UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED May 31, 2020

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number 1-12879

GRIFFIN INDUSTRIAL REALTY, INC.

(Exact name of registrant as specified in its charter)


Delaware		06-0868496
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

641 Lexington Avenue, New York, New York		10022
(Address of principal executive offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (212) 218-7910

______________________________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	GRIF	The Nasdaq Stock Market LLC

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 (§ 232.405 of this chapter) 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 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 ☐	Accelerated filer ☒
Non-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 Exchange Act). Yes ☐ No ☒

Number of shares of Common Stock outstanding at July 7, 2020: 5,131,147

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PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

GRIFFIN INDUSTRIAL REALTY, INC.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

(unaudited)


	May 31, 2020		Nov. 30, 2019
ASSETS
Real estate assets at cost, net	$	247,157	$	238,614
Cash and cash equivalents		4,027		5,874
Short-term investments		—		1,011
Deferred income taxes		4,785		3,281
Real estate assets held for sale		6,940		2,137
Other assets		17,813		17,578
Total assets	$	280,722	$	268,495

LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage loans, net of debt issuance costs	$	158,375	$	142,575
Deferred revenue		8,886		10,918
Revolving lines of credit		4,100		5,875
Accounts payable and accrued liabilities		4,237		4,318
Dividend payable		—		2,538
Other liabilities		17,460		11,509
Total liabilities		193,058		177,733
Commitments and Contingencies (Note 9)
Stockholders' Equity
Common stock, par value $0.01 per share, 10,000,000 shares authorized, 5,724,070 and 5,668,043 shares issued, respectively, and 5,131,147 and 5,075,120 shares outstanding, respectively		57		57
Additional paid-in capital		116,096		113,256
(Deficit) Retained earnings		(94)		919
Accumulated other comprehensive loss, net of tax		(8,066)		(3,141)
Treasury stock, at cost, 592,923 shares		(20,329)		(20,329)
Total stockholders' equity		87,664		90,762
Total liabilities and stockholders' equity	$	280,722	$	268,495

See Notes to Consolidated Financial Statements.

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GRIFFIN INDUSTRIAL REALTY, INC.

Consolidated Statements of Operations

(dollars in thousands, except per share data)

(unaudited)


	For the Three Months Ended				For the Six Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Rental revenue	$	9,214	$	8,421	$	18,128	$	16,858
Revenue from property sales		101		8,660		851		9,526
Total revenue		9,315		17,081		18,979		26,384

Operating expenses of rental properties		2,470		2,419		5,326		5,084
Depreciation and amortization expense		3,359		2,939		6,594		5,881
General and administrative expenses		2,438		1,809		4,495		3,899
Costs related to property sales		19		1,009		185		1,823
Total expenses		8,286		8,176		16,600		16,687

Gain on insurance recovery		—		126		—		126
Operating income		1,029		9,031		2,379		9,823

Interest expense		(1,899)		(1,618)		(3,691)		(3,268)
Investment income		2		89		28		181
(Loss) income before income tax benefit (provision)		(868)		7,502		(1,284)		6,736
Income tax benefit (provision)		175		(1,683)		271		(1,503)
Net (loss) income	$	(693)	$	5,819	$	(1,013)	$	5,233


Basic net (loss) income per common share	$	(0.14)	$	1.15	$	(0.20)	$	1.03

Diluted net (loss) income per common share	$	(0.14)	$	1.14	$	(0.20)	$	1.03

See Notes to Consolidated Financial Statements.

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GRIFFIN INDUSTRIAL REALTY, INC.

Consolidated Statements of Comprehensive Income (Loss)

(dollars in thousands)

(unaudited)


	For the Three Months Ended				For the Six Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Net (loss) income	$	(693)	$	5,819	$	(1,013)	$	5,233

Other comprehensive loss, net of tax:
Reclassifications included in net loss		244		26		339		68
Unrealized loss on cash flow hedges		(2,740)		(2,754)		(5,264)		(4,254)
Total other comprehensive loss, net of tax		(2,496)		(2,728)		(4,925)		(4,186)
Total comprehensive (loss) income	$	(3,189)	$	3,091	$	(5,938)	$	1,047

See Notes to Consolidated Financial Statements.

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GRIFFIN INDUSTRIAL REALTY, INC.

Consolidated Statements of Changes in Stockholders’ Equity

For the Six Months Ended May 31, 2020 and 2019

(dollars in thousands)

(unaudited)


	Shares of			Additional		(Deficit)		Accumulated Other
	Common Stock	Common		Paid-in		Retained		Comprehensive		Treasury
	Issued	Stock		Capital		Earnings		Income (Loss)		Stock		Total
Balance at November 30, 2018	5,635,706	$	56	$	112,071	$	(211)	$	2,395	$	(19,483)	$	94,828
Stock-based compensation expense	—		—		184		—		—		—		184
Exercise of stock options, including shares tendered related to stock options exercised and tax withholdings	29,838		1		856		—		—		(846)		11
Net income	—		—		—		5,233		—		—		5,233
Total other comprehensive loss, net of tax	—		—		—		—		(4,186)		—		(4,186)
Balance at May 31, 2019	5,665,544	$	57	$	113,111	$	5,022	$	(1,791)	$	(20,329)	$	96,070

Balance at November 30, 2019	5,668,043	$	57	$	113,256	$	919	$	(3,141)	$	(20,329)	$	90,762
Stock-based compensation expense	—		—		260		—		—		—		260
Exercise of stock options	2,734		—		80		—		—		—		80
Sale of common stock	53,293		—		2,500		—		—		—		2,500
Net loss	—		—		—		(1,013)		—		—		(1,013)
Total other comprehensive loss, net of tax	—		—		—		—		(4,925)		—		(4,925)
Balance at May 31, 2020	5,724,070	$	57	$	116,096	$	(94)	$	(8,066)	$	(20,329)	$	87,664

See Notes to Consolidated Financial Statements.

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GRIFFIN INDUSTRIAL REALTY, INC.

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)


	For the Six Months Ended
	May 31, 2020		May 31, 2019
Operating activities:
Net (loss) income	$	(1,013)	$	5,233
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		6,594		5,881
Noncash rental revenue including straight-line rents		(1,052)		(1,008)
Gain on sales of properties		(666)		(7,703)
Deferred income taxes		(271)		1,503
Stock-based compensation expense		260		184
Amortization of debt issuance costs		211		146
Gain on insurance recovery		—		(126)
Payment of employee withholding taxes on options exercised		—		(87)
Amortization of terminated swap agreement		—		31
Changes in assets and liabilities:
Other assets		1,904		987
Accounts payable and accrued liabilities		(34)		(683)
Deferred revenue		(1,282)		(946)
Other liabilities		(1,827)		61
Net cash provided by operating activities		2,824		3,473

Investing activities:
Acquisition of land and buildings		(13,670)		—
Additions to real estate assets		(6,330)		(7,549)
Changes in short-term investments, net		1,011		5,000
Proceeds from sales of properties, net of expenses		828		9,188
Deferred leasing costs and other		(439)		(293)
Proceeds from sales of properties deposited in escrow		—		(7,628)
Net cash used in investing activities		(18,600)		(1,282)

Financing activities:
Proceeds from mortgage and construction loans		21,500		288
Principal payments on mortgage loans		(5,445)		(1,924)
Dividends paid to stockholders		(2,538)		(2,279)
Sale of common stock		2,500		—
Net repayments on revolving lines of credit		(1,775)		—
Payment of debt issuance costs		(393)		—
Proceeds from exercise of stock options		80		98
Net cash provided by (used in) financing activities		13,929		(3,817)
Net decrease in cash and cash equivalents		(1,847)		(1,626)
Cash and cash equivalents at beginning of period		5,874		8,592
Cash and cash equivalents at end of period	$	4,027	$	6,966

See Notes to Consolidated Financial Statements.

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GRIFFIN INDUSTRIAL REALTY, INC.

Notes to Consolidated Financial Statements

(dollars in thousands unless otherwise noted, except per share data)

(unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

Griffin Industrial Realty, Inc. ("Griffin") is a real estate business principally engaged in developing, acquiring, managing and leasing industrial/warehouse properties. Griffin 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. Griffin also owns several office/flex properties and undeveloped land. Periodically, Griffin may sell certain of its real estate assets 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 consolidated financial statements reflect its accounts and its consolidated subsidiaries. Griffin consolidates the subsidiaries it controls through (i) voting rights or similar rights or (ii) by means other than voting rights if Griffin is the primary beneficiary of a variable interest entity (“VIE”). There are no VIEs in which Griffin is not a primary beneficiary.

Griffin may acquire property using a reverse like-kind exchange structure (a “Reverse 1031 Like-Kind Exchange”) under Section 1031 of the Internal Revenue Code of 1986, as amended, to defer taxable gains on the subsequent sale of real estate property. As such, the acquired property (the “Parked Property”) is in the possession of a qualified intermediary engaged to execute the Reverse 1031 Like-Kind Exchange until the subsequent sale transaction and the Reverse 1031 Like-Kind Exchange are completed. Griffin retains essentially all of the legal and economic benefits and obligations related to the Parked Property prior to the completion of the Reverse 1031 Like-Kind Exchange. As such, a Parked Property is included in Griffin’s consolidated financial statements as a consolidated VIE until legal title is transferred to Griffin upon completion of the Reverse 1031 Like-Kind Exchange.

These financial statements have been prepared in conformity with the standards of accounting measurement set forth by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 270, “Interim Reporting” and in accordance with the accounting policies stated in Griffin’s audited consolidated financial statements for the fiscal year ended November 30, 2019 (“fiscal 2019”) included in Griffin’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on February 13, 2020. These financial statements should be read in conjunction with the Notes to Consolidated Financial Statements appearing in that report. All adjustments, comprising only normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim periods, have been reflected and all intercompany transactions have been eliminated. The consolidated balance sheet data as of November 30, 2019 was derived from Griffin’s audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. Griffin regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation expense, deferred income tax asset valuations and the valuation of derivative instruments. Griffin bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by Griffin may differ materially and adversely from Griffin’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Griffin considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. At May 31, 2020 and November 30, 2019, $2,637 and $4,299, respectively, of the cash and cash equivalents included on Griffin’s consolidated balance sheets were held in cash equivalents. Griffin’s short-term investments at November 30, 2019 were comprised of repurchase agreements with Webster Bank, N.A. (“Webster

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Bank”) that were collateralized with securities issued by the United States Government or its sponsored agencies and were accounted for as held-to-maturity securities under FASB ASC 320, “Investments – Debt and Equity Securities” (“ASC 320”). The repurchase agreements were carried at their resell amounts, which approximated fair value due to their short-term nature. Interest on repurchase agreements was reflected as interest receivable that was included in other assets.

As of May 31, 2020, Griffin was a party to twelve 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.

The results of operations for the three months ended May 31, 2020 (the “2020 second quarter”) and the six months ended May 31, 2020 (the “2020 six month period”) are not necessarily indicative of the results to be expected for the full year. The three months and six months ended May 31, 2019 are referred to herein as the “2019 second quarter” and “2019 six month period,” respectively. Certain amounts from the 2019 six month period have been reclassified to conform to the current fiscal period’s presentation.

COVID-19

During and subsequent to the 2020 six month period, the world has been impacted by the spread of the coronavirus (COVID-19), which has created significant economic uncertainty and volatility. The full extent to which the coronavirus pandemic impacts Griffin’s business, operations, liquidity and financial results will depend on numerous evolving factors that Griffin is not able to predict at this time, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact on economic activity from the pandemic and actions taken in response; the effect on Griffin’s tenants and their businesses; the ability of tenants to make their rental payments; any closures of tenants’ facilities; the ability of existing or prospective tenants to evaluate or enter into leases; and Griffin’s ability to complete property sales. Any of these events could materially adversely impact Griffin’s business, financial condition, results of operations or stock price.

Griffin collected essentially 100% of April 2020 rent and 99% of rent in each of May and June 2020. In March and April 2020, Griffin received aggregate rent relief requests from tenants representing 22% of total monthly rent. Griffin has not received any new requests for rent relief subsequent to April 30, 2020. Griffin has not finalized agreements with the three tenants whose rent relief requests remain outstanding. Based on the current discussions, the anticipated amount of rent relief granted to the three tenants whose requests remain outstanding would equate to less than 1% of Griffin's total annual rental revenue. All other requests for rent relief were either denied by Griffin or the tenants withdrew their requests.

Recent Accounting Pronouncements Adopted

In February 2016, the FASB issued Accounting Standards Update (“ASU” or “Update”) 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 U.S. GAAP. Leases are 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 and ASU No. 2018-11,

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“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. 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 FASB ASC Topic 840, “Leases.” In December 2018, the FASB issued ASU No. 2018-20, “Leases (Topic 842): Narrow Scope Improvements for Lessors,” which provides clarification on implementation issues associated with adopting ASU No. 2016-02. In March 2019, the FASB issued ASU No. 2019-01, “Leases (Topic 842): Codification Improvements,” which clarifies the determination of fair value of an underlying asset by lessors that are not manufacturers or dealers, presentation on the statement of cash flows for sales-type and direct financing leases and transition issues related to Topic 250, Accounting Changes and Error Corrections.

Griffin used the modified retrospective method upon adoption of ASU No. 2016-02, ASU No. 2018-10, ASU No. 2018-11, ASU No. 2018-20 and ASU No. 2019-01 when they became effective for Griffin on December 1, 2019, and, therefore, Griffin did not restate any comparative periods. Upon adoption, Griffin elected the package of practical expedients permitted under the transition guidance, which permits Griffin to not reassess its prior conclusions about lease identification, lease classification and initial direct costs. Griffin elected to combine the non-lease components of common area maintenance charges with the related lease components. Griffin did not elect the practical expedient to use hindsight in determining the lease term and in assessing impairment of right-of-use assets. Griffin did elect the practical expedient pertaining to land easements that allows an entity to choose to not apply ASC 842 to certain existing land easements at transition. Griffin made an accounting policy election to keep leases with an initial term of twelve months or less off of the balance sheet. Griffin’s leases with its tenants were classified as operating leases under previous guidance and remained operating leases upon the adoption of ASC 842, therefore, as a lessor there was no significant impact upon adoption. As a lessee, Griffin has two operating leases that resulted in the recognition of ROU assets of $858 and lease liabilities of $858 related to Griffin’s executive office in New York City at the time of adoption. The adoption of ASC 842 did not have a material impact on Griffin’s consolidated statements of operations or cash flows.

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. 2017-12 makes more financial and nonfinancial hedging strategies eligible for hedge accounting, amends the presentation and disclosure requirements and changes how entities assess effectiveness. In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which provides clarification on implementation issues associated with adopting ASU No. 2017-12. ASU No. 2017-12 and ASU No. 2019-04 each became effective for Griffin on December 1, 2019. The application of ASU No. 2017-12 and ASU No. 2019-04 did not have an impact on Griffin’s 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 became effective for Griffin on December 1, 2019. The application of ASU No. 2018-07 did not have an impact on Griffin’s consolidated financial statements.

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.” ASU No. 2018-16 permits the use of the Swap OIS Rate (“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. The amendments in ASU No. 2018-16 were required to be adopted concurrently with the amendments in ASU No. 2017-12, therefore, ASU No. 2018-16 became effective for Griffin on December 1, 2019. The application of ASU No. 2018-16 did not have an impact on Griffin’s consolidated financial statements.

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During the 2020 six month period, Griffin did not transfer any assets or liabilities into or out of Levels 1 or 2. The following are Griffin’s financial assets and liabilities carried at fair value and measured at fair value on a recurring basis:


	May 31, 2020
	Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Interest rate swap liabilities	$	—	$	10,210	$	—


	November 30, 2019
	Quoted Prices in		Significant		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Interest rate swap liabilities	$	—	$	4,052	$	—

The carrying and estimated fair values of Griffin’s financial instruments are as follows:


	Fair Value	May 31, 2020				November 30, 2019
	Hierarchy	Carrying		Estimated		Carrying		Estimated
	Level	Value		Fair Value		Value		Fair Value
Financial assets:
Cash and cash equivalents	1	$	4,027	$	4,027	$	5,874	$	5,874
Short-term investments	2	$	—	$	—	$	1,011	$	1,011
Financial liabilities:
Mortgage loans, net of debt issuance costs	2	$	158,375	$	161,842	$	142,575	$	145,235
Revolving lines of credit	2	$	4,100	$	4,100	$	5,875	$	5,875
Interest rate swap liabilities	2	$	10,210	$	10,210	$	4,052	$	4,052

The amounts included in the consolidated financial statements for cash and cash equivalents, short-term investments, leasing receivables from tenants and accounts payable and accrued liabilities approximate their fair values because of the short-term maturities of these instruments. The amount included in the consolidated financial statements for the revolving lines of credit approximate their fair values because of their variable interest rates. The fair values of the mortgage loans, net of debt issuance costs, are estimated based on current rates offered to Griffin for similar debt of the same remaining maturities and, additionally, Griffin considers its credit worthiness in determining the fair value of its mortgage loans. The fair values of the interest rate swaps (used for purposes other than trading) are determined based on discounted cash flow models that incorporate the cash flows of the derivatives as well as the current OIS 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.

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3. Real Estate Assets

Real estate assets consist of:


	Estimated
	Useful Lives	May 31, 2020		Nov. 30, 2019
Land		$	32,753	$	30,750
Land improvements	10 to 30 years		45,508		40,992
Buildings and improvements	10 to 40 years		236,621		220,086
Tenant improvements	Shorter of useful life or terms of related lease		32,939		30,318
Machinery and equipment	3 to 20 years		10,958		7,557
Construction in progress			3,745		3,542
Development costs			5,169		10,404
			367,693		343,649
Accumulated depreciation			(120,536)		(105,035)
		$	247,157	$	238,614

Total depreciation expense and capitalized interest related to real estate assets were as follows:


	For the Three Months Ended				For the Six Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Depreciation expense	$	2,967	$	2,599	$	5,830	$	5,190

Capitalized interest	$	—	$	87	$	—	$	129

Real estate assets held for sale consist of:


	May 31, 2020		Nov. 30, 2019
Land	$	508	$	323
Land improvements		269		388
Buildings and improvements		—		417
Development costs		6,163		1,009
	$	6,940	$	2,137

On March 9, 2020, Griffin, through a consolidated VIE, purchased 170 Sunport Lane (“170 Sunport”), an approximately 68,000 square foot industrial/warehouse building in Orlando, Florida for $5,749, including acquisition costs. Griffin provided all of the funding to the VIE to purchase 170 Sunport and determined that the fair value of the assets acquired approximated the purchase price. The $5,749 purchase price represented the cost of the assets which were allocated to the real estate assets on a relative fair value basis. The real estate assets primarily reflect the building and land improvements that are being depreciated principally over forty years and building and land improvements that are being depreciated over a period of fifteen years.

On February 18, 2020, Griffin, through a consolidated VIE, purchased 3320 Maggie Boulevard (“3320 Maggie”), an approximately 108,000 square foot industrial/warehouse building in Orlando, Florida for $7,921, including acquisition costs. Griffin provided all of the funding to the VIE to purchase 3320 Maggie and determined that the purchase price represented the cost of the assets which were allocated to the real estate assets on a relative fair value basis. Of the $7,921 purchase price, $7,941 represented the relative fair value of real estate assets, $770 represented the relative fair value of the acquired intangible asset and $790 represented the relative fair value of the acquired intangible liability, comprised of the value of the below market lease at the time of acquisition (see Notes 2 and 8). The intangible asset is included in other assets and the intangible liability is included in other liabilities on Griffin’s consolidated balance sheet. The real estate assets primarily reflect the building and land improvements that are being depreciated principally over forty years and building and tenant improvements that are being depreciated over a period of seven years. The intangible liability is being amortized over the term of the lease.

The acquisitions of 170 Sunport and 3320 Maggie were made utilizing Reverse 1031 Like-Kind Exchanges that were entered into at the time the properties were acquired. As such, as of May 31, 2020, 170 Sunport and 3320 Maggie

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are in the possession of a qualified intermediary engaged to execute the Reverse 1031 Like-Kind Exchanges until the potential real estate sales transactions and the Reverse 1031 Like-Kind Exchanges are completed. Griffin retains essentially all of the legal and economic benefits and obligations related to 170 Sunport and 3320 Maggie prior to the completion or termination of the Reverse 1031 Like-Kind Exchanges. Accordingly, 170 Sunport and 3320 Maggie are included in Griffin’s consolidated financial statements as consolidated VIEs until legal title is transferred to Griffin upon completion of the Reverse 1031 Like-Kind Exchanges.

In the 2020 six month period, real estate assets held for sale increased by $4,803, reflecting: (a) an increase of $5,987 from real estate assets transferred into real estate assets held for sale as a result of entering into agreements to sell such real estate; partially offset by (b) a decrease of $1,084 from real estate assets held for sale being transferred back into real estate assets, as a result of the termination of agreements to sell such real estate assets; and (c) a reduction of $100 for a property sale that closed. The real estate assets held for sale that were returned to real estate assets, in the 2020 six month period were Griffin’s farm in Quincy, Florida and the approximately 7,200 square foot restaurant building in Griffin Center in Windsor, Connecticut.

4. Mortgage Loans

Griffin’s mortgage and construction loans consist of:


	May 31, 2020		Nov. 30, 2019
4.72%, due October 3, 2022 *	$	4,122	$	4,174
4.39%, due January 2, 2025 *		18,804		19,101
4.17%, due May 1, 2026 *		12,923		13,115
3.79%, due November 17, 2026 *		24,341		24,701
4.39%, due August 1, 2027 *		9,904		10,034
3.97%, due September 1, 2027		11,557		11,673
4.57%, due February 1, 2028 *		17,855		18,069
5.09%, due July 1, 2029		5,492		5,725
5.09%, due July 1, 2029		3,848		4,011
3.60%, due January 2, 2030 *		6,446		—
3.48%, due February 1, 2030		14,906		—
4.33%, due August 1, 2030		16,456		16,634
4.51%, due April 1, 2034		13,874		14,030
3.91%, due January 27, 2020 *		—		3,206
Nonrecourse mortgage loans		160,528		144,473
Debt issuance costs		(2,153)		(1,898)
Nonrecourse mortgage loans, net of debt issuance costs		158,375		142,575

*Variable rate loans. Griffin has entered into interest rate swap agreements to effectively fix the interest rates on these loans to the rates reflected above.

Griffin’s weighted average interest rate on its mortgage loans, including the effect of its interest rate swap agreements, was 4.21% and 4.31% as of May 31, 2020 and November 30, 2019, respectively. As of May 31, 2020, Griffin was a party to twelve interest rate swap agreements related to its variable rate nonrecourse mortgage loans 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 May 31, 2020, and none is anticipated over the term of the agreements. Amounts in AOCI will be reclassified into interest expense over the term of the swap agreements to achieve fixed interest rates on each variable rate mortgage. None of the interest rate swap agreements contain any credit risk related contingent features. In the 2020 and 2019 six month periods, Griffin recognized losses, included in other comprehensive income, before taxes of $6,158 and $5,365, respectively, on its interest rate swap agreements. As of May 31, 2020, $1,963 was expected to be reclassified over the next twelve months to AOCI from interest expense. As of May 31, 2020, the net fair value of Griffin’s interest rate swap agreements was a liability of $10,210, which is included in other liabilities on Griffin’s consolidated balance sheet.

On December 20, 2019, two wholly-owned subsidiaries of Griffin entered into a nonrecourse mortgage loan (the “2019 Webster Mortgage”) with Webster Bank for $6,500. The 2019 Webster Mortgage is collateralized by

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7466 Chancellor Drive (“7466 Chancellor”), an approximately 100,000 square foot industrial/warehouse building in Orlando, Florida, that was acquired on October 25, 2019. The 2019 Webster Mortgage has a ten-year term with monthly principal payments based on a twenty-five-year amortization schedule. The interest rate for the 2019 Webster Mortgage is a floating rate of the one month LIBOR rate plus 1.75%. At the time the 2019 Webster Mortgage closed, Griffin entered into an interest rate swap agreement with Webster Bank that effectively fixes the interest rate of the 2019 Webster Mortgage at 3.60% for the entire loan term. $5,875 of the proceeds from the 2019 Webster Mortgage were used to repay Webster Bank for the borrowing under Griffin’s Acquisition Credit Line (as defined below) that was used to finance a portion of the purchase price of 7466 Chancellor (see Note 5).

On January 23, 2020, two wholly-owned subsidiaries of Griffin closed on a nonrecourse mortgage loan (the “2020 State Farm Mortgage”) with State Farm Life Insurance Company for $15,000. The 2020 State Farm Mortgage is collateralized by two industrial/warehouse buildings in the Lehigh Valley of Pennsylvania, 6975 Ambassador Drive and 871 Nestle Way, that aggregate approximately 254,000 square feet. The 2020 State Farm Mortgage has a ten-year term with monthly principal payments based on a twenty-five-year amortization schedule. The interest rate for the 2020 State Farm Mortgage is 3.48%. $3,191 of the proceeds from the 2020 State Farm Mortgage were used to repay the mortgage loan on 871 Nestle Way that was scheduled to mature on January 27, 2020.

On June 30, 2020, a wholly-owned subsidiary of Griffin (the “Borrower”) closed on a nonrecourse mortgage loan (the “2020 Webster Mortgage”) with Webster Bank for $5,100. The 2020 Webster Mortgage is collateralized by 3320 Maggie, which was acquired on February 18, 2020. The 2020 Webster Mortgage has a ten-year term with monthly principal payments based on a twenty-five year amortization schedule. The interest rate for the 2020 Webster Mortgage is a floating rate of the one month LIBOR rate plus 2.56%. At the time the 2020 Webster Mortgage closed, Griffin entered into an interest rate swap agreement with Webster Bank that effectively fixes the interest rate of the 2020 Webster Mortgage at 3.50% for the entire loan term. $4,100 of the proceeds from the 2020 Webster Mortgage were used to repay Webster Bank for the borrowing under Griffin’s Acquisition Credit Line that was used to finance a portion of the purchase price of 3320 Maggie (see Note 5).

Under the terms of the 2020 Webster Mortgage, the Borrower must maintain a minimum debt service coverage ratio (the “DSCR”), calculated by dividing the trailing twelve months net operating income of 3320 Maggie by the debt service on the 2020 Webster Mortgage for the DSCR test period, as further described under the terms of the 2020 Webster Mortgage, equal to or greater than 1.25 times, and the Loan to Value Ratio (as defined and further described under the 2020 Webster Mortgage) may not exceed 65%. The terms of the 2020 Webster Mortgage require that commencing on January 1, 2024, an annual amount equal to a total of $1.00 per square foot shall be deposited by the Borrower into an escrow account with Webster Bank until such escrow account balance reaches $300. Subject to certain terms and conditions under the 2020 Webster Mortgage, (i) the funds in the escrow account may be released by Webster Bank upon extension of 3320 Maggie’s existing lease, or entry into any other Approved Lease (as defined and further described under the 2020 Webster Mortgage) on terms and conditions acceptable to Webster Bank, in each case for a term that runs for a minimum of one year beyond the maturity date of the 2020 Webster Mortgage, or (ii) a portion of the funds in the escrow account may be released by Webster Bank for tenant improvements and lease commissions related to Approved Leases.

5. Revolving Credit Agreements

Griffin has a $19,500 revolving credit line (the “Webster Credit Line”) with Webster Bank that is scheduled to expire on September 30, 2021, with an option to extend for an additional year through September 30, 2022. Interest on borrowings under the Webster Credit Line are at the one-month LIBOR rate plus 2.50%. In the event that Webster Bank determines that LIBOR is no longer available, the Amended Webster Credit Line contemplates that Webster Bank shall transition to a comparable rate of interest to the LIBOR rate. Under the terms of the Revolving Credit Line Amendment, Griffin must maintain: (a) a maximum loan to value ratio of 72%; (b) a minimum liquidity, as defined in the Revolving Credit Line Amendment, of $5,000; and (c) a fixed charge coverage ratio, defined as EBITDA minus cash income taxes and dividends paid divided by debt service (the “Fixed Charge Coverage Ratio”), of at least 1.1 to 1.0.

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The Webster Credit Line is collateralized by Griffin’s properties in Griffin Center South in Bloomfield, Connecticut, aggregating approximately 235,000 square feet, an approximately 48,000 square foot single-story office building in Griffin Center in Windsor, Connecticut and an approximately 31,000 square foot industrial/warehouse building in Bloomfield, Connecticut. As of May 31, 2020, there were no borrowings against the Webster Credit Line, however, the Webster Credit Line secured certain unused standby letters of credit aggregating $484 that are related to Griffin's development activities.

On June 30, 2020, in connection with the 2020 Webster Mortgage, Griffin and Webster Bank entered into a letter agreement (the “Side Note”) amending the Webster Credit Line. Under the terms of the Side Note, an amount equal to one year’s debt service ($306) on the 2020 Webster Mortgage will be carved out and not available to be borrowed (the “Holdback”) under the Line of Credit. If the debt service is not paid on the 2020 Webster Mortgage, Webster Bank would be able to advance funds from the Webster Credit Line as needed to make monthly payments of debt service under the 2020 Webster Mortgage. The provisions regarding the Holdback expire on September 30, 2021, the maturity date of the Webster Credit Line, and any extension to the maturity date of the Webster Credit Line will not apply to the Holdback.

Griffin also has a credit line of $15,000 with Webster Bank that is to be used to finance property acquisitions (the “Acquisition Credit Line”). The Acquisition Credit Line is unsecured, expires on September 30, 2021 with an option to extend for an additional year through September 30, 2022, and may be used to fund up to 65% of the purchase price of real estate acquisitions. Interest on advances under the Acquisition Credit Line are at the one-month LIBOR rate plus 2.75%. In the event that LIBOR is no longer readily determinable or available, the Acquisition Credit Line contemplates that Webster Bank shall transition to an alternate rate of interest to the LIBOR rate taking into account then prevailing standards in the market for determining interest rates for commercial loans made by financial institutions in the United States at such time. Amounts borrowed under the Acquisition Credit Line are expected to be repaid with proceeds from long-term financing of the property acquired. If amounts borrowed under the Acquisition Credit Line are not repaid within 135 days from the date the properties are acquired, Griffin has agreed to either (a) repay the portion of the Acquisition Credit Line allocable to such advance or (b) execute a first-lien mortgage in favor of Webster Bank. Under the terms of the Acquisition Credit Line, Griffin must maintain (i) a minimum debt service coverage ratio of the aggregate acquired property (as defined in the Acquisition Credit Line) equal to or greater than 1.25 times; (ii) a minimum net worth of not less than $80,000; (iii) a minimum liquidity, as defined in the Acquisition Credit Line, of $5,000; (iv) a ratio of total debt plus preferred stock, to total assets not to exceed 50% of the total fair market value of Griffin’s assets; and (v) a Fixed Charge Coverage Ratio of at least 1.1 to 1.0.

At November 30, 2019, $5,875 was outstanding under the Acquisition Credit Line for the purchase in October 2019 of 7466 Chancellor, which was repaid on December 20, 2019 using the proceeds from the 2019 Webster Mortgage (see Note 4). As of May 31, 2020, $4,100 was outstanding under the Acquisition Credit Line for the purchase of 3320 Maggie at an interest rate of 3.12%. Subsequent to May 31, 2020, the outstanding balance of $4,100 was repaid using the proceeds from the 2020 Webster Mortgage (see Note 4).

6. Stockholders’ Equity

Per Share Results

Basic and diluted per share results were based on the following:


	For the Three Months Ended				For the Six Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Net (loss) income	$	(693)	$	5,819	$	(1,013)	$	5,233

Weighted average shares outstanding for computation of basic per share results		5,125,000		5,067,000		5,100,000		5,066,000
Incremental shares from assumed exercise of Griffin stock options (a)		—		40,000		—		31,000
Adjusted weighted average shares for computation of diluted per share results		5,125,000		5,107,000		5,100,000		5,097,000

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(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 the 2020 second quarter and 2020 six month period would have been 43,000 and 49,000, respectively.

Sale of Common Stock

On March 3, 2020, Gordon F. DuGan was appointed to serve as a Director of Griffin, effective immediately. Mr. DuGan was also appointed as Chairman of the Board of Directors. Mr. DuGan and Griffin entered into a Chairmanship and Advisory Agreement ( the “Advisory Agreement”), on March 3, 2020, whereby Mr. DuGan agreed to also serve as a non-employee advisor to Griffin on, amongst other things, growth strategy, including identifying markets, acquisitions and other transactions, recruitment of key personnel, potential capital raising efforts and general management advice (collectively the “Advisory Services”). As compensation to Mr. DuGan for providing such Advisory Services, Mr. DuGan received: (i) a non-qualified stock option to acquire 48,000 shares of Griffin Common Stock at an exercise price of $45.98 per share under the 2009 Stock Option Plan (see Griffin Stock Option Plans below) and (ii) a non-qualified stock option (the “Supplemental Advisor Option”) to acquire 52,000 shares of Griffin Common Stock at an exercise price of $46.91 per share under the 2020 Incentive Award (see Griffin Stock Option Plans below).

On March 9, 2020, Griffin completed the sale of 53,293 shares of Griffin’s Common Stock at a price per share of $46.91, for cash proceeds of $2,500, in accordance with the Advisory Agreement and pursuant to a Stock Purchase Agreement, dated as of March 5, 2020, between Mr. DuGan and Griffin.

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 Stock Option Plans

Through March 3, 2020, stock options were granted by Griffin under the Griffin Industrial Realty, Inc. 2009 Stock Option Plan (as amended, the “2009 Stock Option Plan”). Options granted under the 2009 Stock Option Plan were 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.

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 were fully exercisable immediately upon the date of the option grant. Stock options issued to non-employee directors upon their re-election to the board of directors vest on the second anniversary from the date of grant. Stock options issued to employees vest in

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equal installments on the third, fourth and fifth anniversaries from the date of grant. None of the stock options outstanding at May 31, 2020 may be exercised as stock appreciation rights.

On March 3, 2020, Griffin’s Board of Directors adopted and approved the Griffin Industrial Realty, Inc. and Griffin Industrial, LLC 2020 Incentive Award Plan (the “2020 Incentive Award Plan”). The 2020 Incentive Award Plan was effective as of the date it was adopted by the Board, subject to stockholder approval, which was received at Griffin’s 2020 Annual Meeting of Stockholders on May 7, 2020. The 2020 Incentive Award Plan replaced the 2009 Stock Option Plan and authorizes for grant a total of 300,000 shares (plus any shares subject to awards under the 2009 Stock Option Plan, as of the date of stockholder approval of the 2020 Incentive Award Plan, that are forfeited, expire, are converted to shares of another person or are settled for cash), subject to certain adjustments in the 2020 Incentive Award Plan. In addition to granting stock options, the 2020 Incentive Award Plan also enables Griffin to grant stock appreciation rights, restricted stock awards, restricted stock unit awards, partnership interests, other equity or cash based awards and dividend equivalents. No new awards will be granted under the 2009 Stock Option Plan; however, all outstanding awards under the 2009 Stock Option Plan remain outstanding in accordance with their terms.

The following options were granted by Griffin under the 2020 Incentive Award Plan and the 2009 Stock Option Plan:


	For the Six Months Ended
	May 31, 2020			May 31, 2019
		Fair Value per			Fair Value per
	Number of	Option at		Number of	Option at
	Shares	Grant Date		Shares	Grant Date
Non-employee directors	111,258	$	11.00 - 14.17	5,946	$	12.87

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 Six Months Ended
	May 31, 2020		May 31, 2019
Expected volatility	29.7 - 30.3	%	30.9	%
Risk free interest rates	0.5 - 0.9	%	2.3	%
Expected option term (in years)	8.5		8.5
Annual dividend yield	1.3	%	1.2	%


Number of option holders at May 31, 2020		29

Compensation expense and related tax benefits for stock options were as follows:


	For the Three Months Ended				For the Six Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Compensation expense	$	203	$	94	$	260	$	184

Related tax benefit	$	34	$	13	$	43	$	26

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For all periods presented, the forfeiture rate for directors ranged from 0% to 2%, the forfeiture rate for executives was 17.9% and the forfeiture rate for employees was 38.3%. The rates utilized were based on the historical activity of the grantees.

As of May 31, 2020, the unrecognized compensation expense related to nonvested stock options that will be recognized during future periods is as follows:


Balance of Fiscal 2020	$	249
Fiscal 2021	$	442
Fiscal 2022	$	377
Fiscal 2023	$	244
Fiscal 2024	$	120
Fiscal 2025	$	23

A summary of Griffin’s stock option activity is as follows:


	For the Six Months Ended
	May 31, 2020			May 31, 2019
	Number of		Weighted Avg.	Number of		Weighted Avg.
	Shares		Exercise Price	Shares		Exercise Price
Outstanding at beginning of period	189,822	$	28.23	224,001	$	28.20
Granted	111,258	$	45.72	5,946	$	36.99
Exercised	(2,734)	$	29.25	(29,838)	$	28.71
Forfeited	—	$	—	(2,788)	$	35.86
Outstanding at end of period	298,346	$	34.74	197,321	$	28.28


				Weighted Avg.
				Remaining
Range of Exercise Prices for	Outstanding at	Weighted Avg.		Contractual Life	Total Intrinsic
Vested and Nonvested Options	May 31, 2020	Exercise Price		(in years)	Value
$23.00 - $28.00	112,638	$	26.76	5.7	$	1,536
$28.00 - $32.00	62,478	$	29.21	2.1		698
$32.00 - $47.00	123,230	$	44.84	9.6		61
	298,346	$	34.74	6.6	$	2,295

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive loss, net of tax, comprised of unrealized gains on cash flow hedges is as follows:


	For the Six Months Ended
	May 31, 2020			May 31, 2019
Balance at beginning of period	$	(3,141)	$	2,395
Other comprehensive loss before reclassifications		(5,264)		(4,254)
Amounts reclassified		339		68
Net activity for other comprehensive loss		(4,925)		(4,186)
Balance at end of period	$	(8,066)	$	(1,791)

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Changes in accumulated other comprehensive loss are as follows:


	For the Three Months Ended
	May 31, 2020						May 31, 2019
			Tax						Tax
			(Expense)		Net-of				(Expense)		Net-of
	Pre-Tax		Benefit		Tax		Pre-Tax		Benefit		Tax
Reclassification included in net (loss) income:
Loss on cash flow hedges (interest expense)	$	304	$	(60)	$	244	$	33	$	(7)	$	26

Change in other comprehensive loss:
Decrease in fair value of Griffin’s cash flow hedges		(3,186)		446		(2,740)		(3,530)		776		(2,754)

Other comprehensive loss	$	(2,882)	$	386	$	(2,496)	$	(3,497)	$	769	$	(2,728)


	For the Six Months Ended
	May 31, 2020						May 31, 2019
			Tax						Tax
			(Expense)		Net-of				(Expense)		Net-of
	Pre-Tax		Benefit		Tax		Pre-Tax		Benefit		Tax
Reclassification included in net (loss) income:
Loss on cash flow hedges (interest expense)	$	429	$	(90)	$	339	$	88	$	(20)	$	68

Change in other comprehensive loss:
Decrease in fair value of Griffin’s cash flow hedges		(6,587)		1,323		(5,264)		(5,453)		1,199		(4,254)

Other comprehensive loss	$	(6,158)	$	1,233	$	(4,925)	$	(5,365)	$	1,179	$	(4,186)

Cash Dividend

Griffin did not declare a cash dividend in the 2020 six month period or the 2019 six month period. During the 2020 six month period, Griffin paid $2,538 for the cash dividend declared in the fiscal 2019 fourth quarter. During the 2019 six month period, Griffin paid $2,279 for the cash dividend declared in the fiscal 2018 fourth quarter.

7. Leases

As lessor, all of Griffin’s leases with its tenants were classified as operating leases under previous guidance and remained operating leases upon the adoption of ASC 842, therefore, as a lessor there was no significant impact upon adoption. Griffin’s rental revenue reflects the leasing of industrial/warehouse and, to a lesser extent, office/flex space and certain land parcels. Griffin does not have any variable payment leases with its tenants.

The future minimum rental payments, including expected tenant reimbursements, to be received under noncancelable operating leases as of May 31, 2020 are as follows:


Balance of fiscal 2020	$	17,430
2021		33,916
2022		27,769
2023		22,684
2024		19,665
Later years		45,374
	$	166,838

Griffin currently leases an entire 165,000 square foot industrial/warehouse building (“1985 Blue Hills”) in Windsor, Connecticut to a single tenant under a lease that expires on March 31, 2024. Such lease contains an option whereby the tenant could purchase 1985 Blue Hills at a purchase price equal to the greater of $11,500 or fair market value as determined under the terms of the lease. The tenant did not exercise its purchase option before it expired on June 1, 2020.

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In fiscal 2016, Griffin entered into a ten-year sublease (the “New York Office Lease”) for approximately 1,920 square feet in New York City for its executive offices. The sublease is with Bloomingdale Properties, Inc., an entity that is controlled by certain members of the Cullman and Ernst Group, which is considered a related party to Griffin.

Upon adoption of ASC 842 on December 1, 2019, Griffin, as lessee, recognized two ROU assets aggregating $858 and lease liabilities aggregating $858 for operating leases it had previously entered into, the New York Office Lease and a lease for office equipment. Griffin adopted the practical expedient for not separating lease components from non-lease components. ROU assets and lease liabilities are included in other assets and other liabilities, respectively, on Griffin’s consolidated balance sheet. ROU assets are evaluated for impairment in a manner consistent with the treatment of other long-lived assets. These lease agreements do not provide a readily determinable implicit rate nor is it available to Griffin from its lessors, therefore, Griffin utilized its incremental borrowing rate of 3.5% at the time of adoption in order to discount lease payments to present value. These lease agreements do not contain any significant residual value guarantees or restrictive covenants. The lease costs are allocated over the remaining lease terms on a straight-line basis. Expense related to operating leases was $69 in the 2020 six month period. The weighted average remaining lease term for Griffin’s operating leases as of May 31, 2020, was 6.4 years.

Maturities of lease liabilities as of May 31, 2020 are as follows:


Balance of Fiscal 2020	$	68
Fiscal 2021		136
Fiscal 2022		143
Fiscal 2023		141
Fiscal 2024		140
Thereafter		269
Total undiscounted payments	$	897
Less: imputed interest		(95)
Present value of minimum lease payments	$	802

8. Supplemental Financial Statement Information

Short-Term Investments

As of May 31, 2020, Griffin did not have any short-term investments. As of November 30, 2019, Griffin’s short-term investments of $1,011 consisted of repurchase agreements accounted for as held-to-maturity securities under ASC 320 on its consolidated balance sheet. The repurchase agreements were with Webster Bank and were collateralized by securities issued by the United States Government or its sponsored agencies. The repurchase agreements were carried at their resell amounts, which approximated fair value due to their short-term nature.

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Other Assets

Griffin's other assets are comprised of the following:


	May 31, 2020		Nov. 30, 2019
Deferred rent receivable	$	6,061	$	5,740
Deferred leasing costs, net		5,146		4,468
Intangible assets, net		2,438		1,907
Prepaid expenses		966		2,926
Mortgage escrows		801		515
Right-of-use assets		772		—
Accounts receivable (primarily leases)		630		904
Registration statement costs		281		281
Furniture, fixtures and equipment, net		195		193
Deferred financing costs related to revolving lines of credit		183		256
Deposits		36		234
Other		304		154
Total other assets	$	17,813	$	17,578

Accounts Payable and Accrued Liabilities

Griffin's accounts payable and accrued liabilities are comprised of the following:


	May 31, 2020		Nov. 30, 2019
Accrued construction costs and retainage	$	1,105	$	1,849
Accrued lease commissions		920		223
Accrued interest payable		615		568
Accrued salaries, wages and other compensation		446		863
Trade payables		271		295
Other		880		520
Total accounts payable and accrued liabilities	$	4,237	$	4,318

Other Liabilities

Griffin's other liabilities are comprised of the following:


	May 31, 2020		Nov. 30, 2019
Interest rate swap liabilities	$	10,210	$	4,052
Deferred compensation plan		3,522		5,593
Prepaid rent from tenants		1,163		1,013
Lease liabilities		802		—
Intangible liability, net		762		—
Security deposits of tenants		727		538
Conditional asset retirement obligations		171		171
Land sale deposits		50		—
Other		53		142
Total other liabilities	$	17,460	$	11,509

Supplemental Cash Flow Information

Accounts payable and accrued liabilities related to additions to real estate assets decreased by $744 in the 2020 six month period and increased by $2,777 in the 2019 six month period.

Griffin maintains a non-qualified deferred compensation plan (the “Deferred Compensation Plan”) for certain of its highly compensated employees. In the 2020 six month period, the liability for the Deferred Compensation Plan was reduced by approximately $1,900 for a payment made to Frederick M. Danziger, Griffin’s former Executive Chairman, as a result of his retirement in fiscal 2019.


PART I -		FINANCIAL INFORMATION

	ITEM 1	Financial Statements

		Consolidated Balance Sheets (unaudited) as of May 31, 2020 and November 30, 2019	3

		Consolidated Statements of Operations (unaudited) for the Three Months and Six Months Ended May 31, 2020 and 2019	4

		Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three Months and Six Months Ended May 31, 2020 and 2019	5

		Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Six Months Ended May 31, 2020 and 2019	6

		Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended May 31, 2020 and 2019	7

		Notes to Consolidated Financial Statements (unaudited)	8

	ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

	ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	38

	ITEM 4	Controls and Procedures	38

PART II -		OTHER INFORMATION

	ITEM 1	Not Applicable

	ITEM 1A	Risk Factors	39

	ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	39

	ITEMS 3-5	Not Applicable

	ITEM 6	Exhibits	39

		SIGNATURES	45