2018 ANNUAL REPORT
Griffin Industrial Realty, Inc.
641 Lexington Avenue - 26th Floor
New York, NY 10022
(212) 218 - 7910
www.griffinindustrial.com
Corporate Directors and Officers
Directors
David R. Bechtel
Edgar M. Cullman, Jr.
Frederick M. Danziger
Executive Chairman
Michael S. Gamzon
Thomas C. Israel
Jonathan P. May
Albert H. Small, Jr.
President and Chief Executive Officer
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
RSM US LLP
157 Church Street
New Haven, CT 06510
Independent Registered Public Accountants
Stock Listing
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
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
Front Cover
Shown here are two recently completed industrial/warehouse buildings in New England Tradeport.
220 Tradeport Drive (bottom) is the approximately 234,000 square foot build-to-suit facility that was
completed and placed in service in the fourth quarter of fiscal 2018 and 330 Stone Road (top) is the
approximately 137,000 square foot facility built on speculation that was completed and placed in service
at the end of fiscal 2017. Both buildings are fully leased.
Back Cover
Shown here are 220 Tradeport Drive (continuation from the front), a portion of an approximately
1,000,000 square foot warehouse (middle) built and owned by Dollar Tree, Inc. on land acquired from
foot
Griffin and 100 International Drive (top), Griffin’s approximately 304,000 square
industrial/warehouse building under a long-term lease to The Tire Rack, Inc.
GRIFFIN INDUSTRIAL REALTY, INC.
641 Lexington Avenue
26th Floor
New York, NY 10022
April 5, 2019
To Our Stockholders:
In fiscal 2018 we continued the significant growth of our business with Griffin’s property portfolio and
net operating income from leasing (‘‘Leasing NOI’’)1 each increasing approximately 10%. Notably, we added
to, or commenced development of, industrial/warehouse buildings in all three of our current geographic
markets, Hartford, Connecticut, the Lehigh Valley of Pennsylvania and the greater Charlotte, North Carolina
area. In Connecticut we completed a 234,000 square foot build-to-suit building (‘‘220 Tradeport’’) with a
twelve and a half year lease term for an investment-grade industrial tenant. In the Lehigh Valley, one of the
leading industrial/warehouse markets in the country, we built, on speculation, a 134,000 square foot building
(‘‘6975 Ambassador’’). And in the Charlotte, North Carolina area, we commenced construction, on
speculation, of a two-building 283,000 square foot development (‘‘160 and 180 International’’) on land
located across the street from the 277,000 square foot industrial/warehouse building (‘‘215 International’’) we
acquired in fiscal 2017. We now own properties totaling 4,078,000 square feet with industrial/warehouse
buildings comprising 89% of our portfolio.
We continued to maintain a high occupancy level in our industrial/warehouse portfolio with 95% of
Griffin’s 3,645,000 square feet leased as of February 28, 2019. We benefitted from the lease-up of previously
vacant space, including the 137,000 square foot speculative building (‘‘330 Stone’’) located in New England
Tradeport (‘‘NE Tradeport’’) which was completed just prior to the end of fiscal 2017, and the addition of
220 Tradeport. At the end of the fiscal 2019 first quarter (the ‘‘2019 first quarter’’), our only vacancies of
industrial/warehouse space were the recently completed 6975 Ambassador and a 48,000 square foot space in
NE Tradeport. Our office/flex portfolio, which comprises only 11% of our total square footage, has a current
occupancy of 74%, a slight improvement from fiscal 2017. We do not intend to grow our office/flex portfolio
but plan to make the necessary investments to best position these properties in a competitive market.
Griffin’s high occupancy levels, the addition of new buildings and the benefit from a full year of rental
revenue from the fully-leased 215 International, helped drive the increase in our Leasing NOI from
$21.1 million in fiscal 2017 to $23.2 million in fiscal 2018.
We continue to monetize our land holdings and reinvest those proceeds into our real estate business. In
fiscal 2018, Griffin completed the sale of 49 acres of undeveloped land in Southwick, Massachusetts for
$0.9 million to a local farmer. In the 2019 first quarter, Griffin sold the development rights of a 116 acre
agricultural parcel in East Windsor, Connecticut and, subsequent to the end of the 2019 first quarter, closed
on the sale of this land for combined cash proceeds of $1.6 million. Additionally, Griffin has an agreement
to sell a 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. The purchaser has exercised its option to close, which is
expected to occur before the end of Griffin’s fiscal 2019 second quarter. There is no guarantee that the
foregoing transaction will be completed under its current terms, or at all.
In fiscal 2018, Griffin invested $28.6 million into its real estate assets, the major portions of which were
$20.7 million in new building construction (principally 220 Tradeport and 6975 Ambassador), $4.6 million in
tenant and building improvements related to leasing (principally 220 Tradeport and 330 Stone) and
$2.7 million for the purchase of undeveloped land. In addition to using cash on hand, we funded these
investments with new borrowings of $19.8 million in fiscal 2018, principally reflecting a new construction to
permanent mortgage loan on 220 Tradeport and the refinancing, with additional proceeds, of a mortgage
loan on three NE Tradeport buildings. As of February 28, 2019, Griffin’s weighted average interest rate on
its debt outstanding was 4.31% and only $7.6 million (out of a total of $146.4 million) of the Company’s debt
matures before the end of fiscal 2024. We believe that our available capital, which included cash and
short-term investments of approximately $25.6 million as of our fiscal 2018 year end, a $15 million revolving
1 Leasing NOI, which Griffin defines as rental revenue ($32.8 million in fiscal 2018 and $29.9 million in fiscal 2017) less
operating expenses of rental properties ($9.5 million in fiscal 2018 and $8.9 million in fiscal 2017) is not a financial
measure in conformity with U.S. generally accepted accounting principles (‘‘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. In prior periods, Griffin referred to this metric as ‘‘profit from leasing activities.’’ Griffin changed from
profit from leasing activities to Leasing NOI to be more in line with terminology used by other real estate companies.
credit line and our $30 million ‘‘at-the-market’’ equity offering program (the ‘‘ATM’’), positions Griffin for
future growth. Given our current liquidity, we do not expect to obtain proceeds from the ATM in the near
term.
Over the past five fiscal years, Griffin’s property portfolio has grown 66%, or 1.6 million square feet,
and Leasing NOI has grown 85%, or $10.6 million. With our occupancy level at 95% as of the end of fiscal
2018, we expect future growth in Leasing NOI mostly will come from increasing our industrial/warehouse
portfolio, with rent increases and higher occupancy levels expected to be lesser factors. In fiscal 2019 we
expect to continue to make significant investments in our real estate business, including the completion 160
and 180 International which we anticipate delivering during our fiscal 2019 third quarter. We also have
agreements to purchase 45 acres of undeveloped land in the Charlotte area and 14 acres of undeveloped
land in the Lehigh Valley, which combined are expected to support approximately 650,000 square feet of
potential industrial/warehouse development. Both of these potential acquisitions and subsequent
developments remain subject to several conditions and there is no guarantee that they will be completed
under their current terms, or at all. Although we believe the impact of these developments on our Leasing
NOI likely will be minimal in fiscal 2019, we expect them to contribute positively to our operating results in
subsequent years as we complete and lease-up the projects over time.
We are optimistic that we will have opportunities to invest our capital in the future in our three existing
markets as well as evaluate opportunities in select other markets in the Northeast, Middle Atlantic and
Southeast regions. We note, however, that the current market for acquisitions in the industrial real estate
sector remains competitive, with sales prices and valuations at historically high levels and construction costs
increasing, which may impact returns on investment. As such, we expect to continue to be disciplined in our
approach and pursue only those developments and acquisitions that we believe have strategic merit and
would generate an acceptable return on capital over the long-term.
Before closing, we would like to note that Tom Israel will be stepping down from our Board of
Directors following our annual meeting this year. Tom has served as a trusted advisor on our board since
2000 while also chairing our Audit Committee and serving as a member of our Compensation and
Nominating Committees. We want to thank Tom for his insights, thought-provoking questions and
contributions to our strategy and growth over these past nineteen years.
Griffin’s employees continue to be critical to our success and we greatly appreciate their efforts. We are
excited by our progress in fiscal 2018 and look forward to the continued growth of our real estate business.
15APR200403350245
Frederick M. Danziger
Executive Chairman
6APR201214532889
Michael S. Gamzon
President and Chief Executive Officer
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. The words
‘‘believes,’’ ‘‘anticipates,’’ ‘‘plans,’’ ‘‘expects,’’ ‘‘intend,’’ ‘‘may,’’ and similar expressions are intended to identify forward-looking
statements. These forward-looking statements include, but are not limited to, statements about Griffin’s opportunities and
position for growth, plans with regard to increasing Griffin’s industrial/warehouse portfolio, plans regarding Griffin’s office/flex
portfolio, conditions in the real estate industry, the timing of completion of construction projects, expansion and property
acquisitions and the impact on Leasing NOI, completion of land sales, Griffin’s financial position, intent regarding the ATM
facility, anticipated future liquidity 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, 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 are described in Griffin’s Securities
and Exchange Commission filings, including the ‘‘Business,’’ ‘‘Risk Factors,’’ ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ and ‘‘Forward-Looking Statements’’ sections in Griffin’s Annual Report on
Form 10-K/A for the fiscal year ended November 30, 2018. 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.
GRIFFIN INDUSTRIAL REALTY, INC.
641 Lexington Avenue
26th Floor
New York, NY 10022
April 5, 2019
To Our Stockholders:
This year will be one of transition in leadership for Griffin. After heading our Company since the
spin-off from Culbro Corp. in 1997, Frederick ‘‘Mike’’ Danziger will retire as an employee of Griffin
effective May 31 of this year. Mike set the vision for Griffin to become a leading regional industrial/
warehouse real estate company and executed on that strategy through the establishment of our speculative
building program in New England Tradeport, monetizing non-core land holdings to provide capital to
support our development efforts, and the disposition of non-core businesses. Under Mike’s leadership,
Griffin earned a reputation for building and maintaining high quality properties as we grew our square
footage from less than one-half million square feet in 1997 to over four million today. All of us at Griffin
will miss the energy and attention Mike brought to the office each day.
Fortunately, we will continue to benefit from Mike’s intelligence, vision and deep knowledge of Griffin
as he is expected to continue to serve as a member of our Board of Directors, in the role of non-executive
Chairman.
We owe Mike a deep gratitude for establishing the platform to enable Griffin’s past and future success.
Sincerely,
6APR201214532889
Michael S. Gamzon
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2018
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 No
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 No
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 No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $111,373,000 based on the
closing sales price on The Nasdaq Stock Market LLC on May 31, 2018, 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, 2019, 5,065,173 shares of common stock were outstanding.
EXPLANATORY NOTE
Griffin Industrial Realty, Inc. ("Griffin") filed its Annual Report on Form 10-K for the year ended November
30, 2018 (the "Original Filing") with the U.S. Securities and Exchange Commission (the "SEC") on February 12,
2019. Griffin is filing this amendment (this “Amendment”) to the Original Filing due to an inadvertent omission of the
auditor’s tenure in the Report of Independent Registered Public Accounting Firm appearing in Item 8 of the Original
Filing (the “Audit Report”). Accordingly, this Amendment amends the Original Filing to include the auditor’s tenure in
the Audit Report.
In addition, pursuant to the rules of the SEC, the exhibit list included in Item 15 of Part IV of the Original Filing
has been amended to reference new certifications from Griffin’s principal executive officer and principal financial
officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The new certifications of Griffin’s
principal executive officer and principal financial officer are attached as exhibits to this Amendment. The exhibit list has
also been amended to reference a new consent of the independent registered public accounting firm attached as Exhibit
23.1.
Except as described above, this Amendment does not amend or update any other information contained in the
Original Filing. This Amendment is presented as of the filing date of the Original Filing and does not reflect events
occurring after that date. Griffin has included a complete copy of the Original Filing, as amended per above, in this
filing.
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 a 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 and a construction loan; 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; risks
related to issuance or sales of common stock; risks related to volatility of common stock; risks of future offerings that are
senior to common stock, or preferred stock issuances; 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, 2018, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ITEM 1A RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 1B UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 2
ITEM 3
ITEM 4
ITEM 5
ITEM 6
ITEM 7
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . . . . . 26
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . . . . . 42
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Consolidated Statements of Comprehensive Income (Loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ITEM 9A CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ITEM 9B OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . 76
ITEM 11
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ITEM 14
PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
PART IV
ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
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.
Griffin’s buildings are located in the north submarket of Hartford, Connecticut, the Lehigh Valley of
Pennsylvania and the greater Charlotte, North Carolina area. 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)
and 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.
As of November 30, 2018, Griffin owned thirty - seven buildings comprising approximately 4,078,000 square
feet that was 93% leased. Approximately 89% of Griffin’s square footage is industrial/warehouse space, with the balance
being office/flex space. As of November 30, 2018, approximately 95% of Griffin’s industrial/warehouse space was
leased and approximately 72% of Griffin’s office/flex space was leased. As stated in “Item 2. Properties” below, Griffin
generally uses nonrecourse mortgage loans and occasionally uses construction loans to finance some of its real estate
development activities, and as of November 30, 2018, approximately $147.2 million was outstanding under all such
loans. In fiscal 2018, profit from leasing activities (which Griffin defines as rental revenue less operating expenses of
rental properties)1 was approximately $23.2 million, while debt service (interest and scheduled principal payments) on
nonrecourse mortgage loans and a construction loan was approximately $9.8 million.
In fiscal 2018, Griffin completed and placed in service two industrial/warehouse buildings, one of which was an
approximately 234,000 square foot build-to-suit building (“220 Tradeport”) 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 a build-to-suit building, Griffin entered into a twelve and a half year lease for
220 Tradeport prior to the start of construction. The other building completed in fiscal 2018 was an approximately
134,000 square foot building (“6975 Ambassador”), built on speculation, in the Lehigh Valley. 6975 Ambassador is not
yet leased. In fiscal 2018, Griffin also leased approximately 70,000 square feet of previously vacant NE Tradeport
industrial/warehouse space, including the remaining 63,000 square feet in 330 Stone Road (“330 Stone”) an
approximately 137,000 square foot industrial/warehouse building in NE Tradeport that was placed in service and
partially leased just prior to the end of fiscal 2017. Griffin also extended leases aggregating approximately
408,000 square feet in fiscal 2018, including a full building lease of 4275 Fritch Drive, an approximately 228,000 square
foot industrial/warehouse building in the Lehigh Valley. Also in fiscal 2018, Griffin completed a lease of approximately
11,000 square feet of previously vacant office/flex space. Leases for approximately 55,000 square feet (mostly
industrial/warehouse space) expired in fiscal 2018 and were not re-leased. The net effect of Griffin’s leasing transactions
in fiscal 2018 was an increase of approximately 256,000 square feet of industrial/warehouse space under lease as of
November 30, 2018, as compared to November 30, 2017, and an increase of approximately 4,000 square feet of
office/flex space under lease as of November 30, 2018, as compared to November 30, 2017.
In fiscal 2017, Griffin entered the Charlotte, North Carolina market with the purchase of 215 International Drive
(“215 International”), an approximately 277,000 square foot industrial/warehouse building in Concord, North Carolina.
Subsequent to completing the purchase, Griffin leased the approximately 73,000 square feet in that building that was
vacant at the time of the acquisition. Also in fiscal 2017, Griffin completed construction, on speculation, of 330 Stone
___________________
1Profit from leasing activities is not a financial measure in conformity with accounting principles generally accepted in the United
States of America (“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
and leased approximately 74,000 square feet of that building to a tenant that relocated from approximately 39,000 square
feet in another of Griffin’s NE Tradeport industrial/warehouse buildings. The balance of 330 Stone was leased in fiscal
2018. Griffin was able to backfill the approximately 39,000 square feet that was vacated with a new tenant that took
occupancy in the first quarter of fiscal 2018. In fiscal 2017, Griffin also leased approximately 104,000 square feet of
previously vacant NE Tradeport industrial/warehouse space, including a ten and a 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. 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 renew 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.
In fiscal 2016, Griffin completed and placed in service an approximately 252,000 square foot industrial building
(“5210 Jaindl”) in the Lehigh Valley, thus completing the development of an approximately 50 acre parcel of
undeveloped land acquired in December 2013. As of November 30, 2016, 5210 Jaindl was fully leased. 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. 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,
including a lease for an entire approximately 57,000 square foot NE Tradeport industrial/warehouse building that was
subsequently re-leased during fiscal 2016. 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.
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, 2018 or leasing space in buildings expected to be
completed in 2019. 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 2018, Griffin completed a land sale of approximately 49 acres of undeveloped land in Southwick,
Massachusetts (the “2018 Southwick Land Sale”) for approximately $0.9 million. The proceeds from the 2018
Southwick Land Sale were placed in escrow at closing and subsequently used in the acquisition of an approximately 22
acre parcel of undeveloped land in Concord, North Carolina (the ‘Concord Land”) 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 1031 Like-
Kind Exchange enabled Griffin to defer the gain on the 2018 Southwick Land Sale for income tax purposes. In fiscal
2018, Griffin commenced construction of two warehouse/industrial buildings totaling approximately 283,000 square feet
on the Concord Land. Additionally, Griffin also completed one smaller land sale in fiscal 2018 for approximately $0.1
million.
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 1031 Like-Kind
Exchange. In addition to the 2017 Phoenix Crossing Land Sale, Griffin also sold approximately 76 acres of undeveloped
land in Southwick, Massachusetts (the “2017 Southwick Land Sale”) for approximately $2.1 million. The proceeds from
5
the 2017 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 fiscal 2018,
Griffin constructed 6975 Ambassador on the Lehigh Valley land acquired.
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 2013 Phoenix Crossing Land Sale.
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. Such sale transactions
may take place either before or after obtaining development approvals and building basic infrastructure.
Griffin’s development of its land is affected by regulatory and other constraints. Subdivision and commercial or
residential development of land may also be affected by the potential adoption of initiatives meant to limit or concentrate
growth. Development 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.
Portions of Griffin’s landholdings in Connecticut are zoned for residential and office uses. The weakness in these
markets has adversely affected Griffin, and may continue to do so in the future, by potentially lowering selling prices for
land intended for such uses or delaying sales or development of such land.
Griffin maintains a corporate website at www.griffinindustrial.com. Griffin’s Annual Report on Form 10 - K
(including audited financial statements), 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 at
www.griffinindustrial.com/investors or through the SEC website at http://www.sec.gov. Griffin will provide electronic
or paper copies of its foregoing filings free of charge upon request. Griffin was incorporated in 1970.
6
Industrial/Warehouse Properties
Connecticut
A summary of Griffin’s Connecticut industrial/warehouse square footage at the end of each of the past three
fiscal years and leases in Griffin’s Connecticut industrial/warehouse buildings scheduled to expire during the next three
fiscal years are as follows:
November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . .
Square footage of leases expiring . . . . . . . . . . . . . .
Percentage of total space at November 30, 2018 . .
Number of tenants with leases expiring . . . . . . . . . .
Annual rental revenue (including tenant
Square
Footage
Owned
1,681,000
1,817,000
2,051,000
Square
Footage
Leased
1,564,000
1,748,000
2,004,000
Percentage
Leased
93 %
96 %
98 %
2019
46,000
2020
97,000
2021
225,000
1 %
2
2 %
3
6 %
6
reimbursements) of expiring leases . . . . . . . . . . . . $ 334,000
$ 784,000
$ 1,812,000
Annual rental revenue of expiring leases as a
percentage of Griffin’s total fiscal 2018 rental
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 %
2 %
6 %
Griffin’s total portfolio of approximately 2,051,000 square feet of industrial/warehouse space in Connecticut
was 98% leased as of November 30, 2018. A significant portion of Griffin’s industrial development in Connecticut is in
NE Tradeport, where Griffin has built and currently owns fifteen industrial/warehouse buildings aggregating
approximately 1,837,000 square feet. Griffin owns three industrial/warehouse buildings in Connecticut that are not
located in NE Tradeport, including a 165,000 square foot industrial building (“1985 Blue Hills”) in Windsor,
Connecticut, that is being used principally as a data center and call center. Under the terms of the full building lease of
1985 Blue Hills, which runs through March 31, 2024 with several options to renew, the tenant has the option to purchase
the building from March 1, 2021 through May 1, 2021 at a purchase price that is the greater of $11.5 million or fair
market value as determined under the terms of the lease.
In fiscal 2018, Griffin leased approximately 331,000 square feet in NE Tradeport, including the full building
lease of approximately 234,000 square feet in 220 Tradeport and approximately 63,000 square feet in 330 Stone.
Approximately 27,000 square feet of the fiscal 2018 leasing replaced existing leases that expired and were not renewed.
Also in fiscal 2018, Griffin renewed several leases aggregating approximately 180,000 square feet, including a full
building lease for approximately 127,000 square feet at 759 Rainbow Road. The rental rates for leases in NE Tradeport
that were renewed in fiscal 2018 were, on average, essentially unchanged from the rental rates of the expiring leases.
Management believes that the rental rates on the two NE Tradeport leases aggregating approximately 46,000 square feet
that are scheduled to expire in fiscal 2019 are approximately 10% below market rates for similar space.
The Q4 2018 CBRE|New England Marketview Report (“Q4 2018 CBRE|New England Report”) from CBRE
Group, Inc. (“CBRE”), a national real estate services company, stated that the vacancy rate in the greater Hartford
industrial market decreased to 7.2% at the end of 2018 from 8.8% at the end of 2017, and that net absorption in the
greater Hartford industrial market in 2018 was approximately 1.2 million square feet. The Q4 2018 CBRE|New England
Report also stated that the vacancy rate in the north submarket of Hartford, where Griffin’s properties are located,
decreased to 5.4% at the end of 2018 from 6.3% at the end of 2017, with net absorption of approximately 0.3 million
square feet in 2018. The decrease in the Hartford industrial market vacancy rate in 2018 continued the downward trend
from 2014, when the vacancy rate in the Hartford industrial market was 12.3%.
In NE Tradeport, Griffin holds entitlements to potentially develop an additional approximately 440,000 square
feet, consisting of one approved building site on approximately 34 acres and approved additions to two of its existing
buildings. Griffin owns an additional 99 acres of undeveloped land within NE Tradeport, 60 acres of which are in
Windsor and the abutting 39 acres of which are in East Granby. Full approvals for the development of this remaining
7
land for industrial use are not in place, and the East Granby land would require a zone change for industrial development.
Parts of such acreage may not be developable. Griffin believes that additional infrastructure improvements, which may
be significant, may be required to obtain approvals to develop portions of this land, particularly the land in East Granby.
Griffin expects to continue to direct much of its real estate efforts in Connecticut on the construction and leasing of
industrial/warehouse facilities in NE Tradeport and other suitably located land currently owned. As of November 30,
2018, Griffin also owns approximately 76 acres of undeveloped land in Phoenix Crossing that is zoned for industrial and
commercial development.
As of November 30, 2018, approximately $86.4 million was invested (net book value) by Griffin in its
Connecticut industrial/warehouse buildings, approximately $2.8 million was invested (net book value) by Griffin in the
undeveloped NE Tradeport land and approximately $1.5 million was invested in the undeveloped Phoenix Crossing land.
As of November 30, 2018, sixteen of Griffin’s Connecticut industrial/warehouse buildings were mortgaged for an
aggregate of approximately $82.6 million.
Lehigh Valley, Pennsylvania
A summary of Griffin’s Lehigh Valley industrial/warehouse square footage 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 the next
three fiscal years are as follows:
November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . .
Square
Footage
Owned
1,183,000
1,183,000
1,317,000
Square
Footage
Leased
1,183,000
1,183,000
1,183,000
Percentage
Leased
100 %
100 %
90 %
Square footage of leases expiring . . . . . . . . . . . . . .
Percentage of total space at November 30, 2018 . .
Number of tenants with leases expiring . . . . . . . . . .
Annual rental revenue (including tenant
2019
—
— %
—
2020
201,000
5 %
1
2021
609,000
15 %
3
reimbursements) of expiring leases . . . . . . . . . . . . $
— $ 1,356,000 $ 4,577,000
Annual rental revenue of expiring leases as a
percentage of Griffin’s total fiscal 2018 rental
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— %
4 %
14 %
Since Griffin entered the Lehigh Valley market in fiscal 2010, Griffin has purchased a fully leased
approximately 120,000 square foot industrial building, acquired approximately 114 acres of undeveloped land and built,
on speculation, five industrial/warehouse buildings aggregating approximately 1,197,000 square feet on the land
acquired. As of November 30, 2018, Griffin owned six industrial/warehouse buildings in the Lehigh Valley aggregating
approximately 1,317,000 square feet.
In fiscal 2017, Griffin acquired an approximately 14 acre parcel of undeveloped land in the Lehigh Valley, and
in the fourth quarter of fiscal 2018 completed 6975 Ambassador, an approximately 134,000 square foot
industrial/warehouse building, built on speculation on that land parcel. 6975 Ambassador is not yet leased, however,
Griffin’s other five buildings in Lehigh Valley are fully leased. In fiscal 2018, Griffin renewed a full building lease for
one of its Lehigh Valley industrial/warehouse buildings at a rental rate 12% higher than the rental rate in effect at the
time of the renewal. Approximately $72.9 million was invested (net book value) in Griffin’s Lehigh Valley buildings as
of November 30, 2018. All Lehigh Valley industrial/warehouse buildings, except 6975 Ambassador, are mortgaged
under three separate nonrecourse mortgage loans for a total of approximately $48.4 million as of November 30, 2018.
The vacancy rate of Lehigh Valley industrial/warehouse properties, in the counties where Griffin’s Lehigh
Valley properties are located, as reported in CBRE’s Q4 2018 Marketview Lehigh Valley PA Industrial Report (the “Q4
2018 CBRE Lehigh Valley Report”) was 4.8% at the end of 2018, with a net absorption of approximately 5.5 million
square feet in 2018.
8
On January 11, 2018, Griffin entered into an agreement to purchase an approximately 14 acre parcel of
undeveloped land in the Lehigh Valley (the “Lehigh Valley Land”). Subsequently, the agreement was amended to reduce
the purchase price from $3.6 million in cash to $3.1 million in cash and extend the due diligence and entitlement periods.
If the transaction closes, Griffin plans to construct an approximately 156,000 square foot industrial/warehouse building
on the Lehigh Valley Land. The closing of this purchase, anticipated to take place in fiscal 2019, is subject to several
conditions, including 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.
Charlotte, North Carolina
A summary of Griffin’s Charlotte, North Carolina industrial/warehouse square footage at the end of each of the
past two fiscal years and leases in Griffin’s Charlotte, North Carolina industrial/warehouse building scheduled to expire
during the next three fiscal years are as follows:
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . .
Square
Footage
Owned
277,000
277,000
Square
Footage
Leased
277,000
277,000
Square footage of leases expiring . . . . . . . . . . . . . . .
Percentage of total space at November 30, 2018 . . .
Number of tenants with leases expiring . . . . . . . . . . .
Annual rental revenue (including tenant
2019
2020
—
— %
—
—
— %
—
Percentage
Leased
100 %
100 %
2021
108,000
3 %
1
reimbursements) of expiring leases . . . . . . . . . . . . . $
—
$
—
$ 591,000
Annual rental revenue of expiring leases as a
percentage of Griffin’s total fiscal 2018 rental
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— %
— %
2 %
In fiscal 2017, Griffin completed its first acquisition of property in the Charlotte, North Carolina area when it
acquired 215 International, which was constructed in 2015 and 74% leased when it was acquired. Subsequent to the
closing, one of the tenants in 215 International leased the remaining approximately 73,000 square feet that had been
vacant at the time the building was acquired. As of November 30, 2018, approximately $17.4 million was invested (net
book value) in 215 International, and this building was mortgaged under a nonrecourse mortgage loan for approximately
$11.9 million. CBRE’s Q4 2018 Marketview Charlotte Industrial Report stated a vacancy rate of 5.3% for warehouse
space at the end of 2018 and absorption of 4.8 million square feet of warehouse space in 2018.
In the fiscal 2018 third quarter, Griffin purchased the Concord Land for approximately $2.7 million in cash,
including acquisition expenses. Approximately $0.8 million of the purchase price of the Concord Land was paid using
the proceeds from the 2018 Southwick Land Sale to complete a 1031 Like-Kind Exchange. In the fiscal 2018 fourth
quarter, Griffin started site work and construction, on speculation, on two industrial/warehouse buildings aggregating
approximately 283,000 square feet on the Concord Land. Griffin expects to spend approximately $15.0 million for the
site work and construction of those two buildings, with expected completion of the buildings in the second half of fiscal
2019.
On June 26, 2018, Griffin entered into an agreement for the purchase of approximately 36 acres of undeveloped
land in Mecklenburg County, North Carolina in the greater Charlotte area (the “Mecklenburg Land”) for approximately
$4.7 million in cash. On December 5, 2018, Griffin entered into an agreement for the purchase of approximately 9 acres
of undeveloped land (the “Additional Mecklenburg Land”) that is adjacent to the Mecklenburg Land for approximately
$0.9 million in cash. If acquired, the Additional Mecklenburg Land is expected to be combined with the Mecklenburg
Land to enable Griffin to construct more industrial/warehouse space than could be constructed on the Mecklenburg Land
alone. Closings on the purchases of the Mecklenburg Land and the Additional Mecklenburg Land are subject to several
conditions, including obtaining all governmental approvals for Griffin’s development plans. Griffin would only complete
the purchase of the Additional Mecklenburg Land if the Mecklenburg Land is acquired. The amount of
industrial/warehouse space to be developed on the Mecklenburg Land and, if also acquired, the Additional Mecklenburg
Land, will be based upon findings during the approvals process. The closings on the purchases of the Mecklenburg Land
9
and the Additional Mecklenburg Land are not anticipated to take place until the third quarter of fiscal 2019. There is no
guarantee that the purchases of the Mecklenburg Land and the Additional Mecklenburg Land will be completed under
their 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 regions and selected markets targeted by Griffin. 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 additional build-to-suit facilities on its
undeveloped land if lease terms are favorable.
Office/Flex Properties
A summary of Griffin’s office/flex square footage at the end of each of the past three fiscal years and leases in
Griffin’s office/flex buildings scheduled to expire during the next three fiscal years are as follows:
November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . .
Square footage of leases expiring . . . . . . . . . . . . . .
Percentage of total space at November 30, 2018 . .
Number of tenants with leases expiring . . . . . . . . . .
Annual rental revenue (including tenant
Square
Footage
Owned
433,000
433,000
433,000
Square
Footage
Leased
319,000
308,000
312,000
Percentage
Leased
74 %
71 %
72 %
2019
55,000
2020
70,000
2021
34,000
1 %
3
2 %
6
1 %
3
reimbursements) of expiring leases . . . . . . . . . . . . $ 895,000
$ 1,220,000
$ 639,000
Annual rental revenue of expiring leases as a
percentage of Griffin’s total fiscal 2018 rental
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 %
4 %
2 %
All of Griffin’s office/flex properties are located in Griffin Center in Windsor and Bloomfield, Connecticut and
Griffin Center South in Bloomfield, which are in the north submarket of Hartford. The Hartford office/flex market
remained weak in 2018, as evidenced by vacancy rates at the end of 2018, as stated in the Q4 2018 CBRE|New England
Report, of 17.2% for the overall Hartford market and 33.6% in north submarket of Hartford.
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. Griffin’s office/flex
square footage was approximately 72% leased as of November 30, 2018.
As of November 30, 2018, Griffin’s total office/flex space of approximately 433,000 square feet comprised
approximately 11% of Griffin’s total square footage. Griffin expects 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.
In fiscal 2018, Griffin entered into a five year lease for approximately 11,000 square feet at 320 West Newberry
Road in Griffin Center South that was previously vacant. Additionally, Griffin renewed a lease for approximately 8,000
square feet of office/flex space in fiscal 2018 at the same rate as the expiring lease and the lease for the approximately
7,000 square foot restaurant building expired. Management believes that the rental rates on the leases for office/flex
space scheduled to expire in fiscal 2019 are approximately 15% higher than the market rates for similar space.
10
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, 2018, approximately
$17.8 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 $4.3 million as of November 30, 2018, and Griffin’s single
story office building in Griffin Center and the eight single-story office/flex buildings and an 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, 2018.
Residential Developments
Simsbury, Connecticut
Several years ago, Griffin filed plans for Meadowood, a proposed residential community in 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 items, 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, 2018, 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.
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 six additional lots. As of November 30, 2018, Griffin held nineteen Stratton Farms
residential lots. The book value for Griffin’s Stratton Farms was approximately $1.0 million at November 30, 2018.
Other
Concurrent with Griffin’s sale in fiscal 2014 of its landscape nursery business, Imperial Nurseries, Inc.
(“Imperial”), Griffin and the buyer, 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. The Imperial Lease grants Monrovia options to extend the term for up to an additional fifteen years and 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. After the expiration of that lease, Griffin entered into a new three year lease of the
Florida Farm with another grower that started July 1, 2016. On December 18, 2017, the tenant leasing the Florida Farm
filed for protection under Chapter 11 of the U.S. Bankruptcy Code and subsequently rejected the Florida Farm Lease
effective September 15, 2018. The lease of the Florida Farm had a rental rate of $0.5 million per year at the time it was
terminated. On September 28, 2018, Griffin and the tenant entered into a Stipulated Order whereby Griffin agreed to
allow the tenant to remain on the Florida Farm through October 31, 2018 at the then current rental rate under the Florida
Farm Lease. Griffin received all rent due under the Florida Farm Lease and the Stipulated Order. The Florida Farm was
not leased as of November 30, 2018. Griffin is currently marketing the Florida Farm for sale or lease.
In fiscal 2018, Griffin leased approximately 427 acres of undeveloped land in Connecticut and Massachusetts to
local farmers. Approximately 560 acres and 650 acres were leased to local farmers in fiscal 2017 and fiscal 2016,
respectively. The revenue generated from the leasing of farmland is not material to Griffin’s total revenue.
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On January 25, 2016, Griffin entered into an Option Purchase Agreement (the “Simsbury Option Agreement”),
subsequently amended on January 22, 2019. Under the terms of the Simsbury Option Agreement, as amended, Griffin
granted the buyer an exclusive option to purchase approximately 280 acres of undeveloped land in Simsbury,
Connecticut for approximately $7.7 million. Through November 30, 2018, the buyer paid approximately $0.3 million of
option fees to extend its option period through January 25, 2019. In fiscal 2018, the buyer received approval from
Connecticut’s regulatory authority for the buyer’s planned use of the land, which is to generate solar electricity.
Subsequent litigation challenging that approval was settled during fiscal 2018, thereby allowing the buyer to use the land
to be purchased as planned. On January 24, 2019, the buyer exercised its option to purchase the land under the Simsbury
Option Agreement, as amended. As per the terms of the Simsbury Option Agreement, as amended, closing on the land
sale contemplated by the Simsbury Option Agreement, as amended, is required to take place within 90 days from the
date the buyer exercised its option to purchase the land. There is no guarantee that the sale of land as contemplated under
the Simsbury Option Agreement, as amended, 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 option to purchase approximately 288 acres of undeveloped land in East Granby
and Windsor, Connecticut for approximately $7.8 million. The buyer intended to use the land to generate solar
electricity. The buyer’s option expired on May 5, 2018 and was not extended, thus terminating the EGW Option
Agreement. Accordingly, the buyer forfeited the option fees (approximately $50,000) paid through that date.
Employees
As of November 30, 2018, Griffin had 34 employees, including 33 full - time employees. 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 in the areas where Griffin’s buildings 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 and state 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
intended for residential use, Griffin’s ability to develop such property for its intended purposes would be materially
affected.
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Griffin periodically reviews its properties for the purpose of evaluating such properties’ compliance with
applicable federal and state environmental laws. In connection with the sale of Imperial, Griffin 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, Griffin is in discussions with the Connecticut Department of Energy and Environmental
Protection (“DEEP”) regarding 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 on any of its properties. 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.
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.
89% 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 the greater Charlotte, North
Carolina area, which represented 61%, 32% and 7% of Griffin’s total portfolio by square footage, respectively, as of
November 30, 2018. 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.
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:
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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:
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.
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 such liabilities, which could adversely affect its cash flow
and financial position.
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Weakness in Griffin’s office/flex portfolio could negatively impact its business.
Griffin’s office/flex portfolio, which comprises 11% of its total square footage and was 72% occupied as of
November 30, 2018, 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 33% as of December 31, 2018, according to the Q4 2018
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
potential risk of functional obsolescence of Griffin’s properties over time.
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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 and construction loans could have a material adverse effect on
its financial condition.
As of November 30, 2018, Griffin had indebtedness under nonrecourse mortgage loans and a construction loan
of approximately $147.2 million, collateralized by approximately 89% 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 92% of Griffin’s nonrecourse mortgage loans as of November 30, 2018 require a lump-sum or
“balloon” payment at maturity. Griffin’s ability to make a balloon payment at maturity may be uncertain and may
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depend upon its ability to obtain additional financing. At the time the balloon payment is due, Griffin may or may not be
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 have a material adverse effect on 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;
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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;
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 2018, 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
could affect Griffin’s 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.
Additionally, government international trade policies, including implementation of or changes in tariffs, could impact the
cost of products used in Griffin’s facilities. 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.
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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
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
in 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
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all. Any financing or refinancing issues could have a material adverse effect on Griffin. Market turmoil and the
tightening of credit could 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.
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 IT 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
20
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
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 44.9% of the outstanding common stock of Griffin as of November 30,
2018. 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.
In December 2017, the United States 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 on
its operations of certain aspects of the TCJA that have not yet become effective for Griffin. The impact of those aspects
of the TCJA that are not yet effective for Griffin could be material to Griffin’s results of operations in future periods.
Risks Related to Griffin’s Common Stock
Issuances or sales of Griffin’s common stock or the perception that such issuances or sales might occur
could adversely affect the per share trading price of Griffin’s common stock.
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. Griffin’s board of directors can authorize the issuance of additional
securities without stockholder approval. Furthermore, on May 10, 2018, Griffin filed a shelf registration statement on
21
Form S-3 with the SEC that allows it to offer up to $30 million of securities from time to time in one or more public
offerings of its common stock.
The issuance or sale of Griffin common stock, including under Griffin’s shelf registration statement, in
connection with future property, portfolio or business acquisitions, to repay indebtedness or for general corporate
purposes, or the availability of shares for resale in the open market, could have an adverse effect on the per share trading
price of Griffin’s common stock and would be dilutive to existing stockholders.
The exercise of any options or the issuance of any common stock granted to certain directors, executive officers
and other employees under Griffin’s 2009 Stock Option Plan or other equity incentive plan could also have an adverse
effect on the per share trading price of its common stock and be dilutive to existing stockholders. The existence of such
options could also adversely affect the terms upon which Griffin may be able to obtain additional capital through the sale
of equity securities.
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
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;
• prevailing interest rates;
•
• changes in market valuations of similar companies;
• adverse market reaction to any additional or future issuance of debt or equity Griffin
the market for similar securities;
incurs in the future;
• additions or departures of key management personnel;
• actions by institutional stockholders;
• speculation in the press or investment community;
•
•
the realization of any of the other risk factors presented in this annual report;
the extent of investor interest in Griffin’s securities or attractiveness of Griffin’s equity
securities in comparison to other equity securities, including securities issued by other
real estate-based companies;
• Griffin’s underlying asset value;
•
• changes in tax laws;
•
• general market and economic conditions.
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.
Future offerings of debt securities, which would be senior to Griffin common stock upon liquidation, and/or
preferred stock, which may be senior to Griffin common stock for purposes of dividend distributions or upon
liquidation, may adversely affect the per share trading price of its common stock.
In the future, Griffin may attempt to increase its capital resources by making offerings of debt or additional
equity securities, including medium-term notes, senior or subordinated notes and classes or series of its preferred stock
22
under the Shelf Registration Statement. Upon liquidation, holders of Griffin debt securities and shares of Griffin
preferred stock, and lenders with respect to other borrowings will be entitled to receive its available assets prior to
distribution to the holders of its common stock. Additionally, any convertible or exchangeable securities that Griffin
issues in the future may have rights, preferences and privileges more favorable than those of its common stock and may
result in dilution to owners of its common stock. Holders of Griffin common stock are not entitled to preemptive rights
or other protections against dilution. Any shares of Griffin preferred stock that are issued in the future under the Shelf
Registration Statement or otherwise, could have a preference on liquidating distributions or a preference on dividend
payments that could limit Griffin’s ability pay dividends to the holders of its common stock. Because Griffin’s decision
to issue securities in any future offering under the Shelf Registration Statement or otherwise will depend on market
conditions and other factors beyond its control, Griffin cannot predict or estimate the amount, timing or nature of its any
such future offerings. Thus, Griffin’s stockholders bear the risk of any such future offerings reducing the per share
trading price of its common stock and diluting their interest in Griffin.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
23
ITEM 2. PROPERTIES.
Land Holdings
As of November 30, 2018, Griffin’s land holdings were as follows:
Location
Connecticut
Land Area (in acres)
Developed Undeveloped
Bloomfield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East Granby . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
East Windsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granby . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Simsbury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Suffield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Windsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
15
—
—
—
—
274
151
525 (a)
116
333 (a)
774 (b)
33 (c)
535 (d)
Florida
Quincy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,066 (e)
Massachusetts
Southwick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
297
North Carolina
Concord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania
Lower Nazareth Township . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hanover Township . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Breinigsville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Upper Macungie Township . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
51
49
17
14
22 (f)
—
—
—
—
Note: The development of some of Griffin’s undeveloped land may be limited by difficulties in obtaining entitlements,
government regulations such as zoning, traffic considerations, potential environmental issues, initiatives intended
to limit or concentrate residential growth, other restrictions to development imposed by governmental agencies and
the nature of the land itself (i.e. the presence of wetlands or topography of the land).
(a) 347 acres in East Granby and 323 acres in Granby comprise the Connecticut Farm that is leased to Monrovia under
the Imperial Lease.
(b) Includes 280 acres under the Simsbury Option Agreement, as amended, and 277 acres for the site of the approved
Meadowood residential development.
(c) Includes 19 acres for the Stratton Farms residential development.
(d) Includes 94 acres of undeveloped land in NE Tradeport and 61 acres of undeveloped land in Phoenix Crossing.
(e) Reflects the Florida Farm.
(f) Two industrial/warehouse buildings aggregating approximately 283,000 square feet are currently under construction
on the 22 acre parcel in Concord.
24
Developed Properties
As of November 30, 2018, Griffin owned thirty - seven buildings, comprised of twenty-five 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* . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
220 Tradeport 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.
234,000 sq. ft.
165,000 sq. ft.
148,500 sq. ft.
138,400 sq. ft.
136,900 sq. ft.
136,900 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* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6975 Ambassador Drive, Allentown, PA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
871 Nestle Way, Breinigsville, PA* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
302,600 sq. ft.
280,000 sq. ft.
252,000 sq. ft.
228,000 sq. ft.
134,000 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, Griffin’s construction loan or Griffin’s
revolving line of credit as of November 30, 2018.
25
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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Griffin’s common stock is traded on The Nasdaq Stock Market LLC under the symbol GRIF. As of January 31,
2019, there were 146 holders of record of Griffin common stock, 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 $33.63 per share.
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.
Dividend Policy
26
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected statement of operations data for fiscal years 2014 through 2018 and
balance sheet data as of the end of each fiscal year. The selected statement of operations data for fiscal 2016, fiscal 2017
and fiscal 2018 and the selected balance sheet data for fiscal 2017 and fiscal 2018 are derived from the audited
consolidated financial statements included in Item 8 of this Annual Report. The selected statement of operations data for
fiscal 2014 and fiscal 2015 and the balance sheet data for fiscal 2014, fiscal 2015 and fiscal 2016 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.
2018
2017
2016
(dollars in thousands, except per share data)
2015
2014
Statement of Operations Data:
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,800 $ 43,884 $ 30,851 $ 28,088 $ 24,219
6,729
Depreciation and amortization expense . . . . . . . . . . . . . . . . . .
1,809
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,248)
(Loss) income from continuing operations . . . . . . . . . . . . . . .
144
Income from discontinued operations (1) . . . . . . . . . . . . . . . .
(1,104)
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.24)
Basic (loss) income per share from continuing operations . . .
0.03
Basic income per share from discontinued operations (1) . . .
(0.21)
Basic net (loss) income per share . . . . . . . . . . . . . . . . . . . . . . .
(0.24)
Diluted (loss) income per share from continuing operations .
0.03
Diluted income per share from discontinued operations (1) . . . . . . .
Diluted net (loss) income per share . . . . . . . . . . . . . . . . . . . . .
(0.21)
Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263,469 249,037 223,623 208,050 185,690
69,481
Mortgage and construction loans, net of debt issuance costs . 145,052 129,203 109,697
95,879
90,803
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.20
0.30
Cash dividends declared per common share . . . . . . . . . . . . . .
10,064
12,622
4,627
—
4,627
0.92
—
0.92
0.92
—
0.92
11,404
4,971
(1,653)
—
(1,653)
(0.33)
—
(0.33)
(0.33)
—
(0.33)
7,668
4,314
425
—
425
0.08
—
0.08
0.08
—
0.08
8,797
5,627
576
—
576
0.11
—
0.11
0.11
—
0.11
89,185
94,809
0.30
94,828
0.45
93,053
0.40
(1) Fiscal year 2014 includes the results from the growing operations of the landscape nursery business, which was sold
on January 8, 2014.
27
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.
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.
28
Summary
In the fiscal year ended November 30, 2018 (“fiscal 2018”), Griffin incurred a net loss of approximately
$1.7 million as compared to net income of approximately $4.6 million in the fiscal year ended November 30, 2017
(“fiscal 2017”). The net loss in fiscal 2018, as compared to the net income in fiscal 2017, principally reflected: (a) a
decrease of approximately $7.7 million in operating income in fiscal 2018 as compared to fiscal 2017; (b) an increase of
approximately $0.6 million in interest expense in fiscal 2018 as compared to fiscal 2017; and (c) a gain of approximately
$0.3 million in fiscal 2017 from the sale of Griffin’s holdings of common stock of Centaur Media, plc (“Centaur
Media”); partially offset by (d) a decrease of approximately $2.2 million in the income tax provision in fiscal 2018 as
compared to fiscal 2017.
The lower operating income in fiscal 2018, as compared to fiscal 2017, reflected: (a) an approximately
$9.3 million decrease in gain from property sales; and (b) an approximately $1.3 million increase in depreciation and
amortization expense in fiscal 2018 as compared to fiscal 2017; partially offset by (c) an approximately $2.2 million
increase in profit from leasing activities2 (which Griffin defines as rental revenue less operating expenses of rental
properties); and (d) an approximately $0.8 million decrease in general and administrative expenses in fiscal 2018 as
compared to fiscal 2017. The lower gain from property sales in fiscal 2018, as compared to fiscal 2017, principally
reflected a gain of approximately $8.0 million in fiscal 2017 on the sale of approximately 67 acres of undeveloped land
in Phoenix Crossing (the “2017 Phoenix Crossing Land Sale”). The higher depreciation and amortization expense in
fiscal 2018, as compared to fiscal 2017, principally reflected depreciation and amortization related to:
(a) 215 International Drive (“215 International”), an approximately 277,000 square foot industrial/warehouse building
that was acquired in the fiscal 2017 third quarter and is Griffin’s first property in the Charlotte, North Carolina area;
(b) 330 Stone Road (“330 Stone”), an approximately 137,000 square foot industrial/warehouse building that was
completed and placed in service just prior to the end of fiscal 2017 in New England Tradeport (“NE Tradeport”),
Griffin’s industrial park located in Windsor and East Granby, Connecticut; and (c) tenant improvements and lease
commissions related to new leases in the latter part of fiscal 2017 and fiscal 2018.
The increase in profit from leasing activities to approximately $23.2 million in fiscal 2018, from approximately
$21.1 million in fiscal 2017, principally reflected an approximately $2.8 million increase in rental revenue in fiscal 2018
as a result of more space under lease in fiscal 2018 than fiscal 2017, partially offset by an increase of approximately
$0.7 million in operating expenses of rental properties, due principally to 215 International and 330 Stone being in
service for the entire year in fiscal 2018. The lower general and administrative expenses in fiscal 2018, as compared to
fiscal 2017, principally reflected a decrease of approximately $0.5 million of expenses related to Griffin’s non-qualified
deferred compensation plan in fiscal 2018 and an expense of approximately $0.3 million in fiscal 2017 for the write-off
of costs related to a land purchase that was not completed. The higher interest expense in fiscal 2018, as compared to
fiscal 2017, principally reflected the higher amount of debt outstanding in fiscal 2018 as compared to fiscal 2017.
The lower income tax provision in fiscal 2018, as compared to fiscal 2017, reflected pretax income in fiscal
2017, as compared to a pretax loss in fiscal 2018, partially offset by approximately $1.0 million in the fiscal 2018
income tax provision for the re-measurement of Griffin’s deferred tax assets and liabilities from the reduction in the U.S.
federal corporate statutory tax rate from 35% to 21% under the Tax Cuts and Jobs Act (“TCJA”) that became effective
for Griffin in the fiscal 2018 first quarter. As Griffin had net deferred tax assets when the TCJA became effective for
Griffin, the re-measurement of deferred tax assets and liabilities resulted in the charge that is included in the fiscal 2018
income tax provision.
___________________
2Profit from leasing activities is not a financial measure in conformity with accounting principles generally accepted in the United
States of America (“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.
29
Results of Operations
Fiscal 2018 Compared to Fiscal 2017
Total revenue decreased from approximately $43.9 million in fiscal 2017 to approximately $33.8 million in
fiscal 2018, reflecting a decrease of approximately $12.9 million in revenue from property sales partially offset by an
increase of approximately $2.8 million in rental revenue.
Rental revenue increased to approximately $32.8 million in fiscal 2018 from approximately $29.9 million in
fiscal 2017. The approximately $2.8 million increase in rental revenue in fiscal 2018 over fiscal 2017 was principally due
to: (a) approximately $1.0 million of rental revenue from two newly constructed buildings added to Griffin’s portfolio,
330 Stone and 220 Tradeport Drive (“220 Tradeport”), an approximately 234,000 square foot build-to-suit
industrial/warehouse building in NE Tradeport that was completed and fully leased in the fiscal 2018 fourth quarter;
(b) an increase of approximately $0.8 million of rental revenue from 215 International as a result of owning that building
for the entire year in fiscal 2018 versus a partial year in fiscal 2017; (c) approximately $1.8 million of rental revenue
from leasing previously vacant space; and (d) an increase in rental revenue of approximately $0.2 million from all other
properties; partially offset by (e) approximately $1.0 million of rental revenue from leases that expired.
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, 2018 . . . . . . . . . . . . . . . . . . .
As of November 30, 2017 . . . . . . . . . . . . . . . . . . .
Total
Square
Footage
4,078,000
3,710,000
Square
Footage
Leased
3,777,000
3,515,000
Percentage
Leased
93%
95%
The approximately 368,000 square foot increase in Griffin’s real estate portfolio from November 30, 2017 to
November 30, 2018 was due to the completion and placing into service in the fiscal 2018 fourth quarter of 220 Tradeport
and 6975 Ambassador Drive (“6975 Ambassador”), an approximately 134,000 square foot industrial/warehouse
building, built on speculation, in the Lehigh Valley of Pennsylvania. 6975 Ambassador is not yet leased.
The approximately 262,000 square foot net increase in space leased as of November 30, 2018, as compared to
November 30, 2017, reflected: (a) an increase of approximately 234,000 square feet from the completion of and lease
commencement at 220 Tradeport; (b) an increase of approximately 63,000 square feet from leasing the remaining vacant
space at 330 Stone, resulting in that building, which was built on speculation, becoming fully leased; and (c) leasing
approximately 47,000 square feet of previously vacant space (mostly industrial/warehouse space); partially offset by
(d) a reduction of approximately 82,000 square feet from lease expirations, including approximately 48,000 square feet
in a NE Tradeport industrial/warehouse building as a result of a lease amendment (the “Lease Amendment”) with a
tenant that had filed for protection under Chapter 11 of the U.S. Bankruptcy Code whereby the tenant reduced its space
under lease from approximately 100,000 square feet to approximately 52,000 square feet. In fiscal 2018, Griffin renewed
several leases aggregating approximately 415,000 square feet (mostly industrial/warehouse space), including a three year
renewal of a full building lease of an approximately 228,000 square foot building in the Lehigh Valley scheduled to
expire on September 30, 2018, at a rental rate 12% higher than the rental rate in effect at the time of the lease renewal
and a three year renewal of a full building lease of an approximately 127,000 square foot building in NE Tradeport that
was scheduled to expire on February 28, 2019.
As of November 30, 2018, Griffin’s approximately 3,645,000 square feet of industrial/warehouse space, which
comprised approximately 89% of Griffin’s total square footage, was 95% leased, with the only significant vacancies
being 6975 Ambassador and the approximately 48,000 square feet in NE Tradeport that was vacated as a result of the
Lease Amendment. Griffin’s office/flex buildings, aggregating approximately 433,000 square feet (11% of Griffin’s total
square footage) are located in the Hartford, Connecticut area, and were approximately 72% leased as of November 30,
2018.
All of Griffin’s industrial/warehouse buildings and office/flex buildings in Connecticut are in the north
submarket of Hartford. The Q4 2018 CBRE|New England Marketview Report (“Q4 2018 CBRE|New England Report”)
30
from CBRE Group, Inc. (“CBRE”), a national real estate services company, stated that the vacancy rate in the greater
Hartford industrial market decreased to 7.2% at the end of 2018 from 8.8% at the end of 2017, and that net absorption in
the greater Hartford industrial market in 2018 was approximately 1.2 million square feet. The Q4 2018 CBRE|New
England Report also stated that the vacancy rate in the north submarket of Hartford, where a portion of Griffin’s
properties are located, decreased to 5.4% at the end of 2018 from 6.3% at the end of 2017, with net absorption of
approximately 0.3 million square feet in 2018. The decrease in the Hartford industrial market vacancy rate in 2018
continued the downward trend from 2014, when the vacancy rate in the Hartford industrial market was 12.3%. The
Hartford office/flex market remained weak in 2018, as evidenced by vacancy rates at the end of 2018, as stated in the Q4
2018 CBRE|New England Report, of 17.2% for the overall Hartford market and 33.6% in north submarket of Hartford.
The strong growth and active leasing market for industrial/warehouse space that the Lehigh Valley experienced
in recent years continued in 2018. The vacancy rate of Lehigh Valley industrial/warehouse properties, in the counties
where Griffin’s Lehigh Valley properties are located, as reported in CBRE’s Q4 2018 Marketview Lehigh Valley PA
Industrial Report, was 4.8% at the end of 2018, with a net absorption of approximately 5.5 million square feet in 2018.
The Charlotte, North Carolina industrial real estate market remained strong in 2018. CBRE’s Q4 2018 Marketview
Charlotte Industrial Report stated a vacancy rate of 5.3% for warehouse space at the end of 2018 and absorption of
4.8 million square feet of warehouse space in 2018. 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, 2018 or
leasing space in buildings expected to be completed in 2019.
Revenue from property sales of approximately $1.0 million in fiscal 2018 reflected approximately $0.8 million
from the sale of approximately 49 acres of undeveloped land in Southwick, Massachusetts (the “2018 Southwick Land
Sale”), approximately $0.1 million from the sale of a residential lot at Stratton Farms, Griffin’s residential subdivision in
Suffield, Connecticut, and approximately $0.1 million from a buyer’s forfeiture of a deposit on a potential land sale that
was not completed. The aggregated cost related to the 2018 Southwick Land Sale, the Stratton Farms residential lot sale
and the deposit forfeiture was approximately $0.1 million, resulting in a total pretax gain of approximately $0.9 million
from property sales in fiscal 2018.
Revenue from property sales of approximately $14.0 million in fiscal 2017 reflected: (a) approximately
$10.3 million from the 2017 Phoenix Crossing Land Sale; (b) approximately $2.1 million from the sale of approximately
76 acres of undeveloped land in Southwick, Massachusetts (the “2017 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. The costs related to the 2017 Phoenix Crossing Land Sale, the 2017 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, $1.9 million and
$0.1 million, respectively. Property sales occur periodically and year to year changes in revenue from property sales may
not be indicative of any trends in Griffin’s real estate business.
Operating expenses of rental properties increased to approximately $9.5 million in fiscal 2018 from
approximately $8.9 million in fiscal 2017. The approximately $0.6 million increase in operating expenses of rental
properties in fiscal 2018, as compared to fiscal 2017, principally reflected approximately $0.2 million of expenses at
330 Stone (placed in service just prior to the end of fiscal 2017), a total of approximately $0.2 million of expenses at
220 Tradeport and 6975 Ambassador (both were placed in service in the fiscal 2018 fourth quarter), an increase of
approximately $0.1 million of expenses at 215 International (acquired in the fiscal 2017 third quarter) and an increase of
approximately $0.1 million of expenses across all other properties.
Depreciation and amortization expense increased to approximately $11.4 million in fiscal 2018 from
approximately $10.1 million in fiscal 2017. The approximately $1.3 million increase in depreciation and amortization
expense in fiscal 2018, as compared to fiscal 2017, principally reflected: (a) an approximately $0.4 million increase from
a full year of depreciation and amortization expense at 215 International in fiscal 2018 versus a partial year in fiscal
2017; (b) approximately $0.4 million of depreciation and amortization expense at 330 Stone; (c) approximately
$0.2 million of depreciation and amortization expense related to 220 Tradeport and 6975 Ambassador; and
(d) approximately $0.3 million of depreciation and amortization expense on tenant improvements and lease commissions
related to new leases in the latter part of fiscal 2017 and fiscal 2018.
31
Griffin’s general and administrative expenses decreased to approximately $7.7 million in fiscal 2018 from
approximately $8.6 million in fiscal 2017. The approximately $0.8 million decrease in general and administrative
expenses in fiscal 2018, as compared to fiscal 2017, principally reflected approximately $0.5 million of lower expenses
related to Griffin’s non-qualified deferred compensation plan, a decrease of approximately $0.2 million of incentive
compensation expense and approximately $0.3 million of expense incurred in fiscal 2017 for the write-off of
expenditures incurred for a potential purchase of undeveloped land in the Lehigh Valley that was not completed, partially
offset by an increase of approximately $0.2 million for all other general and administrative expenses. The lower expense
related to Griffin’s non-qualified deferred compensation plan reflected the effect of lower stock market performance on
participant balances in fiscal 2018, as compared to fiscal 2017, which resulted in a smaller increase in the non-qualified
deferred compensation plan liability in fiscal 2018 as compared to fiscal 2017.
Griffin’s interest expense increased to approximately $6.3 million in fiscal 2018 from approximately
$5.7 million in fiscal 2017. The approximately $0.6 million increase in interest expense in fiscal 2018, as compared to
fiscal 2017, principally reflected interest expense of approximately $0.8 million on the higher amount of outstanding
debt in fiscal 2018, partially offset by an increase of approximately $0.2 million of interest capitalized in fiscal 2018 as
compared to fiscal 2017.
Griffin’s income tax provision was approximately $0.5 million in fiscal 2018 as compared to approximately
$2.7 million in fiscal 2017. The income tax provision in fiscal 2018 included approximately $1.0 million for the re-
measurement of Griffin’s deferred tax assets and liabilities as a result of the reduction in the U.S. federal corporate
statutory tax rate from 35% to 21% under the TCJA. As Griffin had net deferred tax assets at the time the TCJA became
effective for Griffin, the re-measurement of deferred tax assets and liabilities resulted in the charge included in the fiscal
2018 income tax provision. Partially offsetting the charge for the re-measurement of deferred tax assets and liabilities
were income tax benefits of approximately $0.3 million on the approximately $1.1 million pretax loss in fiscal 2018 and
approximately $0.2 million related to the exercise of stock options in fiscal 2018.
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 Blvd. (“5210 Jaindl”), an approximately 252,000 square
foot industrial/warehouse building in the Lehigh Valley that 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 in the fiscal 2017 third quarter;
partially offset by (d) a decrease of approximately $1.0 million from leases that expired.
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 the acquisition of 215 International and the completion of construction and placing
into service of 330 Stone just prior to the end of fiscal 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%
32
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.
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 2017 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. 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, $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 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. 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 the end
of fiscal 2017, 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. 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 “2016 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; 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; (b) approximately $0.5 million related to 215 International; and (c) an increase of approximately
$0.2 million across 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
33
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.
In fiscal 2017, Griffin sold its remaining holdings of the common stock of 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%.
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 $8.4 million in fiscal 2018 as compared to
approximately $9.4 million in fiscal 2017. The approximately $1.0 million decrease in net cash provided by operating
activities in fiscal 2018, as compared to fiscal 2017, principally reflected a decrease in cash of approximately
$3.4 million from changes in assets and liabilities substantially offset by an increase in cash of approximately
$2.4 million from results of operations as adjusted for gains on property sales and noncash expenses in fiscal 2018, as
compared to fiscal 2017. The increase in cash provided by results of operations as adjusted for gains on property sales
and noncash expenses principally reflected the approximately $2.2 million increase in profit from leasing activities in
fiscal 2018, as compared to fiscal 2017.
The approximately $3.4 million decrease in cash from changes in assets and liabilities in fiscal 2018, as
compared to fiscal 2017, principally reflected: (a) a decrease in deferred revenue of approximately $1.2 million in fiscal
2018 as compared to an increase of approximately $2.4 million in fiscal 2017; (b) an increase in other liabilities of
approximately $0.2 million in fiscal 2018 as compared to an increase of approximately $1.1 million in fiscal 2017; and
(c) a decrease in accounts payable and accrued liabilities of approximately $0.3 million in fiscal 2018 as compared to an
increase of approximately $0.3 million in fiscal 2017; partially offset by (d) a decrease in other assets of approximately
$0.3 million in fiscal 2018 as compared to an increase of approximately $2.1 million in fiscal 2017. The unfavorable
change in deferred revenue in fiscal 2018, as compared to fiscal 2017, principally reflected less cash received in fiscal
2018 for tenant and building improvements that will be recognized as rental revenue over the tenants’ respective lease
terms. The less favorable change in other liabilities in fiscal 2018, as compared to fiscal 2017, principally reflected a
smaller increase of Griffin’s non-qualified deferred compensation plan liability, reflected through lower general and
34
administrative expenses, as a result of the effect of lower stock market performance on participant balances in fiscal
2018. The unfavorable change in accounts payable and accrued liabilities in fiscal 2018, as compared to fiscal 2017,
principally reflected the timing of payments. The lower increase in other assets in fiscal 2018, as compared to fiscal
2017, principally reflected a decrease in amounts due from tenants.
In fiscal 2017, net cash provided by operating activities increased to approximately $9.4 million from
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 results of operations as adjusted for gains on property sales and noncash
expenses in fiscal 2017, as compared to fiscal 2016. The increase in net income as adjusted for gains on property sales
and noncash expenses reflected the approximately $2.8 million increase in profit from leasing activities in fiscal 2017, as
compared to fiscal 2016, 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 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, as compared to
fiscal 2016, 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,
principally due to timing of payments received from tenants for additional tenant and building improvements related to
new leases.
Net cash used in investing activities was approximately $45.3 million in fiscal 2018, as compared to
approximately $19.9 million in fiscal 2017 and approximately $16.6 million in fiscal 2016. The net cash used in
investing activities in fiscal 2018 reflected: (a) cash payments of approximately $28.6 million for additions to real estate
assets; (b) net cash of $17.0 million used for short-term investments; and (c) cash payments of approximately
$0.8 million for deferred leasing costs and other uses; partially offset by (d) cash proceeds of approximately $1.0 million
from property sales; and (e) approximately $0.1 million of cash proceeds from a fiscal 2017 property sale returned from
escrow.
The approximately $28.6 million of cash payments for additions to real estate assets in fiscal 2018 reflected the
following:
New building construction (including site work) . . . . . . . . . . . . . . . . . . . . . . . . . $ 20.7 million
Tenant and building improvements related to leasing . . . . . . . . . . . . . . . . . . . . . $ 4.6 million
Purchase of undeveloped land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.7 million
Development costs and infrastructure improvements . . . . . . . . . . . . . . . . . . . . . . $ 0.6 million
Cash payments for new building construction (including site work) in fiscal 2018 included approximately
$12.8 million for the construction of 220 Tradeport and approximately $7.7 million for the construction, on speculation,
of 6975 Ambassador. Griffin completed construction of both 220 Tradeport and 6975 Ambassador in the fiscal 2018
fourth quarter. The total cost of site work and construction (excluding tenant improvements) of 220 Tradeport and
6975 Ambassador were approximately $13.2 million and approximately $8.1 million, respectively. Cash payments for
new building construction (including site work) in fiscal 2018 also included the approximately $0.1 million of final
payments for the construction of 330 Stone, which was completed in the fiscal 2017 fourth quarter, and approximately
$0.1 million for the start of construction, on speculation, of two industrial/warehouse buildings aggregating
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approximately 283,000 square feet on a land parcel in Concord, North Carolina (the “Concord Land”) that was
purchased in fiscal 2018 (see below). Griffin expects to spend approximately $15.0 million for the site work and
construction (excluding tenant improvements) of the two buildings being built on the Concord Land, with expected
completion in the second half of fiscal 2019.
Cash payments for tenant and building improvements in fiscal 2018 principally related to the full building lease
at 220 Tradeport (approximately $2.0 million), the approximately 74,000 square foot lease at 330 Stone that commenced
just prior to the end of fiscal 2017 (approximately $1.5 million) and approximately $1.1 million related to other new
leases and lease renewals signed in the latter part of fiscal 2017 and fiscal 2018.
The cash payment of approximately $2.7 million, including acquisition costs, for the purchase of undeveloped
land in fiscal 2018 was for the purchase of the Concord Land, an approximately 22 acre parcel in the greater Charlotte
area. Approximately $0.8 million of the purchase price of the Concord Land was paid using the proceeds from the 2018
Southwick Land Sale to complete a like-kind exchange (“1031 Like-Kind Exchange”) under Section 1031 of the Internal
Revenue Code of 1986, as amended (see below).
Net cash payments of $17.0 million used for short-term investments in fiscal 2018 reflected the investment in
repurchase agreements with Webster Bank, N.A. (“Webster Bank”) that are collateralized with securities issued by the
United States Government or its sponsored agencies. These repurchase agreements have maturities of up to six months,
and as of November 30, 2018, had a weighted average maturity of less than 90 days. Cash payments of approximately
$0.8 million for deferred leasing costs and other uses in fiscal 2018 reflected approximately $0.7 million for lease
commissions and other costs related to new and renewed leases and approximately $0.1 million for purchases of
equipment.
The approximately $1.0 million of cash proceeds from property sales in fiscal 2018 reflected approximately
$0.8 million from the 2018 Southwick Land Sale, approximately $0.1 million from the sale of a Stratton Farms
residential lot and approximately $0.1 million from a buyer’s forfeiture of a deposit on a potential land sale that did not
close. The approximately $0.1 million of cash proceeds from property sales returned from escrow in fiscal 2018 reflected
the amount remaining after approximately $1.8 million of the approximately $1.9 million of total cash proceeds from the
2017 Southwick Land Sale, deposited into escrow at closing, were used to purchase the Lehigh Valley land site for
6975 Ambassador in fiscal 2017 to complete a 1031 Like-Kind Exchange.
In fiscal 2017, net cash used in investing activities of approximately $19.9 million 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.
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).
Cash payments 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
Development costs and infrastructure improvements . . . . . . . . . . . . . . . . . . . . . . $ 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 payments for new building construction in fiscal 2017 were for 330 Stone,
which was 54% leased as of November 30, 2017, as a result of a lease for approximately 74,000 square feet with a tenant
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that had leased approximately 39,000 square feet in one of Griffin’s other NE Tradeport industrial/warehouse buildings.
The balance of 330 Stone was leased in fiscal 2018 and that building was fully leased as of November 30, 2018. 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. In fiscal 2018, 6975 Ambassador was built on the
Lehigh Valley land acquired.
The approximately $13.0 million of cash proceeds from property sales in fiscal 2017 reflected approximately
$9.7 million from the 2017 Phoenix Crossing Land Sale, approximately $1.9 million from the 2017 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 2016 Griffin Center
Land Sale, offset by approximately $0.1 million of cash that remained in escrow from the 2017 Southwick Land Sale.
The cash proceeds from the 2016 Griffin Center Land Sale were deposited into escrow at closing for the potential
purchase of a replacement property under a 1031 Like-Kind Exchange. The net cash proceeds from the 2016 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 2017
Southwick Land Sale were deposited into escrow at closing and subsequently, approximately $1.8 million of such
proceeds were used to purchase the approximately 14 acre parcel of undeveloped land in the Lehigh Valley where
6975 Ambassador was built (see above). The approximately $0.1 million of proceeds from the 2017 Southwick Land
Sale that remained in escrow were returned to Griffin in fiscal 2018.
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 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 approximately $3.5 million of proceeds, net of transaction expenses, received from the 2016
Griffin Center Land Sale were placed in escrow for potential acquisition of a replacement property 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 2016 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. 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. The cash spent on
deferred leasing costs and other in fiscal 2016 principally reflected lease commissions paid to real estate brokers for new
leases.
Net cash provided by financing activities was approximately $15.4 million in fiscal 2018, as compared to
approximately $15.9 million in fiscal 2017 and approximately $15.8 million in fiscal 2016. The net cash provided by
financing activities in fiscal 2018 reflected proceeds of approximately $31.6 million from a mortgage loan and a
construction loan and approximately $1.8 million from the exercise of stock options; partially offset by:
(a) approximately $15.4 million of principal payments on mortgage loans; (b) a payment of approximately $2.0 million
for a dividend on Griffin’s common stock (“Common Stock”) that was declared in the fiscal 2017 fourth quarter and paid
in fiscal 2018; and (c) approximately $0.6 million for payments of debt issuance costs.
The proceeds from a mortgage loan and a construction loan in fiscal 2018 reflected approximately $18.8 million
from a mortgage loan refinancing (see below) and approximately $12.8 million from a construction loan (see below).
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The principal payments on mortgage loans reflected a payment of approximately $11.8 million in connection with the
mortgage loan refinancing and approximately $3.6 million of recurring principal payments.
On March 15, 2017, a subsidiary of Griffin closed on a $12.0 million nonrecourse mortgage (the “2017 People’s
Mortgage”) with People’s United Bank, N.A. (“People’s Bank”). On January 30, 2018, that subsidiary refinanced the
2017 People’s Mortgage with a new approximately $18.8 million nonrecourse mortgage loan (the “2018 People’s
Mortgage”) with People’s Bank. The 2017 People’s Mortgage had a balance of approximately $11.8 million at the time
of refinancing. The 2018 People’s Mortgage is collateralized by the same two NE Tradeport industrial/warehouse
buildings (aggregating approximately 275,000 square feet) that collateralized the 2017 People’s Mortgage, in addition to
330 Stone. Upon closing the 2018 People’s Mortgage, Griffin received proceeds of $7.0 million (before transaction
costs), net of the approximately $11.8 million used to refinance the 2017 People’s Mortgage. The 2018 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 2018 People’s Mortgage is a floating rate of the one month LIBOR rate plus 1.95%. At the time the
2018 People’s Mortgage closed, Griffin entered into an interest rate swap agreement with People’s Bank that, combined
with an interest rate swap agreement with People’s Bank entered into at the time the 2017 People’s Mortgage closed,
effectively fixes the interest rate of the 2018 People’s Mortgage at 4.57% over the mortgage loan’s ten year term. Under
the terms of the 2018 People’s Mortgage, Griffin entered into a master lease for 759 Rainbow Road (“759 Rainbow”),
one of the buildings that collateralize the 2018 People’s Mortgage. The master lease would become effective only if the
full building tenant in 759 Rainbow does not renew its lease when it is scheduled to expire in fiscal 2022 and would stay
in effect until either the space is re-leased to a new tenant or the maturity date of the 2018 People’s Mortgage.
On March 29, 2018, a subsidiary of Griffin closed on a $13.8 million construction to permanent mortgage loan
(the “State Farm Loan”) with State Farm Life Insurance Company (“State Farm”), to provide a significant portion of the
funds for the construction of 220 Tradeport and tenant improvements related to the full building lease of that building.
As a build-to-suit building, Griffin entered into a twelve and a half year lease for 220 Tradeport prior to the start of
construction. Through November 30, 2018, Griffin had borrowed approximately $12.8 million under the State Farm
Loan. Upon the commencement of rent payments by the tenant in 220 Tradeport, the terms of the State Farm Loan
provide that it will convert to a fifteen year nonrecourse permanent mortgage loan, which is expected to take place in
fiscal 2019. Under the terms of the State Farm Loan, the interest rate on the State Farm Loan is 4.51% during both the
construction period and for the term of the permanent mortgage. Monthly principal payments, which begin after the
conversion to a nonrecourse permanent mortgage loan, will be based on a twenty-five year amortization schedule. The
State Farm Loan may be increased to approximately $14.3 million if certain additional improvements are made to 220
Tradeport.
The net cash provided by financing activities of approximately $15.9 million in fiscal 2017 reflected proceeds
of approximately $39.1 million from new mortgage loans 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.
On September 22, 2017, two subsidiaries of Griffin closed on the refinancing of a nonrecourse mortgage (the
“2012 Webster Mortgage”) with 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 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 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
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$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 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 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.
The net cash provided by financing activities of approximately $15.8 million in fiscal 2016 reflected
approximately $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.
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 Blvd. (“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.
On April 26, 2016, Griffin closed on a nonrecourse mortgage (the “2016 People’s Mortgage”) with People’s
Bank and received mortgage proceeds of $14.4 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%
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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 an additional 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. Also in fiscal 2016, Griffin received additional mortgage proceeds
of approximately $2.6 million and approximately $1.8 million from mortgages that closed in fiscal 2015.
On July 22, 2016, Griffin renewed its revolving credit line with Webster Bank (the “Webster Credit Line”) that
was scheduled to expire on August 1, 2016. The terms of the renewal increased the amount of the credit line from
$12.5 million to $15.0 million and granted Griffin an option to extend the credit line for an additional year provided there
is no default at the time such extension is requested. On June 18, 2018, Griffin exercised its option for a one year
extension of the Webster Credit Line that was scheduled to expire on July 31, 2018. Interest on borrowings under the
Webster Credit Line remained 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. There have been no borrowings under the Webster
Credit Line since its inception in fiscal 2013. As of November 30, 2018, the Webster Credit Line secured certain standby
letters of credit aggregating approximately $1.1 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.
On April 11, 2018, Griffin filed a universal shelf registration statement on Form S-3 (the “Universal Shelf”)
with the SEC. Under the Universal Shelf, Griffin may offer and sell up to $50 million of a variety of securities including
common stock, preferred stock, warrants, depositary shares, debt securities, units or any combination of such securities
during the three year period that commenced upon the Universal Shelf becoming effective on April 25, 2018. Under the
Universal Shelf, Griffin may periodically offer one or more types of securities in amounts, at prices and on terms
announced, if and when the securities are ever offered. On May 10, 2018, Griffin filed a prospectus supplement with the
SEC under which it may issue and sell, from time to time, up to an aggregate of $30 million of its Common Stock under
an “at-the-market” equity offering program (the “ATM Program”) through Robert W. Baird & Co. Incorporated
(“Baird”), as sales agent. Under the sales agreement with Baird, Griffin sets the parameters for the sales of its Common
Stock under the ATM Program, including the number of shares to be issued, the time period during which sales are
requested to be made, limitations on the number of shares that may be sold in any one trading day and any minimum
price below which sales of shares may not be made. Sales of Common Stock, if any, under the ATM Program would be
made in offerings as defined in Rule 415 of the Securities Act of 1933, as amended. In addition, with the prior consent of
Griffin, Baird may also sell shares in privately negotiated transactions. Griffin expects to use the net proceeds, if any,
from the ATM Program for acquisitions of target properties consistent with Griffin’s investment strategies, repayment of
debt and general corporate purposes. If Griffin obtains additional capital by issuing equity, the interests of its existing
stockholders will be diluted. If Griffin incurs additional indebtedness, that indebtedness may impose financial and other
covenants that may significantly restrict Griffin’s operations.
With its significant amount of cash, cash equivalents and short-term investments and availability under the
Webster Credit Line, Griffin does not expect to issue Common Stock under the ATM Program or issue other securities
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under the Universal Shelf in the near term. Griffin cannot give assurance that it could issue Common Stock under the
ATM Program or obtain additional capital under the Universal Shelf on favorable terms, or at all. See “Risk Factors-
Risks Related to the Real Estate Industry-Volatility in the capital and credit markets could materially adversely impact
Griffin” and “Risk Factors-Risks Related to Griffin’s Common Stock-Issuances or sales of Griffin’s common stock or
the perception that such issuances or sales might occur could adversely affect the per share trading price of Griffin’s
common stock” included in Part I, Item 1A of this Annual Report.
On January 25, 2016, Griffin entered into an Option Purchase Agreement (the “Simsbury Option Agreement”),
subsequently amended on January 22, 2019. Under the terms of the Simsbury Option Agreement, as amended, Griffin
granted the buyer an exclusive option to purchase approximately 280 acres of undeveloped land in Simsbury,
Connecticut for approximately $7.7 million. Through November 30, 2018, the buyer paid approximately $0.3 million of
option fees to extend its option period through January 25, 2019. In fiscal 2018, the buyer received approval from
Connecticut’s regulatory authority for the buyer’s planned use of the land, which is to generate solar electricity.
Subsequent litigation challenging that approval was settled thereby allowing the buyer to use the land to be purchased as
planned. On January 24, 2019, the buyer exercised its option to purchase the land under the Simsbury Option Agreement.
As per the terms of the Simsbury Option Agreement, as amended, closing on the land sale contemplated by the Simsbury
Option Agreement, as amended, is required to take place within 90 days from the date the buyer exercised its option to
purchase the land. There is no guarantee that the sale of land contemplated under the Simsbury Option Agreement, as
amended, 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 option to purchase approximately 288 acres of undeveloped land in East Granby
and Windsor, Connecticut for approximately $7.8 million. The buyer intended to use the land to generate solar
electricity. The buyer’s option expired on May 5, 2018 and was not extended, thus terminating the EGW Option
Agreement. Accordingly, the buyer forfeited the option fees (approximately $50,000) paid through that date, which is
included in revenue from property sales in the fiscal 2018 statement of operations.
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”). Subsequently, the agreement was
amended to reduce the purchase price from $3.6 million in cash to $3.1 million in cash and extend the due diligence
period. If the transaction closes, Griffin plans to construct an approximately 156,000 square foot industrial/warehouse
building on the Lehigh Valley Land. The closing of this purchase, anticipated to take place in fiscal 2019, is subject to
several conditions, including 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 June 26, 2018, Griffin entered into an agreement for the purchase of approximately 36 acres of undeveloped
land in Mecklenburg County, North Carolina in the greater Charlotte area (the “Mecklenburg Land”) for approximately
$4.7 million in cash. On December 5, 2018, Griffin entered into an agreement for the purchase of approximately 9 acres
of undeveloped land (the “Additional Mecklenburg Land”) which is adjacent to the Mecklenburg Land for
approximately $0.9 million in cash. If acquired, the Additional Mecklenburg Land is expected to be combined with the
Mecklenburg Land to enable Griffin to construct more industrial/warehouse space than could be constructed on the
Mecklenburg Land only. Closings on the purchases of the Mecklenburg Land and the Additional Mecklenburg Land are
subject to several conditions, including obtaining all governmental approvals for Griffin’s development plans. Griffin
would only complete the purchase of the Additional Mecklenburg Land if the Mecklenburg Land is acquired. The
amount of industrial/warehouse space to be developed on the Mecklenburg Land and, if also acquired, the Additional
Mecklenburg Land, will be based upon findings during the approvals process. The closings on the purchases of the
Mecklenburg Land and the Additional Mecklenburg Land are not anticipated to take place until the third quarter of fiscal
2019. There is no guarantee that the purchases of the Mecklenburg Land and the Additional Mecklenburg Land will be
completed under their current terms, or at all.
In the near-term, Griffin plans to continue to invest in its real estate business, including construction of
additional buildings on its undeveloped land, expenditures for tenant improvements as new leases and lease renewals 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
41
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 additional build-to-suit facilities on its undeveloped land if lease terms
are favorable.
As of November 30, 2018, Griffin had cash, cash equivalents and short-term investments totaling approximately
$25.6 million. Management believes that its cash, cash equivalents and short-term investments as of November 30, 2018,
cash generated from leasing operations and property sales (including the potential approximately $7.7 million property
sale contemplated under the Simsbury Option Agreement, as amended) and borrowing capacity under the Webster Credit
Line will be sufficient to meet its working capital requirements, to purchase land parcels currently under agreement, to
make other investments in real estate assets, and to pay dividends on its Common Stock, when and if declared by the
Board of Directors, for at least the next twelve months.
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, statements about the costs of site work and construction of the buildings under construction on the
Concord Land; near-term expectations regarding any potential issuance of securities under the ATM Program or the
Universal Shelf, and anticipated use of any future proceeds from the ATM program; completion of the land sale under
the Simsbury Option Agreement, as amended; the purchases of the Lehigh Valley Land, the Mecklenburg Land and the
Additional Mecklenburg Land, anticipated closing dates of such purchases and Griffin’s plans with regard to the
foregoing properties; the conversion of the State Farm Loan to a nonrecourse permanent mortgage loan and related use
of proceeds; the acquisition and development of additional properties and/or undeveloped land parcels; construction of
additional buildings, tenant improvements and infrastructure improvements; Griffin’s anticipated future liquidity and
capital expenditures; 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
42
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
213,621 $
8,592
17,000
1,556
2,652
20,048
263,469 $
196,740
30,068
—
1,904
1,932
18,393
249,037
Nov. 30, 2018
Nov. 30, 2017
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage and construction loans, net of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . $
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and Contingencies (Note 10)
Stockholders' Equity
Common stock, par value $0.01 per share, 10,000,000 shares authorized, 5,635,706
and 5,541,029 shares issued, respectively, and 5,065,173 and 5,000,535 shares
outstanding, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 570,533 and 540,494 shares, respectively . . . . . . . . . . . . . . . . .
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
145,052 $
10,599
3,333
2,279
7,378
168,641
129,203
11,818
4,991
2,000
7,972
155,984
56
112,071
(211)
2,395
(19,483)
94,828
263,469 $
55
108,770
2,806
(284)
(18,294)
93,053
249,037
See Notes to Consolidated Financial Statements.
43
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Statements of Operations
(dollars in thousands, except per share data)
For the Fiscal Years Ended
Rental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue from property sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nov. 30, 2018 Nov. 30, 2017 Nov. 30, 2016
26,487
4,364
30,851
32,777 $
1,023
33,800
29,939 $
13,945
43,884
Operating expenses of rental properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs related to property sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,532
11,404
7,749
144
28,829
8,866
10,064
8,552
3,780
31,262
8,250
8,797
7,367
810
25,224
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,971
12,622
5,627
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of common stock of Centaur Media plc . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income before income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(6,270)
151
—
—
(1,148)
(505)
(1,653) $
(5,690)
93
275
—
7,300
(2,673)
4,627 $
(4,545)
107
—
122
1,311
(735)
576
Basic net (loss) income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(0.33) $
0.92 $
0.11
Diluted net (loss) income per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(0.33) $
0.92 $
0.11
See Notes to Consolidated Financial Statements.
44
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Statements of Comprehensive Income (Loss)
(dollars in thousands)
For the Fiscal Years Ended
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nov. 30, 2018 Nov. 30, 2017 Nov. 30, 2016
576
(1,653) $
4,627 $
Other comprehensive income, net of tax:
Reclassifications included in net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain (loss) on cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in fair value of Centaur Media plc . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive income, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
473
2,242
—
2,715
1,062 $
651
(45)
159
765
5,392 $
856
(174)
(646)
36
612
See Notes to Consolidated Financial Statements.
45
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Statements of Changes in Stockholders’ Equity
For the Fiscal Years Ended November 30, 2018, 2017 and 2016
(dollars in thousands)
Shares of
Additional Retained Accumulated Other
Common Stock Common Paid-in Earnings Comprehensive
Income (Loss)
Stock
Treasury
Stock
Balance at November 30, 2015 . . . . . . . . . . . . . . .
Repurchase of common stock. . . . . . . . . . . . . . . . .
Reversal of tax benefit on forfeited stock options . .
Stock-based compensation expense . . . . . . . . . . . .
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 expense . . . . . . . . . . . .
Dividend declared, $0.40 per share . . . . . . . . . . . .
Total other comprehensive income,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2017 . . . . . . . . . . . . . . .
Adoption of ASU No. 2016-09 –
Cumulative effect of recognition of tax benefit
from exercise of stock options . . . . . . . . . . . . . .
Adoption of ASU No. 2018-02 - Reclassification
Issued
5,541,029 $
—
—
—
—
—
—
5,541,029
—
—
—
—
Capital (Deficit)
55 $ 108,188 $ 1,117 $
—
—
—
—
(17)
—
267
—
—
— (1,514)
—
—
—
—
576
—
—
179
55 108,438
—
—
—
—
(17)
—
349
—
—
— (2,000)
—
Total
(1,085) $ (13,466) $ 94,809
(3,354)
(3,354)
(17)
—
267
—
(1,514)
—
36
—
576
—
90,803
(16,820)
(1,474)
(1,474)
(17)
—
349
—
(2,000)
—
—
—
—
—
36
—
(1,049)
—
—
—
—
—
—
5,541,029
—
—
—
—
55 108,770
—
4,627
2,806
765
—
(284)
—
—
(18,294)
765
4,627
93,053
—
—
—
879
—
—
879
of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
36
(36)
—
—
Exercise of stock options, including shares
tendered related to stock options exercised and
tax withholdings. . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . .
Dividend declared, $0.45 per share . . . . . . . . . . . .
Total other comprehensive income,
net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2018 . . . . . . . . . . . . . . .
94,677
—
—
1
—
—
—
2,951
350
—
— (2,279)
—
—
—
(1,189)
—
—
1,763
350
(2,279)
—
—
5,635,706 $
—
—
56 $ 112,071 $
—
—
— (1,653)
(211) $
2,715
—
2,715
(1,653)
2,395 $ (19,483) $ 94,828
—
—
See Notes to Consolidated Financial Statements.
46
GRIFFIN INDUSTRIAL REALTY, INC.
Consolidated Statements of Cash Flows
(dollars in thousands)
For the Fiscal Years Ended
Nov. 30, 2018 Nov. 30, 2017 Nov. 30, 2016
(1,653) $
4,627 $
576
Operating activities:
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sales of properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of terminated swap agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of employee withholding taxes on options exercised . . . . . . . . . . . . . . . . . . .
Gain on sales of common stock of Centaur Media plc . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities:
Additions to real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of properties, net of expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred leasing costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of properties returned from (deposited in) escrow, net . . . . . . . . . . .
Acquisition of building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of common stock of Centaur Media plc . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,404
(879)
428
350
297
211
(39)
—
—
(320)
(339)
(1,219)
200
8,441
(28,621)
(17,000)
998
(802)
91
—
—
(45,334)
10,064
(10,165)
2,623
349
333
98
—
(275)
—
(2,050)
303
2,396
1,076
9,379
(17,605)
—
13,027
(1,556)
3,444
(18,440)
1,216
(19,914)
Financing activities:
Proceeds from mortgage and construction loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage proceeds returned from escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for termination of interest rate swap agreement . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
31,623
(15,439)
(2,000)
1,802
(569)
—
—
—
15,417
(21,476)
30,068
8,592 $
39,125
(19,287)
(1,514)
—
(595)
(1,474)
—
(341)
15,914
5,379
24,689
30,068 $
See Notes to Consolidated Financial Statements.
47
8,797
(3,554)
785
267
283
—
—
—
(122)
59
337
(656)
445
7,217
(15,734)
—
3,536
(890)
(3,536)
—
—
(16,624)
45,525
(24,822)
(1,546)
—
(578)
(3,354)
600
—
15,825
6,418
18,271
24,689
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
industrial/warehouse 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.
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. 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.
Real estate assets and any related intangible assets that are acquired that meet the definition of a business
combination in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 805-10, “Business Combinations,” are recorded at fair value. Griffin's intangible assets consist of: (i) the value
of in-place leases; and (ii) the value of the associated relationships with tenants. Purchase accounting is applied to the
assets associated with the real estate acquired. Acquisition costs incurred are expensed and included in general and
administrative expenses. 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.
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.”
Assets classified as “held for sale” are reported at the lower of their carrying value or fair value less costs to sell.
Depreciation of assets ceases upon designation of a property as “held for sale.”
Cash and Cash Equivalents
Griffin considers all highly liquid investments with a maturity of three months or less at the date of purchase to
be cash equivalents. At November 30, 2018 and 2017, $4,980 and $29,432, respectively, of the cash and cash equivalents
included on Griffin's consolidated balance sheets were held in cash equivalents.
48
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Investments
Griffin’s short-term investments were comprised of repurchase agreements with Webster Bank, N.A. (“Webster
Bank”) that are collateralized with securities issued by the United States Government or its sponsored agencies and are
accounted for as held-to-maturity securities under FASB ASC 320, “Investments – Debt and Equity Securities” (“ASC
320”). The repurchase agreements are carried at their resell amounts, which approximates fair value due to their short-
term nature. Interest on repurchase agreements is reflected as interest receivable that is included in other assets.
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 ASC 320,
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 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.
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, 2018, 2017 and 2016.
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.
49
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
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.
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.
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, 2018, 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.
Treasury Stock
Treasury stock is recorded at cost as a reduction of stockholders’ equity on Griffin’s consolidated balance
sheets.
50
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
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
result in tenant defaults under leases or may lead to a curtailment of expansion plans; (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. Griffin's short-term investments consist of repurchase agreements that are not significantly exposed to interest rate
risk.
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.
51
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Recent Accounting Pronouncements Adopted
In February 2018, the FASB issued Accounting Standards Update (“ASU” or “Update”) No. 2018-02, “Income
Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income,” which is intended to eliminate the stranded tax effects within AOCI resulting from the
Tax Cuts and Jobs Act (“TCJA”) that was enacted on December 22, 2017. The effective date for ASU No. 2018-02 is for
fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption
permitted for public entities for which financial statements have not yet been released. Griffin elected to early adopt and
apply the provisions of ASU No. 2018-02 in the 2018 first quarter. This adoption resulted in a one-time reclassification
of the effect of re-measuring Griffin’s net deferred tax assets related to interest rate swap agreements within AOCI and
retained earnings resulting from the reduction in the U.S. federal statutory tax rate from 35% to 21%. The reclassification
resulted in a decrease to AOCI and an increase to retained earnings of $36, with no net impact to total stockholders’
equity.
In May 2017, the FASB issued 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. ASU No. 2017-09 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. ASU No. 2017-09 became
effective for Griffin in the 2018 first quarter and was applied on a prospective basis. The adoption of ASU No. 2017-09
did not have an 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. ASU No. 2017-01 also provides greater consistency in applying the guidance by making the
definition of a business more operable. ASU No. 2017-01 became effective for Griffin in the 2018 first quarter. As
Griffin did not acquire a business in fiscal 2018, there was no impact on Griffin’s consolidated financial statements from
the adoption of ASU No. 2017-01.
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. ASU
No. 2016-09 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. ASU No. 2016-09 became effective for Griffin in the 2018 first quarter. Griffin recorded a
deferred tax asset of $879 (see Note 4) with a corresponding increase in retained earnings upon adoption. The adoption
of ASU No. 2016-09 did not affect the classification of any current awards and did not have a retrospective impact on
Griffin’s cash flows as no tax benefits from stock options were recognized in the periods presented. As part of the
adoption of ASU No. 2016-09, Griffin is continuing its policy of estimating the forfeiture rate of options.
Recent Accounting Pronouncements Not Yet Adopted
In October 2018, the FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): Inclusion of the
Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge
Accounting Purposes” This ASU No. 2018-16 permits the use of the Overnight Index Swap (“OIS”) Rate based on the
Secured Overnight Financing Rate as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in
addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate
(“LIBOR”) and the OIS Rate based on the Federal Funds Effective Rate. For entities that have not already adopted ASU
No. 2017-12 (see below), the amendments in ASU No. 2018-16 are required to be adopted concurrently with the
amendments in ASU No. 2017-12. Griffin intends to adopt ASU No. 2018-16 when ASU No. 2017-12 becomes
effective. Griffin does not expect the application of ASU No. 2018-16 to have an impact on its consolidated financial
statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure
Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 removes,
52
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
modifies and adds certain disclosure requirements in FASB ASC 820, “Fair Value Measurement (“ASC 820”). The
amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should
be applied prospectively in the year of adoption. All other amendments should be applied retrospectively to all periods
presented upon their effective date. ASU No. 2018-13 will become effective for Griffin in fiscal 2021. Early adoption is
permitted upon issuance for any removed or modified disclosures. Griffin does not expect the application of ASU No.
2018-13 to have an impact on its consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting,’ to include share-based payment transactions for
acquiring goods and services from nonemployees. ASU No. 2018-07 simplifies the accounting for nonemployee share-
based payments by aligning it more closely with the accounting for employee awards. ASU No. 2018-07 will become
effective for Griffin in fiscal 2020. Early adoption is permitted, but no earlier than Griffin’s adoption of Topic 606 (see
below). Griffin does not expect the application of ASU No. 2018-07 to have an impact on its consolidated financial
statements.
In August 2017, the FASB issued 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. ASU
No. 2017-02 will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amend the
presentation and disclosure requirements and change how entities assess effectiveness. ASU No. 2017-12 will become
effective for Griffin in fiscal 2020. Griffin does not expect the application of ASU No. 2017-12 to have an impact on its
consolidated financial statements.
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 ASU No. 2016-02 is largely unchanged from that
applied under current accounting principles generally accepted in the United States of America (“U.S. GAAP”). Leases
will be either classified as finance or operating, with classification affecting the pattern of expense recognition in the
income statement. ASU No. 2016-02 also requires significant additional disclosures about the amount, timing and
uncertainty of cash flows from leases. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to
Topic 842, Leases,” which provides narrow amendments to clarify how to apply certain aspects of the new lease
standard. Additionally, in July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted
Improvements,” which provides an alternative transition method that permits an entity to use the effective date of ASU
No. 2016-02 as the date of initial application through the recognition of a cumulative effect adjustment to the opening
balance of retained earnings upon adoption. Consequently, an entity’s reporting for the comparative periods presented in
the financial statements in which it adopts the new lease standard will continue to be in accordance with current U.S.
GAAP under ASC Topic 840, “Leases.” ASU No. 2016-02, ASU No. 2018-10 and ASU No. 2018-11 will become
effective for Griffin in fiscal 2020 using a modified retrospective approach for leases in effect as of and after the date of
adoption. Early adoption and practical expedients to measure the effect of adoption are allowed. Griffin is evaluating the
impact that the application of ASU No. 2016-02 will have on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).”
ASU No. 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers. ASU No. 214-09 is not applicable to revenue from leases. ASU No. 2014-09 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, ASU No. 2014-09 requires improved disclosures to help users of financial statements better understand the
nature, amount, timing and uncertainty of revenue that is recognized. ASU No. 2014-09 permits the use of either the
retrospective or cumulative effect transition method.
53
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Griffin has concluded that it has two material revenue streams: (i) rental revenue; and (ii) revenue from property
sales. As noted above, rental revenue is not subject to ASU No. 2014-09 because it is subject to the guidance of ASC
Topic 840, Leases. Revenue from property sales was evaluated based on the criteria established under ASU No. 2014-09,
which served as the basis for the accounting analysis and documentation as it relates to the impact of ASU No. 2014-09.
Griffin has determined that there will not be a change in the recognition of revenue from property sales upon adoption of
ASU No. 2014-09. Griffin will use the modified retrospective method upon adoption of ASU No. 2014-09 when it
becomes effective for Griffin on December 1, 2018. However, Griffin does not expect to record a cumulative effect
adjustment to its consolidated balance sheet at the time of adoption.
There are various other Updates recently issued which represent technical corrections to the accounting
literature or apply to specific industries. Griffin does not expect the application of any of these other Updates to have an
impact on its consolidated financial statements.
2. Fair Value
Griffin applies the provisions of 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’s 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. Level 2 assets also include Griffin’s short-term
investments in repurchase agreements with Webster Bank (see Note 1). The repurchase agreements with
Webster Bank are carried at their resell amounts, which approximates fair value due to their short-term nature.
On June 9, 2017, Griffin closed on the acquisition of 215 International Drive (“215 International”), an
approximately 277,000 square foot industrial/warehouse building in Concord, North Carolina (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 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, 2018 and
2017, Griffin’s consolidated balance sheets include acquired intangible assets related to the acquisition of
215 International in fiscal 2017. 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.
54
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
During fiscal 2018, 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, 2018
Quoted Prices in Significant Significant
Active Markets for Observable Unobservable
Interest rate swap assets . . . . . . . . . . . . . . . . . . . . . . . $
Interest rate swap liabilities . . . . . . . . . . . . . . . . . . . . $
Identical Assets
(Level 1)
Inputs
(Level 2)
— $ 3,157 $
56 $
— $
Inputs
(Level 3)
—
—
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 $
—
—
The carrying and estimated fair values of Griffin’s financial instruments are as follows:
Fair Value
Hierarchy Carrying
Level
Value
November 30, 2018
November 30, 2017
Estimated
Fair Value Value
Carrying
Estimated
Fair Value
Financial assets:
Cash and cash equivalents . . . . .
Sale proceeds held in escrow . . .
Short-term investments . . . . . . .
Interest rate swap assets . . . . . . .
Financial liabilities:
Mortgage and construction loans,
net of debt issuance costs . . . . . .
Interest rate swap liabilities . . . .
1
1
2
2
2
2
— $
$ 8,592 $ 8,592 $ 30,068 $ 30,068
91
— $
$
—
$ 17,000 $ 17,000 $
644
$ 3,157 $ 3,157 $
91 $
— $
644 $
$ 145,052 $ 144,712 $ 129,203 $ 128,999
845
56 $
$
845 $
56 $
The amounts included in the consolidated financial statements for cash and cash equivalents, short-term
investments, sale 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 mortgage
and construction 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 and construction 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 in fiscal 2017 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.
Quoted Prices in Significant Significant
Active Markets for Observable Unobservable
Real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
55
Identical Assets
(Level 1)
Inputs
(Level 2)
— $ 16,789 $
— $
— $
Inputs
(Level 3)
—
1,651
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
3. Real Estate Assets
Real estate assets consist of:
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, 2018 Nov. 30, 2017
20,403
$
30,833
187,116
21,961 $
38,280
204,258
29,163
10,958
562
13,443
318,625
(105,004)
27,924
10,958
486
14,132
291,852
(95,112)
$ 213,621 $ 196,740
Total depreciation expense and capitalized interest related to real estate assets were as follows:
For the Fiscal Years Ended
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nov. 30, 2018 Nov. 30, 2017 Nov. 30, 2016
7,768
8,831 $
9,853 $
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
352 $
103 $
274
On April 26, 2018, Griffin closed on the sale of approximately 49 acres (the “2018 Southwick Land Sale”) of
undeveloped land in Southwick, Massachusetts. Griffin received cash proceeds of $850, before transaction costs, and
recorded a pretax gain of $794 on the 2018 Southwick Land Sale. The net cash proceeds, after transaction costs, of $847
from the 2018 Southwick Land Sale were deposited into escrow for the acquisition of a replacement property in a like-
kind exchange (“1031 Like-Kind Exchange”) under Section 1031 of the Internal Revenue Code of 1986, as amended (the
“IRC”), for income tax purposes. On July 18, 2018, Griffin closed on the purchase of an approximately 22 acre parcel of
undeveloped land in Concord, North Carolina (the “Concord Land”) for a purchase price of $2,600, before transaction
costs, as a replacement property under a 1031 Like-Kind Exchange.
On August 4, 2017, Griffin completed the sale of approximately 76 acres (the “2017 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 2017 Southwick Land Sale. The net cash proceeds, after transaction costs, of
$1,943 from the 2017 Southwick Land Sale were deposited into escrow for the acquisition of a replacement property as
part of a 1031 Like-Kind Exchange. On August 24, 2017, Griffin closed on the purchase of an approximately 14 acre
parcel of undeveloped land in Upper Macungie Township, Lehigh County, Pennsylvania (the “Macungie Land”) for a
purchase price of $1,800, before transaction costs, as a replacement property under a 1031 Like-Kind Exchange. The
remaining amount of $91 in escrow was returned to Griffin in the fiscal 2018 first quarter.
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, after transaction costs, of $9,711 from the 2017 Phoenix Crossing Land Sale were deposited into escrow and
subsequently used for the acquisition (see below) of 215 International, an approximately 277,000 square foot
56
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
industrial/warehouse building in Concord, North Carolina, as the replacement property under a 1031 Like-Kind
Exchange.
On June 9, 2017, Griffin closed on the purchase of 215 International for a purchase price of $18,440. 215
International was Griffin’s first property in the Charlotte area. The purchase price was paid in cash at closing using
proceeds of $9,711 held in escrow from the 2017 Phoenix Crossing Land Sale (see above) 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 was 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 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 are being depreciated over forty years. Other building and
tenant improvements are being depreciated over a period of five to eighteen years. The value of the intangible assets is
being 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.
Rental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revenue from property sales . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Fiscal Year Ended November 30, 2017
As reported Adjustments (a) Pro forma
30,309
13,945
44,254
29,939 $
13,945
43,884
370 $
—
370
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
39
470
—
—
509
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
57
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
(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 the
financing of 215 International subsequent to the date of the acquisition (see Note 5).
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).
Real estate assets held for sale consist of:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nov. 30, 2018 Nov. 30, 2017
504
354
1,074
1,932
1,645 $
—
1,007
2,652 $
$
The increase in real estate assets held for sale in fiscal 2018 reflected $1,435 reclassified from real estate assets
for land expected to be sold partially offset by $610 reclassified to real estate assets as a result of a proposed property
sale that is no longer expected to take place and a reduction of $105 for property sales that closed.
4. Income Taxes
The income tax provision for fiscal 2018, fiscal 2017 and fiscal 2016 is summarized as follows:
For the Fiscal Years Ended
Nov. 30,
Nov. 30,
Nov. 30,
2018
2017
2016
Current federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current state and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred state and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . $
25 $
(43) $
(7)
(2,610)
(13)
(102)
(678)
250
(505) $ (2,673) $
50
—
(580)
(205)
(735)
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted and became effective for Griffin on
January 1, 2018. The TCJA reduced the U.S. federal corporate statutory income tax rate from 35% to 21%, which results
in a blended fiscal 2018 federal corporate statutory rate for Griffin of approximately 22%. The impact of the lower
statutory rate resulted in a net charge of $1,001 for the re-measurement of Griffin’s deferred tax assets and deferred tax
liabilities that is included in Griffin’s fiscal 2018 income tax provision.
In the fiscal 2018 first quarter, prior to the effective date of the U.S. federal corporate statutory income tax rate
reduction, Griffin recorded a deferred tax asset of $879 related to the cumulative effect of stock option exercises upon
adoption of ASU No. 2016-09 (see Note 1). Griffin had not previously recognized a current tax benefit in fiscal 2017 or
fiscal 2016 from the exercise of employee stock options. In fiscal 2017, Griffin utilized net operating loss carryforwards
to offset taxable income and in fiscal 2016, a benefit was not recorded because Griffin did not have taxable income. In
each of fiscal 2017 and fiscal 2016, the deferred tax asset related to non - qualified stock options was reduced by $17,
respectively, as a result of exercises and forfeitures of those options.
58
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
The income tax provisions in fiscal 2018 and fiscal 2016 are net of the effect of recording charges related to
valuation allowances on certain state deferred tax assets (principally Connecticut) of $681 and $1,798, respectively, less
federal income tax benefits of $146 and $629, respectively. The income tax provision in fiscal 2017 is net of the effect of
recording a benefit related to valuation allowances on certain state deferred tax assets (principally Connecticut) of $238
less federal income tax expense of $87. 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.
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 was based on
management's projections of taxable income in Connecticut in future years that would generate income taxes in excess of
capital based taxes.
Other comprehensive income (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 included in other comprehensive
(797) $
—
(463) $
23
(399)
347
income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(797) $
(440) $
(52)
For the Fiscal Years Ended
Nov. 30,
Nov. 30,
Nov. 30,
2018
2017
2016
The differences between the income tax provision at the U.S. statutory income tax rate and the actual income
tax provision for fiscal 2018, fiscal 2017 and fiscal 2016 are as follows:
For the Fiscal Years Ended
Nov. 30,
Nov. 30,
Nov. 30,
2018
2017
2016
Tax benefit (provision) at statutory rate . . . . . . . . . . . . . . . . $
State and local taxes, including valuation allowance, net of
255 $ (2,555) $
(459)
federal tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal rate change under TCJA . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . $
78
(24)
(1,001)
187
(505) $ (2,673) $
(18)
(41)
—
(59)
(205)
(35)
—
(36)
(735)
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.
59
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,
2018
2017
Deferred tax assets:
Federal net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . .
Retirement benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-qualified stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,657 $
2,402
2,236
1,416
480
—
220
10,411
(2,190)
8,221
3,797
3,841
1,366
1,936
970
159
226
12,295
(1,363)
10,932
(4,331)
(1,018)
(674)
(642)
(6,665)
1,556 $
(7,199)
(1,291)
—
(538)
(9,028)
1,904
At November 30, 2018, Griffin had federal net operating loss carryforwards of approximately $15,862 with
expirations ranging from fourteen to twenty years and state net operating loss carryforwards (net of valuation
allowances) of approximately $650 with expirations ranging from eleven to twenty years. Management has determined
that a valuation allowance is required for net operating loss carryforwards in Connecticut related to Griffin and Imperial
Nurseries, Inc. (“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 amount 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 2016 and fiscal 2017 are open to examination by the Internal Revenue
Service (“IRS”). An IRS examination of the fiscal 2015 federal tax return was completed in fiscal 2018 and was accepted
as filed.
60
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
5. Mortgage and Construction Loans
Griffin's mortgage loans, which are nonrecourse, and its construction loan, are as follows:
3.91%, due January 27, 2020 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4.72%, due October 3, 2022 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.39%, due January 2, 2025 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.17%, due May 1, 2026 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.79%, November 17, 2026 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.39%, due August 1, 2027 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.97%, due September 1, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.57%, due February 1, 2028 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.09%, due July 1, 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.09%, due July 1, 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.33%, due August 1, 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.45%, due March 1, 2027 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonrecourse mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonrecourse mortgage loans, net of debt issuance costs . . . . . . . . . . .
Nov. 30, 2018 Nov. 30, 2017
3,478
4,367
20,221
13,844
26,076
10,523
12,115
—
6,597
4,622
17,308
11,826
130,977
(1,774)
129,203
3,345 $
4,273
19,674
13,487
25,402
10,284
11,898
18,482
6,172
4,324
16,978
—
134,319
(1,723)
132,596
4.51% construction loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction loan, net of debt issuance costs . . . . . . . . . . . . . . . . . . . .
12,842
(386)
12,456
—
—
—
Mortgage and construction loans, net of debt issuance costs . . . . . . . . $ 145,052 $ 129,203
∗ 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 2019 through 2023 are $4,064, $7,400, $4,391, $8,438 and $4,681, respectively. The aggregate book
value of land and buildings that are collateral for the nonrecourse mortgage loans was $169,105 at November 30, 2018.
On March 29, 2018, a subsidiary of Griffin closed on a $13,800 construction to permanent mortgage loan (the
“State Farm Loan”) with State Farm Life Insurance Company (“State Farm”), to provide a significant portion of the
funds for the construction of an approximately 234,000 square foot build-to-suit industrial/warehouse building (“220
Tradeport Drive”) in New England Tradeport (“NE Tradeport”), Griffin’s industrial park located in Windsor and East
Granby, Connecticut. In the fiscal 2017 fourth quarter, Griffin entered into a long-term lease (the “220 Tradeport Lease”)
with one tenant for the entire building. Upon completion of 220 Tradeport Drive and commencement of rent payments
by the tenant (six months after lease commencement), the State Farm Loan provides that it will convert to a fifteen year
nonrecourse permanent mortgage loan, which is expected to take place in fiscal 2019. Under the terms of the State Farm
Loan, the interest rate on the loan is 4.51% during both the construction phase and for the term of the permanent
mortgage. Monthly principal payments, which begin after conversion to a nonrecourse permanent mortgage loan, will be
based on a twenty-five year amortization schedule. The State Farm Loan may be increased to $14,288 if certain
additional improvements are made to 220 Tradeport Drive.
The 220 Tradeport Lease, which commenced on September 5, 2018, has a term of twelve and a half years 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.
61
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
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
(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 (“Berkshire”). The 2017 Berkshire Mortgage refinanced an existing mortgage loan (the
“2009 Berkshire Mortgage”) with Berkshire 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 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 (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 is schedule to expire in 2025. 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.
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 $211 and $98 in fiscal 2018 and fiscal 2017, respectively, related to the termination of the
2009 Berkshire Swap. Griffin expects to record interest expense of approximately $32 in fiscal 2019 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”). On January 30, 2018, that subsidiary refinanced the
2017 People’s Mortgage with a new nonrecourse mortgage loan (the “2018 People’s Mortgage”) with People’s Bank.
The 2017 People’s Mortgage had a balance of $11,781 at the time of the refinancing. The 2017 People’s Mortgage is
collateralized by the same two NE Tradeport industrial/warehouse buildings, aggregating approximately 275,000 square
feet that collateralized the 2017 Peoples Mortgage. In addition, 330 Stone Road, an approximately 137,000 square foot
industrial/warehouse building in NE Tradeport that was completed and placed in service near the end of fiscal 2017, was
added to the collateral for the 2018 People’s Mortgage. At the closing of the 2018 People’s Mortgage, Griffin received
62
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
additional mortgage proceeds of $7,000, (before transaction costs), net of the $11,781 used to refinance the 2017
People’s Mortgage. The 2018 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 2018 People’s Mortgage is a variable rate consisting of
the one month LIBOR rate plus 1.95%. At the time the 2018 People’s Mortgage closed, Griffin also entered into an
interest rate swap agreement with People’s Bank that, combined with an interest rate swap agreement with People’s
Bank entered into at the time the 2017 People’s Mortgage closed, effectively fixes the interest rate of the 2018 People’s
Mortgage at 4.57% over the mortgage loan’s ten year term. Under the terms of the 2018 People’s Mortgage, Griffin
entered into a master lease for 759 Rainbow Road (“759 Rainbow”), one of the buildings that collateralize the 2018
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 either the space is
re-leased to a new tenant or the maturity date of the 2018 People’s Mortgage.
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. The 2016 Webster Mortgage is collateralized by 5220 Jaindl along with an adjacent approximately
252,000 square foot industrial building. 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 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.
As of November 30, 2018, 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,
2018 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 2018,
fiscal 2017 and fiscal 2016, Griffin recognized net gains before taxes, included in other comprehensive income, of
$3,302, $949 and $1,081, respectively, on its interest rate swap agreements.
As of November 30, 2018, $363 is expected to be reclassified over the next twelve months from AOCI to
interest expense. As of November 30, 2018, the net fair value of Griffin’s interest rate swap agreements was $3,101, with
$3,157 included in other assets and $56 included in other liabilities on Griffin’s consolidated balance sheet. As of
November 30, 2017, the fair value of Griffin’s interest rate swap agreements was a liability of $201, with $644 included
in other assets and $845 included in other liabilities on Griffin’s consolidated balance sheet.
6. Revolving Credit Agreement
Griffin has a $15,000 revolving credit line (the “Webster Credit Line”) with Webster Bank that was scheduled
to expire on July 31, 2018. In the 2018 third quarter, Griffin and Webster Bank completed a Second Mortgage
Modification Agreement that extended the Webster Credit Line through July 31, 2019. Interest on borrowings under the
Webster Credit Line remains 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 $10,798 at November 30, 2018. There have been no borrowings under the
Webster Credit Line since its inception in fiscal 2013. As of November 30, 2018, the Webster Credit Line secured
certain standby letters of credit aggregating $1,068 that are related to Griffin's development activities.
63
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
7. Stockholders’ Equity
Per Share Results
Basic and diluted results per share were based on the following:
For the Fiscal Years Ended
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,653) $
Nov. 30, 2018
Nov. 30, 2017
Nov. 30, 2016
576
4,627 $
Weighted average shares outstanding for computation of basic per
share results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incremental shares from assumed exercise of Griffin stock options (a) . .
Adjusted weighted average shares for computation of diluted per share
5,023,000
—
5,010,000
28,000
5,117,000
6,000
results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,023,000
5,038,000
5,123,000
(a) Incremental shares from the assumed exercise of Griffin stock options are not included in periods where the
inclusion of such shares would be anti-dilutive. The incremental shares from the assumed exercise of stock
options for fiscal 2018 would have been 57,000 shares.
Universal Shelf Filing/At-the-Market Equity Offering Program
On April 11, 2018, Griffin filed a universal shelf registration statement on Form S-3 (the “Universal Shelf”)
with the SEC. Under the Universal Shelf, Griffin may offer and sell up to $50,000 of a variety of securities including
common stock, preferred stock, warrants, depositary shares, debt securities, units or any combination of such securities
during the three year period that commenced upon the Universal Shelf becoming effective on April 25, 2018. Under the
Universal Shelf, Griffin may periodically offer one or more types of securities in amounts, at prices and on terms
announced, if and when the securities are ever offered. On May 10, 2018, Griffin filed a prospectus supplement with the
SEC under which it may issue and sell, from time to time, up to an aggregate of $30,000 of its common stock (“Common
Stock”) under an “at-the-market” equity offering program (the “ATM Program”) through Robert W. Baird & Co.
Incorporated (“Baird”), as sales agent. Under a sales agreement with Baird, Griffin will set the parameters for the sales of
its Common Stock under the ATM Program, including the number of shares to be issued, the time period during which
sales are requested to be made, limitations on the number of shares that may be sold in any one trading day and any
minimum price below which sales of shares may not be made. Sales of Common Stock, if any, under the ATM Program
would be made in offerings as defined in Rule 415 of the Securities Act of 1933, as amended. In addition, with the prior
consent of Griffin, Baird may also sell shares in privately negotiated transactions. Griffin expects to use net proceeds, if
any, from the ATM Program for acquisitions of target properties consistent with Griffin’s investment strategies,
repayment of debt and general corporate purposes. If Griffin obtains additional capital by issuing equity, the interests of
its existing stockholders will be diluted. If Griffin incurs additional indebtedness, that indebtedness may impose financial
and other covenants that may significantly restrict Griffin’s operations. Griffin currently does not expect to issue
Common Stock under the ATM Program or issue other securities under the Universal Shelf in the near term.
Griffin Stock Option Plan
Stock options are granted by Griffin under the Griffin Industrial Realty, Inc. 2009 Stock Option Plan (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 an exercise price not less than 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.
64
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Stock options issued expire ten years from the grant date. In accordance with the 2009 Stock Option Plan, stock
options issued 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, 2018 may be exercised as stock appreciation rights.
The following options were granted by Griffin under the 2009 Stock Option Plan to non-employee directors and
employees:
For the Fiscal Years Ended
Nov. 30, 2018
Nov. 30, 2017
Nov. 30, 2016
Fair Value per
Fair Value per
Fair Value per
Non-employee directors . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . . . . . .
Number of Option at
Grant Date
14.41
-
Shares
5,195 $
- $
5,195
Number of Option at
Grant Date
$
$
Shares
6,570
5,000
11,570
13.49
11.13
Number of
Shares
8,409 $
Option at
Grant Date
11.30
101,450 $ 7.51 - 11.65
109,859
The fair values of all options granted were estimated as of the grant date using the Black-Scholes option-pricing
model. Assumptions used in determining the fair value of the stock options granted were as follows:
For the Fiscal Years Ended
Nov. 30, 2018 Nov. 30, 2017
Nov. 30, 2016
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . .
Risk free interest rates . . . . . . . . . . . . . . . . . . . . . .
Expected option term (in years) . . . . . . . . . . . . . .
Annual dividend yield . . . . . . . . . . . . . . . . . . . . . .
30.5 % 32.7 to 39.6 % 32.9 to 41.1 %
3.0 % 2.1 to 2.2 % 1.2 to 1.5 %
8.5
1.1 % 0.8 to 0.9 %
7.5 to 8.5
5 to 8.5
0.9 %
Number of option holders at November 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
Compensation expense and related tax benefits for stock options were as follows:
For the Fiscal Years Ended
Compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nov. 30, 2018 Nov. 30, 2017 Nov. 30, 2016
267
349 $
350 $
Related tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
53 $
86 $
62
For all years presented, the forfeiture rate used for directors was 0%, the forfeiture rate used for executives was
17.9% and the forfeiture rate used for employees was 38.3%. The rates utilized were based on the historical activity of
the grantees.
As of November 30, 2018, the unrecognized compensation expense related to nonvested stock options that will
be recognized during future periods is as follows:
Fiscal 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
265
125
32
The total grant date fair value of options vested during fiscal 2018, fiscal 2017 and fiscal 2016 was $69, $55 and
$457, respectively. The intrinsic value of options exercised in fiscal 2018 was $765. There were no options exercised in
fiscal 2017 and fiscal 2016.
65
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, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,727 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,859 $
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,040) $
Outstanding at November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,546 $
11,570 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,354) $
Outstanding at November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333,762 $
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,195 $
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (94,677) $
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,279) $
Outstanding at November 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,001 $
Weighted Avg.
Options Exercise Price
30.47
26.83
30.73
29.23
30.59
36.82
29.22
38.48
31.18
33.78
28.20
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, 2018 Exercise Price
26.76
29.14
36.29
28.20
Weighted Avg. Contractual Life Total Intrinsic
(in years)
7.2
3.3
6.4
5.4
115,137 $
100,050 $
8,814 $
224,001 $
1,001
631
8
1,640
Value
$
$
Accumulated Other Comprehensive Income (Loss)
As of November 30, 2017, Griffin no longer held any shares of Centaur Media as Griffin sold its remaining
1,952,462 shares of Centaur Media in fiscal 2017 (see Note 9). 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.
66
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
Accumulated other comprehensive income (loss) for fiscal 2018, fiscal 2017 and fiscal 2016, 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, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive loss before reclassifications . . . . . . . . . . . . . . . . . . .
Amounts reclassified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net activity for other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income before reclassifications . . . . . . . . . . .
Amounts reclassified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net activity for other comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income before reclassifications . . . . . . . . . . . . . . . .
Amounts reclassified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adoption of ASU No. 2018-02 - reclassification of deferred taxes to
retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net activity for other comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,744) $
(174)
856
682
(1,062)
(45)
823
778
(284)
2,242
473
(36)
2,679
2,395 $
Changes in accumulated other comprehensive income (loss) are as follows:
659 $ (1,085)
(820)
(646)
856
—
36
(646)
(1,049)
13
114
159
651
(172)
765
(13)
(284)
—
2,242
—
473
—
(36)
—
2,679
—
— $ 2,395
November 30, 2018
Tax
(Expense)
For the Fiscal Years Ended
November 30, 2017
Tax
(Expense)
November 30, 2016
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):
Loss on cash flow hedges (interest
expense) . . . . . . . . . . . . . . . . . . . . . . . . . . $
Realized gain on sale of Centaur Media
636 $
(163) $
473 $ 1,299 $
(476) $
823 $ 1,358 $
(502) $
856
(gain on sale) . . . . . . . . . . . . . . . . . . . . .
—
—
—
(281)
109
(172)
—
—
—
Total reclassifications included in net
income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in fair value
636
(163)
473 1,018
(367)
651 1,358
(502)
856
adjustment on Griffin's cash flow hedges
2,876
(634)
2,242
(58)
13
(45)
(277)
103
(174)
Mark to market adjustment on Centaur
Media for an increase (decrease) in
fair value . . . . . . . . . . . . . . . . . . . . . . . .
Mark to market adjustment on Centaur
Media for an increase (decrease) in the
foreign currency exchange rate . . . . . . . .
Total change in other comprehensive
—
—
—
220
(77)
143
(763)
267
(496)
—
—
—
25
(9)
16
(230)
80
(150)
income (loss) . . . . . . . . . . . . . . . . . . . . . 2,876
Total other comprehensive income (loss) . . $ 3,512 $
(634)
(797) $
2,242
187
2,715 $ 1,205 $
(73)
(440) $
114 (1,270)
88 $
765 $
450
(52) $
(820)
36
Cash Dividends
In fiscal 2018, fiscal 2017 and fiscal 2016, Griffin declared annual cash dividends of $0.45, $0.40 and $0.30 per
common share, respectively, which were paid in the first quarters of fiscal 2019, fiscal 2018 and fiscal 2017,
respectively.
67
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 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 its expiration, Griffin
repurchased 47,173 shares of its outstanding Common Stock for $1,474. Under this repurchase program, Griffin
repurchased a total of 152,173 shares of its Common Stock for $4,828.
See Supplemental Cash Flow Information in Note 9 for information on Common Stock received in connection
with the exercise of stock options.
8. Operating Leases
Griffin's rental revenue reflects the leasing of industrial, flex and office space and the lease of the nursery
growing facility in Connecticut previously used by Imperial. Future minimum rental payments, including expected tenant
reimbursements, to be received under noncancelable leases as of November 30, 2018 were:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
31,641
30,448
23,656
16,542
13,207
35,273
150,767
All future minimum rental payments, principally for Griffin’s corporate headquarters, under noncancelable
leases, as lessee, as of November 30, 2018 were:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
128
124
124
124
124
361
985
Total rental expense for all operating leases, as lessee, in fiscal 2018, fiscal 2017 and fiscal 2016 was $149,
$156 and $194, 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 2018,
fiscal 2017 and fiscal 2016 was $124, $124 and $10, respectively, which is included in general and administrative
expenses.
68
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
9. Supplemental Financial Statement Information
Investments - Held-to-Maturity Securities
As of November 30, 2018, Griffin held $17,000 of repurchase agreements accounted for as held-to-maturity
securities under ASC 320 and classified as short-term investments on its consolidated balance sheet. The repurchase
agreements are with Webster Bank and are collateralized by securities issued by the United States Government or its
sponsored agencies. The repurchase agreements are carried at their resell amounts, which approximates fair value due to
their short-term nature. As of November 30, 2018, Griffin’s repurchase agreements had a weighted average maturity of
less than 90 days with no maturities longer than six months.
Investments - 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.
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
and $79 in fiscal 2017 and fiscal 2016, respectively.
Other Assets
Griffin's other assets are comprised of the following:
$
Deferred rent receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred leasing costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage escrows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease receivables from tenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Registration statement costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and equipment, net . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs related to the Webster Credit Line . . . . .
Sale proceeds held in escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nov. 30, 2018 Nov. 30, 2017
5,351
5,113
644
2,774
1,695
713
448
1,097
—
251
47
91
169
18,393
5,602
4,355
3,157
2,780
1,399
1,072
452
407
281
245
33
—
265
20,048 $
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 $1,271 and $975 as of November
30, 2018 and November 30, 2017, respectively.
Amortization expense of intangible assets is as follows:
For the Fiscal Years Ended
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nov. 30, 2018 Nov. 30, 2017 Nov. 30, 2016
58
296 $
203 $
69
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:
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
296
296
296
137
92
Deferred leasing costs, net reflected accumulated amortization of $5,719 and $5,109 as of November 30, 2018
and November 30, 2017, respectively. Amortization expense related to deferred leasing costs in fiscal 2018, fiscal 2017
and fiscal 2016 was $1,159, $946 and $881, respectively. Furniture, fixtures and equipment, net reflected accumulated
depreciation of $920 and $902 as of November 30, 2018 and November 30, 2017, respectively. Total depreciation
expense related to furniture, fixtures and equipment in fiscal 2018, fiscal 2017 and fiscal 2016 was $96, $84 and $90,
respectively.
Accounts Payable and Accrued Liabilities
Griffin's accounts payable and accrued liabilities are comprised of the following:
Accrued salaries, wages and other compensation . . . . . . . . . . . . . . $
Accrued construction costs and retainage . . . . . . . . . . . . . . . . . . . .
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued lease commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accounts payable and accrued liabilities . . . . . . . . . . . . . . . . $
Nov. 30, 2018 Nov. 30, 2017
1,154
931 $
1,894
832
482
555
432
380
393
136
636
499
4,991
3,333 $
Other Liabilities
Griffin's other liabilities are comprised of the following:
Deferred compensation plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prepaid rent from tenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security deposits of tenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land sale deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conditional asset retirement obligations . . . . . . . . . . . . . . . . . . . . .
Interest rate swap liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Nov. 30, 2018 Nov. 30, 2017
5,005
5,145 $
1,041
1,134
583
533
195
260
204
171
845
56
99
79
7,972
7,378 $
Supplemental Cash Flow Information
In fiscal 2018, Griffin received 30,039 shares of its Common Stock in connection with the exercise of stock
options as consideration for the exercise price and for reimbursement of income tax withholdings related to those stock
option exercises. The shares received were recorded as treasury stock, which resulted in an increase in treasury stock of
$1,189 and did not affect Griffin’s cash.
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 “2016 Griffin Center Land Sale”). The proceeds from
the 2016 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).
70
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
An increase of $245 in fiscal 2017 (prior to the sale of the remaining shares) and a decrease of $993 in fiscal
2016 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
decreased by $1,062 in fiscal 2018 and increased by $642 in fiscal 2017.
Griffin did not receive any income tax refunds in fiscal 2018, fiscal 2017 or fiscal 2016. Interest payments in
fiscal 2018, fiscal 2017 and fiscal 2016 were $6,041, $5,368 and $4,507, respectively, including capitalized interest of
$352, $103 and $274 in fiscal 2018, fiscal 2017 and fiscal 2016, 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 2018, fiscal 2017 and fiscal 2016 were
$65, $65 and $64, 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, 2018 and 2017 was $5,145 and $5,005, 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 2018, fiscal 2017 and fiscal 2016 was $12, $11 and $7, 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. Commitments and Contingencies
As of November 30, 2018, Griffin had committed purchase obligations of approximately $14,997, principally
related to the construction of two industrial/warehouse buildings aggregating approximately 283,000 square feet in
Concord, North Carolina (see Note 3) and the development of other Griffin properties.
On June 26, 2018, Griffin entered into an agreement for the purchase of approximately 36 acres of undeveloped
land in Mecklenburg County, North Carolina in the greater Charlotte area (the “Mecklenburg Land”) for approximately
$4,700 in cash. On December 5, 2018, Griffin entered into an agreement for the purchase of approximately 9 acres of
undeveloped land (the “Additional Mecklenburg Land”) that is adjacent to the Mecklenburg Land for approximately
$900 in cash. If acquired, the Additional Mecklenburg Land would be combined with the Mecklenburg Land, enabling
Griffin to construct more industrial/warehouse space than could be constructed on the Mecklenburg Land only. Closings
on the purchases of the Mecklenburg Land and the Additional Mecklenburg Land are subject to several conditions,
including obtaining all governmental approvals for Griffin’s development plans. Griffin would only complete the
purchase of the Additional Mecklenburg Land if the Mecklenburg Land is acquired. The amount of industrial/warehouse
space to be developed on the Mecklenburg Land and, if also acquired, the Additional Mecklenburg Land, will be based
upon findings during the approvals process. The closings on the purchases of the Mecklenburg Land and the Additional
Mecklenburg Land are not anticipated to take place until the third quarter of fiscal 2019. There is no guarantee that
purchases of the Mecklenburg Land and the Additional Mecklenburg Land will be completed under their current terms,
or at all.
71
GRIFFIN INDUSTRIAL REALTY, INC.
Notes to Consolidated Financial Statements (Continued)
(dollars in thousands unless otherwise noted, except per share data)
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”). Subsequently, the agreement was
amended to reduce the purchase price from $3,600 in cash to $3,100 in cash and extend the due diligence period. If the
transaction closes, Griffin plans to construct an approximately 156,000 square foot industrial/warehouse building on the
Lehigh Valley Land. The closing of this purchase, anticipated to take place in fiscal 2019, is subject to several
conditions, including 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 25, 2016, Griffin entered into an Option Purchase Agreement (the “Simsbury Option Agreement”),
subsequently amended on January 22, 2019. Under the terms of the Simsbury Option Agreement, as amended, Griffin
granted the buyer an exclusive option to purchase approximately 280 acres of undeveloped land in Simsbury,
Connecticut for approximately $7,700. Through November 30, 2018, the buyer paid $260 of option fees to extend its
option period through January 25, 2019. In fiscal 2018, the buyer received approval from Connecticut’s regulatory
authority for the buyer’s planned use of the land, which is to generate solar electricity. Subsequent litigation challenging
that approval was settled thereby allowing the buyer to use the land to be purchased as planned. On January 24, 2019, the
buyer exercised its option to purchase the land under the Simsbury Option Agreement. As per the terms of the Simsbury
Option Agreement, as amended, closing on the land sale contemplated by the Simsbury Option Agreement, as amended,
is required to take place within 90 days from the date the buyer exercised its option to purchase the land. There is no
guarantee that the sale of land as contemplated under the Simsbury Option Agreement, as amended, 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.
11. Subsequent Events
In accordance with FASB ASC 855, “Subsequent Events,” Griffin has evaluated all events or transactions
occurring after November 30, 2018, 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, 2018, other than the disclosures herein.
72
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Griffin Industrial Realty, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Griffin Industrial Realty, Inc. and its subsidiaries (the
Company) as of November 30, 2018 and 2017, the related consolidated statements of operations, comprehensive income
(loss), changes in stockholders' equity and cash flows for each of the three years in the period ended November 30, 2018,
and the related notes to the consolidated financial statements and schedules (collectively, the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
November 30, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period
ended November 30, 2018, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company's internal control over financial reporting as of November 30, 2018 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 12, 2019 expressed an unqualified opinion on the
effectiveness of the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
/s/ RSM US LLP
We have served as the Company’s auditor since 2008.
New Haven, Connecticut
February 12, 2019
73
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, 2018 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, 2018, based on
the criteria established in the “2013 Internal Control—Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013. Based on its assessment and those criteria, management of the
Company has concluded that, as of November 30, 2018, 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, 2018, 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.
74
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Griffin Industrial Realty, Inc.
Opinion on the Internal Control Over Financial Reporting
We have audited Griffin Industrial Realty, Inc. and subsidiaries' (the Company) internal control over financial reporting
as of November 30, 2018, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of November 30, 2018, 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) (PCAOB), the consolidated financial statements of the Company and our report dated February 12, 2019
expressed an unqualified opinion.
Basis for Opinion
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 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 are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) 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 (3) 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.
/s/ RSM US LLP
New Haven, Connecticut
February 12, 2019
75
ITEM 9B. OTHER INFORMATION.
None.
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
78
49
51
72
74
52
62
52
61
56
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, 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
76
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.
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. also is a Director of United Bankshares, Inc. 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 is 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 as a consultant to assist the Audit Committee to fulfill its responsibilities.
77
The Audit Committee believes that this type of engagement provides it with additional expertise comparable to what
would be provided by an audit committee financial expert.
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 five meetings in fiscal 2018.
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, strategic direction and cybersecurity, 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 business including cybersecurity
threats and how those threats are managed;
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 2018.
78
Board Diversity; Selection and Evaluation of Director Candidates
The Board seeks to ensure that a majority of its members are independent within the Nasdaq listing standards.
In 2018, the Nominating Committee revised its statement on the Selection and Evaluation of Director Candidates to
reflect the Board’s value of diversity, including profession, geography, gender, ethnicity, skills and experience. The
Nominating Committee agreed that when it evaluates the desired skills and characteristics of prospective Board
members, it will include diversity, in its broadest sense, within the context of the composition of the Board as a whole.
The Nominating Committee shall select prospective Board members with personal and professional integrity, who have
demonstrated appropriate ability and judgment and who the Nominating Committee believes will be effective, in
conjunction with the other members of the Board, in collectively serving the long-term interests of Griffin and its
stockholders. In addition, directors must be committed to devoting the time and effort necessary to be responsible and
productive members of the Board.
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. Since 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 2018, all such Section 16(a) filing requirements were satisfied.
79
ITEM 11. EXECUTIVE COMPENSATION
This section discusses the material components of the executive compensation program for Griffin’s executive
officers who are named in the “Summary Compensation Table” below. As a “smaller reporting company” as defined in
Rule 12b-2 of the Exchange Act, Griffin is not required to include a Compensation Discussion and Analysis and has
elected to comply with the scaled disclosure requirements applicable to smaller reporting companies. Griffin’s named
executive officers (the “Named Executive Officers”) for the fiscal year ended November 30, 2018 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
Thomas M. Lescalleet . . . . . . . . . . . . . . . . . . . . . . Senior Vice President, Griffin Industrial, LLC
Summary Compensation Table
The following table presents information regarding compensation of each of Griffin’s Named Executive
Officers for services rendered during fiscal years 2018, 2017 and 2016:
Name and Principal Position
Frederick M. Danziger . . . . . . . . . . . . 2018 $ 350,000 $ — $
2017 $ 350,000 $ — $
2016 $ 369,308 $ — $
Executive Chairman
of Griffin
Year
($)
Salary
($)
Bonus
Option
Awards (1)
($)
Non-Equity
Incentive Plan
Compensation
($)
54,227 $
77,600 $
58,207 $
— $
— $
— $
All Other
Compensation
($)
Total
($)
151 (2) $
$
137
$
2,893
404,378
427,737
430,408
— $
Michael S. Gamzon . . . . . . . . . . . . . . 2018 $ 519,038 $ — $
2017 $ 509,039 $ — $
— $
2016 $ 485,760 $ — $ 640,750 $
President and Chief
Executive Officer of Griffin
118,580 $
174,863 $
116,413 $
653,403
15,785 (3) $
$
15,437
699,339
$ 1,256,704
13,781
Thomas M. Lescalleet . . . . . . . . . . . . 2018 $ 268,974 $ — $
— $
2017 $ 263,700 $ — $
— $
2016 $ 258,530 $ — $ 135,375 $
Senior Vice President,
Griffin Industrial, LLC
147,225 $
217,136 $
133,175 $
11,622 (4) $
$
11,440
$
12,213
427,821
492,276
539,293
(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 $252, matching contributions related to the Griffin 401(k) Savings Plan of
$7,297 and matching contributions related to the Deferred Compensation Plan of $8,236.
(4) Represents life insurance premium of $252, matching contributions related to the Griffin 401(k) Savings Plan of
$8,070 and a medical insurance allowance of $3,300.
80
Outstanding Equity Awards at Fiscal Year - End
The following table presents information with respect to each unexercised stock option held by Griffin’s Named
Executive Officers as of November 30, 2018. There are no restricted stock awards.
Option Awards (1)
Number of
Securities
Number of
Securities
Underlying Underlying
Unexercised Unexercised Option
Exercise
Options
(#)
Options
(#)
Exercisable Unexercisable
Price
($)
Option
Expiration
Value of
Value of
Unexercised Unexercised
In-the-Money
In-the-Money
Options at Options at
Fiscal Year
End (2)
($)
Fiscal Year
End (2)
($)
Name
Frederick M. Danziger . . . . . . . . . . . . . . . .
Date
— $ 28.77 1/19/2021 $ 167,000 $
Exercisable Unexercisable
—
Michael S. Gamzon . . . . . . . . . . . . . . . . . . .
— $ 28.77 1/19/2021 $ 167,000 $
55,000 $ 26.89 5/13/2026 $
55,000
—
— $ 470,800
$ 167,000 $ 470,800
25,000
25,000
—
25,000
Thomas M. Lescalleet . . . . . . . . . . . . . . . . .
—
12,500 $ 26.89 5/13/2026 $
— $ 107,000
(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 $35.45 per share (the closing price of Griffin’s common stock on November 30, 2018) and the exercise
price of each stock option.
Narrative to Summary Compensation Table and Additional Narrative Disclosure
As of November 30, 2018, 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 material compensation or
benefits, including any payments at, following, or in connection with a termination of employment, change in control or
change in the Named Executive Officer’s responsibilities. The narrative below describes the material elements of
compensation disclosed in the Summary Compensation Table above.
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. The annual base salaries of the Executive Chairman and the CEO
were determined by the Compensation Committee. The annual base salary of Mr. Lescalleet was determined by the
Executive Chairman and the CEO and approved by the Compensation Committee.
Annual Incentive Compensation Program
Each of the Named Executive Officers participated in the Griffin Industrial Realty, Inc. Incentive Compensation
Plan for fiscal year 2018 (the “Griffin Incentive Plan”), Under the Griffin Incentive Plan, incentive compensation was
awarded based on the achievement of certain specific performance measures in one or more of the following six
categories: (i) Adjusted Funds from Operations; (ii) Property Sales; (iii) Build-to-Suit Projects; (iv) Buildings Built on
Speculation; (v) Leasing; and (vi) Acquisitions. Each Named Executive Officer is entitled to a specific percentage of
each incentive compensation pool under the Griffin Incentive Plan based upon his responsibilities as determined by
senior management and approved by the Compensation Committee. Additionally, the Compensation Committee retains
the discretion to adjust incentive compensation awards to Griffin’s employees. The Compensation Committee did not
utilize such discretion to adjust any incentive compensation awards (or grant any discretionary bonus amounts) to
Griffin’s Named Executive Officers for fiscal 2018.
81
The maximum compensation amounts and amounts accrued under the Griffin Incentive Plan with respect to
each objective for fiscal 2018, based on the level of achievement of each incentive plan component, is shown in the
following table. The amounts in the table below reflect performance against each incentive plan component.
Incentive Plan Component
Adjusted Funds from Operations . . . . . . . . . . . . . . . $
Property Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Build-to-Suit Projects . . . . . . . . . . . . . . . . . . . . . . . .
Buildings Built on Speculation . . . . . . . . . . . . . . . .
Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum Aggregate
Amount of Incentive
Plan Component
562,500
250,000
250,000
250,000
180,000
200,000
1,692,500
$
Amount Earned
Based on Actual Level
of Achievement
$
$
508,583
44,909
150,000
—
126,313
—
829,805
The aggregate amount of $829,805 earned under the Griffin Incentive Plan is not expected to be fully allocated
and paid to Griffin employees for fiscal 2018. Incentive compensation for fiscal 2018 of approximately $760,000 is
expected to be paid to Griffin employees under such plan, with $320,032 of such amount paid to Named Executive
Officers. Such payments to the Named Executive Officers will be based on the specific percentages of each incentive
compensation pool as per the Griffin Incentive Plan.
Equity Compensation
No stock options were awarded to any of the Named Executive Officers or to any employee of Griffin in fiscal
2018. The currently outstanding stock options held by the Named Executive Officers Stock vest in equal installments on
the third, fourth and fifth anniversaries from the date of grant, subject to acceleration of vesting as set forth below.
While Griffin was not a party to any employment, change in control or other agreement with any Named
Executive Officers, 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, 2018, the closing market price of $35.45 per share of Griffin common stock exceeded the
exercise price for all of the outstanding options held by Named Executive Officers and the aggregate value of all
unvested options held by the Named Executive Officers (based on the excess of the November 30, 2018 closing price of
Griffin’s common stock over the exercise price) was $577,800. The individual awards for each Named Executive Officer
and the values thereof are set forth in the table in the Outstanding Equity Awards at Fiscal Year-End section above.
Deferred Compensation
Griffin maintains a Deferred Compensation Plan for certain of its employees, including the Named Executive
Officers, 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. Participants of Griffin’s Deferred
Compensation Plan may elect to have their balances paid out in a lump sum or annual installments upon termination of
employment or a change in control of Griffin. Griffin’s contributions to the Deferred Compensation Plan for
Mr. Gamzon in an amount equal to $8,236 is included in the “All Other Compensation” column of the Summary
Compensation Table. Messrs. Danziger and Lescalleet did not contribute to the Deferred Compensation Plan in fiscal
82
2018. No earnings from the Deferred Compensation Plan are included in the “All Other Compensation” column of the
Summary Compensation Table.
Director Compensation
The following table represents information regarding the compensation paid during fiscal 2018 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 narrative disclosure. Messrs. Frederick M. Danziger and Michael S. Gamzon did not receive compensation
related to their activities as members of the Board of Directors.
Fees
Name
David R. Bechtel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,500 $ 14,972 (1) $ 67,472
Edgar M. Cullman, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,000 $ 14,972 (1) $ 53,972
Thomas C. Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,500 $ 14,972 (1) $ 79,472
Jonathan P. May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,000 $ 14,972 (1) $ 76,972
Albert H. Small, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,500 $ 14,972 (1) $ 69,472
Earned or
Paid in Cash
($)
Option
Awards
($)
Total
($)
(1) The amount shown for Option Awards reflects the grant date fair value of options granted in fiscal 2018. 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, 2018:
Director
David R. Bechtel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Edgar M. Cullman, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas C. Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jonathan P. May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Albert H. Small, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subject to
Outstanding Options
as of 11/30/18
4,646
5,794
13,855
9,800
9,679
Number of Shares
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.
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
83
of Directors vest on the second anniversary of the date of grant. In 2018, Griffin granted each of the Non-Employee
Directors an option exercisable for 1,039 shares of common stock upon their reelection to the Board of Directors.
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, 2019.
Name and Address (1)
Cullman and Ernst Group (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,336,662
878,248
Edgar M. Cullman, Jr. (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
294,884
Frederick M. Danziger (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
113,656
Michael S. Gamzon (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,387
David R. Bechtel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
Beneficially Percent
of Total
Owned (2)
45.6
17.3
5.8
2.2
*
4 Brookside Park
Greenwich, CT 06831
Thomas C. Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,898
*
Ingleside Investors
12 East 49th Street
New York, NY 10017
Jonathan P. May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,447
116 East 95th Street
New York, NY 10128
Albert H. Small, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,502
7311 Arrowood Road
Bethesda, MD 20817
Anthony J. Galici . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,860
*
*
*
Griffin Industrial Realty, Inc.
204 West Newberry Road
Bloomfield, CT 06002
Thomas M. Lescalleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
*
Griffin Industrial, LLC
204 West Newberry Road
Bloomfield, CT 06002
Scott Bosco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,000
*
Griffin Industrial, LLC
204 West Newberry Road
Bloomfield, CT 06002
Gabelli Funds, LLC et al (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,636,522
32.3
Gabelli Funds, LLC
One Corporate Center
Rye, NY 10580
All directors and executive officers collectively, consisting of 10 persons (5) . . . . . . 1,385,882
26.8
* 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” or “SEC”). 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
84
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, 2019 as follows:
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, 2019
3,441
25,000
25,000
2,293
11,502
7,447
5,577
12,500
—
5,000
(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 with
Shares with
Shares
Beneficially
Owned
Sole Voting and Shared Voting
and Dispositive
Dispositive
Power
Name
Cullman Jr., Edgar M. . . . . . . . . . . . . . . . . . . . . . . . . .
Cullman, Susan R. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Danziger, Lucy C. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Danziger, David M. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gamzon, Rebecca D. . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernst, John L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sicher, Carolyn B. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cullman, Georgina D. . . . . . . . . . . . . . . . . . . . . . . . . .
Cullman, Elissa F. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cullman, Samuel B. . . . . . . . . . . . . . . . . . . . . . . . . . .
Cullman III, Edgar M. . . . . . . . . . . . . . . . . . . . . . . . . .
Danziger, Frederick M. . . . . . . . . . . . . . . . . . . . . . . . .
B Bros. Realty LLC (a) . . . . . . . . . . . . . . . . . . . . . . . .
Kirby, John J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fabrici, Carolyn S. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gamzon, Michael S. . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernst, Alexandra . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Danziger, Sheena S. . . . . . . . . . . . . . . . . . . . . . . . . . .
Kerns, Jessica P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estate of Louise B. Cullman (b) . . . . . . . . . . . . . . . . .
Ernst, Margot P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ernst, Matthew L. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
878,248
785,121
584,103
468,372
386,996
380,955
344,029
340,149
325,449
324,193
321,858
294,884
233,792
152,223
116,037
113,656
94,428
50,000
45,134
39,548
21,777
5,176
53,049
42,760
85,286
59,402
10,550
7,349
21,422
9,550
14,850
13,594
11,259
90,129
233,792
4,730
—
63,656
1,748
—
1,250
39,548
—
1,650
Power
825,199
742,361
498,817
408,970
376,446
373,606
322,607
330,599
310,599
310,599
310,599
204,755
—
147,493
116,037
50,000
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.
85
(4) Griffin has received a copy of Schedule 13D/A and Schedule 13G/A as filed with the Commission by Gabelli
Funds, LLC et al, reporting ownership of these shares as of July 10, 2018 and December 31, 2018, respectively. As
reported in said Schedule 13D/A and Schedule 13G/A, Gabelli Funds, LLC reports sole dispositive power with
respect to 571,201 shares, GAMCO Asset Management Inc. (“GAMCO”) reports sole voting power with respect to
756,621 of these shares and sole dispositive power with respect to 810,321 of these shares and Teton Advisors, Inc.
(“Teton Advisors”) reports sole voting and dispositive power with respect to 255,000 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 41,100 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 62,000 shares held by the Gabelli Value 25 Fund, Inc., the 272,600 shares held by the
Gabelli Small Cap Growth Fund, the 9,000 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
Plan Category
Equity compensation plan approved by security holders . . . .
Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
(a)
Weighted Average
exercise
price of
outstanding
options, warrants
and rights
(b)
Number of securities
remaining available for future
issuance under the equity
compensation plan (excluding
securities reflected in
column (a))
(c)
224,001 $
28.20
174,402
Note: There are no equity compensation plans that were not approved by security holders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.
Transactions with Related Persons
On November 24, 2015, the Audit Committee approved a ten year sublease whereby Griffin leased
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 was at market rates for such space at the time the sublease was entered into
and enables either Griffin or Bloomingdale Properties to terminate the sublease agreement upon a change in control (as
defined therein) 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
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.
86
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 2018 and fiscal 2017:
Fiscal
2017 Fees
Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 452,947 $ 430,781
70,400
20,585
Audit-related fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,375
50,675
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
All other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 572,722 $ 502,041
Fiscal
2018 Fees
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 in fiscal
2018 reflect fees for professional services rendered by RSM US in connection with Griffin’s filing of a universal shelf
registration statement and a prospectus supplement for an “at-the-market” equity offering program and fees for the audit
of the Griffin 401(k) Savings Plan by RSM US. Audit - related fees in fiscal 2017 reflect fees 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 2018
or fiscal 2017.
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 2018, 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.
87
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
PART IV
(a)(1) Financial Statements of Griffin Industrial Realty, Inc. See Item 8.
Consolidated Balance Sheets as of November 30, 2018 and November 30, 2017 . . . . . . . . . . . . . . . . . . .
43
Consolidated Statements of Operations for the Fiscal Years Ended November 30, 2018,
November 30, 2017 and November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44
Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years Ended
November 30, 2018, November 30, 2017 and November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45
Consolidated Statements of Changes in Stockholders’ Equity for the Fiscal Years Ended
November 30, 2018, November 30, 2017 and November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
Consolidated Statements of Cash Flows for the Fiscal Years Ended November 30, 2018,
November 30, 2017 and November 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47
48
(a)(2) Financial Statement Schedules
II—Valuation and Qualifying Accounts and Reserves
III—Real Estate and Accumulated Depreciation
(a)(3) Exhibits
88
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
10 - Q 001 - 12879 10.21 10/11/02
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
10.5 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
89
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
90
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
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
Incorporated by Reference
Form File No.
8 - K
001 - 12879 10.3
Exhibit
Filing
Date
6/9/14
Filed/
Furnished
Herewith
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
10 - Q 001 - 12879 10.39 10/9/15
10 - Q 001 - 12879 10.40 10/9/15
and 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
91
Exhibit
Number
Exhibit Description
10.51 Open - End Mortgage, Assignment of Leases and Rents
Form File No.
10 - K 001-12879 10.50 2/10/17
Exhibit
Filing
Date
Filed/
Furnished
Herewith
Incorporated by Reference
and 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
10 - K 001-12879 10.51 2/10/17
and 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 - K 001-12879 10.60 2/8/18
10.61 Amended and Restated Open-End Mortgage Deed and
10-K 001-12879 10.61 2/8/18
Security Agreement dated January 30, 2018 between
Tradeport Development V, LLC and People’s United
Bank, N.A.
10.62 $14,287,500 Promissory Note dated March 29, 2018
10.63 Open-End Construction Mortgage Deed and Security
10-Q 001-12879 10.62 7/10/18
10-Q 001-12879 10.63 7/10/18
Agreement by Tradeport Development VI, LLC in favor
of and for the benefit of State Farm Life Insurance
Company dated March 29, 2018
10.64 Construction Loan Agreement by and between State Farm
Life Insurance Company and Tradeport Development VI,
LLC dated March 29, 2018
10-Q 001-12879 10.64 7/10/18
10.65 Sales Agreement dated May 10, 2018 by and between
8-K
001-12879 1.1
5/10/18
Griffin Industrial Realty, Inc. and Robert W. Baird & Co.
Incorporated
21 Subsidiaries of Griffin Industrial Realty, Inc.
*
92
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form File No.
Exhibit
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
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
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
93
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.
GRIFFIN INDUSTRIAL REALTY, INC.
Signatures
Date: April 5, 2019
BY:
/s/ ANTHONY J. GALICI
Anthony J. Galici
Vice President, Chief Financial Officer and
Secretary, Principal Accounting Officer
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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 14, 2019 at the DoubleTree by Hilton Hotel,
569 Lexington Avenue, New York, NY 10022.
G R I F
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.
2018 ANNUAL REPORT
Griffin Industrial Realty, Inc.
641 Lexington Avenue - 26th Floor
New York, NY 10022
(212) 218 - 7910
www.griffinindustrial.com