INDUS REALTY TRUST, INC. - Annual Report: 2012 (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)

(212) 218-7910
(Registrant's telephone number, including area code)

         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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes 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 $62,050,000 based on the closing sales price on The NASDAQ Stock Market LLC on June 1, 2012, 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 February 5, 2013, 5,139,590 shares of common stock were outstanding.

FORWARD-LOOKING STATEMENTS

        This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For this purpose, any statements contained in this Annual Report on Form 10-K that relate to future events or conditions, including without limitation, the statements in Part I, Item 1. "Business" and Item 1A. "Risk Factors" and in Part II under Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as located elsewhere in this annual report regarding industry prospects or Griffin's prospective results of operations or financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," and similar expressions are intended to identify forward-looking statements. Such forward-looking statements represent management's current expectations and are inherently uncertain. There are a number of important factors that could materially impact the value of Griffin's common stock or cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include: adverse economic conditions and credit markets; a downturn in the residential real estate market; risks associated with concentration of real estate holdings; risks associated with entering new real estate markets; potential environmental liabilities; competition and governmental regulations; inadequate insurance coverage; risks of agricultural and environmental factors; concentration of customers; regulatory risks; risks associated with the cost of raw materials and energy costs; availability of transportation vendors to deliver product; availability of labor; risks of loss in the landscape nursery business not covered by insurance; risks of investing in a foreign company; litigation risks; and the concentrated ownership of Griffin common stock by members of the Cullman and Ernst families. These and the important factors discussed under the caption "Risk Factors" in Part 1, Item 1A of this Form 10-K for the fiscal year ended December 1, 2012, among others, could cause actual results to differ materially from those indicated by forward-looking statements made in this Form 10-K and presented elsewhere by management from time to time. Any such forward-looking statements represent management's estimates as of the date of this Annual Report on Form 10-K. While Griffin may elect to update such forward-looking statements at some point in the future, Griffin disclaims any obligation to do so, even if subsequent events cause Griffin's views to change. These forward-looking statements should not be relied upon as representing Griffin's views as of any date subsequent to the date of this Annual Report on Form 10-K.

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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) a 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) a landscape nursery business comprised of the growing of containerized plants for sale principally to independent retail garden centers and rewholesalers, whose main customers are landscape contractors. Griffin was incorporated in 1970.

        As of December 1, 2012, Griffin held 5,277,150 shares of common stock (an approximate 4% interest) in Centaur Media plc, a publicly held magazine and information services publisher based in the United Kingdom. On January 30, 2013, Griffin sold 1,000,000 shares of its Centaur Media common stock for approximately $0.9 million. As of December 1, 2012, Griffin held 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"). On January 18, 2013, Griffin sold its investment in SNHC for initial cash proceeds of approximately $3.2 million (see Investments on page 12).

        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. Through fiscal 2009, Griffin's development activities were carried out on parts of its land in Connecticut and Massachusetts and all of Griffin Land's real estate assets, including buildings and undeveloped land, were located in the Hartford, Connecticut area, primarily in the north submarket of Hartford. In fiscal 2010, Griffin Land completed its first acquisitions of real estate assets outside of the Hartford area by purchasing a fully leased 120,000 square foot industrial building in Breinigsville, Pennsylvania and a 51 acre parcel of undeveloped land in Lower Nazareth, Pennsylvania. Both the building and undeveloped land acquired are located in the Lehigh Valley region of Pennsylvania. In fiscal 2012, Griffin Land completed the construction, on speculation, of a 228,000 square foot industrial building on 17 acres of the undeveloped land in Lower Nazareth. On December 28, 2012, Griffin Land acquired an approximately 49 acre parcel of undeveloped land in Hanover Township, also in the Lehigh Valley of Pennsylvania.

        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 also will continue to seek to acquire and develop properties not presently owned, including land and buildings outside the Hartford area. The headquarters for Griffin Land is in Bloomfield, Connecticut.

        As of December 1, 2012, Griffin Land owned thirty buildings comprising approximately 2.5 million square feet. Approximately 76% of this square footage is comprised of industrial/warehouse space, with the balance principally being office/flex space. As of December 1, 2012, approximately 69% of Griffin Land's industrial/warehouse space was leased, however, excluding the newly constructed 228,000 square foot industrial building that was completed at the end of the 2012 third quarter and was not leased as of December 1, 2012, approximately 79% of Griffin Land's industrial/warehouse space was leased while approximately 90% of Griffin Land's office/flex space was leased as of December 1, 2012. Griffin Land uses nonrecourse mortgages to finance partly its real estate development activities, and as of

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December 1, 2012, approximately $59.5 million was outstanding under such loans. In fiscal 2012, Griffin Land's profit from its leasing activities including general and administrative expenses and before depreciation and amortization expenses (excluding the results from a warehouse building that was sold on January 31, 2012, see below) was approximately $9.1 million (see note (a) on page 28 under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, Fiscal 2012 Compared to Fiscal 2011), while debt service on its nonrecourse mortgage debt was approximately $5.6 million.

        In the greater Hartford area, there are a number of warehouse facilities and office buildings, some of which are fully or partially vacant, that are competitive with Griffin Land's warehouse facilities and office/flex buildings. Additional capacity or an increase in vacancies in either the industrial or office markets 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. There can be no assurance as to the direction of the real estate market in this region in the near future.

        As a result of the weak economy, market activity for the leasing of industrial space in the Hartford market has been slow for the past four years and there has not been any significant absorption of vacant space. Market activity for office/flex space has also been slow during that time, although somewhat better than the industrial market. Griffin Land believes that it benefits from its reputation as a stable company with sufficient resources to meet its obligations and deliver space to tenants timely and in accordance with the terms of their lease agreements.

        In fiscal 2012, Griffin Land entered into three new leases for an aggregate of approximately 151,000 square feet of industrial space and two new leases for an aggregate of approximately 32,000 square feet of office/flex space. The new leases for industrial space include a three-year lease (with two one-year renewal options) for an entire building, approximately 127,000 square feet, in New England Tradeport ("Tradeport"), Griffin Land's industrial park in Windsor and East Granby, Connecticut. In connection with this new full building lease, Griffin Land entered into a lease termination agreement with an existing tenant that had leased approximately 42,000 square feet in that building, but had previously vacated its space and was seeking to sublease. Griffin Land has agreed to be paid $325,000 in connection with the early termination of the lease, which was scheduled to expire in 2014. In fiscal 2012, Griffin Land renewed and extended several leases aggregating approximately 87,000 square feet of industrial space and approximately 70,000 square feet of office/flex space. In fiscal 2012, leases aggregating approximately 98,000 square feet expired and were not renewed. Of such space, approximately 85,000 square feet is industrial space (including the approximately 42,000 square foot lease that was terminated early and is now subject to a new, full building lease) and approximately 13,000 square feet is office/flex space.

        In fiscal 2011, Griffin Land entered into two new leases for an aggregate of approximately 29,000 square feet of previously vacant office/flex space and a new lease for approximately 10,000 square feet of industrial space that had just become vacant due to the early termination of a lease for that space. Griffin Land also renewed and/or extended several leases of industrial space aggregating approximately 207,000 square feet and three leases of office/flex space aggregating approximately 46,000 square feet in fiscal 2011. Most of the leases that were renewed were scheduled to expire in fiscal 2011, except for leases aggregating approximately 43,000 square feet that were scheduled to expire subsequent to fiscal 2011.

        In fiscal 2010, Griffin Land entered into several new leases for an aggregate of approximately 81,000 square feet of previously vacant office/flex space. New leasing of industrial space by Griffin Land was minimal in fiscal 2010, as only a short-term lease for approximately 11,000 square feet was signed. During fiscal 2010, Griffin Land was able to renew and/or extend several leases aggregating approximately 259,000 square feet, mostly of industrial space, including the extension for an additional

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nine years of the full building lease in the Breinigsville, Pennsylvania building acquired in fiscal 2010. However, leases aggregating approximately 76,000 square feet, of mostly industrial space, expired in fiscal 2010 and were not renewed.

        In fiscal 2012, Griffin Land completed three property sales. The largest of these was the 2012 first quarter sale of its fully leased 308,000 square foot warehouse building in Manchester, Connecticut (the "Raymour Building"). Under the terms of the full building lease with Raymour & Flanigan for that building, Griffin Land gave notice to Raymour in the 2011 fourth quarter that Griffin Land was exercising the put option under its lease to sell the facility to Raymour. The proceeds of approximately $16.0 million from that sale were placed in escrow for the potential acquisition of a replacement property as part of a Section 1031 like-kind exchange for income tax purposes. As Griffin Land did not identify a property it considered to be a suitable replacement property during the time period for purchasing a replacement property under IRS regulations, the proceeds from the sale of the Raymour Building were disbursed from the escrow account to Griffin Land in the 2012 second quarter. The sale of this property and all operating results for this property are reported as a discontinued operation for all periods presented in Griffin's consolidated statements of operations in this Annual Report on Form 10-K.

        In the 2012 third quarter, Griffin Land sold approximately 93 acres of undeveloped land in Tradeport to Dollar Tree Distribution, Inc. for cash proceeds of $7.0 million (the "Dollar Tree Sale"). Because Griffin Land is required, under the terms of the Dollar Tree Sale, to construct a sewer line to service the land sold, the Dollar Tree Sale is being accounted for under the percentage of completion method, whereby the revenue and gain on sale are recognized as the total costs related to the property sold are incurred. The proceeds from the Dollar Tree Sale were placed in escrow for the purchase of a replacement property under a Section 1031 like-kind exchange. On December 28, 2012, Griffin Land closed on the purchase of an approximately 49 acre parcel of undeveloped land in the Lehigh Valley of Pennsylvania using the proceeds from the Dollar Tree Sale that had been held in escrow to complete the Section 1031 like-kind exchange.

        In the fiscal 2012 fourth quarter, Griffin Land also completed the sale of approximately 14 acres of undeveloped land in Windsor, Connecticut for cash proceeds of approximately $1.0 million.

        In fiscal 2011, Griffin Land received total cash proceeds of approximately $4.0 million from three property sales that closed during that year. The largest of these was the sale of approximately 165 acres of undeveloped land in Suffield and Granby, Connecticut to a local farmer for cash proceeds of $3.0 million. In connection with that sale, the state of Connecticut acquired the development rights on that land from the farmer who purchased the property. In fiscal 2011, Griffin Land also closed on the sale of approximately 57 acres of undeveloped land (much of which is wetlands) in Granby to a local homebuilder and closed on the sale of approximately 10 acres of land in Southwick, Massachusetts.

        In fiscal 2010, Griffin Land closed on two property sales, the sale of four of Griffin Land's remaining twenty-five lots at Stratton Farms, a residential development in Suffield, Connecticut for cash proceeds of $0.4 million and the sale of a 5 acre parcel of undeveloped land in Bloomfield, Connecticut for cash proceeds of $0.1 million. The sale of the four Stratton Farms residential lots was the first closing under an option agreement whereby a privately owned regional homebuilder could have purchased all of Griffin Land's remaining Stratton Farms residential lots. However, the buyer did not purchase any additional lots within the time frame specified under the agreement, and the agreement lapsed in fiscal 2012 and was not extended (see the section entitled "Residential Developments-Suffield" in this Item on page 10).

        The weakness in the residential real estate market has adversely affected Griffin Land's real estate development activities. The continued weakness 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.

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        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, community opposition and other restrictions to development imposed by governmental agencies.

Commercial and Industrial Developments

New England Tradeport

        The major portion of Griffin Land's commercial and industrial development effort has been focused on New England Tradeport, the 600 acre industrial park near Bradley International Airport and Interstate 91, located in Windsor and East Granby, Connecticut. Within Tradeport, Griffin Land built and currently owns approximately 1,465,000 square feet of warehouse and light manufacturing space in thirteen buildings, of which approximately 76% was leased as of December 1, 2012. Tradeport also contains a bottling and distribution plant built by the Pepsi Bottling Group ("Pepsi") on land sold to Pepsi by Griffin Land in the early 1990s, a large distribution facility built by Walgreen on land purchased from Griffin Land in fiscal 2006, and a large distribution facility currently being built by Dollar Tree on land purchased from Griffin Land in fiscal 2012. The current State Traffic Certificate ("STC") covering Tradeport allows for total development of approximately 4,390,000 square feet within Tradeport. Of that total capacity, approximately 3,594,000 square feet currently is used by existing development, including approximately 2,129,000 square feet in the three buildings (including the one under construction) owned by others and approximately 1,465,000 square feet in existing Griffin Land-owned buildings.

        Griffin Land holds the remaining approximately 796,000 square feet of unbuilt capacity which relates to four approved buildings and an approved addition to one of Griffin Land's existing buildings. Griffin Land also owns all of the remaining undeveloped land within Tradeport, which consists of two contiguous parcels totaling approximately 95 acres, 60 acres of which are located in Windsor and the abutting 35 acres located in East Granby. There are no STC or other approvals currently in place (other than zoning in the case of Windsor) for the development of this remaining undeveloped land, and Griffin Land believes that additional infrastructure improvements, which may be significant, may be required to obtain approvals to develop this land. As part of the Dollar Tree Sale, a sewer line is planned to be brought to an accessible point near the edge of this 95 acre combined parcel. Griffin Land intends to continue to direct much of its real estate efforts in Connecticut on the construction and leasing of its warehouse and light manufacturing facilities at Tradeport.

        In fiscal 2009, Griffin Land completed a build-to-suit warehouse and light manufacturing building in Tradeport of approximately 304,000 square feet. Construction of this new facility commenced upon Griffin Land entering into a ten-year lease with Tire Rack, a private company that is using this facility as its northeast distribution center. Tire Rack currently pays rent on 257,000 square feet of the building but pays for the operating expenses of the entire building. No later than the beginning of the sixth year of the lease, August 2014, Tire Rack is required to pay rent on the entire building. The lease also contains provisions for a potential expansion that would increase the size of the building up to approximately 450,000 square feet.

        As of December 1, 2012, approximately $58.0 million was invested (net book value) in buildings owned by Griffin Land that are located in Tradeport and approximately $3.9 million was invested (net book value) by Griffin Land in the undeveloped land there. As of December 1, 2012, ten of Griffin Land's Tradeport buildings were mortgaged for an aggregate of approximately $44.8 million. Two Tradeport buildings built in fiscal 2007 (including the building which Griffin Land recently entered into a full building lease) and an older Tradeport building, aggregating approximately 373,000 square feet, are currently not mortgaged. A summary of Griffin Land's square footage owned and leased in

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Tradeport at the end of each of the past three fiscal years and leases in Tradeport scheduled to expire during each of the next three fiscal years are as follows:

        Subsequent to the end of fiscal 2012, Griffin Land leased approximately 24,000 square feet of previously vacant space in Tradeport, which, if included in the square footage leased as of December 1, 2012, would have increased the percentage of square footage leased to 78%.

Griffin Center and Griffin Center South

        Griffin's other substantial commercial development in Connecticut is the combination of its buildings in 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 December 1, 2012, approximately 63% of the acreage had been used to develop approximately 2,165,000 square feet of office and industrial space. Griffin Land owns approximately 617,000 of the 2,165,000 square feet of developed space.

        Griffin Center currently includes eleven office buildings, a flex building and a small restaurant, five of which are owned by Griffin Land. 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 flex building (the "NU Building"), which is used principally as office, data center and call center space and the small restaurant building. As of December 1, 2012, approximately $18.2 million was invested (net book value) in Griffin Land's buildings in Griffin Center and approximately $1.3 million was invested by Griffin Land in the undeveloped land there. Griffin Land's two multi-story office buildings and the NU Building in Griffin Center are separately mortgaged for an aggregate of approximately $10.7 million, and Griffin Land's single story office building is included as collateral under Griffin's $12.5 million revolving line of credit. There were no borrowings under the revolving line of credit as of December 1, 2012.

        In fiscal 2012, Griffin Land leased approximately 9,000 square feet of previously vacant space in one of its multi-story office buildings which was essentially offset by the amount of square footage under leases that expired and were not renewed. In fiscal 2011, Griffin Land leased approximately 18,000 square feet of previously vacant space in one of its multi-story office buildings in Griffin Center. In fiscal 2010, Griffin Land completed several new leases in Griffin Center for an aggregate of approximately 51,000 square feet. As of December 1, 2012, approximately 335,000 square feet of Griffin Land's buildings was leased, comprising approximately 88% 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

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

        Subsequent to the end of fiscal 2012, Griffin Land leased approximately 36,000 square feet of previously vacant office space in Griffin Center, which, if included in the square footage leased as of December 1, 2012, would have increased the percentage of square footage leased to 97%.

        Griffin Center South is a 130 acre tract with sixteen buildings of single story office, flex and storage space totaling approximately 1,152,000 square feet. Griffin Land currently owns nine buildings in Griffin Center South with an aggregate of approximately 235,000 square feet, of which approximately 217,000 square feet is single story office and flex space and approximately 18,000 square feet is storage space. In fiscal 2012, Griffin Land leased approximately 23,000 square feet of previously vacant space and renewed a tenant for 9,000 square feet, which represents a 5,000 square foot reduction in space for that tenant. Also, in fiscal 2012, Griffin Land received notice that a tenant was exercising an option to terminate its lease for approximately 19,000 square feet in one of Griffin Land's flex buildings in Griffin Center South in August 2013, one year earlier than the scheduled lease expiration. In fiscal 2011, Griffin Land completed a lease for approximately 11,000 square feet of previously vacant space and renewed and/or extended leases for approximately 46,000 square feet. Also during fiscal 2011, approximately 14,000 square feet of previously leased space became vacant as two tenants reduced their spaces in connection with the extensions of their leases. In fiscal 2010, Griffin Land completed two new leases aggregating approximately 31,000 square feet in its Griffin Center South properties.

        As of December 1, 2012, approximately $8.0 million was invested (net book value) in Griffin Land's buildings in Griffin Center South and approximately $0.4 million was invested by Griffin Land in the undeveloped land there. As of December 1, 2012, Griffin Land's nine properties in Griffin Center South are included as collateral under Griffin's $12.5 million revolving line of credit. There were no borrowings under the revolving line of credit as of December 1, 2012. Griffin Land believes that the undeveloped land remaining in Griffin Center South is sufficient to build at least two additional buildings aggregating approximately 175,000 square feet.

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        As of December 1, 2012, approximately 219,000 square feet of space in the Griffin Center South buildings owned by Griffin Land was leased, comprising 93% of Griffin Land's total space in Griffin Center South. 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 years and leases in Griffin Center South scheduled to expire during each of the next three fiscal years are as follows:

Lehigh Valley Industrial Properties and Other Property

        In fiscal 2010, Griffin Land completed its first acquisition of property outside of the Hartford, Connecticut area, when it acquired a fully leased 120,000 square foot industrial building (the "Olympus Building") in Breinigsville, Pennsylvania, which is located in the Lehigh Valley. Subsequent to the purchase of the Olympus Building, Griffin Land and the tenant in that building agreed on a nine year extension of the lease, which now runs through 2025. Also in fiscal 2010, Griffin Land acquired approximately 51 acres of undeveloped land in Lower Nazareth, Pennsylvania, which was renamed Lehigh Valley Tradeport, and is located in a major industrial area of the Lehigh Valley. The land acquired has approvals for the development of two industrial buildings totaling approximately 530,000 square feet. In fiscal 2012, Griffin Land completed construction on the first of two buildings expected to be built in Lehigh Valley Tradeport, a 228,000 square foot industrial building. This building was built on speculation. Although there have been expressions of interest by prospective tenants, this new building has not yet been leased. The work done in Lehigh Valley Tradeport for the construction of this new building included a portion of the site work necessary for the construction of the second building.

        As of December 1, 2012, Griffin Land owned three industrial buildings aggregating approximately 379,000 square feet that are located outside of its core Connecticut office and industrial parks, including the Olympus Building and the newly built industrial building in Lehigh Valley Tradeport discussed above, which are a combined approximately 348,000 square feet. The third industrial building not located in one of Griffin Land's Connecticut industrial parks is a 31,000 square foot warehouse building in Bloomfield, Connecticut. The site of the Bloomfield building has approximately 24 acres of undeveloped land and abuts an approximately 244 acre parcel of undeveloped land located partly in Bloomfield and partly in Windsor, Connecticut that is also owned by Griffin Land. Griffin Land is currently in the process of obtaining approvals for roadwork that would connect the undeveloped land on both parcels for future development purposes. The Olympus Building and the warehouse in Bloomfield, Connecticut were fully leased as of December 1, 2012. Approximately $17.1 million was invested (net book value) in these three buildings at that date. The Olympus Building in Pennsylvania is mortgaged for approximately $4.1 million as of December 1, 2012, while the other two buildings are not mortgaged.

        On December 28, 2012, Griffin Land acquired a 49 acre parcel of undeveloped land in Hanover Township, Pennsylvania, also in the Lehigh Valley, for approximately $7.1 million in cash. Griffin Land expects to develop two industrial buildings totaling at least 500,000 square feet on the land acquired. As the approvals for such development are not yet in place, the seller agreed to provide Griffin Land with recission rights if the required approvals are not obtained or the seller does not complete certain

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post-closing obligations. The funds used to acquire this land were principally the proceeds from the Dollar Tree Sale that had been held in escrow since the closing of that transaction in order to qualify for a Section 1031 like-kind exchange for income tax purposes.

        Griffin Land may seek to acquire additional properties and/or undeveloped land parcels to expand the industrial/warehouse portion of its real estate business. Griffin Land continues to examine potential properties in the northeast and mid-Atlantic areas for potential acquisition.

Residential Developments

Simsbury

        Several years ago, Griffin Land filed plans for the creation of a residential community, called Meadowood, on a 363 acre site in the Town of Simsbury, Connecticut. After several years of litigation with the town regarding this proposed residential development, a settlement was reached. The settlement terms included, among other things, approval for up to 296 homes, certain remediation measures and offsite road improvements to be performed by Griffin Land and the purchase by the Town of a portion of the Meadowood land for Town open space. The sale of land to the town closed in fiscal 2008. In fiscal 2012, Griffin Land performed a portion of the required remediation work on the site and completed the required offsite road improvements. Griffin Land expects to complete the remaining required remediation work on the site in fiscal 2013. As of December 1, 2012, the book value of the land for this proposed development, including design, development and legal costs, was approximately $6.4 million.

        Griffin Land owns another approximate 432 acres in Simsbury, portions of which are zoned for residential use and other portions of which are zoned for industrial use. Not all of this land is developable. The land currently zoned for industrial use is probably more suited to commercial or mixed use development. Griffin Land may seek to develop or sell such land.

Suffield

        In fiscal 2006, Griffin Land completed the infrastructure for a fifty lot residential subdivision in Suffield, Connecticut called Stratton Farms. Griffin Land sold twenty-five residential lots in Stratton Farms to a local homebuilder in fiscal 2006 and fiscal 2007. That homebuilder did not exercise its option to purchase additional residential lots, thus canceling the option to acquire the remaining Stratton Farms lots. The homebuilder's decision not to purchase any lots after 2007 was attributed to the weakening of the residential real estate market. In 2009, the homebuilder that purchased the twenty-five Stratton Farms lots entered into bankruptcy proceedings, and the remaining unsold lots held by that homebuilder were foreclosed on by a local bank and sold to a privately owned regional homebuilder.

        In fiscal 2010, Griffin Land entered into an agreement with that privately owned regional homebuilder whereby in exchange for a payment of $100,000, the homebuilder obtained an option to purchase the remaining twenty-five residential lots of Stratton Farms. Under the agreement's lot takedown schedule, Griffin Land closed on the sale of the first four lots in fiscal 2010. The option was terminated in fiscal 2012 without any purchases of additional lots by the homebuilder. As of December 1, 2012, Griffin Land held the remaining twenty-one lots.

Other

        In fiscal 2012, Griffin Land leased approximately 542 acres of undeveloped land in Connecticut and Massachusetts to local farmers. Approximately 600 acres and 751 acres were leased to local farmers in fiscal 2011 and fiscal 2010, respectively. The revenue generated from the leasing of farmland is not material to Griffin Land's total revenue.

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

Landscape Nursery Business

        Griffin's landscape nursery business is operated by its wholly owned subsidiary, Imperial Nurseries, Inc. ("Imperial"). Imperial grows containerized landscape nursery plants for sale principally to independent retail garden centers and rewholesalers, whose main customers are landscape contractors. Imperial's major markets are in the Northeast and mid-Atlantic areas of the United States. The landscape nursery industry is extremely fragmented, and Imperial believes it is one of the larger regional growers of landscape nursery products in the Northeast.

        Imperial's sales are extremely seasonal, peaking in spring. Imperial's sales are also strongly affected by weather conditions, particularly in the spring planting season. Imperial's sales have been adversely affected by the slowdown in new housing starts during the past several years and the overall weak economy. Imperial expects 2013 sales to be hampered by continued weakness in the economy and the low level of new housing starts over the past several years in Imperial's markets. Imperial's sales are made to a large variety of customers, no single one of which represented more than 10% of Imperial's total net sales in fiscal 2012, fiscal 2011 or fiscal 2010. However, in fiscal 2012, fiscal 2011 and fiscal 2010, aggregate net sales to Imperial's ten largest customers accounted for 18%, 20% and 25%, respectively, of Imperial's total net sales. A significant amount of sales to independent retail garden centers are made through cooperative buying organizations. Approximately 23% of Imperial's total net sales in fiscal 2012 were made through buying cooperatives with 15% of Imperial's total net sales in fiscal 2012 made through one such buying cooperative.

        Imperial's inventory consists principally of container-grown plants. Imperial's largest volume products 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. In fiscal 2011, Imperial and another grower each became a 50% owner in Novalis LLC. Imperial has also entered into other licensing agreements that enable it to grow and sell some branded products that are available only to a limited number of growers. These programs are directed toward increasing Imperial's sales to independent retail garden centers. Sales to independent retail garden centers generally have more favorable gross margins as compared with sales to other customer segments. Offsetting the increase in sales to independent retail garden centers has been a decrease in sales volume to mass merchant and rewholesaler customers, which generally have lower pricing than independent retail garden center customers. Imperial has increased the percentage of its product sold to independent retail garden centers to 67% of sales volume in fiscal 2012 as compared to 50% of sales volume in fiscal 2009, while sales volume to mass merchants has decreased from 10% in fiscal 2009 to 4% in fiscal 2012.

        Imperial's growing operations are based on its farm in Granby and East Granby, Connecticut on land owned by Griffin (approximately 445 acres used). Imperial also uses approximately 10 acres of additional land (owned by Griffin) in Connecticut to grow liners (starter plants) for transplanting into containers.

        In fiscal 2012, Imperial's cost of goods sold includes charges totaling approximately $0.4 million to increase inventory reserves for unsaleable plants and plants that are expected to be sold below cost as seconds. In fiscal 2011, Imperial's cost of goods sold includes charges totaling $1.4 million reflecting: (a) $0.5 million to increase inventory reserves for disease issues, mostly due to boxwood plants that, in the 2011 fourth quarter, became unsaleable after contracting boxwood blight, a fungal disease; (b) $0.4 million for plant disposals in excess of expected amounts and to increase inventory reserves for

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plants that were sold below cost as seconds; (c) $0.3 million for plants lost due to the collapse, from snow load during the 2011 first quarter, of some of Imperial's hoop houses in which the plants were stored; and (d) $0.2 million for workers compensation charges from prior year policies related to the Florida farm.

        In fiscal 2010, Imperial's cost of goods sold included a charge of $1.0 million for crop losses due to changes in plant fertilization methods that were made in 2010 that, due to a combination of factors including extremely hot and dry weather in that year, negatively affected some varieties, particularly rhododendron and certain other broadleaf evergreens. The crop losses incurred in fiscal 2010 did not have a significant impact on fiscal 2011 net sales, as most of the units lost would generally not have become saleable until the latter part of fiscal 2011, but did result in fewer plants being available for sale in fiscal 2012. Imperial purchased some inventory from other growers to replace a portion of the plants lost, but a majority of the plants lost due to the fertilization change were not replaced.

        Although Imperial continues to review ways to improve its operating results, including cost reductions for its growing operations, changes in the relative quantities of some products grown, increasing sales to customer segments that are more profitable for Imperial, using smaller delivery trucks to improve order turn-around time, especially after the peak spring shipping season, and changes in the potting and growing cycles for some of its containerized production, Imperial expects to incur an operating loss in fiscal 2013. In response to the difficult industry conditions, Imperial reduced its production of new plants in 2009 and 2010. These changes resulted in a reduction of inventory levels and fewer plants being available for sale in fiscal 2010 through 2012 than were available prior to the reduction of inventory. Imperial does not expect any further significant reductions in its inventory level over the next few years. Any changes to improve operating results materially, 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 operating results.

        Imperial also owns a farm of approximately 490 usable acres in Quincy, Florida, which is currently leased to a private company through July 31, 2015. The lease agreement includes an option for the lessee to purchase the Florida farm at any time during the lease period at an agreed upon price.

Investments

Centaur Media plc

        Centaur Media plc ("Centaur Media") is a publicly traded company listed on the London Stock Exchange. As of December 1, 2012, Griffin held 5,277,150 shares of Centaur Media and accounts for its investment in Centaur Media as an available-for-sale security. Accordingly, changes in the market value of Griffin's 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. On January 30, 2013, Griffin sold 1,000,000 shares of its Centaur Media common stock for proceeds of approximately $0.9 million.

Shemin Nurseries Holding Corp.

        Shemin Nurseries Holding Corp. ("SNHC") is a privately held company that operates a landscape nursery distribution business. As of December 1, 2012, Griffin held an approximately 14% equity interest in SNHC and accounted for its investment in SNHC under the cost method of accounting for investments. In fiscal 2012, Griffin received a distribution of approximately $0.7 million from SNHC. On January 18, 2013, Griffin sold its investment in SNHC for initial cash proceeds of approximately $3.2 million. Some additional cash proceeds on this sale may be received as a result of certain post-closing purchase price adjustments based on the amount of working capital of SNHC as of the closing date.

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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 December 1, 2012, Griffin employed 99 people on a full-time basis, including 73 in its landscape nursery business and 20 in its real estate business. 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 portions of Connecticut, Massachusetts and the Lehigh Valley region of Pennsylvania in which Griffin's real estate holdings are concentrated. Some of these competitors have greater financial resources than Griffin. Griffin's real estate business competes on the bases of location, price, availability of space, convenience and amenities.

        The landscape nursery business is competitive, and Imperial competes against a number of other companies, including national, regional and local growers of landscape nursery products. 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 (including delivery) 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 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 residual chemicals from the prior use of the land for farming, principally on a portion of the land that is intended for residential use. In the event that Griffin 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, any material expense in complying with such laws. Griffin Land may incur remediation costs in the future in connection with its development operations. Such costs are not expected to be significant as compared to expected proceeds from development projects or property sales.

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ITEM 1A.    RISK FACTORS.

        Griffin's real estate and landscape nursery businesses have a number of risk factors. The risk factors discussed below are those 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, conditions in the credit markets or by local economic conditions in the markets in which its properties are located. Such conditions may impact Griffin's results of operations, financial condition or ability to expand its operations 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 increase future interest expense; and



•

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 also may 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 may 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.

Downturn in the Residential Real Estate Market

        The continued weakness in the residential real estate market may adversely affect Griffin Land's real estate development activities, including delaying the development and/or sale of Griffin Land's undeveloped land intended for residential use. The weakness 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 rewholesaler customer segment, which accounted for approximately 24% of Imperial's sales volume in fiscal 2012.

Risks Associated with Concentration of Real Estate Holdings

        Griffin Land's real estate operations are concentrated primarily in the Hartford, Connecticut area, with additional operations in the Lehigh Valley of Pennsylvania. Adverse changes in the local economies, state or local governmental regulations or real estate markets 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.

Risks Associated with Entering New Real Estate Markets

        In fiscal 2010, Griffin Land acquired a fully-leased 120,000 square foot industrial building in Breinigsville, Pennsylvania and a 51 acre parcel of undeveloped land in Lower Nazareth, Pennsylvania, known as Lehigh Valley Tradeport. In fiscal 2012, Griffin Land built, on speculation, a 228,000 square

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foot industrial building on a portion of Lehigh Valley Tradeport. On December 28, 2012, Griffin Land completed the acquisition of approximately 49 acres of undeveloped land in Hanover Township, Pennsylvania. These acquisitions were Griffin Land's first purchases of properties outside of the Hartford, Connecticut market where Griffin Land's core real estate holdings are located. Griffin Land expects to continue to seek to acquire properties outside of the Hartford, Connecticut market. Operating in a real estate market that is new for Griffin Land creates additional risks and uncertainties to Griffin's operations.

Potential Environmental Liabilities

        Griffin Land has extensive land holdings in Connecticut and Massachusetts, and, starting in fiscal 2010 has acquired an industrial building and undeveloped land in Pennsylvania. 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 a contamination. The law typically imposes clean-up responsibility and liability regardless of whether the owner or operator knew of or caused the contamination. Changes in environmental regulations may impact the development potential of Griffin Land's undeveloped land or could increase operating costs due to the cost of complying with new regulations.

Competition and Governmental Regulations

        Griffin Land's real estate operations compete with other properties in Griffin Land's areas of operation. The construction of new facilities by competitors would increase capacity in the marketplace, and an increase in the amount of vacancies in competitors' properties and negative absorption of space could result in Griffin 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 or increase Griffin Land's costs of development.

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 extreme cold or severe drought conditions. In 2011, significantly higher than normal snowfall in the early part of the year, and an unusual heavy snowfall in late October resulted in the loss of plants and hoop houses. Management believes that Imperial's Connecticut farm has sufficient water supplies available; however, a severe drought could impact Imperial's ability to maintain adequately its inventory. In addition, a severe drought in Imperial's major sales markets could substantially impact Imperial's sales.

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        Other agricultural and environmental factors that could materially impact Imperial's growing operations are plant diseases, pests and the improper use of herbicides, pesticides and fertilizers, as evidenced by the crop losses in fiscal 2011 due to disease issues on its boxwood plants and crop losses in fiscal 2010 that resulted from a change in fertilization methods. 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 2012, Imperial's ten largest customers accounted for approximately 18% of Imperial's total net sales in fiscal 2012. 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 has one customer with which it has a sales contract. Total revenue under that sales contract was approximately $0.3 million in fiscal 2012. Sales to independent garden centers made through buying cooperatives accounted for approximately 23% of Imperial's total net sales in fiscal 2012, with sales through one buying cooperative accounting for approximately 15% of Imperial's total net sales in fiscal 2012. The loss of one of Imperial's larger customers or the inability to collect accounts receivable from one of the buying cooperatives could have an adverse effect on Imperial.

        None of Griffin Land's tenants accounted for 10% or more of its total rental revenue in fiscal 2012.

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. 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 that use 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. An increase in the cost of building new facilities could negatively impact Griffin Land's future operating results through increased depreciation expense. 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. An increase in energy costs could lower Griffin's results from its real estate business.

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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 or disruptions in trucking services during critical delivery periods. Significant increases in transportation costs could have a material adverse effect on Imperial's business as Imperial may not be able to pass along such increases to customers. Also, some of Imperial's customers located farthest from Imperial's Connecticut farm may choose to purchase product from local growers.

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 number 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. The insurance contains policy specifications and insured limits, and does not cover all possible losses that Imperial could incur. Imperial incurred losses of plants and hoop houses due to excessive snowfall in 2011, not all of which were covered under Imperial's insurance policies. Because of the prohibitive cost beginning in fiscal 2012, Imperial no longer maintains the limited insurance coverage on its plant inventories that it had in previous years.

Investment in a 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.

Griffin is Subject to Litigation That May Adversely Impact Operating Results

        Griffin is, and may in the future be, a party to a number of legal proceedings and claims arising in the ordinary course of business which could become significant. Given the inherent uncertainty of litigation, we can offer no assurance that a future adverse development related to existing litigation or any future litigation will not have a material adverse impact on Griffin's business, 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 David M. Danziger, a director of Griffin, Frederick M. Danziger, Griffin's Chairman and Chief Executive Officer, Michael S. Gamzon, President and Chief Operating Officer of Griffin and John J. Kirby, Jr., a director of Griffin, members of their families and trusts for their benefit, partnerships in which they own substantial interests and charitable foundations on whose boards of directors they sit, owned, directly or indirectly, approximately 46.0% of the outstanding common stock of Griffin as of December 1, 2012. There is an informal understanding that the persons and entities included in the

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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.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

        Not applicable.

ITEM 2.    PROPERTIES.

Land Holdings

        Griffin is a major landholder in the state of Connecticut, owning approximately 3,196 acres. Griffin also owns approximately 426 acres of land in Massachusetts and approximately 68 acres of land in Pennsylvania. In addition, Griffin owns approximately 1,066 acres in northern Florida (the "Florida Farm"), most of the useable portion of which was formerly used for Imperial's growing operations or was contiguous to such operations. The Florida Farm is now leased to a private company that grows landscape nursery stock and has an option to purchase the Florida Farm at any time during the lease term.

        At December 1, 2012, the book value of land holdings owned by Griffin was approximately $20.8 million. Griffin believes the fair market value of such land is substantially in excess of its book value.

        Listings of the locations of Griffin's land holdings, a portion of which, principally in Bloomfield, East Granby and Windsor, Connecticut and Breinigsville, Pennsylvania have been developed, and nursery real estate, are as follows:

Land Holdings

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Nursery Real Estate

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Developed Properties

        As of December 1, 2012, Griffin Land owned thirty buildings, comprised of seventeen industrial/warehouse buildings, twelve office/flex buildings and a small restaurant building. A listing of those facilities is as follows:

        Griffin leases approximately 2,300 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 12 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.

        Griffin is involved, as a defendant, in various litigation matters arising in the ordinary course of business. In the opinion of management, based on the advice of legal counsel, the ultimate liability, if any, with respect to these matters is not expected to be material to Griffin's financial position, results of operations or cash flows.

ITEM 4.    MINE SAFETY DISCLOSURES.

Not applicable.

PART II

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

Market Information

        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 February 5, 2013, the number of record holders of common stock of Griffin was approximately 237, 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 $30.00 per share.

Dividend Policy

        In fiscal 2010 and fiscal 2011, Griffin declared quarterly cash dividends of $0.10 per share. In the 2011 fourth quarter, Griffin's Board of Directors decided to change Griffin's dividend policy for succeeding years. Beginning in fiscal 2012, rather than continuing to pay a quarterly dividend, Griffin intends to consider the payment of an annual dividend at the end of its fiscal year. This change permits the Board to evaluate better both Griffin's prior full year results and its cash needs for the succeeding year when determining whether to declare an annual dividend. In the 2012 fourth quarter, Griffin declared an annual dividend of $0.20 per share.

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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 December 1, 2007 to December 1, 2012. It is assumed in the graph that the value of each investment was $100 at December 1, 2007. 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 2008 through 2012 and balance sheet data as of the end of each fiscal year. The selected statement of operations financial data for fiscal 2010, fiscal 2011 and fiscal 2012 and the selected balance sheet financial data for fiscal 2011 and fiscal 2012 are derived from the audited consolidated financial statements included in Item 8 of this report. The selected financial data for fiscal 2008 and fiscal 2009 and the balance sheet data for fiscal 2010 were derived from the audited consolidated financial statements for those years.

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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 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. 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. Generally, 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 ("U.S. GAAP"). 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, potential sales outlets and sales pricing.

        Income taxes:    In accounting for income taxes under Financial Accounting Standards Board ("FASB") ASC 740, 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 reviews annually, as well as when conditions may indicate, its long-lived assets to determine if there are any indications of impairment, such as a prolonged vacancy. If indications of impairment are present, Griffin evaluates the carrying value of the assets in relation to undiscounted cash flows or the estimated fair value of the underlying assets. 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 on a straight-line basis over the applicable lease term in accordance with the Lease Topic (FASB ASC 840). Gains on property sales are recognized in accordance with the Property, Plant and Equipment-Real Estate Sales Topic (FASB ASC 360-20) 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

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option-pricing model. In determining the estimated fair values of stock options issued, Griffin makes assumptions on expected volatility, risk free interest rates, expected option terms and dividend yields.

        Derivative instruments:    Griffin evaluates each interest rate swap agreement to determine if it qualifies as an effective cash flow hedge. Changes in the fair value of each interest rate swap agreement that management determines to be an effective cash flow hedge are recorded as a component of other comprehensive income. The fair value of each interest rate swap agreement is determined based on observable market participant data, such as yield curves, as of the fair value measurement date.

Summary

        Griffin had net income of approximately $1.0 million in fiscal 2012 as compared to a net loss of approximately $2.5 million in fiscal 2011. The net income in fiscal 2012, as compared to the net loss in fiscal 2011, reflects a decrease in Griffin's loss from continuing operations and an increase in income from Griffin's discontinued operation. Griffin incurred a loss from continuing operations of approximately $0.7 million in fiscal 2012 as compared to a loss from continuing operations of approximately $3.0 million in fiscal 2011. The lower loss from continuing operations in fiscal 2012, as compared to fiscal 2011, principally reflects an operating profit of approximately $2.1 million in fiscal 2012 as compared to an operating loss of approximately $0.2 million in fiscal 2011 along with lower interest expense and higher investment income in fiscal 2012 as compared to fiscal 2011. Partially offsetting the increase in operating profit, lower interest expense and higher investment income was a lower income tax benefit in fiscal 2012 as compared to fiscal 2011.

        The increase of approximately $2.3 million in Griffin's operating results in fiscal 2012 as compared to fiscal 2011 reflects an increase of approximately $1.5 million in operating profit at Griffin Land in fiscal 2012 as compared to fiscal 2011 and a decrease of approximately $1.0 million in Imperial's operating loss in fiscal 2012 as compared to fiscal 2011, partially offset by an increase of approximately $0.2 million in Griffin's general corporate expense in fiscal 2012 as compared to fiscal 2011. The increase in operating profit at Griffin Land in fiscal 2012 was principally due to higher gains from property sales in fiscal 2012 as compared to fiscal 2011. The lower operating loss incurred by Imperial in fiscal 2012 principally reflects higher gross profit in fiscal 2012 as compared to fiscal 2011. The increase in general corporate expense in fiscal 2012 principally reflects higher expense related to Griffin's non-qualified deferred compensation plan. Interest expense decreased approximately $0.6 million in fiscal 2012 as compared to fiscal 2011 due principally to an increase in capitalized interest in fiscal 2012 as compared to fiscal 2011. Investment income increased by approximately $0.4 million in fiscal 2012 as compared to fiscal 2011 due principally to dividend income from Shemin Nurseries Holding Corp. ("SNHC"). The lower income tax benefit in fiscal 2012 as compared to fiscal 2011 principally reflects the lower pretax loss in fiscal 2012 as compared to fiscal 2011.

        On January 31, 2012, Griffin Land closed on the sale of its fully leased 308,000 square foot warehouse building in Manchester, Connecticut for $16.0 million in cash (before transaction expenses), and recorded a gain on sale, before taxes, of approximately $2.9 million. In the 2011 fourth quarter, Griffin Land had given notice to the lessee of the Manchester warehouse that it was exercising the put option under its lease to sell the building to the lessee. Accordingly, under U.S. GAAP, the Manchester warehouse was classified as real estate held for sale on Griffin's consolidated balance sheet as of December 3, 2011 and the results of operations and the gain on the sale of this property are reported as a discontinued operation for all periods presented.

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Results of Operations

Fiscal 2012 Compared to Fiscal 2011

        Griffin's consolidated total revenue decreased from approximately $37.2 million in fiscal 2011 to approximately $36.6 million in fiscal 2012. The net decrease of approximately $0.6 million reflects an increase of approximately $1.6 million at Griffin Land, offset by a decrease of approximately $2.2 million at Imperial.

        Total revenue at Griffin Land increased from approximately $22.2 million in fiscal 2011 to approximately $23.7 million in fiscal 2012, reflecting an increase of approximately $1.8 million of revenue from property sales, partially offset by a decrease of approximately $0.2 million in rental revenue. Property sales in fiscal 2012 include the closing in the 2012 third quarter of the sale of approximately 93 acres of undeveloped land in Tradeport to Dollar Tree Distribution, Inc. for cash proceeds (before transaction expenses) of $7.0 million (the "Dollar Tree Sale"). Griffin Land is required, under the terms of the sale, to construct a sewer line to service the land sold. Accordingly, because of Griffin Land's continuing involvement with the land that was sold, the Dollar Tree Sale is being accounted for under the percentage of completion method, whereby the revenue and the gain on sale are recognized as the total costs related to the property sold are incurred. In fiscal 2012, Griffin Land recognized approximately $4.7 million of revenue from the Dollar Tree Sale. The balance of the revenue from the Dollar Tree Sale will be recognized as the costs of construction of the sewer line are incurred, which is expected to be in the first half of fiscal 2013. In addition to the Dollar Tree Sale in fiscal 2012, Griffin Land sold approximately 14 acres of undeveloped land in Windsor, Connecticut for cash proceeds of approximately $1.0 million. Property sales in fiscal 2011 reflected $3.0 million from the sale of approximately 165 acres of undeveloped land in Suffield and Granby, Connecticut and two smaller sales of undeveloped land for a total of $1.0 million. Property sales occur periodically, and changes in revenue from year to year from those transactions may not be indicative of any trends in the real estate business.

        The decrease of approximately $0.2 million in rental revenue at Griffin Land principally reflects: (a) a decrease of approximately $0.6 million of rental revenue in fiscal 2012 as compared to fiscal 2011 from leases that expired and were not renewed; and (b) a decrease of approximately $0.2 million of rental revenue in fiscal 2012 as compared to fiscal 2011 from lower billings for common area maintenance charges to tenants; partially offset by (c) an increase of approximately $0.5 million of rental revenue from space under lease in fiscal 2012 that was vacant in fiscal 2011; and (d) an increase of approximately $0.1 million of rental revenue related to agreements with tenants to terminate leases earlier than scheduled.

        A summary of the square footage of Griffin Land's real estate portfolio, excluding the 308,000 square foot warehouse in Manchester, Connecticut that was sold in the 2012 first quarter and is accounted for as a discontinued operation in Griffin's consolidated statements of operations for all periods presented, is as follows:

        The increase in total square footage of Griffin Land's real estate portfolio in fiscal 2012 reflects the construction, on speculation, of a new 228,000 square foot industrial building in the Lehigh Valley of Pennsylvania. Although there has been interest by prospective tenants for this new facility, there currently are no lease agreements in place. Excluding the recently constructed new industrial building in the Lehigh Valley, Griffin Land's percentage of space leased as of December 1, 2012 would be 82%. The increase in square footage leased in fiscal 2012 reflects several new leases aggregating

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approximately 183,000 square feet entered into during fiscal 2012, partially offset by leases aggregating approximately 98,000 square feet that expired and were not renewed or terminated early. Approximately 151,000 square feet of the new leasing in fiscal 2012 was industrial space, including a new three-year full building lease for approximately 127,000 square feet of industrial space in one of Griffin Land's New England Tradeport buildings. In connection with the new full building lease, Griffin Land entered into a lease termination agreement with an existing tenant that had leased approximately 42,000 square feet in that building, but had previously vacated its space and was seeking to sublease. In fiscal 2012, Griffin Land also renewed and extended several leases aggregating approximately 157,000 square feet, approximately 56% of which is industrial space, with the balance being office/flex space. Also, in fiscal 2012, Griffin Land received notice that a tenant was exercising an option to terminate its lease for approximately 19,000 square feet in one of Griffin Land's flex buildings in Griffin Center South on August 31, 2013, one year earlier than the scheduled lease expiration. In fiscal 2012, there was an increase in requests for proposals by prospective tenants as compared to the two previous fiscal years. This increase in market activity has resulted in the leasing of some of Griffin Land's vacant space as described above. There is no guarantee that this increase in market activity in fiscal 2012 will continue or that it will result in any additional new leasing by Griffin Land. Subsequent to the end of fiscal 2012, Griffin Land entered into two leases aggregating approximately 36,000 square feet of previously vacant office space and a lease for approximately 24,000 square feet of previously vacant industrial space.

        Imperial's landscape nursery business is highly seasonal, with spring sales included in its second quarter (March through May) historically the majority of Imperial's annual sales. Net sales and other revenue at Imperial decreased from approximately $15.0 million in fiscal 2011 to approximately $12.8 million in fiscal 2012. The decrease in net sales in fiscal 2012, as compared to fiscal 2011, reflects an approximately 16% decline in unit sales volume resulting in a decrease of approximately $2.7 million in net sales. The decrease in unit sales volume was partly due to Imperial having fewer units available for sale in fiscal 2012 than fiscal 2011, which is attributed to: (i) production plan changes made over the past three years to bring Imperial's inventory more in line with expected demand; (ii) changes to Imperial's product mix to include more color items with longer bloom time; and (iii) units lost in an early season winter storm in the fourth quarter of fiscal 2011 that were expected to be available for sale in fiscal 2012. The lower sales volume was also due to a weak market, especially in the latter part of the year, as fall season sales were below expectations and less than previous years. Partially offsetting the effect of the lower unit sales volume in fiscal 2012 was approximately $0.5 million from improved pricing in fiscal 2012 as compared to fiscal 2011. The improved pricing reflects Imperial's more balanced inventory on hand in fiscal 2012 as compared to prior years, thus avoiding the need to discount heavily certain items in order to liquidate excess inventories. In addition, in fiscal 2012 there was an increase in the percentage of Imperial's sales to its independent retail garden center customer segment, which generally is at higher prices than sales of comparable product to Imperial's other customer segments. Sales to the independent retail garden center customer segment accounted for approximately 67% of Imperial's total net sales in fiscal 2012, as compared to approximately 60% in fiscal 2011.

        Griffin's consolidated operating profit, including general corporate expense, was approximately $2.1 million in fiscal 2012 as compared to a consolidated operating loss, including general corporate expense, of approximately $0.2 million in fiscal 2011. Operating profit at Griffin Land increased from approximately $6.5 million in fiscal 2011 to approximately $8.1 million in fiscal 2012. Imperial's operating loss decreased from approximately $2.7 million in fiscal 2011 to approximately $1.7 million in fiscal 2012. Griffin's general corporate expense increased from approximately $4.1 million in fiscal 2011 to approximately $4.3 million in fiscal 2012.

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        Operating profit at Griffin Land in fiscal 2012 and 2011 was as follows:

        Profit from leasing activities before general and administrative expenses and before depreciation and amortization expense increased by approximately $0.3 million in fiscal 2012 as compared to fiscal 2011, due principally to a decrease of approximately $0.5 million of costs related to rental revenue excluding depreciation and amortization expense, partially offset by the approximately $0.2 million decrease in rental revenue. The decrease in costs related to rental revenue excluding depreciation and amortization expense principally reflects lower snow removal expenses incurred during the winter months in the early part of fiscal 2012 due to relatively mild winter weather as compared to the more severe winter weather in fiscal 2011.

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        Griffin Land's gain from property sales in fiscal 2012 includes approximately $3.9 million from the Dollar Tree Sale that is being accounted for under the percentage of completion method. Griffin Land expects the total gain on the Dollar Tree Sale to be approximately $5.9 million after all revenue is reported and all costs are incurred. Griffin Land's gain from property sales in fiscal 2012 also included approximately $0.7 million from the sale of approximately 14 acres of undeveloped land in Windsor, Connecticut and approximately $0.1 million from the recognition as current period revenue of a deposit from a homebuilder that was expected to be applied to future sales of residential lots under an option agreement with that homebuilder. The homebuilder did not complete the scheduled purchases of residential lots in the 2012 fourth quarter, so the option agreement was terminated and the deposit was forfeited as per the terms of the agreement.

        Griffin Land's general and administrative expenses decreased by approximately $0.1 million in fiscal 2012 as compared to fiscal 2011 due principally to lower real estate tax expense on Griffin Land's undeveloped land. Depreciation and amortization expense at Griffin Land increased by approximately $0.1 million in fiscal 2012 as compared to fiscal 2011, due principally to depreciation expense on the new industrial building constructed in fiscal 2012 and placed in service at the start of the 2012 fourth quarter.

        Imperial's operating losses in fiscal 2012 and 2011 were as follows:

        The decrease of approximately $1.0 million in Imperial's operating loss in fiscal 2012 as compared to fiscal 2011 reflects an increase of approximately $1.1 million in gross profit and a decrease of approximately $0.4 million in selling, general and administrative expenses, partially offset by the inclusion in fiscal 2011 of an approximately $0.6 million gain on insurance recoveries. The increase in gross profit principally reflects: (a) approximately $0.5 million from improved pricing in fiscal 2012; (b) approximately $0.8 million due to lower charges for unsaleable inventories included in cost of goods sold in fiscal 2012 than in fiscal 2011; and (c) inclusion in fiscal 2011 of an approximately $0.2 million charge for retrospective workers compensation costs related to Imperial's Florida farm, which had been shut down; partially offset by (d) an approximately $0.2 million decrease in gross profit due to lower sales volume in fiscal 2012; and (e) a decrease of approximately $0.2 million due to higher costs in fiscal 2012 as compared to fiscal 2011. Imperial's net sales and other revenue in both fiscal 2012 and fiscal 2011 include approximately $0.5 million of rental revenue from its Florida farm and approximately $0.2 million of revenue from royalties. Imperial's cost of goods sold in both fiscal 2012 and 2011 includes approximately $0.3 million related to the rental revenue from the Florida farm. Excluding the effect of the royalties and rental revenue and related costs, Imperial's non-U.S. GAAP gross margin on sales increased from less than 1% in fiscal 2011 to 9.0% in fiscal 2012. The increase in gross margin principally reflects the lower charges for unsaleable inventories and the improved pricing in fiscal 2012 as compared to fiscal 2011. Gross margin excluding the effects of royalty revenue and rental revenue and expenses of Imperial's Florida farm is presented because Griffin believes it assists investors in assessing Imperial's performance in its core business of growing and selling containerized plants. On a U.S. GAAP basis, Imperial's gross margin on net sales and other revenue increased from 2.2% in fiscal 2011 to 11.1% in fiscal 2012.

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        The decrease of approximately $0.4 million in Imperial's selling, general and administrative expenses in fiscal 2012, as compared to fiscal 2011, principally reflects a decrease of approximately $0.1 million of severance expenses, a decrease of $0.1 million in selling expenses, principally due to lower commissions reflecting the lower sales in fiscal 2012, and a decrease of approximately $0.1 million in payroll expense in fiscal 2012 as compared to fiscal 2011. Despite the decrease in selling, general and administrative expenses in fiscal 2012 as compared to fiscal 2011, the effect of the lower sales in fiscal 2012 as compared to fiscal 2011 resulted in Imperial's selling, general and administrative expenses increasing from 23.9% of net sales and other revenue in fiscal 2011 to 24.4% of net sales and other revenue in fiscal 2012.

        Griffin's general corporate expense increased from approximately $4.1 million in fiscal 2011 to approximately $4.3 million in fiscal 2012, principally due to an increase of approximately $0.1 million in expense for Griffin's non-qualified deferred compensation plan and an increase of approximately $0.1 million, in aggregate, of all other general corporate expenses. The higher expense of the non-qualified deferred compensation plan reflects higher general stock market performance in fiscal 2012 as compared to fiscal 2011, which is reflected in the value of participants' balances.

        Griffin's consolidated interest expense decreased from approximately $4.2 million in fiscal 2011 to approximately $3.5 million in fiscal 2012. The decrease in interest expense of approximately $0.7 million principally reflects approximately $0.6 million of interest that was capitalized in fiscal 2012 as compared to approximately $0.1 million of capitalized interest in fiscal 2011. The increase in capitalized interest principally reflects the interest capitalized on the 228,000 square foot industrial building in the Lehigh Valley that was under construction during most of the year in fiscal 2012. In addition, interest expense decreased by approximately $0.2 million due to the lower average debt outstanding in fiscal 2012 as compared to fiscal 2011. Griffin's average outstanding debt in fiscal 2012 was approximately $60.3 million, as compared to $62.2 million in fiscal 2011, principally reflecting principal payments made on Griffin's nonrecourse mortgages.

        Griffin's investment income increased from approximately $0.2 million in fiscal 2011 to approximately $0.6 million in fiscal 2012. The increase in investment income principally reflects dividend income of approximately $0.4 million from Shemin Nurseries Holding Corp. ("SNHC"). Griffin received total cash of approximately $0.7 million from SNHC in the 2012 first quarter, of which approximately $0.4 million was reported as dividend income with the balance recognized as a return of capital from SNHC. Griffin did not receive any distributions from SNHC in fiscal 2011. On January 18, 2013, Griffin sold its investment in SNHC for initial cash proceeds of approximately $3.2 million. Griffin may receive some additional cash proceeds from the sale of its investment in SNHC as a result of certain post-closing purchase price adjustments based on the amount of working capital of SNHC as of the closing date.

        Griffin's effective tax rate was 14.2% for fiscal 2012, as compared to 28.3% for fiscal 2011. The lower effective tax rate in fiscal 2012 as compared to fiscal 2011 reflects the effect of state income taxes, including the adjustment of certain state deferred tax assets as a result of changes in the apportionment rates of Griffin's taxable income to the different jurisdictions in which Griffin operates.

Fiscal 2011 Compared to Fiscal 2010

        Griffin's consolidated total revenue increased from approximately $34.0 million in fiscal 2010 to approximately $37.2 million in fiscal 2011. The net increase of approximately $3.2 million reflected an increase of approximately $4.3 million in revenue at Griffin Land, partially offset by a decrease of approximately $1.1 million in revenue at Imperial.

        Total revenue at Griffin Land increased from approximately $17.9 million in fiscal 2010 to $22.2 million in fiscal 2011. The increase of approximately $4.3 million reflected an increase in revenue from property sales of $3.5 million and a net increase in rental revenue of approximately $0.8 million.

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The net increase in rental revenue reflected: (a) approximately $1.1 million of rental revenue in fiscal 2011 from space that was vacant for the entirety of fiscal 2010 or for a portion of fiscal 2010; (b) approximately $0.3 million of other revenue, including $0.1 million in connection with an agreement to terminate early a tenant's lease of approximately 10,000 square feet of industrial space; partially offset by (c) an approximately $0.6 million reduction in rental revenue as a result of leases that expired and were not renewed. The approximately 10,000 square feet of industrial space that was vacated in connection with the lease being terminated early was leased to a new tenant immediately upon the termination of the existing lease.

        A summary of the square footage of Griffin Land's real estate portfolio, excluding the 308,000 square foot warehouse in Manchester, Connecticut that was sold in the 2012 first quarter and is accounted for as a discontinued operation for all periods presented, is as follows:

        The slight increase in square footage leased as of December 3, 2011 as compared to November 27, 2010 reflects two new leases that were completed in fiscal 2011 for a total of approximately 29,000 square feet of previously vacant office/flex space, partially offset by a reduction of approximately 14,000 square feet of office/flex space from tenants that reduced their spaces as leases expired. One such tenant reduced its space in connection with a lease extension while another tenant reduced its space when the lease terminated, but that tenant remained on a month-to-month basis. In fiscal 2011, Griffin Land renewed several leases of industrial space aggregating approximately 207,000 square feet and three leases of office/flex space aggregating approximately 46,000 square feet. All of the leases that were renewed were scheduled to expire in fiscal 2011, except for leases of approximately 23,000 square feet of industrial space and approximately 9,000 square feet of office/flex space that were scheduled to expire in fiscal 2012. Market activity for industrial and office/flex space was slow during the three years that preceded fiscal 2011, but in the early part of fiscal 2011, Griffin Land had an increase in market activity, as evidenced by an increase in requests for proposals, particularly for office/flex space, from prospective tenants. The momentum from the increased market activity early in fiscal 2011 did not continue into the latter part of the year and, therefore, did not result in a substantial amount of new leasing.

        Griffin Land had property sales revenue of $4.0 million in fiscal 2011 as compared to property sales revenue of approximately $0.5 million in fiscal 2010. Property sales revenue in fiscal 2011 reflected $3.0 million from the sale of approximately 165 acres of undeveloped land in Suffield and Granby, Connecticut and two smaller sales of undeveloped land for a total of $1.0 million. 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.

        Imperial's landscape nursery business is highly seasonal, with spring sales included in its second quarter (March through May) historically comprising the majority of Imperial's annual sales. Net sales and other revenue at Imperial decreased from approximately $16.1 million in fiscal 2010 to approximately $15.0 million in fiscal 2011. The lower net sales in fiscal 2011 as compared to fiscal 2010 principally reflected a change in the product mix available for sale in fiscal 2011 as compared to fiscal 2010 and a 2% decrease in unit sales volume in fiscal 2011 as compared to fiscal 2010. When factoring in the size of units sold, the decrease in sales volume from fiscal 2010 to fiscal 2011 was 12%. The change in product mix available for sale in fiscal 2011 reflected an increase in smaller size plants that have longer bloom times and provide more color, such as perennials, and a decrease in larger size plants, particularly rhododendron. The reduction in sales of larger size plants reflected planned

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reductions in production of these products over the two previous years, which due to the longer growing cycles of the larger plants, first affected the quantity of plants available for sale in fiscal 2011. Smaller size plants generally have lower selling prices, which contributed to the decrease in net sales from fiscal 2010 to fiscal 2011. The changes in product mix were made to bring Imperial's inventory level and plant varieties offered for sale more in line with expected demand, particularly for the independent retail garden center customer segment, which generally has more favorable gross margins on sales as compared to sales made to other customer segments. Net sales to Imperial's independent retail garden center customer segment increased from 53.6% in fiscal 2010 to 60.0% in fiscal 2011. Partially offsetting the decrease in net sales and other revenue from lower volume and the product mix shift to smaller size plants was improved pricing. Discount levels were reduced in fiscal 2011 as compared to fiscal 2010 mostly due to there being a better match of Imperial's inventory with demand, which reduced the need to discount heavily certain items.

        Griffin's consolidated operating loss, including general corporate expense, was approximately $0.2 million in fiscal 2011, as compared to a consolidated operating loss, including general corporate expense, of approximately $4.0 million in fiscal 2010. Griffin Land's operating profit was approximately $6.5 million in fiscal 2011 as compared to approximately $2.7 million in fiscal 2010. Imperial incurred an operating loss of approximately $2.7 million in fiscal 2011, as compared to an operating loss of approximately $2.8 million in fiscal 2010. Griffin's general corporate expense increased to approximately $4.1 million in fiscal 2011 from approximately $4.0 million in fiscal 2010.

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        Operating profit at Griffin Land in fiscal 2011 and fiscal 2010 was as follows:

        Profit from leasing activities before general and administrative expenses and before depreciation and amortization expense increased from approximately $11.1 million in fiscal 2010 to approximately

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$11.3 million in fiscal 2011. The net increase of approximately $0.8 million in rental revenue was substantially offset by a net increase of approximately $0.6 million in costs related to rental revenue excluding depreciation and amortization expense. The increase in costs related to rental revenue excluding depreciation and amortization expenses reflected an increase of approximately $0.4 million in building operating expenses, due principally to higher snow removal expenses, and an increase of approximately $0.2 million in real estate taxes. Griffin Land's general and administrative expenses excluding depreciation and amortization expense were approximately $0.2 million lower in fiscal 2011 as compared to fiscal 2010. Fiscal 2010 included approximately $0.3 million of acquisition expenses that were not incurred in fiscal 2011. Partially offsetting the change in acquisition expenses was an increase in general and administrative expenses of approximately $0.1 million in fiscal 2011. Depreciation and amortization expense at Griffin Land decreased slightly in fiscal 2011 as compared to fiscal 2010, due principally to certain tenant improvements becoming fully depreciated in fiscal 2011.

        Imperial's operating losses in fiscal 2011 and 2010 were as follows:

        The slightly lower operating loss at Imperial in fiscal 2011 as compared to fiscal 2010 principally reflected the gain on insurance recoveries of approximately $0.6 million in fiscal 2011, substantially offset by an approximately $0.3 million decrease in gross profit and an approximately $0.2 million increase in selling, general and administrative expenses. The decrease in gross profit reflected: (a) an approximately $0.2 million increase in fiscal 2011 of charges for plant losses and to increase reserves for unsaleable inventories as compared to such charges in fiscal 2010; and (b) a decrease of approximately $0.2 million principally from lower sales volume and lower gross margins on sales from Imperial's Connecticut farm.

        Cost of goods sold in fiscal 2011 included a charge of $1.4 million, as compared to a charge of $1.0 million in fiscal 2010. The charge of $1.4 million in fiscal 2011 included: (a) approximately $0.5 million to increase inventory reserves for plant disease issues, mostly due to boxwood plants that became infected with boxwood blight, a fungal disease, in the fiscal 2011 fourth quarter; (b) approximately $0.4 million for plant disposals in excess of expected amounts and to increase inventory reserves for plants that will be sold below cost as seconds; (c) $0.3 million from plants lost due to the collapse, from snow load during the 2011 first quarter, of some of Imperial's hoop houses in which the plants were stored; and (d) $0.2 million for worker's compensation charges from prior year policies related to the Florida farm. Included in the charge to increase inventory reserves for the diseased boxwood plants is approximately $0.3 million to reserve for Imperial's entire crop of field grown boxwood starter plants that would have been transplanted into containers to complete their growth to saleable size. The loss of Imperial's boxwood field grown starter plants has hampered Imperial's ability to continue to have boxwood plants available for sales over the next few years in the quantities Imperial was expecting. The inventory charge in fiscal 2010 was for plant losses that resulted from changes in plant fertilization methods made in that year. However, the extremely hot and dry weather during the 2010 summer combined with the additional fertilizer negatively affected certain plant varieties. Imperial's net sales and other revenue in both fiscal 2011 and fiscal 2010 included rental revenue from its Florida farm of approximately $0.5 million in each year and approximately

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$0.1 million of royalty revenue. Imperial's cost of goods sold in both fiscal 2011 and fiscal 2010 included approximately $0.3 million and approximately $0.4 million, respectively, of costs related to rental revenue from its Florida farm. Excluding the effect of the royalties and the rental revenue and related costs, Imperial's non-U.S. GAAP gross margin on sales decreased from 2.8% in fiscal 2010 to less than 1% in fiscal 2011. The lower gross margins on sales reflected higher costs, including charges for unsaleable inventories, higher plant costs and higher shipping costs, partially offset by improved pricing. Gross margin excluding the effects of royalty revenue and rental revenue and expenses of Imperial's Florida farm is presented because Griffin believes it assists investors in assessing Imperial's performance in its core business of growing and selling containerized plants. On a U.S. GAAP basis, Imperial's gross margin on net sales and other revenue decreased from 4.1% in fiscal 2010 to 2.2% in fiscal 2011.

        Imperial's selling, general and administrative expenses increased from approximately $3.4 million in fiscal 2010 to approximately $3.6 million in fiscal 2011. The increase of approximately $0.2 million principally reflected an increase of $0.1 million in severance costs related to a reduction in personnel at the end of fiscal 2011 and a net increase of $0.1 million in all other selling, general and administrative expenses.

        Griffin's general corporate expense increased from approximately $4.0 million in fiscal 2010 to approximately $4.1 million in fiscal 2011, principally due to increases of approximately $0.1 million in salary expense and $0.1 million in stock option expense, partially offset by a decrease of approximately $0.1 million in expense for Griffin's non-qualified deferred compensation plan. The increase in stock option expense principally reflected the expense associated with stock options granted in the 2011 first quarter. The lower expense of the non-qualified deferred compensation plan reflected lower general stock market performance in fiscal 2011 as compared to fiscal 2010, which is reflected in the value of participants' balances.

        Griffin's consolidated interest expense decreased from approximately $4.5 million in fiscal 2010 to approximately $4.2 million in fiscal 2011. The lower interest expense reflected Griffin's average outstanding debt being approximately $62.2 million in fiscal 2011 as compared to approximately $65.1 million in fiscal 2010. The lower average debt principally reflected there not being any borrowings outstanding under Griffin's revolving line of credit in fiscal 2011 as compared to $2.5 million of borrowings outstanding under Griffin's revolving line of credit during most of fiscal 2010, and lower balances on Griffin Land's nonrecourse mortgages in fiscal 2011 as compared to fiscal 2010, reflecting the payment of mortgage principal since the end of fiscal 2010.

        Griffin's investment income decreased from approximately $0.3 million in fiscal 2010 to approximately $0.2 million in fiscal 2011 due principally to lower dividend income from Centaur Media in fiscal 2011. The lower dividend income from Centaur Media reflected a change in the timing of dividends by Centaur Media.

        Griffin's effective income tax benefit rate was 28.3% in fiscal 2011 as compared to 38.6% in fiscal 2010. The lower effective income tax benefit rate in fiscal 2011 principally reflected the effect of a preference tax of approximately $0.1 million payable to the state of Connecticut and approximately $0.3 million from a change in management's judgment that lowered expected tax benefits to be realized in future years.

        As of December 3, 2011, Griffin had a federal net operating loss carryforward of approximately $8.4 million. Griffin believed that it was more likely than not that its federal net operating loss carryforward would be realized, therefore, the related deferred tax asset was considered more likely than not to be realized and a valuation allowance was not required. Griffin recorded a valuation allowance for a portion of its deferred tax assets related to certain state net operating losses to reduce such deferred tax assets to the amount considered more likely than not to be realized. Griffin holds a

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significant amount of appreciated assets, which could be used in tax planning strategies to realize the benefit of its net operating loss carryforwards before they expire.

Off Balance Sheet Arrangements

        Griffin does not have any off balance sheet arrangements.

Liquidity and Capital Resources

        In fiscal 2012, Griffin's net cash provided by operating activities was approximately $1.9 million as compared to approximately $1.4 million in fiscal 2011. The increase in net cash provided by operating activities in fiscal 2012, as compared to fiscal 2011, reflects the decrease in Griffin's loss from continuing operations in fiscal 2012 as compared to fiscal 2011, a decrease in other current assets of approximately $1.4 million in fiscal 2012 as compared to an increase in other current assets of $0.7 million in fiscal 2011, partially offset by an increase of $0.9 million in Imperial's inventories in fiscal 2012 as compared to a $0.6 million decrease in Imperial's inventories in fiscal 2011. The increase in inventories at Imperial in fiscal 2012 as compared to the decrease in fiscal 2011 principally reflects the decrease in sales at Imperial in fiscal 2012 as compared to fiscal 2011. In addition, inventory purchases by Imperial in fiscal 2012 were higher as compared to fiscal 2011 principally due to purchases of product related to the change in Imperial's product mix and product purchased to replace some of the inventory disposed in past years.

        Net cash provided by investing activities was approximately $3.0 million in fiscal 2012 as compared to approximately $0.8 million in fiscal 2011. The increase in net cash provided by investing activities in fiscal 2012 as compared to fiscal 2011 principally reflects proceeds of approximately $23.4 million from property sales, which includes approximately $15.5 million from the sale of the Manchester, Connecticut warehouse that was completed in the 2012 first quarter and approximately $6.9 million from the Dollar Tree Sale. The proceeds from the Dollar Tree Sale were placed in escrow to acquire a replacement property as part of a Section 1031 like-kind exchange for income tax purposes. The purchase of a replacement property was completed subsequent to the end of fiscal 2012. Partially offsetting the proceeds from property sales was cash of approximately $13.2 million expended for additions to Griffin Land's real estate assets, mostly for the construction, on speculation, of a 228,000 square foot industrial building on a portion of the previously undeveloped Lehigh Valley land that was acquired in 2010. Site work and work on required offsite improvements started in the fiscal 2011 fourth quarter and building construction started in the fiscal 2012 first quarter. The cash expended in fiscal 2012 also went toward the site work and required offsite improvements for a second industrial building on the Lehigh Valley land. Also in fiscal 2012, Griffin received cash of approximately $0.7 million from SNHC, approximately $0.4 million of which was reflected as dividend income and included in operating activities with the remaining approximately $0.3 million reflected as a return of capital and included in investing activities.

        Net cash used in financing activities was approximately $2.2 million in fiscal 2012 as compared to approximately $4.0 million in fiscal 2011. The net cash used in financing activities in fiscal 2012 reflects approximately $1.7 million for payments of principal on Griffin Land's nonrecourse mortgages, the payment of approximately $0.5 million for the fiscal 2011 fourth quarter dividend on Griffin's common stock that was paid in the fiscal 2012 first quarter and approximately $0.1 million for costs related to the refinancing of the nonrecourse mortgage on Griffin Land's two multi-story office buildings that was due on January 1, 2013 (see below). Partially offsetting the cash used for repayment of principal on Griffin Land's nonrecourse mortgages and cash used for the dividend payment was cash of approximately $0.1 million received from the exercise of stock options. Net cash used in financing activities in fiscal 2011 included cash of approximately $2.1 million used for the payment of dividends, approximately $1.9 million for the repayment of principal on Griffin Land's nonrecourse mortgages and

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approximately $0.3 million for debt issuance costs related to Griffin's revolving credit agreement, partially offset by cash of approximately $0.2 million received from the exercise of stock options.

        In fiscal 2012, Griffin maintained a $12.5 million revolving credit line (the "Credit Line") with Doral Bank. The Credit Line expires on May 1, 2013, but there is a company option for a one year extension. Interest on borrowings under the Credit Line is at the higher of prime plus 1.5% or 5.875%. The Credit Line is collateralized by Griffin Land's buildings in Griffin Center South aggregating approximately 235,000 square feet and a 48,000 square foot single-story office building in Griffin Center. There were no borrowings under the Credit Line in fiscal 2012.

        On June 15, 2012, Griffin and two of its wholly-owned subsidiaries entered into the Third Modification Agreement (the "Modification Agreement") to the mortgage loan originally due January 1, 2013 with Webster Bank (the "Webster Mortgage"). The Modification Agreement extended the maturity of the Webster Mortgage to October 2, 2017. In accordance with the Modification Agreement, the interest rate under the Webster Mortgage, which was fixed at 6.08%, changed, effective October 1, 2012, to a floating rate of the one month LIBOR plus 2.75%. In anticipation of entering into the Modification Agreement, on June 7, 2012, Griffin entered into an interest rate swap agreement with Webster Bank to effectively fix the interest rate on the Webster Mortgage at 3.86% from October 1, 2012 through the maturity of the Webster Mortgage. Pursuant to the Modification Agreement, beginning on October 1, 2012, principal payments on the Webster Mortgage are based on a twenty-five year amortization schedule. The Webster Mortgage is collateralized by Griffin Land's two multi-story office buildings in Windsor, Connecticut. The Modification Agreement did not alter the collateral for the Webster Mortgage.

        At the end of fiscal 2011, Griffin's Board of Directors decided that beginning in fiscal 2012, rather than continuing to pay a quarterly dividend, Griffin will consider the payment of an annual dividend at the end of its fiscal year. This change permits the Board to evaluate better both Griffin's prior full year results and its cash needs for the succeeding year when determining whether to pay an annual dividend. In the fiscal 2012 fourth quarter, Griffin's Board declared an annual dividend of $0.20 per share on Griffin's outstanding common stock, and payment of the 2012 annual dividend of approximately $1.0 million was made subsequent to the end of fiscal 2012.

        On December 28, 2012, Griffin Land closed on the purchase of approximately 49 acres of undeveloped land in the Lehigh Valley of Pennsylvania for approximately $7.1 million in cash using the proceeds from the Dollar Tree Sale that were placed in escrow when that transaction was closed. The land acquired is expected to support the development of two industrial buildings totaling at least 500,000 square feet. As the closing was completed prior to Griffin Land obtaining approvals for the expected development of this land, Griffin Land received certain recission rights from the seller whereby if the approvals for development are not obtained or the seller does not complete certain post closing obligations, the seller would re-purchase the land from Griffin Land.

        On January 18, 2013, Griffin sold its investment in SNHC for initial cash proceeds of approximately $3.2 million. Some additional cash proceeds on this sale may be received as a result of certain post-closing purchase price adjustments based on the amount of working capital of SNHC as of the closing date. Also, on January 30, 2013, Griffin sold 1,000,000 shares of its Centaur Media common stock for proceeds of approximately $0.9 million.

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        Griffin's payments (including principal and interest) under contractual obligations as of December 1, 2012 are as follows:

        In the near-term, Griffin plans to continue to invest in its real estate business, including expenditures to build out interiors of its buildings as new leases are signed, the construction of buildings on its undeveloped land, infrastructure improvements required for future development of its real estate holdings and the potential acquisition of other properties outside of the Hartford, Connecticut market. Griffin does not expect to commence any speculative construction projects for its Connecticut real estate portfolio until a substantial portion of Griffin Land's currently vacant space is leased.

        As of December 1, 2012, Griffin had cash and cash equivalents of approximately $10.2 million. Management believes that its cash and cash equivalents and borrowing capacity under the Credit Line will be sufficient to meet Griffin's seasonal working capital requirements, the continued investment in Griffin's real estate assets and the payment of future dividends on its common stock, when and if declared by the Board of Directors. Griffin may also continue to seek other nonrecourse mortgage placements on its properties. Griffin Land's real estate portfolio currently includes five buildings located in Connecticut aggregating approximately 411,000 square feet that are not mortgaged, and the recently completed 228,000 square foot industrial building in the Lehigh Valley of Pennsylvania that also is not mortgaged. Griffin also expects to continue to seek to purchase additional properties and/or undeveloped land parcels to expand the industrial/warehouse portion of its real estate business principally in the northeast and mid-Atlantic areas. Real estate acquisitions may or may not occur based on many factors, including real estate pricing.

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 leasing of currently vacant space, construction and leasing of additional facilities in the real estate business, obtaining approvals for development of the recently acquired land in Pennsylvania, the ability to obtain additional mortgage financing and 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.

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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 12 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. As of December 1, 2012, Griffin had a total of approximately $26.2 million of variable rate debt outstanding, for which Griffin has entered into interest rate swap agreements which effectively fix the interest rate on that debt. There were no other variable rate borrowings outstanding as of December 1, 2012.

        Griffin is exposed to market risks from fluctuations in interest rates and the effects of those fluctuations on the market values of Griffin's cash equivalents. These investments generally consist of overnight investments that are not significantly exposed to interest rate risk.

        Griffin does not have foreign currency exposure in operations. However, 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 UK pound sterling. A 10% decrease in the foreign currency exchange rate at December 1, 2012 would have resulted in an approximately $0.4 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 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 Operations

(dollars in thousands, except per share data)

See Notes to Consolidated Financial Statements.

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GRIFFIN LAND & NURSERIES, INC.

Consolidated Statements of Comprehensive Income (Loss)

(dollars in thousands)

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 December 1, 2012, December 3, 2011 and November 27, 2010

(dollars in thousands)