INDUS REALTY TRUST, INC. - Annual Report: 2008 (Form 10-K)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Commission file number 1-12879

GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)

SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:

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 o No ý

        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 o No ý

        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 ý No o

        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.    ý

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 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 o No ý

        The aggregate market value of the Common Stock held by non-affiliates of the registrant, was approximately $83,278,000 based on the closing sales price on The NASDAQ Stock Market LLC on May 30, 2008, 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 23, 2009, 5,076,463 shares of common stock were outstanding.

PART I

ITEM 1.    BUSINESS

        Griffin Land & Nurseries, Inc. ("Griffin") and its subsidiaries comprise principally a real estate business and a landscape nursery business. Griffin is engaged in two lines of business: (1) the real estate business comprised of (a) the ownership, construction, leasing and management of commercial and industrial properties and (b) the development of residential subdivisions on real estate owned by Griffin in Connecticut and Massachusetts; and (2) the landscape nursery business comprised of the growing of containerized plants for sale principally to independent retail garden centers, rewholesalers, whose main customers are landscape contractors, and mass merchandisers.

        Griffin also owns an approximate 4% interest in Centaur Media, plc ("Centaur Media"), a publicly held magazine and information services publisher based in the United Kingdom, and an approximate 14% interest in Shemin Nurseries Holding Corp. ("SNHC"), a private company that operates a landscape nursery distribution business through its subsidiary, Shemin Nurseries, Inc. ("Shemin Nurseries").

        Griffin was incorporated as Culbro Realty and Development Corporation in 1970 and was a wholly owned subsidiary of Culbro Corporation ("Culbro") through July 3, 1997. On July 3, 1997, Culbro distributed (the "Distribution") to its shareholders the common stock of Griffin in a tax-free distribution. In early 1997, prior to the Distribution, the Company's name was changed to Griffin Land & Nurseries, Inc.

        Griffin does not maintain a corporate website. Griffin's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and the proxy statement for Griffin's Annual Meeting of Stockholders can be accessed through the SEC website at www.sec.gov.

Real Estate Business

        Griffin's real estate division, Griffin Land, is directly engaged in the real estate development business on parts of its land in Connecticut and Massachusetts. Griffin Land develops portions of its properties for industrial, commercial and residential use and expects to continue to sell some of its land holdings either before or after obtaining development approvals. Griffin Land will seek to acquire and develop properties not presently owned and expects to continue to seek to acquire existing buildings. The headquarters for this operation is in Bloomfield, Connecticut.

        Griffin Land's real estate holdings are located primarily in the Hartford, Connecticut area, particularly in the north submarket of Hartford. The Hartford market has experienced some recovery since its decline in the early 1990s, although the recovery has been more evident in the industrial warehousing/distribution and light manufacturing sectors. The office market in the Hartford area, particularly the north submarket, remained weak in 2008. The north submarket of Hartford continues to have the highest vacancy percentage and the lowest rental rates for office space of all of Hartford's submarkets. There can be no assurance as to the direction of the real estate market in this region in the near future.

        Market activity for the leasing of industrial and warehouse space was weaker in 2008 as compared to the previous year. The number of inquiries received by Griffin Land from prospective tenants declined in 2008 from the prior year. In the past three years, several warehousing and light industrial buildings, competitive with Griffin Land's industrial buildings, have been built in the greater Hartford area. These facilities compete with Griffin Land's properties in the leasing of new industrial space in the north submarket of Hartford. Additional capacity in the industrial market could adversely affect Griffin Land's operating results from its leasing business by potentially resulting in longer times to lease vacant space, eroding lease rates in Griffin Land's properties or hindering renewals by existing tenants.

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        The decline in the residential real estate market and tightening of credit availability that started in 2007 continued through 2008. The weakened economy is expected to adversely affect Griffin Land's real estate development activities in the near term. In 2008, Griffin Land's agreement with the local home builder that had purchased the first twenty-five lots of the fifty lots in Stratton Farms, Griffin Land's residential development in Suffield, Connecticut, expired because the home builder did not exercise its option to purchase the next phase of lots in Stratton Farms. The softening of the residential real estate market could result in lower selling prices for Griffin Land's undeveloped land intended for residential use or delay the sale of such land. The continued tightening of the credit markets could adversely impact future financing of Griffin Land's office and industrial facilities and adversely impact the financing of potential acquisitions of real estate assets.

        In fiscal 2008, Griffin Land leased approximately 388,000 square feet, almost all of which was warehouse/light industrial space. Of the newly leased space in fiscal 2008, approximately 308,000 square feet was with an affiliate of Raymour & Flanigan, a regional furniture retailer, which leased Griffin Land's entire warehouse facility in Manchester, Connecticut. In addition, Griffin Land leased approximately 58,000 square feet in a new industrial building built in 2008. The tenant in that new building previously occupied approximately 22,000 square feet in one of Griffin Land's other industrial buildings. Griffin Land also entered into several smaller leases in fiscal 2008 for warehouse, flex and office space. Two small leases for office space expired in fiscal 2008 and were not renewed.

        Property sales revenue in fiscal 2008 was substantially lower than the prior year. In the 2008 fourth quarter, Griffin Land closed on a sale of approximately 75 acres of undeveloped land in Simsbury, Connecticut. The land was sold to the Town of Simsbury for open space as part of the settlement of litigation related to Meadowood, Griffin Land's proposed residential development in Simsbury (see Item 3 Legal Proceedings). Griffin received $0.5 million in cash at the closing, and will receive an additional $2.2 million in four installments through 2012. Also in fiscal 2008, Griffin Land recognized the remaining amounts of revenue and profit that had been deferred from the land sale to Walgreen Co. ("Walgreen") that closed in fiscal 2006. Although all of the cash proceeds from that sale were received in fiscal 2006, because that transaction was accounted for using the percentage of completion method, a portion of the revenue and profit from that sale was initially deferred and recognized in subsequent periods as the required road improvements were made. As of November 29, 2008, all of the required road improvements were completed.

        In fiscal 2007, Griffin Land completed several property sales, generating cash proceeds of $13.3 million. Included in those transactions were the sale of approximately 73 acres of undeveloped land in Griffin Center in Windsor, Connecticut, the sale of approximately 103 acres of undeveloped land in South Windsor, Connecticut, the sale of the second phase of residential lots of Stratton Farms, and the sale of a small parcel of undeveloped land near the central business district of Tampa, Florida. Also in fiscal 2007, Griffin Land purchased approximately 24 acres of land which included an approximate 31,000 square foot warehouse. The land parcel acquired abuts a significant parcel of undeveloped land held by Griffin Land. The terms of that acquisition included a ten-year lease of the warehouse to the seller, who uses the facility in its operations. That acquisition was made using a portion of the proceeds from a land sale earlier in the year as part of a Section 1031 exchange for income tax purposes, which resulted in the deferral of a portion of the income taxes related to the prior land sale.

        Griffin Land's development of its land is affected by regulatory and other constraints. Subdivision and other residential development issues may also be affected by the potential adoption of initiatives meant to limit or concentrate residential growth. Commercial and industrial development activities for Griffin Land's undeveloped land may also be affected by traffic considerations, potential environmental issues and other restrictions to development imposed by governmental agencies.

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Commercial and Industrial Developments

New England Tradeport

        The major portion of Griffin Land's current commercial and industrial development effort is focused on the New England Tradeport ("Tradeport"), a 600 acre industrial park near Bradley International Airport and Interstate 91, located in Windsor and East Granby, Connecticut. Tradeport contains approximately 1,161,000 square feet of warehouse and light manufacturing space in twelve buildings built and owned by Griffin Land, of which approximately 77% was leased as of November 29, 2008. Tradeport also contains a large distribution facility recently built by Walgreen on land purchased from Griffin Land in fiscal 2006 (see below) and a bottling and distribution plant built by the Pepsi Bottling Group ("Pepsi") on land sold to Pepsi by Griffin Land in the early 1990s.

        In 2008, Griffin Land built an approximate 100,000 square foot warehouse and light manufacturing building in Tradeport. Approximately 58,000 square feet of this new building was leased to a tenant which consolidated several of its locations into that space, including approximately 22,000 square feet of space previously leased in one of Griffin Land's other Tradeport buildings. In 2007, Griffin Land completed construction, on speculation, of the shells of two warehouse and light manufacturing facilities. These two buildings are located on an approximate 90 acre parcel within Tradeport that received State Traffic Commission approval for approximately 900,000 square feet of new construction. At the end of fiscal 2008, there was approximately 268,000 square feet of vacant space in Tradeport, most of which is in the three most recently constructed buildings. In January 2009, Griffin Land started site work for a 304,000 square foot building in Tradeport that had received State Traffic Commission approval (separate from the 900,000 square feet mentioned above) for a building of up to 450,000 square feet. As of November 29, 2008, $52.8 million was invested (net book value) in buildings owned by Griffin Land that are located in Tradeport and $5.2 million was invested (net book value) by Griffin Land in the undeveloped land there.

        As of November 29, 2008, all of Griffin Land's Tradeport buildings built prior to fiscal 2007 were mortgaged for an aggregate of approximately $35.7 million. The two Tradeport buildings built in 2007 and the building built in fiscal 2008, aggregating approximately 375,000 square feet, are currently not mortgaged. A summary of Griffin Land's square footage owned and leased in Tradeport at the end of each of the past three fiscal years and leases in Tradeport scheduled to terminate during each of the next three fiscal years are as follows:

        In the 2006 third quarter, Griffin Land sold approximately 130 acres of undeveloped land in Tradeport to Walgreen for their construction of a distribution center. The sale generated cash proceeds of $13.0 million, before transaction expenses. As provided under the terms of the sale contract and as required under a revised State Traffic Commission certificate (the "STC Certificate") covering the area in Tradeport located in Windsor, certain improvements to existing roads were required. The cost of these improvements was the responsibility of Griffin Land, however, a portion of the costs were borne by the town of Windsor and Walgreen. Accordingly, Griffin Land recognized revenue of $11.0 million and profit of $8.6 million through fiscal 2007. This sale was accounted for using the percentage of

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completion method because of Griffin Land's responsibility to make certain road improvements. In fiscal 2008, the required road improvements were completed, and Griffin Land recognized the balance of the previously deferred revenue of approximately $2.0 million and profit of approximately $1.5 million.

        In connection with the fiscal 2006 land sale to Walgreen, the State Traffic Commission of Connecticut (the "STC") approved a revised STC Certificate that allowed Griffin Land to construct an additional approximately 1.1 million square feet of light manufacturing and warehouse space on certain parcels in Tradeport. Through the end of fiscal 2008, Griffin Land has built approximately 375,000 square feet of the 1.1 million approved square feet of this space. Subsequent to the end of fiscal 2008, the STC Certificate for the Windsor land in Tradeport was amended to permit an additional 350,000 square feet to be built (resulting in 1.45 million approved square feet) in connection with a build-to-suit facility that Griffin Land intends to build on one of the undeveloped land parcels in Tradeport (see below). As a result of receiving an amended STC Certificate, Griffin Land has approval to build this new facility in addition to all of the square footage allowed under the previous certificate. The balance of the space that has been approved is expected to be built over time as demand warrants. Upon construction of all of the additional square footage permitted under the STC Certificate, there will remain an additional approximately 152 acres of undeveloped Windsor land in Tradeport, which is contiguous to approximately 36 acres of undeveloped East Granby land. There are no STC or other approvals (other than zoning in the case of Windsor) for the development of this additional land currently in place, and Griffin Land believes that infrastructure improvements, which may be significant, may be required to obtain approvals to develop this land.

        In January 2009, Griffin Land entered into a ten-year lease with a private company to lease approximately 257,000 square feet of a new 304,000 square foot facility to be built in 2009 by Griffin Land in Tradeport. Under certain conditions, but no later than the beginning of the sixth year of the lease, the tenant is required to lease the entire building. The lease contains provisions for expansion of the building up to approximately 450,000 square feet. To finance, in part, the construction of this new building, Griffin has entered into a $12 million construction loan with a bank. The construction loan converts into a nine-year nonrecourse mortgage loan after one year. In connection with this transaction, the STC Certificate for the Tradeport land in Windsor was amended to increase the total permitted square footage that can be built (see above).

        Griffin Land intends to continue to direct its primary efforts in the industrial properties portion of its real estate business with construction and leasing of its warehouse and light manufacturing facilities at Tradeport. Griffin Land currently owns some land not part of Tradeport which may be appropriate for such development over a longer term and which will require substantial additional preparation and zoning approvals. Griffin Land may also seek to acquire additional developed and/or undeveloped land parcels both in Connecticut and elsewhere to expand the industrial/warehouse portion of its real estate business. In 2008, Griffin Land examined several sites in New York and Pennsylvania for potential acquisition. Management expects to continue to seek sites suitable for development in markets other than where Griffin's properties are currently located. Examination of potential sites for potential development may be an extended process.

Griffin Center and Griffin Center South

        Griffin's other substantial commercial development is the combination of Griffin Center in Windsor and Bloomfield, Connecticut and Griffin Center South in Bloomfield. Together these master planned developments comprise approximately 600 acres and as of November 29, 2008, approximately 63% has been developed with approximately 2,165,000 square feet of office and industrial space. In fiscal 2007, Griffin Land sold approximately 73 acres of undeveloped land in Griffin Center to The Hartford Insurance Company ("The Hartford"), which built an approximately 460,000 square foot office building.

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        Griffin Center currently includes eleven office buildings (including the building built by The Hartford), a light manufacturing building and a small restaurant. Griffin Land 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, a 165,000 square foot light manufacturing building and the small restaurant building. As of November 29, 2008, $20.0 million was invested (net book value) in Griffin Land's buildings in Griffin Center and $1.3 million was invested by Griffin Land in the undeveloped land there. Griffin Land's multi-story office buildings and its light manufacturing building in Griffin Center are mortgaged for an aggregate of approximately $12.7 million.

        There was minimal new leasing activity in Griffin Land's Griffin Center properties in fiscal 2008. Griffin Land did enter into a short-term renewal with The Hartford for approximately 37,000 square feet in one of Griffin Land's multi-story office buildings. The renewed lease expires in the first half of fiscal 2009. As of November 29, 2008, approximately 316,000 square feet of Griffin Land's buildings was leased, comprising approximately 83% of Griffin Land's total space in Griffin Center. A summary of Griffin Land's square footage owned and leased in Griffin Center at the end of each of the past three fiscal years and leases in Griffin Center scheduled to terminate during each of the next three fiscal years are as follows:

        Griffin Center South is a 130 acre tract with sixteen buildings of single story office, flex and storage space. Griffin Land currently owns nine buildings in Griffin Center South with an aggregate of approximately 235,000 square feet, which contain approximately 217,000 square feet of single story office and flex space and 18,000 square feet of storage space. At November 29, 2008, Griffin Land's aggregate investment (net book value) in its buildings in Griffin Center South was $8.8 million. As of November 29, 2008, none of Griffin Land's properties in Griffin Center South were mortgaged. Undeveloped land remaining in Griffin Center South is sufficient to build at least two additional buildings aggregating approximately 175,000 square feet.

        Subsequent to the end of fiscal 2008, Griffin received a commitment letter from a bank for a $10 million revolving credit facility. Approximately 195,000 square feet of Griffin Land's space in Griffin Center South and the 48,000 square foot single story office building in Griffin Center will be collateral for this revolving credit facility.

        In fiscal 2008, Griffin Land leased approximately 11,000 square feet of previously vacant space in one of its flex buildings. In fiscal 2007, Griffin Land leased approximately 19,000 square feet of previously vacant space in Griffin Center South and renewed a lease for approximately 2,000 square feet. A lease for approximately 40,000 square feet of office space expired in fiscal 2007 and was not renewed. As of November 29, 2008, approximately 136,000 square feet of space in the Griffin Center South buildings owned by Griffin Land was leased, comprising 58% of Griffin Land's total space in Griffin Center South. In January 2009, Griffin Land entered into a letter of intent to lease approximately 40,000 square feet of office space in Griffin Center South. That space has been vacant since the end of fiscal 2007 when a lease expired and was not renewed. A summary of Griffin Land's square footage owned and leased in Griffin Center South at the end of each of the past three fiscal

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years and leases in Griffin Center South scheduled to terminate during each of the next three fiscal years are as follows:

Other Industrial Properties

        In fiscal 2008, Griffin Land entered into a seven-year lease with an affiliate of Raymour & Flanigan, for Griffin Land's entire 308,000 square foot warehouse in Manchester, Connecticut. That building had been vacant since it was acquired in the 2006 third quarter as part of a Section 1031 exchange whereby income taxes related to the gain on the June 2006 land sale to Walgreen and a smaller 2006 land sale were deferred. In addition to other customary terms, the lease agreement includes an option, with certain conditions, exercisable by Griffin Land, for Griffin Land to sell the property to the lessee, and another option, exercisable by the lessee, to purchase the property from Griffin Land, during different periods during the lease term at a price that has been agreed upon.

        In fiscal 2007, Griffin Land completed the sale of approximately 103 acres of undeveloped land in South Windsor, Connecticut to a food distributor for construction of a distribution facility. This transaction generated cash proceeds of approximately $2.5 million to Griffin Land for its share of the sales price. Also in fiscal 2007, Griffin Land acquired approximately 24 acres of land and an approximate 31,000 square foot warehouse facility in Bloomfield, Connecticut from General Cigar Company, Inc. ("General Cigar"). The purchase price of $2.7 million was paid in cash at closing. The land acquired abuts approximately 244 acres of undeveloped land held by Griffin Land. The purchase of this warehouse facility was also part of a Section 1031 exchange whereby a portion of the income taxes related to the gain on the land sale to The Hartford were deferred. As part of this transaction, Griffin Land entered into a ten-year lease with General Cigar, which will continue to use this facility in its operations.

Residential Developments

Simsbury

        In November 1999, Griffin Land filed plans for the creation of a residential community of 640 homes, called Meadowood, on a 363 acre site in Simsbury, Connecticut. One quarter of these homes were to be deed restricted under Connecticut statutes for affordable housing. The public hearings before Simsbury's land use commissions on this proposed residential development focused on the density of the proposed development, as well as sewer, wetlands and soil contamination issues arising from prior use of the land for farming, as a result of which certain pesticides remain in the upper portion of the soil. After the conclusion of the public hearings, Griffin Land amended its plans and reduced the number of proposed homes to 371. Simsbury's land use commissions rejected the amended plans, and Griffin Land filed several separate but related actions appealing the denials of the land use commissions. At the time the original application for Meadowood was filed, Griffin Land's proposal included a method (which has received support from the Connecticut Department of Environmental Protection) of remediating the soils of the residual pesticides. However, subsequent soil testing conducted by Griffin Land indicated that the residual pesticides that remain in the soil on much of the Meadowood site are below levels that would require remediation.

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        In December 2002, the trial court for two cases related to Meadowood ruled in favor of Griffin Land. Simsbury appealed those decisions, one of which was affirmed and the other, relating to planning, was reversed in part, due to the failure to have obtained a sewer connection approval for Meadowood, which has now been obtained. Those decisions could have required compliance with other court decisions on wetlands conservation and placement of septic systems within the sewer district that could have affected the proposed development. Griffin Land appealed an adverse decision on wetlands issues to the Connecticut Supreme Court, which reversed the decision and remanded the case to the trial level court for further consideration. In November 2003, Griffin Land filed a second amendment to its plans for Meadowood, which reduced the density to 298 homes, with certain land reserved for future development, and eliminated most activities in the wetlands and wetland upland areas. Simsbury's Conservation and Inland Wetlands Commission, which has jurisdiction of wetland issues, denied that application. That denial was appealed.

        In early 2007, Griffin Land and the Town of Simsbury jointly filed a motion in the Appellate Court to have the appeal remanded to the Superior Court in anticipation of the parties potentially presenting a settlement proposal to the court for its review and approval. Also in 2007, Simsbury's Planning, Zoning and Inland Wetlands Commissions approved resolutions for settlement agreements. The settlement terms include, among other things, approval for up to 299 homes, certain remediation measures to be performed by Griffin Land and the purchase by the Town, subject to approvals, of a portion of the Meadowood land for Town open space. In February 2008, the Simsbury Planning Commission approved a resolution recommending that the Town acquire the portion of the Meadowood municipal open space. In March 2008, Griffin Land and Simsbury executed settlement agreements under the terms described above. The settlement agreements were subsequently approved by the Connecticut Superior Court, thus concluding the litigation on this matter with no further appeals possible. In May 2008, the Town of Simsbury approved the purchase of a portion of the Meadowood land for Town open space. The sale of that land closed in the 2008 fourth quarter. Development of Meadowood remains subject to receiving certain environmental approvals from government agencies, including the Army Corps of Engineers and the Connecticut Department of Environmental Protection, which Griffin Land is seeking to obtain.

        As of November 29, 2008, the book value of the land for this proposed development, including design, development and legal costs, was $4.5 million. Management believes that the costs for Meadowood that have been expended to date will be recovered.

        Griffin Land owns another approximate 500 acres in Simsbury, portions of which are zoned for residential use and other portions of which are zoned for industrial use. Not all of such land is developable. The land currently zoned for industrial use is probably more suited to commercial or mixed use. Griffin Land may seek to develop or sell such lands if approvals can be obtained.

Suffield

        In 2003, Griffin Land received approval from the Planning and Zoning Commission of Suffield, Connecticut for the subdivision of 97 acres of contiguous land in Suffield into a development of 50 homes called Stratton Farms. Griffin Land completed construction of the infrastructure for this residential development in fiscal 2005. In fiscal 2006, Griffin Land entered into a contract with a local homebuilder to sell the fifty residential lots over a three-year time period. The first sale, ten residential lots, was completed in the 2006 third quarter, and the second sale, fifteen residential lots, was completed in the 2007 third quarter. In fiscal 2008, the homebuilder did not exercise its option to purchase the next phase of residential lots, thereby canceling the option to acquire the remaining Stratton Farms lots. In fiscal 2008, Griffin Land recognized revenue of $125,000 attributed to this option. The homebuilder's decision not to purchase any lots after 2007 is attributed to the weakening of the residential real estate market during the past two years.

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Other

        In fiscal 2008, Griffin Land leased approximately 658 acres of undeveloped land in Connecticut and Massachusetts to local farmers. Much of this land had previously been leased to General Cigar under a ten-year lease agreement that terminated on February 28, 2007. That lease was entered into when Griffin and General Cigar were wholly owned subsidiaries of Culbro Corporation. The revenue generated from the leasing of farmland is not material to Griffin Land's total revenue.

        Griffin Land is evaluating its other properties for residential or other development in the future. Griffin Land anticipates that obtaining subdivision approvals in many of the towns where it holds land appropriate for residential subdivision will be an extended process.

Landscape Nursery Business

        The landscape nursery business of Griffin is operated by its wholly owned subsidiary, Imperial Nurseries, Inc. ("Imperial"). Imperial grows containerized plants for sale to independent garden centers, rewholesalers, whose main customers are landscape contractors, and mass merchandisers. Imperial's major markets are in the Northeast, Mid-Atlantic and Midwest. The landscape nursery industry is extremely fragmented, and Imperial believes that its sales volume places it among the fifty largest landscape nursery growers in the country.

        Imperial's growing operations are located on land owned by Griffin in Connecticut (approximately 445 acres currently used) and land owned by Imperial in northern Florida (approximately 490 acres currently used). Currently, substantially all of the useable contiguous acreage suitable for the container-growing operations in Connecticut is used, as is a large portion of such acreage in northern Florida. Imperial also uses approximately 45 acres of land in Connecticut to grow liners (starter plants) in the field for transplanting into containers. Imperial is in the process of relocating its field liner growing operation to other land owned by Griffin.

        Imperial's sales are extremely seasonal, peaking in spring, are strongly affected by weather conditions, particularly in the spring planting season, and are affected by commercial and residential building activity. The slowdown in new housing starts during the past two years and the weakened economy have adversely impacted Imperial's results. Imperial expects 2009 sales to be hampered by the continued weakness in the economy and increased competition, as other growers of landscape nursery stock seek to liquidate inventories that were not sold in 2008. Orders for spring 2009 deliveries reflect some probable weakening of prices because of substantial unsold inventories thought to be held by growers that are competitors of Imperial. Imperial's sales are made to a large variety of customers, no single one of which represented more than 10% of Imperial's total sales in fiscal 2008, fiscal 2007 or fiscal 2006. However, aggregate net sales to Imperial's ten largest customers, including several large mass merchandisers, accounted for 21% of Imperial's total sales in fiscal 2008, 25% of Imperial's total net sales in fiscal 2007 and 35% of Imperial's total net sales in fiscal 2006. A significant amount of sales to independent garden centers are made through cooperative buying organizations.

        Imperial's inventories consist principally of container-grown plants on its two farms. The largest volume products of Imperial are evergreens, including rhododendron, flowering shrubs and perennials. Container-grown product is held principally from one to five years before it is sold. Several years ago, Imperial started selling some perennials and several other products as one of several licensed growers under the "Novalis" trade name. Imperial has entered into additional licensing agreements that enable it to grow and sell certain branded products available only to a limited number of growers. These programs are directed toward increasing Imperial's sales to independent garden centers.

        As approved by Griffin's Board of Directors, Imperial will shut down its Quincy, Florida farm by the end of fiscal 2009. Imperial's Quincy, Florida farm represents all of Imperial's growing operations in Florida. Imperial expects to continue to operate its farm in Granby, Connecticut. The shutdown of the Florida farm reflects the difficulties that the farm has encountered in delivering product to most of Imperial's major markets, which are located in the mid-Atlantic area and northeastern United States.

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Imperial has been unable to develop sufficient volume in southern markets that are closer to its Florida farm to reduce that farm's dependence on shipping product substantial distances. The closure of the Florida farm will enable Imperial to focus as a regional grower with most of its major markets within close proximity of its Connecticut farm. Griffin reported charges of $8.9 million in connection with the restructuring of its landscape nursery business in its fiscal 2008 consolidated statement of operations as a result of the shutdown of Imperial's Florida farm. Of this amount, $7.2 million relates to the writedown of inventories and is included in costs of landscape nursery sales and $1.7 million relates to the writeoff of fixed assets and severance payments and is reported as a restructuring charge on the consolidated statement of operations. The closing of the Florida farm will increase the portion of the overhead of Imperial that will need to be covered by Connecticut farm operations. Because the majority of the charge for the shutdown of the Florida farm reflects the disposition of inventories below their carrying values at the time of sale, Griffin expects the closing of the Florida farm to result in some positive cash flow.

        Imperial continues to review other ways to improve its operating results, including changes in the relative quantities of some products currently grown and possible changes in the potting and growing cycles for some of its containerized production. In response to the current and expected difficult industry trend, Imperial has reduced its production plan for 2009. This change is expected to result in some reduction in inventory levels over the next few years. Any such changes, if successful, taking into account the growing cycles of the related plants, will take a substantial period of time to be reflected in Imperial's results of operations to any material extent. In addition, over the past three years, Imperial has increased the percentage of its product sold to independent garden centers and reduced its sales to mass merchant customers. Sales to independent garden centers generally have more favorable gross margins as compared to sales to mass merchandisers.

        In fiscal 2008, Imperial's cost of goods sold includes $1.1 million for inventory losses. The inventory losses reflect a higher than expected level of disposals of unsaleable product, increases to inventory reserves because the carrying costs of certain inventories exceed their net realizeable values and the writeoff of certain inventories that will no longer be sold due to changes in product mix. The charge for unsaleable inventories and net realizeable value issues was $0.7 million in fiscal 2007 and $0.8 million in fiscal 2006. These amounts are in addition to the inventory writedown arising in connection with the shutdown of Imperial's Florida farm.

        Shipping capacity and shipping expense are major cost concerns. Over the past three years, costs of shipping have increased significantly as the result of higher fuel costs and the need to arrange for the return of portable shelving units for subsequent shipments. In fiscal 2007, Imperial increased the number of trucking vendors, improved the routing of shipments and had additional portable shelving units available. These improvements, along with an increase in delivery charges to customers, improved the net impact of transportation on Imperial's operating results. Management is continuing its efforts to review its shipping practices.

Investments

Centaur Media, plc

        In fiscal 2004, Griffin sold its holdings in Centaur Communications, Ltd. ("Centaur Communications") and, in addition to the cash proceeds of $68.9 million, received 6,477,150 shares of common stock of Centaur Holdings, plc ("Centaur Holdings"), approximately 4% of the outstanding common stock of Centaur Holdings at the time of the transaction. In June 2006, Centaur Holdings changed its name to Centaur Media, plc ("Centaur Media"). Centaur Media is a publicly traded company listed on the London Stock Exchange. In fiscal 2007, Griffin sold 1,200,000 shares of its Centaur Media common stock for proceeds of approximately $3.5 million, which resulted in a pretax gain of $2.9 million. Griffin did not sell any of its Centaur Media stock in fiscal 2008, as the market price of this stock as well as the exchange rate for the British pound sterling against the dollar have

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declined over the past eighteen months. Griffin accounts for its remaining investment in Centaur Media as an available-for-sale security. Accordingly, changes in the market value of Griffin's remaining investment in Centaur Media, including both changes in the stock price and changes in the foreign currency exchange rate, are not included in Griffin's net income but are included in Griffin's other comprehensive income.

Shemin Nurseries Holding Corp.

        In fiscal 2001, Griffin sold the portion of Imperial's business that operated wholesale sales and service centers and received cash proceeds of $18.4 million and approximately 14% of the outstanding common stock of Shemin Acquisition Corp. ("Shemin Acquisition"), a privately held company that operated a landscape nursery distribution business and an irrigation supply business through its subsidiaries. Griffin accounted for its investment in Shemin Acquisition under the cost method of accounting for investments. In fiscal 2004, Griffin invested an additional $143,000 in Shemin Acquisition and maintained its approximate 14% ownership interest. In fiscal 2005, Griffin exchanged a portion of its holdings in Shemin Acquisition for common stock in Shemin Nurseries Holding Corp. ("SNHC"), which operates a landscape nursery distribution business through its subsidiary that previously was a wholly-owned subsidiary of Shemin Acquisition. Griffin then completed the sale of its remaining stock in Shemin Acquisition for cash proceeds of $5.7 million. Also in fiscal 2005, Griffin received a cash distribution of $1.7 million from SNHC. In fiscal 2007, Griffin received cash of $1.8 million from SNHC, which included dividend income of $1.6 million and a $0.2 million return of investment. Griffin did not receive any dividends or distributions from SNHC in fiscal 2008. Griffin continues to hold its investment in SNHC and accounts for this investment under the cost method of accounting for investments.

Financial Information Regarding Industry Segments

        See Note 3 to the consolidated financial statements of Griffin for certain financial information regarding the real estate business and the landscape nursery business.

Employees

        As of November 29, 2008, Griffin employed 174 people on a full-time basis, including 21 in its real estate business and 147 in its landscape nursery business, including 56 employees at the Quincy, Florida farm that will be shut down by the end of fiscal 2009. Presently, none of Griffin's employees are represented by a union. Griffin believes that its relations with its employees are satisfactory.

Competition

        Numerous real estate developers operate in the portion of Connecticut and Massachusetts in which Griffin's holdings are concentrated. Some of these businesses may have greater financial resources than Griffin. Griffin's real estate business competes on the bases of location, price, availability of space, convenience and amenities.

        The landscape nursery business is competitive, and Imperial competes against a number of other companies, including national, regional and local landscape nursery businesses. Some of Imperial's competitors in the landscape nursery industry are larger than Imperial. Growers of landscape nursery products compete on the bases of price, product quality, service and product availability.

Regulation: Environmental Matters

        Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of such substances may be

10

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 Land 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 chlordane and dieldrin, arising from the prior use of the land for farming on a portion of the land that is intended for residential use. In the event that Griffin Land is unable to remediate adequately any of its land intended for residential use, Griffin Land's ability to develop such property for its intended purposes would be materially affected.

        Griffin Land periodically reviews its properties for the purpose of evaluating such properties' compliance with applicable state and federal environmental laws. At this time, Griffin Land does not anticipate experiencing, in the next twelve months, material expense in complying with such laws. Some environmental remediation cost will be incurred in connection with site work for the 304,000 square foot warehouse recently started at Tradeport. Griffin Land may incur certain remediation costs in the future in connection with its development operations. Such costs are not expected to be significant as compared to expected proceeds of development projects.

ITEM 1A.    RISK FACTORS

        Griffin's real estate and landscape nursery businesses have a number of risk factors. The risk factors discussed below are the ones that management deems to be material, but they may not be the only risks facing Griffin's businesses. Additional risks not currently known or currently deemed not to be material may also impact Griffin's businesses.

Adverse Economic Conditions and Credit Markets

        Griffin Land's real estate business may be affected by market conditions and economic challenges experienced by the U.S. economy as a whole or by local economic conditions in the market in which its properties are located. The current conditions in the credit markets, or similar conditions existing in the future, may adversely affect Griffin's results of operations, financial conditions or ability to expand as a result of the following:

•

The financial condition of Griffin Land'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;



•

Significant job losses may occur, which may decrease demand for Griffin Land's office and industrial space, causing market rental rates and property values to be negatively impacted;



•

Griffin's ability to borrow on terms and conditions that it finds acceptable, or at all, may be limited, which could reduce its ability to pursue acquisition and development opportunities, refinance existing debt, and/or increased future interest expense;



•

Reduced values of Griffin Land's properties may limit its ability to obtain debt financing collateralized by its properties or may limit the proceeds from such potential financings.

        Imperial's landscape nursery business may also be affected by the weakness in the U.S. economy. Landscape nursery products are a discretionary purchase, and the softening of demand for such products at the retail level will result in the reduction of orders by Imperial's independent garden center customers. Weakness in demand would also result in lower pricing, as other growers of landscape nursery products seek to liquidate inventories before product becomes unsaleable.

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Downturn in the Residential Real Estate Market

        The decline in the residential real estate market may adversely affect Griffin Land's real estate development activities. The decline in the residential real estate market could also result in the delay of the development of Griffin Land's undeveloped land intended for residential use. The slowdown in new housing starts may also adversely affect Imperial's future results. Although Imperial only has minimal sales of product to home builders, they are the ultimate users of a portion of the product sold to Imperial's rewholesale customer segment, which accounted for 33% of Imperial's sales in fiscal 2008.

Risks Associated with Concentration of Real Estate Holdings

        Griffin Land's real estate operations are concentrated in the Hartford, Connecticut area. Adverse changes in the local economy or real estate market could impact Griffin Land's real estate operations, including the market's ability to absorb newly constructed space and Griffin Land's ability to retenant vacant space.

Potential Environmental Liability

        Griffin Land has extensive land holdings in Connecticut and Massachusetts. Under federal, state and local environmental laws, ordinances and regulations, Griffin Land 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 Land may have to make substantial payments, which could adversely affect its cash flow. As an owner or operator of properties, Griffin Land may have to pay for property damage and for investigation and clean-up costs incurred in connection with the contamination. The law typically imposes clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination.

Competition and Governmental Regulations

        Griffin Land's real estate operations compete with other properties in Griffin Land's area of operation. The construction of new facilities by competitors would increase capacity in the marketplace, which could result in Griffin Land experiencing longer times to lease vacant space, eroding lease rates or hindering renewals by existing tenants. Griffin Land's real estate 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 Land to develop its properties.

Insurance Coverage Does Not Include All Potential Losses in the Real Estate Business

        Griffin Land carries comprehensive insurance coverage, including property, fire, terrorism and loss of rental revenue. The insurance coverage contains policy specifications and insured limits. Griffin Land believes its properties are adequately insured. 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 Land's properties, Griffin Land could experience a significant loss of capital invested and potential revenue from the properties affected.

Risks of Agricultural and Environmental Factors

        Imperial's production of plants may be adversely affected by agricultural and environmental factors beyond its control, such as a hurricane at its northern Florida location or severe drought conditions. A hurricane at its northern Florida facility could damage Imperial's facilities and result in a loss of inventory (see Risks of Loss in the Landscape Nursery Business Not Covered by Insurance). Imperial's production facilities could also be adversely affected by severe drought conditions. While management believes that Imperial's Connecticut and northern Florida operations have sufficient water supplies available, a severe drought could impact Imperial's ability to maintain adequately its inventory. In addition, a severe drought in Imperial's main sales markets could substantially impact Imperial's sales.

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        Other agricultural or environmental factors that could materially impact Imperial's growing operations are adverse weather conditions, such as freezing conditions (particularly at the northern Florida facility), plant diseases, pests and the improper use of herbicides and pesticides. The occurrence of any one of these factors could materially affect Imperial's growing operations and result in a portion of Imperial's inventory becoming unsaleable.

Concentration of Customers

        Although no single customer of Imperial accounted for more than 10% of Imperial's total net sales in fiscal 2008, Imperial's ten largest customers, including several mass merchandisers, accounted for approximately 21% of Imperial's total net sales in fiscal 2008. Management expects that a small number of customers will continue to account for a significant portion of Imperial's net sales over the next several years. Imperial does not have any material sales contracts with any of its customers. Certain of Imperial's independent garden center customers purchase product from Imperial through buying cooperatives. The loss of one of Imperial's larger customers or the inability to collect accounts receivable from one of Imperial's larger customers, including buying cooperatives, could have an adverse effect on Imperial.

        One of Griffin Land's tenants accounted for approximately 10% of its total rental revenue in fiscal 2008.

Regulatory Risks

        Imperial's operations are subject to various laws and environmental regulations. The failure to comply with such laws and environmental regulations could result in liabilities being incurred for Imperial's actions. Recently, there has been an increase in legislation regarding the sale and transportation of plant varieties considered to be "invasive" by state governments. The continuation of such legislation could adversely impact Imperial's operations by reducing the area where inventories of plants considered to be invasive may be sold or transported.

Risks Associated with the Cost of Raw Materials and Energy Costs

        Imperial's operations could be adversely affected by increases in the cost of growing plants, the costs of certain materials and energy costs. Prices of certain petroleum based materials, such as plant containers and plastics used in protecting inventory during the winter, have increased as overall petroleum prices have increased. In addition, increases in energy costs and the lack of availability of energy could also adversely impact Imperial's operations, particularly at Imperial's Connecticut facility, which uses heat generated from natural gas and propane to maintain certain parts of its inventory during the winter.

        Griffin Land's construction activities 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 Land's facilities, such as steel, masonry, asphalt, cement and building products may increase. The cost of such items did increase in 2008 but have subsequently returned to lower levels. An increase in the cost of building new facilities would negatively impact Griffin Land's future operating results through increased depreciation expenses. An increase in construction costs would also require increased investment in Griffin Land's real estate assets, which may lower the return on investment in new facilities in the real estate business.

Availability of Transportation Vendors to Deliver Product

        Substantially all of Imperial's sales are delivered to customers' locations using independent contractors for trucking services. The ability to ship products timely, especially during the peak spring shipping season, could be adversely impacted by shortages in available trucking capacity. Significant increases in transportation costs could have a material adverse effect on Imperial's business, as customers may choose to purchase product from local growers or Imperial may not be able to pass

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along such increases to customers. The risks regarding transportation, while significant to Imperial's entire operation, are more acute at its Florida facility, because that facility is, on average, more distant from its customers than Imperial's Connecticut facility.

Availability of Labor

        Labor costs comprise a substantial portion of Imperial's production costs. Imperial is subject to the Fair Labor Standards Act as well as various federal, state and local regulations that govern matters such as minimum wage requirements, working conditions and worker regulations. As a significant amount of Imperial's seasonal employees are paid at slightly above minimum wage rates, any increase in such minimum wage rates could adversely impact Imperial's results. In addition, Imperial depends on a significant amount of seasonal labor, particularly during its peak shipping period in the spring. Changes in immigration laws could make it more difficult for Imperial to meet its seasonal labor requirements, which could adversely affect Imperial's operations.

Risks of Loss in the Landscape Nursery Business Not Covered by Insurance

        Imperial carries comprehensive insurance coverage, including property, liability, fire and terrorism on its production facilities and its inventories. The insurance contains policy specifications and insured limits, and does not cover all possible losses that Imperial could incur. For example, Imperial's insurance that covers its inventory at its northern Florida facility does not include losses that may occur from wind, such as from a hurricane or tornado.

Investment in Foreign Company

        Griffin has an investment in Centaur Media, plc, a public company based in the United Kingdom. The ultimate liquidation of that investment and conversion of proceeds into United States currency is subject to future foreign currency exchange rates.

Litigation

        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 will not be material, individually or in the aggregate, to Griffin's consolidated financial position, results of operations or cash flows.

The Concentrated Ownership of Griffin Common Stock by Members of the Cullman and Ernst Families

        Members of the Cullman and Ernst families (the "Cullman and Ernst Group"), which include Edgar M. Cullman and David M. Danziger, directors of Griffin, Frederick M. Danziger, director and Griffin's President and Chief Executive Officer, and Michael S. Gamzon, a Vice President 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 50.4% of the outstanding common stock of Griffin as of November 29, 2008. 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.

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ITEM 1B.    UNRESOLVED STAFF COMMENTS

        Not applicable.

ITEM 2.    PROPERTIES

Land Holdings

        Griffin is a major landholder in the State of Connecticut, owning approximately 3,560 acres, and also owns approximately 440 acres of land in Massachusetts. In addition, Griffin owns approximately 1,070 acres in northern Florida, most of the useable portion of which is used for Imperial's growing operations or is contiguous to such operations.

        At November 29, 2008, the book value of undeveloped land holdings, including land improvements, owned by Griffin, principally in the Hartford, Connecticut area, was approximately $16.8 million. Griffin believes the fair market value of such land is substantially in excess of its book value, including land improvements.

        A listing of the locations of Griffin's real estate held for development or sale, a portion of which, principally in Bloomfield, East Granby and Windsor, Connecticut has been developed, and nursery real estate, is as follows:

Real Estate Held For Development or Sale

Nursery Real Estate

        Griffin also leases approximately 2,200 square feet in New York City for its executive offices.

        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.

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ITEM 3.    LEGAL PROCEEDINGS

        As discussed in Item 1, certain parts of Griffin's property in Simsbury, Connecticut, are affected by the presence of chlordane. Although various federal, state and local agencies may have an interest in the matter, there are no proceedings known by Griffin to be contemplated by any of these agencies with respect to chlordane.

        In 1999, Griffin Land filed land use applications with the land use commissions of Simsbury, Connecticut for Meadowood, a proposed residential development on approximately 363 acres of land. In 2000, Simsbury's land use commissions issued denials of Griffin Land's Meadowood application. As a result of those denials, Griffin brought several separate, but related, suits appealing those decisions. In 2002, the trial court upheld two of Griffin Land's appeals and ordered the town's Planning and Zoning Commissions to approve the Meadowood application. The Town appealed those decisions. In 2004, the Connecticut Supreme Court ordered the Zoning Commission to approve the zoning regulations proposed by Griffin Land for Meadowood. The Connecticut Supreme Court also ruled that the denial of the Meadowood application by the Planning Commission can be upheld because Griffin Land had not obtained the required sewer usage permits at the time the application was made to the Planning Commission. The required sewer usage permits for Meadowood were subsequently obtained. Also in 2004, the Connecticut Supreme Court reversed a lower court decision that had denied Griffin Land a wetlands permit, and remanded the case to Superior Court for further proceedings to determine if a wetlands permit must be issued. In 2005, the Superior Court ruled that Griffin Land must again apply to the Town's Conservation and Inland Wetlands Commission for a wetlands permit for its proposed Meadowood development.

        In early 2007, Griffin Land and the Town of Simsbury jointly filed a motion in the Appellate Court to have the appeal remanded to the Superior Court in anticipation of the parties potentially presenting a settlement proposal to the court for its review and approval. Also in 2007, the Town's Planning, Zoning and Inland Wetlands Commissions approved resolutions for settlement agreements. The settlement terms include, among other things, approval for up to 299 homes, certain remediation measures to be performed by Griffin Land and the purchase by the Town, subject to approvals, of a portion of the Meadowood land for Town open space. In February 2008, the Simsbury Planning Commission approved a resolution recommending that the Town acquire the portion of the Meadowood land as outlined in the settlement agreements if such land is substantially clean and suitable for use as municipal open space. In March 2008, Griffin Land and Simsbury executed settlement agreements under the terms described above. The settlement agreements were approved by the Connecticut Superior Court on April 18, 2008 and April 28, 2008, thus concluding the litigation on this matter with no further appeals possible. In May 2008, the Town of Simsbury approved the purchase of a portion of the Meadowood land for town open space. The sale of that land closed in November 2008. Development of Meadowood remains subject to receiving certain environmental approvals from government agencies, including the Army Corps of Engineers and the Connecticut Department of Environmental Protection, which Griffin Land will be seeking to obtain.

        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 will not be material to Griffin's financial position, results of operations or cash flows.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

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PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
                   MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

        The following are the high and low prices of common shares of Griffin Land & Nurseries, Inc. as traded on the NASDAQ Stock Market LLC:

        On January 23, 2009, the number of record holders of common stock of Griffin was approximately 392, 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 $31.54 per share.

Issuer Purchases of Equity Securities

        The following table provides information regarding purchases of equity securities by the issuer for the fiscal year ended November 29, 2008.

(1)

On January 30, 2007, Griffin's Board of Directors authorized the repurchase of up to 150,000 shares of Griffin's outstanding common stock through private transactions. The program to repurchase did not obligate Griffin to repurchase any specific number of shares, and could have been suspended at any time at management's discretion. In November 2007, the Board of Directors increased by 100,000 shares the number of shares authorized for repurchase under the program and extended the program through December 31, 2008. There were no share repurchases from November 29, 2008 through December 31, 2008, when the share repurchase program expired and was not renewed.

Dividend Policy

        From the time Griffin became a public company in 1997 through the third quarter of fiscal 2007, Griffin did not pay dividends to its stockholders. In the 2007 fourth quarter, Griffin declared a quarterly cash dividend of $0.10 per share on its common stock. In fiscal 2008, Griffin declared a cash dividend of $0.10 per share for each quarter. Griffin expects to pay quarterly dividends to its shareholders in future quarters subject to the Board of Directors' evaluation of other uses for Griffin's cash.

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Securities Authorized For Issuance Under Equity Compensation Plans

Note:    There are no equity compensation plans that were not approved by security holders.

Stock Performance Graph

        The following graph compares the total percentage changes in the cumulative total stockholder return (assuming the reinvestment of dividends) on Griffin's Common Stock with the cumulative total return of the Russell 2000 Index from November 28, 2003 to November 29, 2008. It is assumed in the graph that the value of each investment was $100 at November 28, 2003. Griffin is not aware of any other company that substantially participates in both the landscape nursery and real estate businesses, and would therefore be suitable for comparison to Griffin as a "peer issuer" within Griffin's lines of business.

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ITEM 6.    SELECTED FINANCIAL DATA

        The following table sets forth selected statement of operations data for fiscal years 2004 through 2008 and balance sheet data as of the end of each fiscal year. The selected statement of operations financial data for fiscal 2006, fiscal 2007 and fiscal 2008 and the selected balance sheet financial data for fiscal 2007 and fiscal 2008 are derived from the audited consolidated financial statements included in Item 8 of this report. The selected financial data for fiscal 2004 and fiscal 2005 and the balance sheet data for fiscal 2006 were derived from the audited consolidated financial statements for those years.

(a)

In fiscal 2006, Griffin adopted FASB Interpretation No. 47 "Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143" ("FIN No. 47"). See Note 1 to Griffin's consolidated financial statements.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                   OPERATIONS

Overview

        The consolidated financial statements of Griffin include the accounts of Griffin's Connecticut and Massachusetts based real estate business ("Griffin Land") and Griffin's subsidiary in the landscape nursery business, Imperial Nurseries, Inc. ("Imperial").

        The notes to Griffin's consolidated financial statements included in Item 8 contain a summary of the significant accounting policies and methods used in the preparation of Griffin's consolidated financial statements. However, in the opinion of management, because of the relative magnitude of Griffin's real estate assets and inventories, accounting methods and estimates related to those assets are critical to the preparation of Griffin's consolidated financial statements. In many other cases, however, Griffin must use an accounting policy or method because it is the only policy or method permitted under accounting principles generally accepted in the United States of America. The following are the critical accounting estimates and methods used by Griffin:

        Investments: Griffin classifies its investments in debt and equity securities that have readily determinable fair values as either available-for-sale or trading securities, based upon management's intent regarding each security. If there is a decline in fair value of available-for-sale securities, Griffin evaluates whether such decline is other than temporary, and if the decline is deemed to be other than temporary, Griffin would record the decline in its consolidated statement of operations.

        Accounts receivable: Management estimates future recoverability of its accounts receivable based on an account's aging, payment history and financial condition.

        Inventories: In applying the principle of the lower of cost or market using the average cost method for nursery stock, management must estimate the future recoverability of certain parts of the inventory that have not matured as planned. Such estimates are based on the physical characteristics of the nursery stock in question and potential sales outlets and sales pricing.

        Income taxes: In applying SFAS No. 109 "Accounting for Income Taxes," management estimates future taxable income from operations, the sale of appreciated assets and tax planning strategies in determining if it is more likely than not that Griffin will realize the benefits of its deferred tax assets.

        Impairment of long-lived assets: Griffin evaluates the carrying value of its long-lived assets in relation to their fair values, operating performance and future undiscounted cash flows. In connection with Griffin's real estate business, development costs that have been capitalized are reviewed periodically for future recoverability.

        Revenue and gain recognition: In the real estate business, revenue includes rental revenue from Griffin Land's commercial and industrial properties and proceeds from property sales. Rental revenue is accounted for in accordance with SFAS No. 13, "Accounting for Leases." Gains on property sales are recognized in accordance with SFAS No. 66, "Accounting for Sales of Real Estate," 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.

        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.

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Summary

        Griffin incurred a net loss in fiscal 2008 of $8.3 million as compared to net income of $8.3 million in fiscal 2007. The lower results in fiscal 2008 principally reflect lower results at Griffin's operating businesses, Griffin Land and Imperial, and lower investment income. The lower operating results principally reflect pretax charges of $8.9 million related to the shutdown of Imperial's Florida growing operations and lower property sales at Griffin Land. Also, fiscal 2007 included a gain on the sale of a portion of Griffin's investment in Centaur Media, plc ("Centaur Media"). There were no Centaur Media shares sold in fiscal 2008.

        Operating profit at Griffin Land decreased from $15.1 million in fiscal 2007 to $4.0 million in fiscal 2008 due principally to lower profit from property sales. Imperial incurred an operating loss of $11.7 million in fiscal 2008, including charges of $8.9 million related to the shutdown of its Florida growing operations, as compared to an operating loss of $1.4 million in fiscal 2007. Griffin's general corporate expense decreased to $3.5 million in fiscal 2008 from $4.3 million in fiscal 2007, principally reflecting a decrease in the liability for Griffin's nonqualified savings plan and lower legal costs. Fiscal 2007 included a pretax gain of $2.9 million from the sale of a portion of Griffin's investment in Centaur Media. There were no sales of Centaur Media common stock in fiscal 2008. Investment income was lower in fiscal 2008 as compared to fiscal 2007 due principally to fiscal 2007 including $1.6 million in dividend income from Shemin Nurseries Holding Corp. ("SNHC"). There were no dividends received from SNHC in fiscal 2008. Interest expense in fiscal 2008 was slightly higher than fiscal 2007 due to a lower amount of capitalized interest in fiscal 2008.

        In fiscal 2007, Griffin adopted SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R)" ("SFAS No. 158"). The adoption of SFAS No. 158 did not impact Griffin's consolidated statement of operations, but did increase Griffin's accumulated other comprehensive income by $137,000 in fiscal 2008 and $47,000 in fiscal 2007. See Notes 1 and 6 to the consolidated financial statements included in Item 8.

        The change in accounting principle in fiscal 2006 reflected the recording of conditional asset retirement obligations in accordance with FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143." Also, at the beginning of the 2006 fiscal year, Griffin adopted SFAS No. 123(R) "Share-Based Payment" ("SFAS No. 123(R)") using the modified prospective method of adoption. Results for prior periods were not restated. See Notes 1 and 7 to the consolidated financial statements included in Item 8.

Fiscal 2008 Compared to Fiscal 2007

        Griffin's consolidated total revenue decreased from $59.4 million in fiscal 2007 to $44.5 million in fiscal 2008. The decrease in total revenue of approximately $14.9 million reflects decreases in revenue of approximately $11.5 million and approximately $3.4 million at Griffin Land and Imperial, respectively.

        Total revenue at Griffin Land decreased from approximately $31.4 million in fiscal 2007 to approximately $19.9 million in fiscal 2008. The decrease of approximately $11.5 million reflects a decrease of approximately $12.7 million of revenue from property sales, partially offset by an increase of approximately $1.2 million of rental revenue. The increase in Griffin Land's rental revenue in fiscal 2008, as compared to fiscal 2007, principally reflects: (i) $0.8 million from leasing previously vacant space; (ii) $0.7 million from leasing space for the entire year in fiscal 2008 as compared to a portion of the year in 2007 because the respective buildings were either built or acquired during fiscal 2007; and (iii) $0.1 million for leasing space in a new industrial building that came on line in the 2008 fourth

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quarter; partially offset by a decrease of $0.5 million from space being vacant this year that was leased during fiscal 2007. A summary of the square footage of Griffin Land's real estate portfolio is as follows:

        The increase in total square footage from 2,016,000 square feet at the end of fiscal 2007 to 2,116,000 square feet at the end of fiscal 2008 reflects the approximate 100,000 square foot industrial building in Tradeport that was built in fiscal 2008 and placed in service in the fourth quarter.

        The increase in square footage leased in fiscal 2008 principally reflects Griffin Land leasing its entire approximate 308,000 square foot warehouse in Manchester, Connecticut, which had been vacant. The new lease is for seven years, and, in addition to other customary terms, includes an option, with certain conditions, exercisable by Griffin Land to sell the property to the lessee, and another option, exercisable by the lessee, to purchase the property from Griffin Land, during different periods during the lease term at a price that has been agreed upon. Also in fiscal 2008, Griffin Land entered into a new lease for approximately 58,000 square feet with a tenant that previously leased approximately 22,000 square feet in one of Griffin Land's other Tradeport industrial buildings, resulting in a net increase of approximately 36,000 square feet being leased. This new lease is for space in the approximate 100,000 square foot industrial building in Tradeport that was built and placed in service in fiscal 2008.

        Market activity for industrial and office space was weak in fiscal 2008, reflecting the downturn in the economy, which accelerated in the latter part of the year. While Griffin Land was able to secure new leases on some of its previously vacant space, the overall activity in the market, based on inquiries from prospective tenants, declined in 2008 from prior years.

        The approximate $12.7 million decrease in revenue from property sales reflects several significant land sale transactions closing in fiscal 2007, while fiscal 2008 included only one property sale that closed during the year along with the recognition of revenue on a property sale that closed in fiscal 2006. Property sale revenue in fiscal 2008 principally includes $2.0 million from the recognition of previously deferred revenue from the sale of undeveloped Tradeport land to Walgreen that closed in fiscal 2006 and has been accounted for under the percentage of completion method and $2.5 million from the sale of land to the Town of Simsbury related to the settlement of litigation in connection with Griffin's proposed residential development in that town. As of November 29, 2008, Griffin Land has recognized all of the previously deferred revenue and gain from the 2006 land sale to Walgreen because the required road improvements related to that sale have been completed. In aggregate, the land sale to Walgreen generated revenue of $13.0 million and a pretax gain of $10.2 million over the past three years. Property sales occur periodically and changes in revenue from year to year from these transactions may not be indicative of any trends in the real estate business.

        Net sales and other revenue at Imperial decreased from $28.0 million in fiscal 2007 to $24.6 million in fiscal 2008, as unit sales volume decreased 16% in fiscal 2008 as compared to fiscal 2007. Management attributes the decrease in net sales to the weakened economy in fiscal 2008 and the reduction in new home construction.

        Griffin incurred a consolidated operating loss, after general corporate expense, of $11.2 million in fiscal 2008 as compared to consolidated operating profit, after general corporate expense, of $9.4 million in fiscal 2007. The lower operating results in fiscal 2008 reflect a decrease of approximately $11.1 million in operating profit at Griffin Land and an increase of approximately $10.3 million in the operating loss incurred by Imperial (including restructuring related charges of $8.9 million in fiscal 2008), partially offset by a reduction in general corporate expense of $0.8 million.

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        Operating results of Griffin Land in fiscal 2008 and 2007 were as follows:

(a)

The costs related to rental revenue excluding depreciation and amortization expense, profit from leasing activities before general and administrative expenses and before depreciation and amortization expense, general and administrative expenses excluding depreciation and amortization expense, and profit before depreciation and amortization expense are disclosures not in conformity with accounting principles generally accepted in the United States of America. They are presented because Griffin believes they are useful financial indicators for measuring the results in its real estate business segment. However, they should not be considered as an alternative to operating profit as a measure of operating results in accordance with accounting principles generally accepted in the United States of America. The aggregate of: (i) costs related to rental revenue excluding depreciation and amortization expense; (ii) costs related to property sales; and (iii) depreciation and amortization expense related to costs of rental revenue, equals the costs related to rental revenue and property sales on Griffin's consolidated statement of operations.

        The increase of $0.9 million in Griffin Land's profit from leasing activities before general and administrative expenses and before depreciation and amortization expense principally reflects the $1.2 million increase in rental revenue, partially offset by a $0.3 million increase in costs related to rental revenue excluding depreciation and amortization expenses. The higher costs principally reflect the operating expenses for buildings that were in operation for the entire year in fiscal 2008 as compared to being in operation for only a portion of fiscal 2007.

        The gain from property sales in fiscal 2008 principally reflects the recognition of the remainder of the previously deferred gain from the land sale to Walgreen that closed in fiscal 2006 and the gain on the land sale that closed in the 2008 fourth quarter. In fiscal 2007, Griffin Land's gain from property sales included gains on several sales of undeveloped land, including two significant sales of undeveloped commercial land, the sale of the second phase of residential lots in Stratton Farms and approximately

23

$2.7 million of previously deferred gain recognized on the land sale to Walgreen that closed in fiscal 2006.

        Griffin Land's general and administrative expenses were essentially unchanged in fiscal 2008 as compared to fiscal 2007. Depreciation and amortization expense at Griffin Land increased from approximately $4.5 million in fiscal 2007 to approximately $5.1 million in fiscal 2008. The increase principally reflects: (i) approximately $0.4 million of depreciation expense related to buildings that were on line for the entire year in fiscal 2008 but were either not in operation in fiscal 2007 or in operation for only a portion of fiscal 2007; (ii) $0.1 million of depreciation expense on the new building completed in fiscal 2008; and (iii) $0.1 million of depreciation expense on tenant improvements related to new leases.

        Operating results of Imperial in fiscal 2008 and fiscal 2007 were as follows:

        Imperial's operating loss in fiscal 2008 increased by approximately $10.3 million over the operating loss in fiscal 2007, reflecting (i) a $9.0 million decrease in gross profit, principally related to the shutdown of its Florida growing operations by the end of fiscal 2009; and (ii) a $1.7 million restructuring charge for the Florida shutdown, partially offset by an approximate $0.3 million decrease in selling, general and administrative expenses. The $9.0 million decrease in gross profit includes the effect of a charge of $7.2 million to reserve for Florida inventories that, as a result of the shutdown of that farm by the end of fiscal 2009, are expected to be sold below their carrying values at the time of sale and a decrease of $1.8 million due to other factors. Those other factors include the decline in sales volume, overall lower pricing in fiscal 2008 and an increase in charges for unsaleable inventories to $1.1 million in fiscal 2008 from $0.7 million in fiscal 2007. The lower pricing reflects the increase in sales discounts offered to generate sales volume and move product before it became unsalable. Those efforts were only partially successful, as some product expected to be sold in fiscal 2008 was held over for sale in fiscal 2009. The carryover of unsold product into fiscal 2009, the closing of Imperial's Florida growing operations by the end of fiscal 2009 and competition from other growers also seeking to liquidate inventories of unsold product from 2008 is expected to result in lower overall pricing in fiscal 2009 as compared to fiscal 2008. Imperial's gross margin on sales, excluding the charges for the shutdown of its Florida growing operations and unsalable inventories, decreased from 15.8% in fiscal 2007 to 12.1% in fiscal 2008. The lower margins principally reflect the lower pricing in the current year and increased delivery costs, which were not entirely offset by increased charges to customers.

        As approved by Griffin's Board of Directors, Imperial will shut down its Quincy, Florida farm, which comprises all of Imperial's growing operations in Florida, by the end of fiscal 2009. Imperial expects to continue to operate its farm in Granby, Connecticut. The shutdown of Imperial's Florida farm reflects the difficulties that facility has encountered in delivering product to most of Imperial's major markets, which are located in the mid-Atlantic area and northeastern United States. Imperial has been unable to develop sufficient volume in more southern markets to reduce its dependence on shipping Florida product substantial distances. The closure of the Florida operations will enable

24

Imperial to focus as a regional grower with most of its major markets within close proximity of its Connecticut farm.

        The restructuring charge is comprised of: (i) $1.1 million to write down fixed assets that will no longer be used; and (ii) $0.6 million for severance payments. A total of approximately 70 employees are affected by the shutdown of the Florida farm including 14 employees who were terminated prior to November 29, 2008. Approximately $0.1 million of severance was paid in the 2008 fourth quarter for the 14 employees terminated in that period. The liquidation of inventory, payment of the balance of the severance and the closing of the Florida growing operations are expected to take place during fiscal 2009. Because the majority of the charge for the shutdown of the Florida growing operations is a non-cash charge that reflects the expected disposition of inventories below their carrying values at the time of sale, Griffin expects the closing of the Florida farm to result in some positive cash flow.

        Included in the reserve for inventory are the excess of the carrying value of the inventory over the estimated sales proceeds and the costs to maintain inventory prior to sale and estimated disposal costs. Management has used its best judgment in estimating sales proceeds, the costs to maintain the inventory and the disposal costs; however, actual amounts may differ from the amounts estimated based on several factors, including market conditions. The effect of differences between estimated and actual amounts will be reflected in fiscal 2009 results.

        Imperial's selling, general and administrative expenses decreased from approximately $5.1 million in fiscal 2007 to approximately $4.8 million in fiscal 2008. The lower selling, general and administrative expenses in fiscal 2008 reflects a decrease of $0.3 million in selling expense, due to lower commission expense as a result of the lower sales, and fiscal 2007 including $0.2 million of costs related to litigation that was settled last year. Partially offsetting these items was a $0.1 million increase in general and administrative payroll expense due to an increase in headcount. As a percentage of net sales, Imperial's selling, general and administrative expenses increased from 18.1% in fiscal 2007 to 19.3% in fiscal 2008.

        Griffin's general corporate expense decreased from $4.3 million in fiscal 2007 to $3.5 million in fiscal 2008. The decrease principally reflects a decrease of $0.7 million in expense related to Griffin's non qualified deferred compensation plan, a decrease of $0.3 million in legal expenses and a decrease of $0.2 million for compliance with Section 404 of the Sarbanes-Oxley Act, partially offset by increases of $0.3 million in payroll expense and $0.1 million in state franchise taxes. The increase in payroll expense reflects an increase in headcount in fiscal 2008.

        In fiscal 2007, Griffin sold 1.2 million of its approximately 6.5 million shares of Centaur Media common stock and recorded a pretax gain of $2.9 million on those sales. Griffin did not sell any of its Centaur Media common stock in fiscal 2008.

        Griffin's consolidated interest expense increased from $3.2 million in fiscal 2007 to $3.3 million in fiscal 2008. The increase in interest expense was due to a decrease of approximately $0.3 million in interest capitalized in fiscal 2008 as compared to fiscal 2007 due to less construction activity in fiscal 2008, partially offset by a decrease of approximately $0.2 million of interest on nonrecourse mortgage debt in fiscal 2008 from fiscal 2007 due to a lower amount of average outstanding debt. Griffin's average outstanding debt in fiscal 2008 was $49.1 million as compared to $51.1 million in fiscal 2007.

        Griffin's investment income decreased from $3.9 million in fiscal 2007 to $1.1 million in fiscal 2008. The decrease principally reflects fiscal 2007 including $1.6 million of dividend income received from SNHC. There was no dividend income received from SNHC in fiscal 2008. Additionally, the average amount of short-term investments in fiscal 2008 was $15.7 million as compared to an average amount of short-term investments of $26.3 million in fiscal 2007, and Griffin's short-term investments had lower returns in fiscal 2008, attributed to lower short-term interest rates.

        Griffin's effective income tax rate was 38.1% for fiscal 2008, as compared to 36.2% for fiscal 2007. The effective tax rates for the 2008 and 2007 fiscal years reflect the statutory federal income tax rates

25

adjusted for state income taxes. Included in the income tax benefit in fiscal 2008 is approximately $0.1 million of tax benefit resulting from the adjustment of amounts estimated in the fiscal 2007 income tax provision to the amounts reflected on the fiscal 2007 income tax returns.

Fiscal 2007 Compared to Fiscal 2006

        Griffin's consolidated total revenue increased from $53.2 million in fiscal 2006 to $59.4 million in fiscal 2007, reflecting an increase in revenue of approximately $9.6 million at Griffin Land, partially offset by a decrease in revenue of approximately $3.4 million at Imperial.

        Revenue at Griffin Land increased from $21.8 million in fiscal 2006 to $31.4 million in fiscal 2007. The increase of approximately $9.6 million reflects an increase of approximately $7.5 million in revenue from property sales and an increase of approximately $2.1 million of revenue from leasing operations. Property sales occur periodically, and changes in revenue from year to year from these transactions are generally not indicators of any trends in the real estate business. Revenue from property sales in fiscal 2007 reflects several sales of undeveloped land, including the sale of approximately 73 acres in Griffin Center in Windsor, Connecticut to The Hartford Insurance Company for their construction of a large office complex, the sale of approximately 103 acres in South Windsor, Connecticut to a food distributor for construction of a distribution facility, the sale of the second phase of residential lots of Stratton Farms, Griffin Land's residential development in Suffield, Connecticut, and the sale of undeveloped land near the downtown area in Tampa, Florida. In addition, fiscal 2007 includes $3.1 million of revenue recognized from the land sale to Walgreen that closed last year and is being accounted for using the percentage of completion method. The revenue recognized in fiscal 2007 from the land sale to Walgreen reflects work performed on the required road improvements in fiscal 2007 and the impact of management reducing its estimate of the total costs to complete the required improvements due to changes to the design of certain portions of the required improvements. The effect of reducing the total estimated cost was to increase the percentage of completion, thereby resulting in additional revenue being recognized in fiscal 2007. Property sales revenue in fiscal 2006 included the initial revenue recognition from the land sale to Walgreen, the first sale of residential lots in Stratton Farms and two smaller land sales.

        The increase of $2.1 million in Griffin Land's revenue from its leasing operations in 2007, as compared to fiscal 2006, principally reflects $1.5 million from leasing space that was vacant during fiscal 2006, net of space previously occupied that is now vacant, $0.3 million from leasing space in the two new Tradeport buildings that were completed and each partially leased this year and $0.3 million from other lease revenue. At December 1, 2007, Griffin Land owned approximately 2,016,000 square feet of industrial, flex and office space, with approximately 1,322,000 square feet (66%) leased. Griffin Land's vacant space at December 1, 2007 includes a 308,000 square foot warehouse, which has remained vacant since it was acquired near the end of the 2006 third quarter. At the end of fiscal 2006, Griffin Land owned approximately 1,711,000 square feet with approximately 1,194,000 square feet (70%) leased. The increase in the total square footage of Griffin Land's portfolio reflects two new industrial buildings in Tradeport completed in fiscal 2007, aggregating approximately 275,000 square feet and an approximate 31,000 square foot warehouse facility acquired in the fiscal 2007 fourth quarter. Approximately 92,000 square feet of the new Tradeport buildings and the entire warehouse facility acquired in fiscal 2007 were leased at the end of fiscal 2007. The increase of approximately 128,000 square feet under lease at the end of fiscal 2007 versus the end of fiscal 2006 reflects the space leased in the new industrial buildings placed in service in fiscal 2007, the space leased in the warehouse facility acquired in fiscal 2007, and approximately 45,000 square feet of previously vacant space leased during fiscal 2007, partially offset by a lease for approximately 40,000 square feet in one of Griffin Land's flex buildings that expired and was not renewed. Market activity for industrial space in the area where Griffin Land's properties are located softened in the second half of fiscal 2007.

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        Net sales and other revenue at Imperial decreased from $31.5 million in fiscal 2006 to $28.0 million in fiscal 2007. Unit sales volume decreased 26% in fiscal 2007 as compared to fiscal 2006. Due to the seasonality of the landscape nursery business, the decrease in Imperial's net sales during fiscal 2007 took place mostly during the second quarter. The decrease in net sales was due to less product being available for sale in fiscal 2007 and generally poor weather in Imperial's markets during most of the 2007 spring. The reduced amount of product available for sale in fiscal 2007 reflects Imperial's efforts in fiscal 2006 to move previously unsold product and management's decision to reduce inventories to levels consistent with sales expectations. The relatively poor weather in the spring of 2007 resulted in the reduction of reorders, as it took retail customers a longer time to sell through their initial deliveries of product. The decrease in net sales was proportionately less than the decrease in unit sales volume due to higher pricing in fiscal 2007 and selling, on average, larger units in fiscal 2007 than fiscal 2006. The higher pricing in fiscal 2007 principally reflects Imperial selling a greater percentage of its product to independent garden center customers, the customer segment with the most favorable pricing for Imperial. Imperial's sales to independent garden center customers increased to approximately 52% of total sales in fiscal 2007 from approximately 43% in fiscal 2006.

        Griffin had consolidated operating profit, including general corporate expense, of $9.4 million in fiscal 2007 as compared to consolidated operating profit of $0.3 million in fiscal 2006. Operating results at Griffin Land and Imperial increased by approximately $8.1 million and approximately $1.1 million, respectively, in fiscal 2007 as compared to fiscal 2006. General corporate expense increased by approximately $0.1 million in fiscal 2007 as compared to fiscal 2006.

        Operating results at Griffin Land in fiscal 2007 and fiscal 2006 were as follows:

(a)

The costs related to rental revenue excluding depreciation and amortization expense, profit from leasing activities before general and administrative expenses and before depreciation and

27

amortization expense, general and administrative expenses excluding depreciation and amortization expense, and profit before depreciation and amortization expense are disclosures not in conformity with accounting principles generally accepted in the United States of America. They are presented because Griffin believes they are useful financial indicators for measuring the results in its real estate business segment. However, they should not be considered as an alternative to operating profit as a measure of operating results in accordance with accounting principles generally accepted in the United States of America. The aggregate of: (i) costs related to rental revenue excluding depreciation and amortization expense; (ii) costs related to property sales; and (iii) depreciation and amortization expense related to costs of rental revenue, equals the costs related to rental revenue and property sales on Griffin's consolidated statement of operations.

        The increase of $0.9 million in Griffin Land's profit from leasing activities before general and administrative expenses and before depreciation and amortization expense principally reflects the increase in rental revenue partially offset by an increase in costs related to rental revenue excluding depreciation and amortization expenses. The higher costs reflect $0.9 million of building operating expenses related to the warehouse facility purchased in the fiscal 2006 third quarter and the Tradeport industrial buildings that were completed in fiscal 2007, and an increase of $0.3 million in various expenses in all of Griffin Land's other buildings.

        The increase in the gain from property sales at Griffin Land in fiscal 2007 principally reflects a higher volume of property sale transactions closed this year (as discussed above). Included in the gain on property sales in fiscal 2007 is the recognition of approximately $2.7 million from the 2006 land sale to Walgreen that was previously deferred. As provided in the terms of the contract for the sale of that land, and as required under the State Traffic Commission Certificate, certain improvements to existing roads were required. The cost of these improvements is the responsibility of Griffin Land, however, a portion of the costs will be reimbursed from the purchaser of the land or performed by the town. As a result of Griffin Land's continuing involvement with the required improvements to the existing roads, this land sale was accounted for under the percentage of completion method. Accordingly, the revenue and the pretax gain on the sale are being recognized on a pro rata basis in a ratio equal to the percentage of the total costs incurred to the total anticipated costs of sale, including the allocated costs of the required improvements to existing roads. The recognition of revenue and profit related to the Walgreen land sale reflects the road improvements made by Griffin Land in fiscal 2007. In addition, in fiscal 2007, management reduced its estimate of the total costs to be incurred to complete the required improvements due to changes to the design of certain portions of the required improvements. As a result, the total projected pretax gain on this transaction increased from $9.7 million to $10.2 million and the percentage of completion increased as a result of the reduction of the total expected costs. While management has used its best estimates based on industry knowledge and experience in projecting the total costs of the required road improvements, increases or decreases in future costs as compared with current projected amounts would reduce or increase the gains to be recognized in future periods. Management expects to complete the required road improvements in fiscal 2008 and recognize the balance of the deferred revenue and profit in that year.

        Griffin Land's general and administrative expenses decreased $0.2 million in fiscal 2007 as compared to fiscal 2006 due principally to lower incentive compensation expense. Depreciation and amortization expense at Griffin Land increased $0.3 million in fiscal 2007 as compared to fiscal 2006. Depreciation expense increased $0.7 million related to the warehouse purchased near the end of the 2006 third quarter, the new industrial buildings and tenant improvements placed in service in fiscal 2007. The effect of these increases was partially offset by lower depreciation of $0.3 million as assets became fully depreciated and the inclusion in fiscal 2006 of $0.1 million of accelerated depreciation and amortization expense related to leases that terminated in that year.

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        Imperial's operating results for fiscal 2007 and fiscal 2006 are as follows:

        The reduction of Imperial's operating loss reflects a $1.3 million increase in gross profit partially offset by a $0.2 million increase in selling, general and administrative expenses. The higher gross profit reflects improved pricing, including higher charges for delivery, and lower delivery costs. The improved pricing reflects a greater percentage of Imperial's sales volume going to independent garden center customers in fiscal 2007 as compared to fiscal 2006, the customer segment with the most favorable pricing for Imperial. The lower delivery costs reflect Imperial expanding its base of trucking vendors in fiscal 2007 and the more efficient routing of trucks. Imperial incurred a charge for unsaleable inventories of $0.7 million in fiscal 2007 as compared to a $0.8 million charge for unsaleable inventory in fiscal 2006. Imperial's gross margin on sales, excluding the charges for unsaleable inventories in fiscal 2007 and fiscal 2006, increased from 10.2% in fiscal 2006 to 15.8% in fiscal 2007.

        Imperial's selling, general and administrative expenses increased by $0.2 million in fiscal 2007 as compared to fiscal 2006, reflecting $0.2 million of costs related to the litigation against Imperial by employees of a farm labor contractor previously engaged by Imperial. The increase in general and administrative expenses was partially offset by a reduction in selling expenses, due principally to lower headcount. As a percentage of net sales, selling, general and administrative expenses increased from 15.4% in fiscal 2006 to 18.1% in fiscal 2007.

        Griffin's general corporate expense increased to $4.3 million in fiscal 2007 from $4.2 million in fiscal 2006. The increase principally reflects (i) $0.3 million of costs related to the litigation against Griffin that was settled during fiscal 2007; (ii) an increase of $0.2 million in payroll expense, payroll taxes and employee benefits due, in part, to additional staff added in fiscal 2007; (iii) an increase of $0.1 million of general legal expenses; and (iv) an increase of $0.3 million in other general corporate expenses. These increases were substantially offset by a decrease of $0.5 million of expenses related to compliance with Section 404 of the Sarbanes-Oxley Act and a reduction of $0.3 million in incentive compensation expense. The lower Section 404 compliance expense reflects the hiring of additional staff to assist in Griffin's compliance efforts, which reduced the services required of outside consultants this year, and generally lower expenses for a company's second year of compliance.

        In fiscal 2007, Griffin sold 1.2 million of its approximately 6.5 million shares of common stock in Centaur Media for proceeds of $3.5 million and recorded a pretax gain of $2.9 million on those sales. In the future, Griffin may sell a portion of its remaining holdings in Centaur Media, depending on the market price of Centaur Media's common stock and the foreign currency exchange rate.

        Griffin's consolidated interest expense increased to $3.2 million in fiscal 2007 from $2.9 million in fiscal 2006. An increase in interest expense due to an additional borrowing of $8.5 million under a nonrecourse mortgage loan, completed in the 2006 fourth quarter, was partially offset by an increase in the amount of interest capitalized in fiscal 2007 as compared to fiscal 2006. The increase in capitalized interest in fiscal 2007 reflects interest capitalized on the construction of a building in Tradeport that was completed at the end of the 2007 first quarter, interest capitalized on a new Tradeport industrial building completed in the 2007 fourth quarter and interest capitalized on land improvements that were

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under construction in fiscal 2007. Griffin's average outstanding debt in fiscal 2007 was $51.1 million as compared to $44.4 million in fiscal 2006.

        Griffin's investment income was $3.9 million in fiscal 2007 as compared to $2.3 million in fiscal 2006. The increase of $1.6 million principally reflects dividend income of $1.6 million from SNHC in fiscal 2007. Investment income from short-term investments and cash equivalents was substantially unchanged in fiscal 2007 as compared to fiscal 2006 as the effect of having, on average, a lower amount of short-term investments and cash equivalents in fiscal 2007 was substantially offset by generally higher interest rates in fiscal 2007 as compared to fiscal 2006. Investment income in fiscal 2007 included interest income related to an income tax refund, which substantially offset the effect of fiscal 2006 including approximately $0.2 million of undistributed equity income from an investment in an agricultural cooperative in which Griffin holds a 25% interest. Because that investment had not been accounted for in periods prior to fiscal 2006, the cumulative effect was recorded in investment income in fiscal 2006. The investment income in fiscal 2007 related to that agricultural cooperative was minimal.

        Griffin's effective income tax rate was 36.2% in fiscal 2007, as compared to 5.3% for fiscal 2006. The effective tax rate in fiscal 2007 reflects a 35% rate for federal income taxes adjusted for state income taxes and permanent differences between book and taxable income. Griffin's income tax benefit for fiscal 2006 reflects the federal statutory rate of 35% substantially offset by the establishment of a valuation allowance of $0.1 million against certain deferred tax assets and the effect of permanent differences. The deferred tax assets on which the valuation allowance was recorded relate to certain state net operating loss carryforwards ("NOLs") of Imperial. The establishment of the valuation allowance in fiscal 2006 reflects management's determination that it is more likely than not that Imperial will not generate sufficient taxable income in the future to utilize the NOLs. In addition, the fiscal 2006 income tax benefit reflects the effect of permanent differences and adjustments to certain deferred tax assets and liabilities. Although these items are not significant amounts, their impact on the effective tax rate was significant because of the small pretax loss in fiscal 2006.

        In fiscal 2006, Griffin recorded a net of tax charge of $0.2 million for a change in accounting principle. This change relates to Griffin's recording the fair value of its conditional asset retirement obligations as prescribed by FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143." 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 are not currently used in Griffin's operations and do not have any book value, therefore, the full amount of the conditional asset retirement obligation was recorded as a charge in Griffin's consolidated statement of operations. These structures remain from the tobacco growing operations of former affiliates of Griffin.

Off Balance Sheet Arrangements

        Griffin does not have any off balance sheet arrangements.

Liquidity and Capital Resources

        Net cash provided by operating activities was $10.2 million in fiscal 2008 as compared to $11.8 million in fiscal 2007. Net cash provided by operating activities in fiscal 2008 includes $14.3 million of cash generated from a reduction of short-term investments as compared to $12.7 million of cash generated from a reduction of short-term investments in fiscal 2007. Excluding the cash provided by the reduction in short-term investments in each year, Griffin used cash of $4.1 million in operating activities in fiscal 2008 as compared to cash of $0.8 million used in operating activities in fiscal 2007. Although Griffin incurred a net loss of $8.3 million in fiscal 2008, the restructuring related charges for the shutdown of Imperial's Florida farm are mostly non-cash charges. The cash of $4.1 million used by Griffin in operating activities in fiscal

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2008 as compared to $0.8 million in fiscal 2007, excluding the cash generated from the reduction in short-term investments in each year, principally reflects the changes in assets and liabilities. The change in cash usage from other current assets principally reflects an increase in income tax receivable in fiscal 2008 whereas in fiscal 2007, the change reflected the collection of an income tax receivable from the previous year.

        In fiscal 2008, Griffin had net cash of $10.8 million used in investing activities as compared to net cash of $2.0 million provided by investing activities in fiscal 2007. The net cash used in investing activities in fiscal 2008 includes additions to Griffin Land's real estate assets of $10.8 million, principally reflecting construction of a new approximate 100,000 square foot industrial building in Tradeport and improvements related to new leases. As a result of an increase in material costs, the per square foot construction cost of this new building was higher than the per square foot cost of construction on other Tradeport buildings previously developed by Griffin Land. An increase in the cost of construction of new facilities results in higher depreciation expense in future periods and requires increased investment in Griffin Land's real estate assets, which may lower the return on investment in new facilities in the real estate business. Additions to property and equipment in fiscal 2008 were $0.5 million, principally to replace equipment used in Imperial's farming operations. Partially offsetting the net cash used for additions to real estate and property and equipment was $0.5 million of cash received from a property sale by Griffin Land. An additional $2.2 million, including interest, will be collected in future periods related to that property sale.

        Net cash provided by investing activities in fiscal 2007 reflected cash of $13.3 million generated from property sales and cash of $3.5 million from the sale of a portion of Griffin's investment in Centaur Media. These items were substantially offset by $14.6 million of cash used for additions to Griffin Land's real estate assets. The additions to Griffin Land's real estate assets in fiscal 2007 were principally for the completion of two industrial buildings in Tradeport, totaling approximately 275,000 square feet, that were built on speculation, the acquisition of a 31,000 square foot warehouse facility in Bloomfield, Connecticut, and tenant improvements related to new leases. As part of the agreement to purchase the warehouse in Bloomfield, Griffin Land entered into a ten-year lease agreement with the seller for the entire warehouse facility. The purchase price of the Bloomfield warehouse was $2.7 million, which was paid for with a portion of the proceeds, then in escrow, from the land sale earlier in the year to The Hartford Insurance Company. Additions to property and equipment, principally for Imperial, were $0.5 million in fiscal 2007, principally to replace equipment used in Imperial's farming operations. The return of investment from SNHC of $0.2 million reflects the portion of a total of $1.8 million received from SNHC that was not reported as dividend income, based on SNHC's cumulative earnings.

        Net cash used in financing activities was $5.8 million in fiscal 2008 as compared to $4.9 million in fiscal 2007. The net cash used in financing activities in fiscal 2008 principally reflects $2.9 million of cash used by Griffin to repurchase 85,200 shares of its outstanding common stock, $2.0 million used to pay dividends on its common stock and $1.2 million used for principal payments on Griffin Land's nonrecourse mortgages and payments of capital lease obligations. In fiscal 2007, net cash used in financing activities principally reflected $4.2 million used by Griffin to repurchase 112,900 shares of its outstanding stock and $2.2 million for payments of principal on Griffin Land's nonrecourse mortgages and capital lease obligations. Included in the fiscal 2007 mortgage principal payments was a $1.0 million prepayment on Griffin Land's 6.08% mortgage due January 1, 2013. Griffin Land was not in compliance with the debt service coverage ratio requirement of that loan, which is collateralized by two multi-story office buildings located in Griffin Center in Windsor, Connecticut. In connection with the $1.0 million prepayment, the lender deferred the debt service coverage requirement until the twelve month period beginning on January 1, 2009. Based on the current level of occupancy of the two multi-story office buildings, Griffin Land would not be in compliance with the debt service coverage ratio requirement as of December 31, 2009. If that is the case, Griffin Land will seek to continue to defer

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the debt service coverage requirement. There can be no assurance that the lender would agree to continue the deferral. Partially offsetting those items in fiscal 2007 were $1.0 million of cash provided by the tax benefit of stock options exercised and $0.4 million of cash provided by the exercise of stock options.

        Griffin plans to continue to invest in its real estate business, including the construction of new facilities, and to incur expenditures to build out the interiors of its buildings as leases are completed, and to continue to invest in infrastructure improvements required for present and future development in its office and industrial parks.

        In fiscal 2008, Griffin Land and the Town of Simsbury, Connecticut, executed agreements settling litigation regarding Meadowood, Griffin Land's proposed residential development. The settlement agreements granted Griffin Land town approvals for Meadowood. The settlement provides, among other things, the number of homes permitted to be built in Meadowood, the amount of open space to be included in Meadowood, the resolution of environmental remediation issues prior to the commencement of construction and the purchase by the Town of a portion of the Meadowood land for Town open space. The sale of that land to the Town closed in November 2008. Griffin Land intends to continue with its Meadowood residential development plans and to proceed with residential development plans on its other land holdings that are appropriate for that use.

        In fiscal 2007, Griffin's Board of Directors authorized a program to repurchase, from time to time, up to 250,000 shares of its outstanding common stock through private transactions through December 31, 2008. The program to repurchase did not obligate Griffin to repurchase any specific number of shares, and could have been suspended at any time at management's discretion. Under this program, Griffin repurchased 198,100 shares of its outstanding common stock for $7.1 million. The program expired on December 31, 2008 and was not renewed.

        In the fourth quarter of fiscal 2007, Griffin's Board of Directors approved a quarterly dividend payment of $0.10 per common share, with the first payment of a quarterly dividend taking place in the 2008 first quarter. In fiscal 2008, the Board declared a dividend of $0.10 per common share for each quarter and Griffin paid $2.0 million of dividends to its common stockholders. Griffin expects to continue to pay quarterly dividends to its stockholders subject to the Board of Directors' evaluation of other uses for Griffin's cash.

        In January 2009, Griffin Land entered into a ten-year lease with a private company for approximately 257,000 square feet of a new approximately 304,000 square foot facility to be built in 2009 by Griffin Land in Tradeport. Under certain conditions, but no later than the beginning of the sixth year of the lease, the tenant is required to lease the entire building. The lease contains provisions for the expansion of the building up to approximately 450,000 square feet. Subsequent to the execution of the lease, Griffin entered into a $12 million construction loan with a bank to provide a portion of the financing for the construction of this facility. The construction loan converts to a nine-year nonrecourse mortgage loan after one year. The interest rate on the construction loan is the greater of 2.75% above the thirty day LIBOR rate or 4%. During the first year, payments are for interest only. Griffin entered into a swap agreement with the bank to fix the interest rate for the final nine years of the loan at 6.35%. Payments during those nine years will be for principal and interest, and will be based on a twenty-five year amortization period.

        In January 2009, Griffin entered into a commitment with a bank for a $10 million revolving credit facility that will have a term of two years, but may be extended for an additional year by Griffin. The facility will be collateralized by several of Griffin Land's buildings in Griffin Center and Griffin Center South. The interest rate will be the greater of prime rate plus 1.5% or 6.88%. Griffin intends to use the facility for seasonal working capital needs and to supplement cash flow from operations. Closing on this revolving credit facility is subject to completion of a definitive loan agreement with the bank. There is no assurance that this credit facility will be completed under its current terms, or at all.

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        Griffin's payments (including principal and interest) under contractual obligations as of November 29, 2008 are as follows:

(1)

Includes obligations for the design of a new building in Tradeport, tenant improvements, and for the purchase of plants and raw materials by Imperial.

(2)

Includes Griffin's deferred compensation plan and other postretirement benefit liabilities.

        During fiscal 2008, Griffin used its own cash and cash generated from the liquidation of a portion of its short-term investments to finance its operations, invest in its real estate business and for general corporate purposes. As of November 29, 2008, Griffin had cash and short-term investments of approximately $13.4 million, down from $34.0 million at the beginning of fiscal 2008. Management believes that a revolving credit facility may be required to supplement its cash and short-term investments to meet its seasonal cash and potential real estate capital expenditure requirements in the upcoming year. Griffin has also obtained construction loan financing for the new approximately 304,000 square foot facility to be built in Tradeport. In fiscal 2009, Griffin will seek to refinance its existing mortgage of approximately $7.5 million that matures on July 1, 2009. Should that refinancing not be achieved, management believes that the capacity under the proposed revolving credit facility would be sufficient to pay down the maturing mortgage and fund operating cash needs.

        Griffin may also continue to seek nonrecourse mortgage placements on selected properties. Griffin also will seek to purchase, either or both, land and buildings, which may potentially include land and buildings in areas not where Griffin Land's current real estate holdings are concentrated. Real estate acquisitions may or may not occur based on many factors, including real estate pricing.

Recent Accounting Pronouncements

        In February 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position 157-2, "Effective Date of FASB Statement No. 157," ("FSP 157-2"), which delayed the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of fiscal 2009 for Griffin. Griffin is evaluating the impact that the application of SFAS No. 157 to nonfinancial assets and nonfinancial liabilities will have on its consolidated financial statements.

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 and Section 21E of the Exchange Act. 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, particularly with respect to the timing of the shutdown of Imperial's Florida farm, the sale of the remaining Florida inventories in 2009,

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Imperial's plan to reduce production in 2009, the reduction in Imperial's inventory levels over the next few years, construction and leasing of additional facilities in the real estate business, approval of proposed residential subdivisions, the potential deferral of the debt service coverage requirement of Griffin's 6.08% mortgage due January 1, 2013, the closing of the proposed revolving credit facility or Griffin's anticipated future liquidity. 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.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risk represents the risk of changes in the value of a financial instrument, derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in earnings and cash flows.

        For fixed rate mortgage debt, changes in interest rates generally affect the fair market value of the debt instrument, but not earnings or cash flows. Griffin does not have an obligation to prepay any fixed rate debt prior to maturity and, therefore, interest rate risk and changes in the fair market value of fixed rate debt should not have a significant impact on earnings or cash flows until such debt is refinanced, if necessary. Griffin's mortgage interest rates and related principal payment requirements are described in Note 5 to the consolidated financial statements. For variable rate debt, changes in interest rates generally do not impact the fair market value of the debt instrument, but do affect future earnings and cash flows. Griffin did not have any variable rate debt outstanding during the fiscal year ended November 29, 2008.

        Griffin is exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on market values of Griffin's cash equivalents. These investments generally consist of overnight investments that are not significantly exposed to interest rate risk. Griffin's short-term investments generally consist of debt instruments with maturities ranging from one to thirteen months, with a weighted average maturity of approximately nine months as of November 29, 2008. Due to the generally short-term composition of its investments, Griffin's investments are not significantly exposed to interest rate risk except to the extent that changes in interest rates will ultimately affect the amount of interest income earned and cash flow from these investments.

        As of November 29, 2008, Griffin did not have any derivative financial instruments in place to manage interest costs, but that does not mean that Griffin will not use them as a means to manage interest rate risk in the future.

        Griffin does not have foreign currency exposure in operations. Griffin does have an investment in a public company, Centaur Media, plc, based in the United Kingdom. The ultimate liquidation of that investment and conversion of proceeds into United States currency is subject to future foreign currency exchange rates involving the British pound sterling. A 10% decrease in the foreign currency exchange rate at November 29, 2008 would have resulted in a $0.3 million reduction of the fair value of that investment.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Operations

(dollars in thousands, except per share data)

See Notes to Consolidated Financial Statements.

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Balance Sheets

(dollars in thousands, except per share data)

See Notes to Consolidated Financial Statements.

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Changes in Stockholders' Equity

For the Fiscal Years Ended November 29, 2008, December 1, 2007 and December 2, 2006

(dollars in thousands)