mr. Bechtel has many years of general business experience
and expertise as a managing member, principal, and CFO of financial service and natural resource companies.
Edgar M. Cullman, Jr. has been a Director of Griffin since May 2015. Mr. Cullman, Jr. has been a managing
member of Culbro LLC, a private equity investment firm, since 2005 and was previously the President and Chief
Executive Officer of General Cigar Holdings from 1996 through April 2005. Mr. Cullman, Jr. is the brother-in-law of
Frederick M. Danziger. Mr. Cullman, Jr. has many years of general business experience and expertise as an executive of
a public company. Mr. Cullman, Jr. is familiar with Griffin’s real estate business from his experience as President and
Chief Executive Officer of Culbro when Griffin’s real estate operations were part of Culbro prior to the spinoff of Griffin
from Culbro in 1997.
80
Thomas C. Israel has been a Director of Griffin since July 2000. Mr. Israel was a Director of Culbro from 1989
until 1997 and a Director of General Cigar Holdings, Inc. from December 1996 until May 2000. Since 1966, Mr. Israel
has been Chairman of A.C. Israel Enterprises, Inc., an investment company. Mr. Israel has significant experience as a
member of Griffin’s Board of Directors, many years of general business experience, finance experience, and expertise as
an executive and board member of public companies.
Jonathan P. May has been a Director of Griffin since September 2012. Mr. May is the founder and has been the
co-managing partner of Floresta Ventures, LLC since March 2016, the Executive Director of Natural Capital Partners
(formerly known as The CarbonNeutral Company) a private company that is a leading provider of carbon reduction
programs for corporations since September 2015, and the Chief Operating Officer and Chief Financial Officer and a
Director of The CarbonNeutral Company from 2008 to September 2015. Mr. May was the founder and managing
Director of Catalytic Capital, LLC from 2004 to 2008. Mr. May has significant general business experience, finance
experience, and expertise as an executive.
Albert H. Small, Jr. has been a Director of Griffin since January 2009. Mr. Small, Jr. was President of
Renaissance Housing Corporation, a private company involved in residential real estate development from 1984 through
March 2005, and President of WCI Communities Mid-Atlantic Division from March 2005 through March 2008. Since
March 2008, Mr. Small, Jr. has been active in the development and management of several commercial and office
developments in Washington D.C. Mr. Small, Jr. has significant experience in real estate development and management
that gives him unique insights into Griffin’s challenges, opportunities and operations.
Scott Bosco has been the Vice President of Construction of Griffin Industrial, LLC, a subsidiary of Griffin,
since July 2005.
Anthony J. Galici has been the Vice President, Chief Financial Officer and Secretary of Griffin since April
1997.
Thomas M. Lescalleet has been the Senior Vice President of Griffin Industrial, LLC, a subsidiary of Griffin,
since March 2002.
Code of Ethics
Griffin’s board of directors has adopted a Code of Ethics that applies to all of its directors, officers and
employees, which is available on its website at www.griffinindustrial.com in the “Investors” section under “Corporate
Governance.” Griffin intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment
to, or waiver from, a provision of our Code of Ethics, as well as Nasdaq’s requirement to disclose waivers with respect to
directors and executive officers, by posting such information on its website at the address and location specified above.
Audit Committee
Griffin’s Audit Committee consists of David R. Bechtel, Thomas C. Israel and Jonathan P. May with Mr. Israel
serving as Chairman. The Audit Committee meets the Nasdaq composition requirements, including the requirements
regarding financial literacy. The Board has determined that each member of the Audit Committee is independent under
the listing standards of Nasdaq and the rules of the SEC regarding audit committee membership. In addition, Mr. Israel
qualifies as a financially sophisticated Audit Committee member under the Nasdaq rules based on his employment
experience in finance. None of the members of the Audit Committee are considered a financial expert as defined by
Item 407(d)(5) of Regulation S-K of the Securities and Exchange Act of 1934 (an “audit committee financial expert”).
Griffin does not have an audit committee financial expert because it believes the members of its Audit Committee have
sufficient financial expertise and experience to provide effective oversight of Griffin’s accounting and financial reporting
processes and the audits of Griffin’s financial statements in accordance with generally accepted accounting principles
and Nasdaq rules. In addition, since January 31, 2012, the Audit Committee has engaged directly a former audit partner
in a public accounting firm who is a certified public accountant with extensive experience in auditing the financial
statements of public and private companies. The Audit Committee had previously engaged the public accounting firm of
which he was a partner as an advisor to the Audit Committee. The Audit Committee believes that this engagement
provides it with additional expertise comparable to what would be provided by an audit committee financial expert.
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The Audit Committee approves all auditing and non-auditing services, reviews audit reports and the scope of
audit by Griffin’s independent registered public accountants and related matters pertaining to the preparation and
examination of Griffin’s financial statements. From time to time, the Audit Committee makes recommendations to the
Board of Directors with respect to the foregoing matters. The Audit Committee held four meetings in fiscal 2017.
Board of Directors’ Role in Oversight of Risk
Management is responsible for Griffin’s day-to-day risk management activities, and the Board’s role is to
engage in informed risk oversight. In fulfilling this oversight role, Griffin’s Board of Directors focuses on understanding
the nature of Griffin’s enterprise risks, including operations and strategic direction, as well as the adequacy of Griffin’s
overall risk management system. There are a number of ways the Board performs this function, including the following:
•
•
•
at its regularly scheduled meetings, the Board receives management updates on Griffin’s business
operations, financial results and strategy, and discusses risks related to its businesses;
the Audit Committee assists the Board in its oversight of risk management by discussing with management,
particularly the Chief Executive Officer and the Chief Financial Officer, Griffin’s major risk exposures and
the steps management has taken to monitor and control such exposures; and
through management updates and committee reports, the Board monitors Griffin’s risk management
activities, including the risk management process, risks relating to Griffin’s compensation programs, and
financial and operational risks being managed by Griffin.
The Board does not believe that its role in the oversight of Griffin’s risk affects the Board’s leadership structure.
Compensation Risk
The Compensation Committee reviews compensation policies and practices affecting employees in addition to
those applicable to executive officers. The Compensation Committee has determined that it is not reasonably likely that
Griffin’s compensation policies and practices for its employees would have a material adverse effect on Griffin.
Nominating Committee
Griffin’s Nominating Committee consists of David R. Bechtel, Thomas C. Israel, Jonathan P. May and Albert
H. Small, Jr. with Mr. May serving as Chairman. All four members of the Nominating Committee are independent
directors. The Nominating Committee reviews candidates for appointment to the Griffin Board of Directors. In searching
for qualified director candidates, the Board may solicit current directors and ask them to pursue their own business
contacts for the names of potentially qualified candidates. The Nominating Committee may consult with outside advisors
or retain search firms to assist in the search for qualified candidates. The Nominating Committee will also consider
suggestions from stockholders for nominees for election as directors. The Nominating Committee does not have a policy
on the consideration of board nominees recommended by stockholders. The Board believes such a policy is unnecessary,
as the Nominating Committee will consider a nominee based on his or her qualifications, regardless of whether the
nominee is recommended by stockholders. Any stockholder who wishes to recommend a candidate to the Nominating
Committee for consideration as a director nominee should submit the recommendation in writing to the Secretary of
Griffin in accordance with the procedures in Griffin’s Amended and Restated By-Laws for stockholder nominations of
directors to permit the Nominating Committee to complete its review in a timely fashion. The Nominating Committee
operates under a written charter adopted by the Board of Directors in 2014, which is publicly available in the “Corporate
Governance” section of the “Investors” section of Griffin’s website located at www.griffinindustrial.com. The
Nominating Committee held one meeting in fiscal 2017.
Board Diversity; Selection and Evaluation of Director Candidates
The Board does not have a formal policy with respect to Board nominee diversity. There are no specific
minimum qualifications that the Nominating Committee believes must be met for a person to serve on the Board. When
identifying nominees for director, the Nominating Committee focuses on relevant subject matter expertise, depth of
knowledge in key areas that are important to Griffin, and the background, perspective and experience of the nominee.
The Nominating Committee is charged with building and maintaining a board that has an ideal mix of talent and
experience to achieve Griffin’s business objectives in the current environment.
82
Board Leadership Structure
The Board believes that there is no single, generally accepted approach to providing Board leadership, and that
each of the possible leadership structures for a board must be considered in the context of the individuals involved and
the specific circumstances facing a company at any given time. Accordingly, the optimal board leadership structure for
Griffin may vary as circumstances change. Griffin’s Board was led by a Non-Executive Chairman through 2011, as
separate individuals held the positions of Chairman of the Board and Chief Executive Officer, and the Chairman of the
Board was not an employee. In May 2012, the Board appointed Mr. Frederick M. Danziger as Chairman of the Board.
Mr. Danziger had been Chief Executive Officer since 1997. In making that appointment, the Board concluded that
Griffin and its stockholders were best served by having Mr. Danziger serve as Chairman of the Board and Chief
Executive Officer. The Board believed that Mr. Danziger’s combined role as Chairman of the Board and Chief Executive
Officer promoted unified leadership and a single, clear focus and direction for management to execute Griffin’s strategy
and business plans. Effective January 1, 2016, the positions of Chairman of the Board and Chief Executive Officer have
been held by separate individuals, Mr. Frederick M. Danziger and Mr. Michael S. Gamzon, respectively. The Board
determined that Mr. Danziger should continue to serve as Executive Chairman to continue to provide Board leadership
continuity.
Communication with the Board of Directors or Nominating Committee
Stockholders who wish to communicate with the Board of Directors or the Nominating Committee should
address their communications to Jonathan P. May, Chairman of the Nominating Committee, via first class mail, at
Griffin Industrial Realty, Inc., 641 Lexington Avenue, 26th Floor, New York, New York, 10022. Such communication
will be distributed to the specific director(s) requested by the stockholders, or if generally to the Board of Directors, to
other members of the Board of Directors as may be appropriate depending on the material outlined in the stockholder
communication.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires Griffin’s officers and directors, and persons who own
more than ten percent of its common stock, to file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Such persons are required by regulation to furnish Griffin with copies of all Section 16(a) forms
they file. Based on its involvement in the preparation of certain such forms, and a review of copies of other such forms
received by it, Griffin believes that with respect to fiscal 2017, all such Section 16(a) filing requirements were satisfied.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis describes the material elements of compensation awarded to,
earned by, or paid to each of Griffin’s named executive officers (the “Named Executive Officers”) during the last
completed fiscal year. The Named Executive Officers for the fiscal year ended November 30, 2017 were as follows:
Frederick M. Danziger . . . . . . . . . . . . . Executive Chairman of the Board (“Executive Chairman”) of Griffin
Michael S. Gamzon . . . . . . . . . . . . . . . Director, President and Chief Executive Officer (“CEO”) of Griffin
Anthony J. Galici . . . . . . . . . . . . . . . . . Vice President, Chief Financial Officer and Secretary of Griffin
Thomas M. Lescalleet . . . . . . . . . . . . . Senior Vice President of Griffin Industrial, LLC
Scott Bosco . . . . . . . . . . . . . . . . . . . . . . Vice President of Construction, Griffin Industrial, LLC
Compensation Philosophy and Overview
Griffin’s compensation programs are designed to attract, motivate and retain the management talent that Griffin
believes is necessary to achieve its financial and strategic goals. Griffin’s Compensation Committee strives to pay for
performance by rewarding each of its Named Executive Officers for team results and their individual contributions to
Griffin’s success. In this way, Griffin believes that the interests of its executives align with the interests of its
stockholders.
83
Design and Implementation
With these objectives in mind, Griffin’s Compensation Committee has built an executive compensation
program that consists of three principal elements:
1. Base Salary
2. Annual Incentive Compensation Programs
3. Long-Term Incentive Program
Griffin also contributes to a 401(k) savings plan and a non-qualified deferred compensation plan on behalf of its
Named Executive Officers. These contributions, however, comprise a relatively minor portion of Griffin’s Named
Executive Officers’ compensation packages. Griffin’s Compensation Committee reviews the Named Executive Officers’
compensation packages each year and makes decisions on each component thereof in order to better align with its
compensation philosophy.
Elements of Compensation
Base Salary
Griffin pays base salaries to its Named Executive Officers in order to provide a consistent, minimum level of
pay that sustained individual performance warrants. Griffin also believes that a competitive annual base salary is
important to attract and retain an appropriate caliber of talent for each position over time.
The annual base salaries of Griffin’s Named Executive Officers are determined by the Executive Chairman and
the CEO (except with regard to their salaries) and approved annually by the Compensation Committee. The annual base
salaries of the Executive Chairman and the CEO are determined by the Compensation Committee. All salary decisions
are based on each Named Executive Officer’s level of responsibility, experience and recent and past performance, as
determined by the Executive Chairman, the CEO and the Compensation Committee, as applicable. Griffin does not
benchmark its base salaries in any way, nor does Griffin employ the services of a compensation consultant.
Annual Incentive Compensation Programs
Griffin’s annual incentive programs are designed to recognize short-term performance against established
annual performance goals, as explained below. These performance goals and target amounts for fiscal 2017 were
developed by the Executive Chairman and the CEO and approved or modified, as necessary, by the Compensation
Committee. Additionally, the Compensation Committee retains the discretion to adjust any awards made to Griffin’s
executives, including making awards in the absence of the attainment of any of the performance goals under Griffin’s
annual incentive compensation plans. Griffin makes annual incentive payments, if any, in the year following the year in
which they are earned.
84
Griffin Incentive Plan
Under the Griffin Industrial Realty, Inc. Incentive Compensation Plan for fiscal year 2017 (the “Griffin
Incentive Plan”), incentive compensation was awarded based on certain defined components as described below:
Incentive Compensation Component
Incentive Compensation Pool Eligibility
(i) Achieving Adjusted Funds from Operations (“FFO”) targets (as
defined in the Griffin Incentive Plan). Target FFO reflects
operating income excluding revenue and costs from property
sales, depreciation and amortization expense, incentive
compensation expense, noncash rental revenue, certain noncash
general and administrative expenses (stock option expense,
expenses related to the non-qualified deferred compensation
plan, write-off of debt issuance costs and write-offs of certain
project costs), acquisition expenses and operating income
related to building acquisitions during the fiscal year.
$125,000 to $562,500 of incentive compensation will be
accrued into this incentive compensation pool if FFO is
between 90% and 105% of the FFO target, which equaled
$12,000,000. For every 1% below the FFO target, the
incentive compensation under this component will decrease by
7.5% from the target component bonus of $500,000. For every
1% above the FFO target, the incentive compensation under
this component will increase by 2.5% from the target
component bonus, with a maximum component bonus of
$562,500.
(ii) Property Sales (as defined in the Griffin Incentive Plan)
Property sales are segregated into three groups:
1) Property sales where Griffin has done subdivision work,
invested in infrastructure or other development activities
to enable the property to be sold (excluding property sales
that would be in Group 3 below). 10% of the pretax gain
from property sales in this group shall be accrued into this
incentive compensation pool.
2) Property sales of land where no improvements have been
made or no development activities have taken place
(excluding property sales that would be in Group 3
below). 5% of the pretax gain from property sales in this
group shall be accrued into this incentive compensation
pool.
3) Large property sales (“Group 3 Property Sales”). A
portion of gain from such large property sales as
determined by Griffin senior management and the
Compensation Committee.
A maximum of $250,000 in total of incentive compensation for
Group 1 and Group 2 property sales may be accrued into this
pool; however, no more than $100,000 of incentive
compensation may be accrued into this pool from any one
transaction.
Incentive compensation for Group 3 Property Sales are not
subject to the $250,000 cap that applies to the incentive
compensation for Group 1 and Group 2 property sales.
10% of the incremental net present value created, as defined in
the Griffin Incentive Plan, shall be accrued into this incentive
compensation pool with a maximum of $125,000 of incentive
compensation that may be accrued under this component.
10% of the incremental net present value created, as defined in
the Griffin Incentive Plan, shall be accrued into this incentive
compensation pool with a maximum of $125,000 of incentive
compensation that may be accrued under this component.
(iii) Build-to-Suit Projects
a.
b.
for build-to-suit projects in Connecticut completed in fiscal
2017
for build-to-suit projects outside Connecticut completed in
fiscal 2017
85
(iv) Buildings Built on Speculation
a.
for buildings built on speculation in Connecticut
b.
for buildings built on speculation outside Connecticut
(v) Leasing
a.
leasing of vacant space in Connecticut
b.
lease renewal or extension
(vi) Acquisitions (as defined in the Griffin Incentive Plan)
10% of the incremental net present value created, as defined in
the Griffin Incentive Plan, shall be accrued into this incentive
compensation pool with a maximum of $125,000 of incentive
compensation that may accrued under this component.
10% of the incremental net present value created, as defined in
the Griffin Incentive Plan, shall be accrued into this incentive
compensation pool with a maximum of $125,000 of incentive
compensation that may be accrued under this component.
4% of the net present value related to new leases, as defined in
the Griffin Incentive Plan, shall be accrued into this incentive
compensation pool with a maximum of $150,000 of incentive
compensation that may be accrued under this component.
2.5% of the net present value related to lease renewals or
extensions, shall be accrued into this incentive compensation
pool as defined in the Griffin Incentive Plan, with a maximum
of $75,000 of incentive compensation that may be accrued
under this component.
10% of the incremental net present value created, as defined in
the Griffin Incentive Plan, shall be accrued into this incentive
compensation pool with a maximum of $150,000 of incentive
compensation that may be accrued under this component.
Each Named Executive Officer is entitled to a specific percentage of each incentive compensation pool under
the Griffin Incentive Plan based upon their responsibilities as determined by senior management and approved by the
Compensation Committee.
Griffin Incentive Plan Results
The foregoing objectives are designed to reward management for increasing Griffin’s operating cash flow and
increase in value of Griffin’s real estate assets. Over the past three years, achievement of the components of the Griffin
Incentive Plan has been as follows:
Incentive Plan Component
Adjusted Funds From Operations . . . . . . . . . . . . . . . . . . . . . .
Profit from property sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value generated from build-to-suit projects . . . . . . . . . . . . . Not Achieved
Value generated from buildings built on speculation . . . . . . Not Achieved
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2017
Achieved
Achieved
Achieved
Achieved
Fiscal 2016
Achieved
Achieved
Fiscal 2015
Achieved
Achieved
Not Achieved
Not Achieved
Achieved
Achieved
Achieved
Achieved
Not Applicable Not Applicable
Amounts earned under each objective are accrued into the Griffin Incentive Plan up to a maximum incentive
compensation amount, which in fiscal 2017 was $1,687,500 (excluding any amount related to Group 3 Property Sales for
which there was no maximum). The maximum compensation amounts and amounts accrued under each objective for
fiscal 2017, based on the level of achievement of each incentive plan component for Griffin is shown in the following
table. The amounts in the table below reflect performance against each incentive plan component, calculated pursuant to
the formulas described above, and Griffin’s Compensation Committee did not exercise any discretion to modify bonuses
from the formulaic results under each incentive plan component (except with respect to Group 3 Property Sales, for
which there was no specific formula).
86
Griffin Incentive Compensation Plan
Incentive Plan Component
(i)
(ii)
Adjusted Funds from Operations . . . . . . . . . . . . . . . . . . .
Property Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
a. Group 1 and 2 Property Sales . . . . . . . . . . . . . . . . . . . .
b. Group 3 Property Sales . . . . . . . . . . . . . . . . . . . . . . . . .
(iii) Build-to-Suit Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
a. Connecticut Properties . . . . . . . . . . . . . . . . . . . . . . . . . .
b. Non-CT Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(iv) Buildings Built on Speculation . . . . . . . . . . . . . . . . . . . . .
a. Connecticut Properties . . . . . . . . . . . . . . . . . . . . . . . . . .
b. Non-CT Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
a. Leasing of Vacant Space . . . . . . . . . . . . . . . . . . . . . . . .
b. Lease Renewal or Extension . . . . . . . . . . . . . . . . . . . . .
(vi) Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(v)
Maximum
Compensation
Amount
Amount Accrued
Based on Level of
Achievement
$
562,500
$
537,604
250,000
—
(1)
(2)
117,857
200,000
125,000
125,000
125,000
125,000
150,000
75,000
150,000
1,687,500
$
—
—
—
—
105,714
75,000
138,048
1,174,223
$
(1) Amount reflects the aggregate maximum compensation amount with respect to Group 1 and Group 2 property
sales.
(2) There is no maximum compensation amount for purposes of Group 3 Property Sales.
Long-Term Incentive Program—Equity Awards
Griffin believes that equity ownership in Griffin is important to provide its Named Executive Officers with
long-term incentives to build value for Griffin’s stockholders. In addition, the equity program is designed to attract and
retain the executive management team. The Griffin equity program consists entirely of stock option awards. Stock
options have value only if the stock price increases over time and, therefore, provide executives with an incentive to
build Griffin’s value. This characteristic ensures that the Named Executive Officers may have a meaningful portion of
their compensation tied to future stock price increases. If Griffin’s stock price increases, stock options have the potential
to provide high returns to its executives, thus helping Griffin to attract and retain management. However, the realizable
value of the stock options can fall to zero if the stock price is lower than the exercise price established on the date of
grant.
Stock option awards to Named Executive Officers are entirely discretionary. The Executive Chairman and the
CEO recommend whether and how many stock options should be awarded to the other Named Executive Officers or
others, and the Compensation Committee approves or, if necessary, modifies their recommendations. The Compensation
Committee solely determines whether and how many stock options should be awarded to the Executive Chairman and
the CEO. In making stock option award determinations, the Executive Chairman and the CEO and the Compensation
Committee consider the prior contribution of participants and their expected future contributions to the growth of Griffin.
In fiscal 2017, no stock options were awarded to any of the Named Executive Officers.
The Griffin Industrial Realty, Inc. 2009 Stock Option Plan (the “2009 Stock Option Plan”) makes available
options to purchase 386,926 shares of Griffin common stock, plus any additional shares subject to the forfeited options
under Griffin’s prior stock option plan. The Compensation Committee of Griffin’s Board of Directors or, with respect to
awards to non-employee directors, the Board of Directors, administers the 2009 Stock Option Plan. Options granted
under the 2009 Stock Option Plan may be either incentive stock options or non-qualified stock options issued at the fair
market value of a share of common stock on the date the award is approved by Griffin’s Compensation Committee.
Vesting of all of Griffin’s previously issued stock options is solely based upon service requirements and does not contain
market or performance conditions.
87
Stock options granted expire no later than ten years from the grant date. In accordance with the 2009 Stock
Option Plan, stock options granted to non-employee directors upon their initial election to the board of directors are fully
exercisable immediately upon the date of the option grant. Stock options granted to non-employee directors upon their
reelection to the board of directors vest on the second anniversary from the date of grant. Stock options granted to
employees vest in equal installments on the third, fourth and fifth anniversaries from the date of grant.
Of the shares of common stock reserved for issuance under the 2009 Stock Option Plan, as of November 30,
2017, 254,661 shares were subject to outstanding options and 159,318 shares were available for future awards (which
includes certain shares that again became available following the forfeiture of outstanding options). In addition to
options outstanding under the 2009 Stock Option Plan, as of November 30, 2017, 79,101 shares remain subject to
outstanding options granted under Griffin’s prior stock option plan. For more information on stock options, see the
Summary Compensation Table, the Grants of Plan-Based Awards Table, the Outstanding Equity Awards Table, and the
Equity Compensation Plan Information Table and their footnotes.
Perquisites and Other Benefits
Griffin’s Named Executive Officers are eligible for the same health and welfare programs and benefits as the
rest of its employees. In addition, Griffin’s Vice President, Chief Financial Officer and Secretary receives an automobile
allowance of $8,000 per year and Griffin Industrial, LLC’s Senior Vice President receives a medical insurance allowance
of $3,300 per year.
Griffin’s Named Executive Officers are entitled to participate in and receive employer contributions to Griffin’s
401(k) Savings Plan. In addition, Griffin has established a non-qualified deferred compensation plan (the “Deferred
Compensation Plan”) that allows eligible participants, including the Named Executive Officers, to defer portions of their
annual base salary, as well as receive employer matching contributions with respect to deferrals, that would exceed IRS
limits under the Griffin 401(k) Savings Plan. For more information on employer contributions to the Griffin 401(k)
Savings Plan and the Deferred Compensation Plan, see the Summary Compensation Table and its footnotes.
Analysis
Base Salary
The following table presents the base salaries for Griffin’s Named Executive Officers in 2017 and the
percentage increase over their 2016 base salaries:
Mr. Danziger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 350,000
Mr. Gamzon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 510,000
Mr. Galici . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 302,000
Mr. Lescalleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 264,198
Mr. Bosco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 171,666
— %
2 %
2 %
2 %
2 %
Annual Salary % Increase
Annual Incentive Compensation Program
The Griffin Incentive Plan for 2017 was designed to reward Griffin’s employees, including Griffin’s Named
Executive Officers, based on the results of Griffin’s operations, consistent with Griffin’s goal to award for performance
through team results. Each Named Executive Officer is entitled to a specific percentage of each incentive compensation
pool under the Griffin Incentive Plan as described above. The amounts earned by Griffin’s employees under the
incentive compensation pools of the Griffin Incentive Plan may, however, be adjusted at the discretion of the
Compensation Committee.
As a result of the achievement of certain of the incentive plan components noted above, and in accordance with
the Griffin Incentive Plan, the total incentive compensation accrued for fiscal 2017 was $1,174,223, which included
$200,000 added to the Group 3 Property Sales incentive compensation pool for a large property sale.
The following table presents the total annual incentive payments made to the Named Executive Officers for
fiscal 2017, which consisted solely of amounts of annual incentive compensation awarded under the Griffin Incentive
88
Plan (allocated as described above). No discretionary payments outside of the Griffin Incentive Plan were awarded to the
Named Executive Officers in fiscal 2017:
Incentive Plan Discretionary Total Annual Incentive
Payments
Payments
77,600 $
Mr. Danziger . . . . . . . . . . . . . . . . . . . . . . . . $
Mr. Gamzon . . . . . . . . . . . . . . . . . . . . . . . . . $ 174,863 $
Mr. Galici . . . . . . . . . . . . . . . . . . . . . . . . . . . $
84,502 $
Mr. Lescalleet . . . . . . . . . . . . . . . . . . . . . . . $ 217,136 $
97,102 $
Mr. Bosco . . . . . . . . . . . . . . . . . . . . . . . . . . $
Bonus Payments
—
—
—
—
—
$
$
$
$
$
77,600
174,863
84,502
217,136
97,102
The Compensation Committee did not exercise its discretion to alter the amounts earned by each Named
Executive Officer from their respective allocation of incentive compensation accruals under the Griffin Incentive Plan.
The Named Executive Officers received no additional discretionary allocation from the Compensation Committee.
Long-Term Incentive Program – Equity Awards Compensation Plan
During fiscal 2017, no stock options were granted to any of the Named Executive Officers.
Shareholder Say-on-Pay Votes
At Griffin’s 2017 annual meeting of stockholders, Griffin’s stockholders were given the opportunity to cast an
advisory vote on Griffin’s executive compensation. Approximately 99.7% of the votes cast on this “2017 say-on-pay
vote” were voted in favor of the proposal. Griffin has considered the 2017 say-on-pay vote and believes that the support
for the 2017 say-on-pay vote proposal indicates that Griffin’s stockholders casting votes are supportive of the approach
to executive compensation. Thus, Griffin did not make changes to its executive compensation arrangements in response
to the 2017 say-on-pay vote. In the future, Griffin will continue to consider the outcome of the say-on-pay votes when
making compensation decisions regarding its Named Executive Officers.
Accounting and Tax Considerations
Section 162(m) of the Internal Revenue Code (the “Code”) generally disallows a tax deduction to public
corporations for compensation over $1,000,000 paid for any fiscal year to certain executive officers. The Tax Cuts and
Jobs Act (“TCJA”), which was signed into law on December 22, 2017, has limited the “performance-based
compensation” exception to the $1,000,000 deduction cap of Section 162(m) of the Code and may adversely affect the
tax deductibility of certain compensation paid to Griffin’s executive officers. However, Griffin does not believe it need
now adopt any policy with respect to the $1,000,000 deduction cap of Section 162(m) of the Code. While the
Compensation Committee will give due consideration to the deductibility of compensation payments on compensation
arrangements with Griffin’s executive officers (including with respect to the TCJA), the Compensation Committee will
make its compensation decisions based on an overall determination of what it believes to be in the best interests of
Griffin and its stockholders, and deductibility will be only one among a number of factors used by the Compensation
Committee in making its compensation decisions.
Section 4999 and Section 280G of the Code provide that certain executives could be subject to significant
excise taxes if they receive payments or benefits that exceed certain limits in connection with a change in ownership or
change in effective control of Griffin and that Griffin or its successors could lose an income tax deduction with respect to
the payments subject to the excise tax. Griffin has not entered into any agreements with any executives that provide for a
tax “gross up” or other reimbursement for taxes the executive might be required to pay pursuant to Section 4999 of the
Code.
Section 409A of the Code imposes significant additional taxes and interest on underpayments of taxes in the
event an employee or other service provider defers compensation under a plan or agreement that does not meet the
requirements of Section 409A of the Code. Griffin has generally structured its programs and individual arrangements in a
manner intended to be exempt from or comply with the requirements of Section 409A of the Code.
89
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management Griffin’s Compensation
Discussion and Analysis, and based upon this review and discussion, has recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Form 10-K and Griffin’s Proxy Statement for its 2018 Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission.
Albert H. Small, Jr. (Chairman)
Thomas C. Israel
Jonathan P. May
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents information regarding compensation of each of Griffin’s Named Executive
Officers for services rendered during fiscal years 2017, 2016 and 2015:
Name and Principal Position
Frederick M. Danziger
Executive Chairman
of Griffin
Michael S. Gamzon
President and Chief
Executive Officer of Griffin
Anthony J. Galici
Vice President, Chief
Financial Officer and
Secretary of Griffin
Thomas M. Lescalleet
Senior Vice President,
Griffin Industrial, LLC
Scott Bosco
Vice President of Construction,
Griffin Industrial, LLC
Option
Awards (1)
($)
Salary
($)
Bonus
($)
Year
2017 $ 350,000 $ — $
— $
2016 $ 369,308 $ — $
— $
2015 $ 549,762 $ — $
— $
— $
2017 $ 509,039 $ — $
2016 $ 485,760 $ — $ 640,750 $
2015 $ 351,237 $ — $
— $
2017 $ 301,423 $ — $
— $
2016 $ 295,442 $ — $ 135,375 $
— $
2015 $ 289,652 $ — $
Non-Equity
Incentive Plan
Compensation
($)
77,600 $
58,207 $
81,500 $
174,863 $
116,413 $
100,000 $
84,502 $
58,207 $
40,750 $
All Other
Compensation
($)
Total
($)
427,737
137 (2) $
430,408
$
2,893
648,808
17,546
$
699,339
15,437 (3) $
$ 1,256,704
13,781
462,962
11,725
$
403,324
17,399 (4) $
505,972
$
16,948
348,344
$
17,942
2017 $ 263,700 $ — $
— $
2016 $ 258,530 $ — $ 135,375 $
— $
2015 $ 253,460 $ — $
2017 $ 171,342 $ — $
— $
2016 $ 167,983 $ — $ 75,810 $
2015 $ 162,870 $ — $
— $
217,136 $
133,175 $
118,400 $
97,102 $
65,490 $
59,350 $
11,440 (5) $
$
12,213
$
10,671
5,333 (6) $
$
5,819
$
4,889
492,276
539,293
382,531
273,777
315,102
227,109
(1) The amounts shown for Option Awards reflect the grant date fair value of options granted in fiscal 2016. For a
discussion of the assumptions and methodologies used to calculate the amounts referred to above, please see the
discussion of stock option awards contained in Part II, Item 8, “Financial Statements and Supplementary Data” of
this Form 10-K in Note 7 of the Notes to Consolidated Financial Statements.
(2) Represents life insurance premium.
(3) Represents life insurance premium of $228, matching contributions related to the Griffin 401(k) Savings Plan of
$7,187 and matching contributions related to the Deferred Compensation Plan of $8,022.
(4) Represents life insurance premium of $401, matching contributions related to the Griffin 401(k) Savings Plan of
$6,725, matching contributions related to the Deferred Compensation Plan of $2,273 and an automobile allowance
of $8,000.
(5) Represents life insurance premium of $228, matching contributions related to the Griffin 401(k) Savings Plan of
$7,912 and a medical insurance allowance of $3,300.
(6) Represents life insurance premium of $228, matching contributions related to the Griffin 401(k) Savings Plan of
$5,082 and matching contributions related to the Deferred Compensation Plan of $23.
90
Grants of Plan-Based Awards
The following table presents information regarding the incentive awards granted to Griffin’s Named Executive
Officers for fiscal 2017:
Option
Grant Approval Target
Date Date
Name
Frederick M. Danziger . . . . . . . . . . . . . . . . . . . — —
Michael S. Gamzon . . . . . . . . . . . . . . . . . . . . . — —
Anthony J. Galici . . . . . . . . . . . . . . . . . . . . . . . . — —
Thomas M. Lescalleet . . . . . . . . . . . . . . . . . . . . — —
Scott Bosco . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
($) (1)
Maximum Options
Estimated
Future Payouts
Under Non-Equity
Grant Date
Awards:
Number of Exercise Fair Value of
Stock and
Price of
Securities
Option
Incentive Plan Awards Underlying Option
Awards
Awards
($)
($/sh)
—
—
—
—
—
—
—
—
—
—
(#)
$ 77,600 $ 90,000 —
$ 174,863 $ 267,500 —
$ 84,502 $ 125,625 —
$ 217,136 $ 398,750 —
$ 97,102 $ 177,813 —
($) (2)
(1) The Griffin Incentive Plan has no threshold or target levels; however, there is an aggregate maximum amount
payable to the Named Executive Officers under the Griffin Incentive Plan (excluding the incentive compensation
component corresponding to Group 3 Property Sales, which is not subject to a maximum). The amounts shown for
the Named Executive Officers in the Target column reflect the actual amounts payable to the Named Executive
Officers under the Griffin Incentive Plan (including the incentive compensation component corresponding to Group
3 Property Sales) based on Griffin’s performance in fiscal 2017. The Compensation Committee did not exercise its
discretion to award the Named Executive Officers any additional incentive compensation outside of the Griffin
Incentive Plan for fiscal 2017.
(2) The maximum amount payable to Messrs. Danziger, Gamzon, Galici, Lescalleet and Bosco under the Griffin
Incentive Plan (excluding the incentive compensation component corresponding to Group 3 Property Sales, which is
not subject to a maximum) equaled $75,000, $242,500, $110,625, $338,750 and $162,813, respectively, calculated
assuming all incentive compensation components of the Griffin Incentive Plan are met at the maximum level of
each, which would result in an accrual of $1,687,500 into the Griffin Incentive Plan (excluding in any accruals with
respect to the incentive compensation component corresponding to Group 3 Property Sales). The amounts shown for
the Named Executive Officers in the Maximum column reflect the sum of (a) the maximums for all incentive
compensation components (other than Group 3 Property Sales) assuming all such incentive compensation
components are met at the maximum level of each, and (b) the actual amounts paid with respect to the incentive
compensation component corresponding to Group 3 Property Sales. The actual amounts paid with respect to
incentive compensation component corresponding to Group 3 Property Sales equaled $25,000 and $60,000 for
Messrs. Gamzon and Lescalleet, respectively, and $15,000 each to Messrs. Danziger, Galici and Bosco.
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Outstanding Equity Awards at Fiscal Year-End
The following table presents information with respect to each unexercised stock option held by Griffin’s Named
Executive Officers as of November 30, 2017. There are no restricted stock awards.
Name
Frederick M. Danziger . . . . . . . . . . . . . . . .
Michael S. Gamzon . . . . . . . . . . . . . . . . . . .
Anthony J. Galici . . . . . . . . . . . . . . . . . . . . .
Thomas M. Lescalleet . . . . . . . . . . . . . . . . .
Scott Bosco . . . . . . . . . . . . . . . . . . . . . . . . .
Option Awards (1)
Number of Number of
Securities
Securities
Underlying Underlying
Unexercised Unexercised Option
Exercise
Options
(#)
Options
(#)
Exercisable Unexercisable
Price
($)
Option
Expiration
Value of
Value of
Unexercised Unexercised
In-the-Money
In-the-Money
Options at Options at
Fiscal Year
End (2)
($)
Fiscal Year
End (2)
($)
15,000
25,000
40,000
25,000
7,500
25,000
—
57,500
7,500
12,500
—
20,000
7,500
12,500
—
20,000
5,000
5,000
—
10,000
Date
Exercisable Unexercisable
$ 33.07 1/20/2019 $
51,450 $ —
$ 28.77 1/19/2021 $ 193,250 $ —
$ 244,700 $ —
61,500 $ —
$ 34.04 1/9/2018 $
$ 33.07 1/20/2019 $
25,725 $ —
$ 28.77 1/19/2021 $ 193,250 $ —
—
—
—
—
—
—
55,000 $ 26.89 5/13/2026 $ —
55,000
$ 33.07 1/20/2019 $
—
—
$ 28.77 1/19/2021 $
12,500 $ 26.89 5/13/2026 $ —
12,500
$ 33.07 1/20/2019 $
—
—
$ 28.77 1/19/2021 $
12,500 $ 26.89 5/13/2026 $ —
12,500
$ 33.07 1/20/2019 $
—
—
$ 28.77 1/19/2021 $
7,000 $ 26.89 5/13/2026 $ —
7,000
$
$ 528,550
$ 280,475 $ 528,550
25,725 $ —
96,625 $ —
$ 120,125
$ 122,350 $ 120,125
25,725 $ —
96,625 $ —
$ 120,125
$ 122,350 $ 120,125
17,150 $ —
38,650 $ —
$
55,800 $
67,270
67,270
(1) Stock options issued to employees vest in equal installments on the third, fourth and fifth anniversaries from the date
of grant (which is ten years prior to the applicable option expiration date).
(2) The amounts presented in these columns have been calculated based upon the difference between the fair market
value of $36.50 per share (the closing price of Griffin’s common stock on November 30, 2017) and the exercise
price of each stock option.
92
Non-Qualified Deferred Compensation
Griffin maintains a Deferred Compensation Plan for certain of its employees who, due to Internal Revenue
Service regulations, cannot take full advantage of the Griffin 401(k) Savings Plan. A portion of an eligible employee’s
salary may be deferred under the Deferred Compensation Plan. The investment options in the Deferred Compensation
Plan currently mirror those of the Griffin 401(k) Savings Plan. The Deferred Compensation Plan is unfunded, with
benefits to be paid from Griffin’s assets. Performance results of an employee’s balance in the Deferred Compensation
Plan are based on the returns of the mutual funds and one common collective trust fund that may be selected by the
employee as if the amounts deferred were invested in the selected mutual funds and the common collective trust fund.
Distributions from the Deferred Compensation Plan generally may occur at termination of employment, change in
control and/or at the time of qualifying hardship events. The following table presents information with respect to the
Deferred Compensation Plan for Griffin’s Named Executive Officers as of November 30, 2017:
Executive
Contributions Contributions Earnings in Balance as of
Aggregate Aggregate
Griffin
for FYE
for FYE
FYE
FYE
Name
Frederick M. Danziger . . . . . . . . . . . . . . $
Michael S. Gamzon . . . . . . . . . . . . . . . . . $
Anthony J. Galici . . . . . . . . . . . . . . . . . . $
Thomas M. Lescalleet . . . . . . . . . . . . . . . $
Scott Bosco . . . . . . . . . . . . . . . . . . . . . . . $
11/30/2017 11/30/2017 (1) 11/30/2017 11/30/2017
—
31,126
46,344
—
2,458
$
$
$
$
$
— $ 138,898 $ 1,870,027
8,022 $ 69,239 $ 412,237
2,273 $ 168,804 $ 1,095,355
— $ 23,282 $ 140,721
23 $ 18,618 $ 103,230
(1) Griffin’s contributions to the Deferred Compensation Plan are included in the “All Other Compensation” column of
the Summary Compensation Table. No earnings from the Deferred Compensation Plan are included in the “All
Other Compensation” column of the Summary Compensation Table.
Potential Payments Upon a Termination or Change in Control
As of November 30, 2017, Griffin was not a party to any employment, change in control or other agreement
with any Named Executive Officers that was expected to obligate Griffin to provide for payments at, following, or in
connection with a termination of employment, change in control or change in the Named Executive Officer’s
responsibilities. However, participants of Griffin’s Deferred Compensation Plan may elect to have their balances paid
out in lump sum or annual installments upon termination of employment or a change in control of Griffin. The deferred
compensation balance for each such Named Executive Officer, as of November 30, 2017, is set forth in the
“Non-Qualified Deferred Compensation” table above. Additionally, pursuant to the 2009 Stock Option Plan, if option
grants are assumed by a successor corporation (or a parent or subsidiary thereof) in connection with a change in control,
the vesting of such grants will be accelerated upon termination of a Named Executive Officer’s employment upon or
within twelve months following such change in control. As of November 30, 2017, the exercise price for 234,500 of the
outstanding options held by Named Executive Officers exceeded the closing market price of $36.50 per share of Griffin
common stock. The aggregate value of such options (based on the excess of the November 30, 2017 closing price of
Griffin’s common stock over the exercise price) is $1,661,745. The following table presents information regarding the
93
value of such options to each of Griffin’s Named Executive Officers following a termination of employment upon or
within twelve months following such change in control (assuming such termination occurred on November 30, 2017):
Estimated Value of
In-the-Money
Options Following
Termination Upon or
Within Twelve Months
Following a
Name
Frederick M. Danziger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Michael S. Gamzon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Anthony J. Galici . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Thomas M. Lescalleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Scott Bosco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Change In Control (1)
244,700
809,025
242,475
242,475
123,070
(1) Stock option values are calculated based on the difference between $36.50, the November 30, 2017 closing price of
Griffin’s common stock, and the option exercise price, multiplied by the total number of stock options.
Director Compensation
The following table represents information regarding the compensation paid during fiscal 2017 to members of
Griffin’s Board of Directors who are not also employees (the “Non-Employee Directors”). The compensation paid to
Messrs. Frederick M. Danziger and Michael S. Gamzon is presented above in the Summary Compensation Table and the
related explanatory notes. Messrs. Frederick M. Danziger and Michael S. Gamzon did not receive compensation related
to their activities as members of the Board of Directors.
Fees
Earned or
Paid in Cash
Option
Awards
($)
Total
($)
Name
David R. Bechtel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,500 $ 17,726 (1) $ 69,226
Edgar M. Cullman, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,000 $ 17,726 (1) $ 56,726
Thomas C. Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,000 $ 17,726 (1) $ 78,726
Jonathan P. May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000 $ 17,726 (1) $ 77,726
Albert H. Small, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,000 $ 17,726 (1) $ 69,726
($)
(1) The amount shown for Option Awards reflects the grant date fair value of options granted in fiscal 2017. For a
discussion of the assumptions and methodologies used to calculate the amounts referred to above, please see the
discussion of stock option awards contained in Part II, Item 8, “Financial Statements and Supplementary Data” of
this Form 10-K in Note 7 of the Notes to Consolidated Financial Statements.
The following table represents the number of outstanding and unexercised stock option awards held by each of
the Non-Employee Directors as of November 30, 2017:
Number of Shares
Director
David R. Bechtel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgar M. Cullman, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas C. Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jonathan P. May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Albert H. Small, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subject to
Outstanding Options
as of 11/30/17
3,607
4,755
13,992
8,761
14,565
Members of the Board of Directors who are not employees of Griffin receive $30,000 per year, $1,500 for each
board meeting they attend and $1,000 for each committee meeting they attend. A non-employee Chairman of the Board
of Directors receives an annual fee of $15,000. The Chairmen of the Audit and Compensation Committees each receive
an annual fee of $10,000 per year. The Nominating Committee Chairman receives an annual fee of $5,000 per year.
94
Audit and Compensation Committee members, excluding the Chairmen, each receive $5,000 per year for their service on
those Committees. Members of the Nominating Committee, excluding the Chairman, each receive $2,500 per year for
their service on that Committee. Annual fees are paid in quarterly installments. Upon the initial election of a
Non-Employee Director to the Board of Directors, the Non-Employee Director is granted options exercisable for shares
of common stock at an exercise price that is the fair market value of a share of common stock at the time of the grant.
The number of shares subject to options granted to Non-Employee Directors at the time of initial election to the Board of
Directors is equal to $60,000 divided by the fair market value per share of Griffin common stock at the time of grant.
Stock options granted to Non-Employee Directors upon their initial election to the Board vest immediately upon
issuance. The 2009 Stock Option Plan also provides that Non-Employee Directors annually receive options exercisable
for shares of common stock at an exercise price that is the fair market value of a share of common stock at the time of
grant. Under the 2009 Stock Option Plan, the number of shares, subject to options, granted to Non-Employee Directors
upon their reelection to the Board of Directors, is equal to $40,000 divided by the fair market value per share of Griffin
common stock at the time of grant. Stock options granted to Non-Employee Directors upon their re-election to the Board
of Directors vest on the second anniversary of the date of grant. In 2017, Griffin granted each of the Non-Employee
Directors an option exercisable for 1,314 shares of common stock upon their reelection to the Board of Directors.
Compensation Committee Interlocks and Insider Participation
During fiscal 2017, Messrs. Israel, May and Small, Jr. served as members of Griffin’s Compensation
Committee. No member of the Compensation Committee has been an officer or employee of Griffin. None of Griffin’s
executive officers have served as a director or member of the compensation committee of any entity whose executive
officers served as a director of Griffin or as a member of Griffin’s Compensation Committee.
95
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table lists the number of shares and options to purchase shares of common stock of Griffin
beneficially owned or held by: (i) each person known by Griffin to beneficially own more than 5% of the outstanding
shares of common stock; (ii) each director; (iii) the Named Executive Officers (as defined in Item 11); and (iv) all
directors and executive officers of Griffin, collectively. Unless otherwise indicated, information is provided as of
January 31, 2018.
Name and Address (1)
Cullman and Ernst Group (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgar M. Cullman, Jr. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Frederick M. Danziger (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael S. Gamzon (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David R. Bechtel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 Brookside Park
Greenwich, CT 06831
Shares
Beneficially
Owned (2)
Percent
of Total
2,363,437
884,947
308,289
119,127
3,387
46.5
17.7
6.1
2.4
*
Thomas C. Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,369
Ingleside Investors
12 East 49th Street
New York, NY 10017
Jonathan P. May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,918
116 East 95th Street
New York, NY 10128
Albert H. Small, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,722
7311 Arrowood Road
Bethesda, MD 20817
Anthony J. Galici . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41,023
Griffin Industrial Realty, Inc.
204 West Newberry Road
Bloomfield, CT 06002
Thomas M. Lescalleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,000
Griffin Industrial, LLC
204 West Newberry Road
Bloomfield, CT 06002
Scott Bosco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,000
Griffin Industrial, LLC
204 West Newberry Road
Bloomfield, CT 06002
*
*
*
*
*
*
Gabelli Funds, LLC et al (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,678,401
33.6
Gabelli Funds, LLC
One Corporate Center
Rye, NY 10580
All directors and executive officers collectively, consisting of 10 persons (5)
1,439,782
27.9
* Less than 1%
(1) Unless otherwise indicated, the address of each person named in the table is 641 Lexington Avenue, New York, NY
10022.
(2) This information reflects the definition of beneficial ownership adopted by the Securities and Exchange Commission
(the “Commission”). Beneficial ownership reflects sole investment and voting power, unless otherwise indicated in
the footnotes to this table. Where more than one person shares investment and voting power in the same shares, such
shares may be shown more than once. Such shares are reflected only once, however, in the total for all directors and
executive officers. Includes stock options granted pursuant to the 2009 Stock Option Plan, as amended, that are
exercisable within 60 days of January 31, 2018 as follows:
96
Name
Edgar M. Cullman, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Frederick M. Danziger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michael S. Gamzon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David R. Bechtel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas C. Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jonathan P. May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Albert H. Small, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anthony J. Galici . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas M. Lescalleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scott Bosco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Exercisable
Within 60 Days of
January 31, 2018
1,912
40,000
32,500
2,293
11,149
5,918
11,722
20,000
20,000
10,000
(3) Based on Schedule 13D/A filed with the Commission on April 27, 2017 on behalf of the Cullman and Ernst Group
and Griffin’s records. Included in the shares held by the Cullman and Ernst Group are the following:
Shares
Shares with
Sole Voting and Shared Voting
and Dispositive
Shares with
Dispositive
Power
Benefically
Name
Owned (c)
Cullman Jr., Edgar M. . . . . . . . . . . . . . . . . . . . . . . . . . . 884,947
Cullman, Susan R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785,121
Danziger, Lucy C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584,103
Danziger, David M. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,659
Gamzon, Rebecca D. . . . . . . . . . . . . . . . . . . . . . . . . . . . 426,283
Ernst, John L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,955
Sicher, Carolyn B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344,029
Cullman, Georgina D. . . . . . . . . . . . . . . . . . . . . . . . . . . 340,149
Cullman, Elissa F. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,449
Cullman, Samuel B. . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,193
Cullman III, Edgar M. . . . . . . . . . . . . . . . . . . . . . . . . . . 321,858
Danziger, Frederick M. . . . . . . . . . . . . . . . . . . . . . . . . . 308,289
B Bros. Realty LLC (a) . . . . . . . . . . . . . . . . . . . . . . . . . 233,792
Kirby, John J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,223
Gamzon, Michael S. . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,127
Fabrici, Carolyn S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,037
94,428
Ernst, Alexandra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Danziger, Sheena S. . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,000
45,134
Kerns, Jessica P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,548
Estate of Louise B. Cullman (b) . . . . . . . . . . . . . . . . . .
Ernst, Margot P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,777
5,176
Ernst, Matthew L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,748
42,760
85,286
59,402
10,550
7,349
21,422
9,550
14,850
13,594
11,259
103,534
233,792
4,730
69,127
—
1,748
—
1,250
39,548
—
1,650
Power
825,199
742,361
498,817
448,257
415,733
373,606
322,607
330,599
310,599
310,599
310,599
204,755
—
147,493
50,000
116,037
92,680
50,000
43,884
—
21,777
3,526
(a) Susan R. Cullman and John Ernst are managing members.
(b) Edgar M. Cullman, Jr., Susan R. Cullman and Lucy C. Danziger are executors.
The Schedule 13D/A states that there is no formal agreement governing the Cullman and Ernst Group’s holding and
voting of shares held by members of the Cullman and Ernst Group but that there is an informal understanding that
the persons and entities included in the group will hold and vote together with respect to shares owned by each of
them in each case subject to any applicable fiduciary responsibilities. None of the shares held by members of the
Cullman and Ernst Group are pledged.
(4) Griffin has received a copy of Schedule 13D/A as filed with the Commission by Gabelli Funds, LLC et al, reporting
ownership of these shares as of December 7, 2017. As reported in said Schedule 13D/A, Gabelli Funds, LLC reports
sole dispositive power with respect to 573,150 shares, GAMCO Asset Management Inc. (“GAMCO”) reports sole
97
voting power with respect to 794,059 of these shares and sole dispositive power with respect to 849,604 of these
shares and Teton Advisors, Inc. (“Teton Advisors”) reports sole voting and dispositive power with respect to
255,647 of these shares. The securities have been acquired by GGCP, Inc. (“GGCP”), and certain of its direct and
indirect subsidiaries, including GAMCO Investors, Inc. (“GBL”), on behalf of their investment advisory clients.
Mario Gabelli, as the controlling stockholder, Chief Executive Officer and a director of GGCP, Chairman and Chief
Executive Officer of GBL, and the controlling shareholder of Teton Advisors, is deemed to have beneficial
ownership of the shares owned beneficially by Gabelli Funds, LLC, GAMCO and Teton Advisors. GBL and GGCP
are deemed to have beneficial ownership of the shares beneficially owned by each of the foregoing persons other
than Mario Gabelli and the Gabelli Foundation, Inc. For the shares held by Gabelli Funds, LLC, with respect to the
45,000 shares held by the Gabelli Capital Asset Fund, the 56,000 shares held by the Gabelli Equity Trust, the
104,000 shares held by the Gabelli Asset Fund, the 63,600 shares held by the Gabelli Value 25 Fund, Inc., the
268,800 shares held by the Gabelli Small Cap Growth Fund, the 10,049 shares held by the Gabelli Equity Income
Fund, the 15,500 shares held by the Gabelli Go Anywhere Fund, and the 11,001 shares held by the Gabelli Global
Small and Mid Cap Value Trust, the proxy voting committee of each such fund has taken and exercises in its sole
discretion the entire voting power with respect to the shares held by such funds.
(5) Excluding shares held by certain charitable foundations, the officers and/or directors of which include certain
officers and directors of Griffin.
Equity Compensation Plan Information
Number of
securities to be
issued upon
exercise of
outstanding
options
(a)
Weighted
average
exercise price
of outstanding
options
(b)
Number of securities
remaining available for future
issuance under the equity
compensation plan (excluding
securities reflected in
column (a))
(c)
333,762 $
29.22
178,847
Plan Category
Equity compensation plan approved by security holders . .
Note: There are no equity compensation plans that were not approved by security holders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.
Review and Approval of Related Person Transactions
Griffin reviews any relationships and transactions in which Griffin and its directors and executive officers or
their immediate family members are participants to determine whether such persons have a direct or indirect material
interest. Griffin’s corporate staff is primarily responsible for the development and implementation of processes and
controls to obtain information from the directors and executive officers with respect to related person transactions and
for then determining, based on the facts and circumstances, whether a related person has a direct or indirect material
interest in the transaction. As required under SEC rules, transactions that are determined to be directly or indirectly
material to a related person are disclosed in Griffin’s Annual Report on Form 10-K and proxy statement.
On November 24, 2015, the Audit Committee approved a proposed transaction whereby Griffin entered into a
ten year sublease of approximately 1,920 square feet of office space for its New York City corporate headquarters from
Bloomingdale Properties, Inc. (“Bloomingdale Properties”), an entity controlled by certain members of the Cullman and
Ernst Group (see “Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters”). The sublease with Bloomingdale Properties is at market rates for such space and enables either Griffin or
Bloomingdale Properties to terminate the sublease agreement upon a change in control (as defined) of either Griffin or
Bloomingdale Properties. The sublease of office space from Bloomingdale Properties reduced the occupancy costs for
Griffin’s corporate headquarters.
Board Independence
Under Nasdaq rules, an “independent director” of a company means a person who is not an officer or employee
of the company or its subsidiaries and, in the opinion of the company’s board of directors, does not have a relationship
98
with the company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a
director. The Board has determined that Messrs. Bechtel, Israel, May and Small, Jr. qualify as independent directors
under Nasdaq rules. All of the members of the Audit, Compensation and Nominating Committees are independent
directors under the applicable Nasdaq and SEC rules.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following is a summary of the fees incurred by Griffin for professional services rendered by RSM US LLP
(“RSM US”) for fiscal 2017 and fiscal 2016:
Fiscal
2016 Fees
Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 430,781 $ 423,682
20,200
Audit-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,380
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
$ 502,041 $ 489,262
20,585
50,675
—
2017 Fees
Fiscal
Audit fees consist of fees incurred for professional services rendered for the audit of Griffin’s consolidated
financial statements and for the review of Griffin’s interim consolidated financial statements. Audit-related fees include
fees incurred for professional services rendered for the audit of the Griffin 401(k) Savings Plan by RSM US. Tax fees
consist of fees incurred for professional services performed by RSM US relating to tax compliance, tax reporting and tax
planning. There were no consulting fees paid to RSM US in fiscal 2017 or fiscal 2016.
The Audit Committee’s policy is to pre-approve all audit, audit-related and tax services to be provided by the
independent registered public accountants. During fiscal 2017, Griffin’s Audit Committee pre-approved all audit,
audit-related and tax services. The Audit Committee has considered the non-audit services provided by RSM US and
determined that the services provided were compatible with maintaining the independence of RSM US.
99
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)(1) Financial Statements of Griffin Industrial Realty, Inc. See Item 8.
PART IV
Consolidated Balance Sheets as of November 30, 2017 and November 30, 2016 . . . . . . . . . . . . .
Consolidated Statements of Operations for the Fiscal Years Ended November 30, 2017,
November 30, 2016 and November 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years Ended
November 30, 2017, November 30, 2016 and November 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Stockholders’ Equity for the Fiscal Years Ended
November 30, 2017, November 30, 2016 and November 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Fiscal Years Ended November 30, 2017,
November 30, 2016 and November 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45
46
47
48
49
50
(a)(2) Financial Statement Schedules
II—Valuation and Qualifying Accounts and Reserves
III—Real Estate and Accumulated Depreciation
(a)(3) Exhibits
100
EXHIBIT INDEX
Incorporated by Reference
Exhibit
Number
Exhibit Description
2.1 Asset Purchase Agreement, dated January 6, 2014,
effective January 8, 2014, among Monrovia
Connecticut LLC as Buyer, Monrovia Nursery Company
as Guarantor, Imperial Nurseries, Inc. as Seller and Griffin
Industrial Realty, Inc. (f/k/a Griffin Land &
Nurseries, Inc.) as Owner
Form File No.
8-K
001-12879 2.1
Exhibit
Filing
Date
1/14/14
Filed/
Furnished
Herewith
2.2 Letter Agreement, dated January 6, 2014, among Imperial
8-K
001-12879 2.2
1/14/14
Nurseries, Inc., River Bend Holdings, LLC, Monrovia
Connecticut LLC and Monrovia Nursery Company
3.1 Amended and Restated Certificate of Incorporation of
10-Q 001-12879 3.1
10/10/13
Griffin Industrial Realty, Inc. (f/k/a Griffin Land &
Nurseries, Inc.)
3.2 Certificate of Amendment of Amended and Restated
Certificate of Incorporation of Griffin Industrial
Realty, Inc. (f/k/a Griffin Land & Nurseries, Inc.)
8-K
001-12879 3.1
5/13/15
3.3 Amended and Restated By-laws of Griffin Industrial
8-K
001-12879 3.2
5/13/15
Realty, Inc.
10.2† Griffin Industrial Realty, Inc. (f/k/a Griffin Land &
10-K 001-12879 10.2
2/13/14
Nurseries, Inc.) 2009 Stock Option Plan
10.3† Form of Stock Option Agreement under Griffin Industrial
10-K 001-12879 10.3
2/13/14
Realty, Inc. (f/k/a Griffin Land & Nurseries, Inc.) 2009
Stock Option Plan
10.4 Mortgage Deed, Security Agreement, Financing Statement
and Fixture Filing with Absolute Assignment of Rents and
Leases dated September 17, 2002 between Tradeport
Development I, LLC and Farm Bureau Life Insurance
Company
10-Q 001-12879 10.21 10/11/02
10.5 Mortgage Deed and Security Agreement dated
10-K 001-12879 10.24 2/28/03
December 17, 2002 between Griffin Center
Development IV, LLC and Webster Bank, N.A.
10.6 Secured Installment Note and First Amendment of
10-Q 001-12879 10.28 7/13/04
Mortgage and Loan Documents dated April 16, 2004
among Tradeport Development I, LLC, and Griffin
Industrial Realty, Inc. (f/k/a Griffin Land &
Nurseries, Inc.) and Farm Bureau Life Insurance
Company
10.7 Mortgage Deed Security Agreement, Fixture Filing,
10-Q 001-12879 10.29 11/3/05
Financing Statement and Assignment of Leases and Rents
dated July 6, 2005 by Tradeport Development II, LLC in
favor of First Sunamerica Life Insurance Company
10.8 Promissory Note dated July 6, 2005
10.9 Guaranty Agreement as of July 6, 2005 by Griffin
Industrial Realty, Inc. (f/k/a Griffin Land &
Nurseries, Inc.) in favor of Sunamerica Life Insurance
Company
10-Q 001-12879 10.30 11/3/05
10-Q 001-12879 10.31 11/3/05
101
Exhibit
Number
Exhibit Description
10.10 Amended and Restated Mortgage Deed Security
Agreement, Fixture Filing, Financing Statement and
Assignment of Leases and Rents dated November 15,
2006 by Tradeport Development II, LLC in favor of First
Sunamerica Life Insurance Company
10.11 Amended and Restated Promissory Note dated
November 16, 2006
Incorporated by Reference
Form File No.
10-K 001-12879 10.32 2/15/07
Exhibit
Filing
Date
Filed/
Furnished
Herewith
10-K 001-12879 10.33 2/15/07
10.12 Guaranty Agreement as of November 16, 2006 by Griffin
10-K 001-12879 10.34 2/15/07
Industrial Realty, Inc. (f/k/a Griffin Land &
Nurseries, Inc.) in favor of Sunamerica Life Insurance
Company
10.13 Construction Loan and Security Agreement dated
10-Q 001-12879 10.36 10/6/10
February 6, 2009 by and between Tradeport
Development III, LLC, Griffin Industrial Realty, Inc.
(f/k/a Griffin Land & Nurseries, Inc.), and Berkshire Bank
10.14 $12,000,000 Construction Note dated February 6, 2009
10.15 Loan and Security Agreement dated July 9, 2009 between
Griffin Industrial Realty, Inc. (f/k/a Griffin Land &
Nurseries, Inc.) and People’s United Bank
10.16 $10,500,000 Promissory Note dated July 9, 2009
10.17 Mortgage and Security Agreement dated January 27, 2010
10-Q 001-12879 10.37 4/9/09
10-Q 001-12879 10.40 10/8/09
10-Q 001-12879 10.41 10/8/09
10-Q 001-12879 10.42 10/6/10
between Riverbend Crossings III Holdings, LLC and
NewAlliance Bank
10.18 $4,300,000 Promissory Note dated January 27, 2010
10.19 First Modification of Promissory Note, Mortgage Deed
10-Q 001-12879 10.43 4/8/10
10-K 001-12879 10.44 2/10/11
and Security Agreement and Other Loan Documents
between Riverbend Crossings III Holdings, LLC and New
Alliance Bank dated October 27, 2010
10.24 Second Amendment to Mortgage Deed and Security
10-Q 001-12879 10.49 7/11/13
Agreement and other Loan Documents between
Riverbend Crossings III Holdings, LLC and First Niagara
Bank dated April 1, 2013
10.25 Amended and Restated Term Note dated April 1, 2013
10.26 Revolving Line of Credit Loan Agreement with Webster
10-Q 001-12879 10.50 7/11/13
10-Q 001-12879 10.51 7/11/13
Bank, N.A. dated April 24, 2013
10.28 Mortgage and Security Agreement between Riverbend
10-Q 001-12879 10.53 10/10/13
Bethlehem Holdings I, LLC and First Niagara Bank, N.A.
effective August 28, 2013
10.29 $9,100,000 Term Note effective August 28, 2013
10.31 First Modification of Mortgage and Loan Documents
between Griffin Center Development I, LLC, Griffin
Industrial Realty, Inc. (f/k/a Griffin Land &
Nurseries, Inc.), Tradeport Development I, LLC and Farm
Bureau Life Insurance Company, dated June 6, 2014
10.32 Amended and Restated Secured Installment Note of
Griffin Center Development I, LLC to Farm Bureau Life
Insurance Company, dated June 6, 2014
102
10-Q 001-12879 10.54 10/10/13
6/9/14
8-K
001-12879 10.1
8-K
001-12879 10.2
6/9/14
Exhibit
Number
Exhibit Description
10.33 Second Modification of Mortgage and Loan Documents
Form File No.
8-K
001-12879 10.3
Exhibit
Filing
Date
6/9/14
Filed/
Furnished
Herewith
Incorporated by Reference
between Tradeport Development I, LLC, Griffin Industrial
Realty, Inc. (f/k/a Griffin Land & Nurseries, Inc.), Griffin
Center Development I, LLC and Farm Bureau Life
Insurance Company, dated June 6, 2014
10.34 Amended and Restated Secured Installment Note of
Tradeport Development I, LLC to Farm Bureau Life
Insurance Company, dated June 6, 2014
8-K
001-12879 10.4
6/9/14
10.35 Mortgage and Security Agreement between Riverbend
10-K 001-12879 10.35 2/13/15
Bethlehem Holdings I, LLC and First Niagara Bank, N.A.
effective December 31, 2014
10.36 Mortgage and Security Agreement between Riverbend
10-K 001-12879 10.36 2/13/15
Bethlehem Holdings II, LLC and First Niagara Bank,
N.A. effective December 31, 2014
10.37 $21,600,000 Term Note effective December 31, 2014
10.38 Mortgage, Assignment of Rents and Security Agreement
10-K 001-12879 10.37 2/13/15
10-Q 001-12879 10.38 10/9/15
dated July 29, 2015 between Tradeport
Development II, LLC and 40|86 Mortgage Capital, Inc.
10.39 $18,000,000 Promissory Note dated July 29, 2015
10.40 Open-End Mortgage, Assignment of Leases and Rents and
10-Q 001-12879 10.39 10/9/15
10-Q 001-12879 10.40 10/9/15
Security Agreement by Riverbend Hanover Properties
II, LLC as Mortgagor to and for the benefit of Webster
Bank, N.A. as Mortgagee dated August 28, 2015 and
effective as of September 1, 2015
10.41 $14,100,000 Promissory Note dated September 1, 2015
10.42† Letter Agreement by and between Griffin Industrial
10-Q 001-12879 10.41 10/9/15
10-K 001-12879 10.41 2/12/16
Realty, Inc. and John J. Kirby, Jr. dated July 22, 2015
10.43† Letter Agreement by and between Griffin Industrial
10-Q 001-12879 10.42 4/8/16
Realty, Inc. and David M. Danziger dated March 8, 2016
10.44† Letter Agreement by and between Griffin Industrial
10-Q 001-12879 10.43 7/8/16
Realty, Inc. and Winston J. Churchill, Jr. dated May 16,
2016
10.45 $14,350,000 Promissory Note dated April 26, 2016
10.46 Loan and Security Agreement between Griffin Industrial
Realty, Inc. and People’s United Bank, N.A. dated April
26, 2016
10-Q 001-12879 10.44 7/8/16
10-Q 001-12879 10.45 7/8/16
10.48 Second Amendment to Revolving Line of Credit Loan
10-Q 001-12879 10.47 10/7/16
Agreement by and between Griffin Industrial Realty, Inc.
and Webster Bank, N.A. dated July 22, 2016
10.49 Amended and Restated Revolving Line of Credit Note
with Webster Bank, N.A. dated July 22, 2016
10.50 $26,724,948.03 Promissory Note dated November 17,
2016
10-Q 001-12879 10.48 10/7/16
10-K 001-12879 10.49 2/10/17
103
Incorporated by Reference
Exhibit
Number
Exhibit Description
10.51 Open-End Mortgage, Assignment of Leases and Rents and
Form File No.
10-K 001-12879 10.50 2/10/17
Exhibit
Filing
Date
Security Agreement by Riverbend Hanover Properties
I, LLC as Mortgagor to and for the benefit of Webster
Bank, N.A. as Mortgagee dated November 14, 2016 and
effective as of November 17, 2016
10.52 Open-End Mortgage, Assignment of Leases and Rents and
10-K 001-12879 10.51 2/10/17
Security Agreement by Riverbend Hanover Properties
II, LLC as Mortgagor to and for the benefit of Webster
Bank, N.A. as Mortgagee dated November 14, 2016 and
effective as of November 17, 2016
10.53† Griffin Industrial Realty, Inc. Deferred Compensation and
10-Q 001-12879 10.52 4/7/17
Supplemental Retirement Plan as amended and restated
effective January 1, 2017
10.54 Loan and Security Agreement between Tradeport
10-Q 001-12879 10.53 4/7/17
Development V, LLC and People’s United Bank N.A.
dated March 15, 2017
10.55 $12,000,000 Promissory Note dated March 15, 2017
10.56 $10,600,000 Term Note dated July 14, 2017
10.57 Amended and Restated Loan and Security Agreement
10-Q 001-12879 10.54 4/7/17
10-Q 001-12879 10.56 10/10/17
10-Q 001-12879 10.57 10/10/17
dated July 14, 2017 between Tradeport Development III,
LLC Griffin Industrial Realty, Inc. and Berkshire Bank
10.58 $12,150,000 Promissory Note dated August 30, 2017
10.59 Deed of Trust, Assignment of Rents and Security
10-Q 001-12879 10.58 10/10/17
10-Q 001-12879 10.59 10/10/17
Agreement dated August 30, 2017 from Riverbend
Concord Properties I, LLC for the benefit of 40|86
Mortgage Capital, Inc.
10.60 Fourth Modification Agreement between Griffin Center
Development IV, LLC, Griffin Center Development V,
LLC, Griffin Industrial Realty, Inc. and Webster Bank,
N.A. dated September 22, 2017
10.61 Amended and Restated Open-End Mortgage Deed and
Security Agreement dated January 30, 2018 between
Tradeport Development V, LLC and People’s United
Bank, N.A.
21 Subsidiaries of Griffin Industrial Realty, Inc.
23.1 Consent of Independent Registered Public Accounting
Firm
31.1 Certifications of Chief Executive Officer Pursuant to
Rules 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934, as amended
31.2 Certifications of Chief Financial Officer Pursuant to
Rules 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934, as amended
32.1 Certifications of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350
32.2 Certifications of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350
104
Filed/
Furnished
Herewith
*
*
*
*
*
*
**
**
Exhibit Description
Exhibit
Number
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Calculation Linkbase Document
101.LAB XBRL Taxonomy Label Linkbase Document
101.PRE XBRL Taxonomy Presentation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase
Document
Incorporated by Reference
Form File No.
Exhibit
Filing
Date
Filed/
Furnished
Herewith
*
*
*
*
*
*
† A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to
Item 15(a)(3) of Form 10-K.
* Filed herewith.
** Furnished herewith.
ITEM 16. FORM 10-K SUMMARY.
N/A
105
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Signatures
Date: February 8, 2018
Date: February 8, 2018
GRIFFIN INDUSTRIAL REALTY, INC.
BY:
BY:
/s/ MICHAEL S. GAMZON
Michael S. Gamzon
President and Chief Executive Officer
/s/ ANTHONY J. GALICI
Anthony J. Galici
Vice President, Chief Financial Officer and
Secretary, Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date
Name
Title
February 8, 2018
/s/ DAVID R. BECHTEL
David R. Bechtel
February 8, 2018
/s/ EDGAR M. CULLMAN, JR.
Edgar M. Cullman, Jr.
Director
Director
February 8, 2018
/s/ FREDERICK M. DANZIGER
Frederick M. Danziger
Executive Chairman of the Board of Directors
February 8, 2018
/s/ ANTHONY J. GALICI
Anthony J. Galici
Vice President, Chief Financial Officer and Secretary,
Principal Accounting Officer
February 8, 2018
/s/ MICHAEL S. GAMZON
Michael S. Gamzon
Director and President and Chief Executive Officer
February 8, 2018
February 8, 2018
/s/ THOMAS C. ISRAEL
Thomas C. Israel
/s/ JONATHAN P. MAY
Jonathan P. May
February 8, 2018
/s/ ALBERT H. SMALL, JR.
Albert H. Small, Jr.
Director
Director
Director
106
Corporate Directors and Officers
Directors
David R. Bechtel
Edgar M. Cullman, Jr.
Frederick M. Danziger
Executive Chairman
Michael S. Gamzon
President and Chief Executive Officer
Thomas C. Israel
Jonathan P. May
Albert H. Small, Jr.
Corporate Data
Executive Headquarters
Griffin Industrial Realty, Inc.
641 Lexington Avenue, 26th Floor
New York, NY 10022
Griffin Industrial, LLC
204 West Newberry Road
Bloomfield, CT 06002
www.griffinindustrial.com
Independent Registered Public Accountants
RSM US LLP
157 Church Street
New Haven, CT 06510
Officers
Frederick M. Danziger
Executive Chairman
Michael S. Gamzon
President and Chief Executive Officer
Anthony J. Galici
Vice President, Chief Financial Officer and Secretary
Special Counsel
Latham & Watkins LLP
885 Third Avenue
New York, NY 10022
Registrar and Transfer Agent
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
www.astfinancial.com (800) 937-5449
Stock Listing
Griffin Industrial Realty, Inc. common stock
trades on the Nasdaq Stock Market under
the symbol GRIF.
Annual Meeting
The Annual Meeting of Stockholders of Griffin
Industrial Realty, Inc. will be held at 2:00 p.m.
on May 15, 2018 at the DoubleTree by Hilton Hotel,
569 Lexington Avenue, New York, NY 10022.
G R I F
Griffin Industrial Realty, Inc.
641 Lexington Avenue - 26th Floor
New York, NY 10022
(212) 218 - 7910
www.griffinindustrial.com