INDUS REALTY TRUST, INC. - Annual Report: 2013 (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 $79,989,000 based on the closing sales price on The NASDAQ Stock Market LLC on May 31, 2013, 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, 2014, 5,146,366 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 plans, expectations, or prospective results of operations or financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," and similar expressions are intended to identify forward-looking statements. Such forward-looking statements represent management's current expectations and are inherently uncertain. There are a number of important factors that could materially impact the value of Griffin's common stock or cause actual results to differ materially from those indicated by such forward-looking statements. Such factors include: adverse economic conditions and credit markets; a downturn in the 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 environmental factors; risks associated with the cost of raw materials or energy costs; regulatory risks; 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 November 30, 2013, 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") operates a real estate business through its wholly-owned subsidiary, Griffin Land, LLC ("Griffin Land") that is principally engaged in the development, management and leasing of commercial and industrial properties. Griffin Land also seeks to add to its industrial and commercial property portfolio through the acquisition and development of land or purchase of buildings. Periodically, Griffin Land may sell certain portions of its undeveloped land that it has owned for an extended time period and the use of which is not consistent with Griffin Land's core development and leasing strategy. The headquarters for Griffin Land is in Bloomfield, Connecticut.

        Through January 8, 2014, Griffin also operated a landscape nursery business through its wholly-owned subsidiary, Imperial Nurseries, Inc. ("Imperial"). Imperial was engaged in the growing of containerized plants for sale principally to independent retail garden centers and rewholesalers, whose main customers are landscape contractors. On January 8, 2014, Griffin and Imperial entered into an Asset Purchase Agreement (the "Purchase Agreement") pursuant to which Imperial's inventory and certain of its assets were sold to Monrovia Connecticut LLC ("Monrovia"), a subsidiary of Monrovia Nursery Company, for approximately $840,000 in cash (subject to certain adjustments) and a non-interest bearing note receivable of $4.25 million (the "Imperial Sale"). Concurrently with the entry into the Purchase Agreement, Imperial and River Bend Holdings, LLC, a wholly-owned subsidiary of Griffin, entered into a Lease and Option Agreement and an Addendum to such agreement (the "Imperial Lease", and together with the Imperial Sale, the "Imperial Transaction") with Monrovia, pursuant to which Monrovia agreed to lease Imperial's Connecticut production nursery for a ten-year period, with options to extend for up to an additional fifteen years exercisable by Monrovia. The Lease also grants Monrovia an option to purchase the land, land improvements and other operating assets that were used by Imperial in its Connecticut growing operations during the first thirteen years of the lease period.

        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 through fiscal 2009. 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 Township, Pennsylvania. Both the building and undeveloped land acquired are located in the Lehigh Valley region of Pennsylvania. In fiscal 2012, Griffin Land built an approximately 228,000 square foot industrial building on 18 acres of the Lower Nazareth land and in fiscal 2013 signed a five-year full building lease for that building. In the fiscal 2013 fourth quarter, Griffin Land started construction (on speculation) of an approximately 303,000 square foot industrial building on the balance of the 51 acre parcel of land in Lower Nazareth. Also in fiscal 2013, Griffin Land acquired an approximately 49 acre parcel of undeveloped land in Hanover Township, also in the Lehigh Valley region of Pennsylvania. Griffin Land expects to continue to seek to acquire and develop properties not presently owned that are consistent with its core strategy of developing and leasing industrial and commercial properties. Griffin Land expects that such potential acquisitions of either undeveloped land or land and buildings are likely to be located outside of the Hartford area.

        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 industrial/warehouse buildings and office/flex buildings. Additional capacity or an increase in vacancies in either the industrial or office market could adversely affect Griffin Land's operating results from its leasing operations by potentially resulting in longer times to lease vacant space, eroding lease rates in Griffin Land's properties or hindering renewals by existing tenants.

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        The greater Hartford industrial market had been slow in recent years, but experienced some recovery in 2012 and 2013. Market activity for office/flex space in the north submarket of Hartford was slow in 2013, with overall vacancy, availability and asking rates remaining relatively flat. 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. The warehouse/industrial market in the Lehigh Valley region of Pennsylvania has had a fairly strong level of leasing activity the past several years and reported vacancy levels are fairly low. As a result of the relatively strong market, there has been an increase in industrial/warehouse space in the Lehigh Valley. There can be no assurances as to the directions of the Hartford and Lehigh Valley real estate markets in the near future.

        As of November 30, 2013, 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 November 30, 2013, approximately 74% of Griffin Land's industrial/warehouse space was leased and approximately 94% of Griffin Land's office/flex space was leased. Griffin Land uses nonrecourse mortgages to finance some of its real estate development activities, and as of November 30, 2013, approximately $66.7 million was outstanding under such loans. In fiscal 2013, Griffin Land's rental revenue, less operating expenses of rental properties, was approximately $12.7 million, while debt service on Griffin Land's nonrecourse mortgages was approximately $5.5 million.

        In fiscal 2013, Griffin Land entered into three new leases of industrial space for an aggregate of approximately 259,000 square feet and several new leases for an aggregate of approximately 49,000 square feet of office/flex space. The new leasing of industrial space included a five-year full building lease of the approximately 228,000 square foot industrial building in the Lehigh Valley that was completed at the end of the fiscal 2012 third quarter. New leases of industrial space in Griffin Land's Connecticut industrial/warehouse properties in 2013 aggregated approximately 31,000 square feet. In fiscal 2013, several leases of industrial space aggregating approximately 168,000 square feet expired and were not renewed. The net effect of these transactions was an increase of approximately 92,000 square feet of industrial space under lease as of November 30, 2013 as compared to December 1, 2012. In fiscal 2013, two leases for office/flex space aggregating approximately 24,000 square feet expired and were not renewed or terminated early. In fiscal 2013, Griffin Land renewed and extended several leases aggregating approximately 116,000 square feet of industrial space and approximately 20,000 square feet of office/flex space. Included in the fiscal 2013 lease renewals was a full building lease of approximately 100,000 square feet that was scheduled to expire in fiscal 2014 but was extended for ten years.

        In fiscal 2012, Griffin Land entered into three new leases of industrial/warehouse space for an aggregate of approximately 151,000 square feet and two new leases of office/flex space for an aggregate of approximately 32,000 square feet. The new leases for industrial/warehouse space included 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 received $325,000 in connection with the early termination of that 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.

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        In fiscal 2011, Griffin Land entered into two new leases of previously vacant office/flex space for an aggregate of approximately 29,000 square feet 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.

        Periodically, Griffin Land may sell certain portions of its undeveloped land that it has owned for an extended time period and the use of which does not fit into Griffin Land's core strategy of developing and leasing industrial and commercial properties. Such sale transactions may take place either before or after obtaining development approvals and either before or after basic infrastructure is built.

        In fiscal 2013, Griffin Land completed three land sales, the principal one of which was the sale of approximately 90 acres of undeveloped land in Windsor, Connecticut (the "Windsor Land Sale") for cash proceeds of approximately $9.0 million, before transaction expenses. The land sold under the Windsor Land Sale is part of an approximately 268 acre parcel of undeveloped land that had been held by Griffin Land for an extended time period. Under the terms of the Windsor Land Sale, Griffin Land and the buyer will construct roadways connecting the land parcel that was sold to existing town roads. The roads to be built will also provide access to the remaining acreage in Griffin Land's land parcel. As a result of Griffin Land's continuing involvement with the land sold, the Windsor Land Sale is being accounted for under the percentage of completion method, under which the revenue and gain on sale are recognized as the total costs related to the property sold are incurred. At the closing of the Windsor Land Sale, the cash proceeds were placed in escrow for the purchase of a replacement property under a Section 1031 like-kind exchange. As of the date of this Annual Report on Form 10-K, a replacement property has not been acquired. Griffin Land also closed on two smaller land sales in fiscal 2013 for aggregate net cash proceeds of approximately $0.3 million.

        In fiscal 2012, Griffin Land completed three property sales. The largest of these was the fiscal 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 ("Raymour") for that building, Griffin Land gave notice to Raymour in the fiscal 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 fiscal 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.

        Also in fiscal 2012, Griffin Land sold approximately 93 acres of undeveloped land in Tradeport that Griffin Land had held for an extended time period to Dollar Tree Distribution, Inc. for cash proceeds of $7.0 million (the "Dollar Tree Sale") as the buyer required ownership of its facility. Because Griffin Land was required, under the terms of the Dollar Tree Sale, to construct a sewer line to service the land sold, the Dollar Tree Sale was accounted for under the percentage of completion method, under which the revenue and gain on sale were recognized as the total costs related to the property sold were 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

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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 fiscal 2012, 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.

        The weakness in the residential real estate market has adversely affected Griffin Land's real estate development activities for this industry sector. The continued weakness of the residential real estate market could result in lower selling prices for Griffin Land's land intended for residential use or delay the sale of such land.

        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 of 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.

        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. Griffin will provide electronic or paper copies of its foregoing filings free of charge upon request. Griffin was incorporated in 1970.

Commercial and Industrial Developments

New England Tradeport

        A significant portion of Griffin Land's commercial and industrial development effort has been focused on New England Tradeport ("Tradeport"), a 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 67% was leased as of November 30, 2013. 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, and large distribution facilities built by Walgreen and Dollar Tree on land parcels purchased from Griffin Land in fiscal 2006 and fiscal 2012, respectively. 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 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 under the STC Certificate which relates to four approved building sites 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

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remaining undeveloped land, and Griffin Land believes that additional infrastructure improvements, which may be significant, may be required to obtain approvals to develop portions of this land. As part of the Dollar Tree Sale, a sewer line was 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 2013, Griffin Land leased approximately 31,000 square feet of previously vacant space in Tradeport and renewed leases for approximately 115,000 square feet in Tradeport, while leases totaling 168,000 square feet expired and were not renewed. As of November 30, 2013, approximately $55.5 million was invested (net book value) in buildings owned by Griffin Land that are located in Tradeport and approximately $4.4 million was invested (net book value) by Griffin Land in the undeveloped land there. As of November 30, 2013, ten of Griffin Land's Tradeport buildings were mortgaged for an aggregate of approximately $43.5 million. Two Tradeport buildings built in fiscal 2007 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 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:

Griffin Center and Griffin Center South

        Griffin Land'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 November 30, 2013, approximately 63% of the acreage has 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 in Griffin Center there are eleven office buildings, a flex building and a small restaurant. Griffin Land owns two multi-story office buildings that have an aggregate of approximately 161,000

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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.

        In fiscal 2013, Griffin Land leased approximately 42,000 square feet of previously vacant office space in Griffin Center and renewed one lease for approximately 5,000 square feet, while one tenant that leased approximately 5,000 square feet in one of Griffin Land's multi-story office buildings negotiated an early termination of that lease in connection with a ten-year early renewal and lease extension of its lease of 32,000 square feet in Griffin Land's single story office building in Griffin Center. Currently there are approximately 207 acres of undeveloped land in Griffin Center.

        As of November 30, 2013, approximately $18.0 million was invested (net book value) in Griffin Land's buildings in Griffin Center and approximately $1.2 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 $10.2 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 November 30, 2013.

        As of November 30, 2013, approximately 373,000 square feet of Griffin Land's buildings in Griffin Center were leased, comprising approximately 98% of Griffin Land's total space in Griffin Center. A summary of Griffin Land's square footage owned and leased in Griffin Center at the end of each of the past three fiscal years and leases in Griffin Center scheduled to expire during each of the next three fiscal years are as follows:

Griffin Center South

        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 2013, Griffin Land leased approximately 7,500 square feet in Griffin Center South and renewed two leases with an aggregate of approximately 16,000 square feet, while a tenant that leased approximately 19,000 square feet exercised its option to terminate its lease effective August 31, 2013, two years earlier than the lease's scheduled expiration date.

        As of November 30, 2013, approximately $7.3 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 November 30, 2013, Griffin Land's nine properties in Griffin

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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 November 30, 2013. 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.

        As of November 30, 2013, approximately 207,000 square feet of space in the Griffin Center South buildings owned by Griffin Land was leased, comprising 88% 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 had 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 to be built in Lehigh Valley Tradeport, an approximately 228,000 square foot industrial building. This building was built on speculation and, in fiscal 2013, Griffin Land entered into a five-year full building lease of this building. The work completed in Lehigh Valley Tradeport for the construction of this building included a portion of the site work necessary for the construction of the second building. In the fiscal 2013 fourth quarter, Griffin Land started construction of the second building planned for Lehigh Valley Tradeport, an approximately 303,000 square foot industrial building. Completion of the construction of this building is expected to be in the fiscal 2014 second quarter. In addition to the costs of the site work for this new building discussed above, Griffin Land has invested approximately $1.4 million in the construction of this new building through November 30, 2013, and expects total construction costs, excluding site costs, to be approximately $9.5 million. These costs do not include leasing related costs.

        As of November 30, 2013, 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

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not located in one of Griffin Land's Connecticut industrial parks is a 31,000 square foot warehouse building in Bloomfield, Connecticut. All of these buildings are fully leased. 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. This 268 acre parcel is known as Phoenix Crossing. In fiscal 2013, Griffin Land sold approximately 90 acres of the Phoenix Crossing land in the Windsor Land Sale. Approximately $18.5 million was invested (net book value) in these three buildings at that date. The Olympus Building in Pennsylvania is mortgaged for approximately $4.0 million as of November 30, 2013, and the 228,000 square foot building in Lehigh Valley Tradeport is mortgaged for approximately $9.1 million as of November 30, 2013.

        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 approximately 530,000 square feet on the land acquired. In late 2013, Griffin Land received final approvals for such development. 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 ("Simsbury"). After several years of litigation with the town regarding this proposed residential development, a settlement was reached. The settlement terms included, among other things, approval for up to 296 homes, certain remediation measures and offsite road improvements to be performed by Griffin Land and the purchase by Simsbury of a portion of the Meadowood land for open space. The sale of land to Simsbury closed in fiscal 2008. In fiscal 2012, Griffin Land performed a portion of the required remediation work on the site and completed the required offsite road improvements. Griffin Land expects to spend approximately $1.4 million in fiscal 2014 to complete the remaining required remediation work on the site. Such work is expected to be completed in the fiscal 2014 second quarter. As of November 30, 2013, the book value of the land for this development, including design, development and legal costs, was approximately $6.6 million.

        Griffin Land owns another approximate 432 acres of undeveloped land 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.

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        In fiscal 2010, Griffin Land entered into an agreement with that privately owned regional homebuilder under which 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. Griffin Land sold one Stratton Farms residential lot in fiscal 2013 to the homebuilder that previously was a party to the option agreement that terminated in 2012. As of November 30, 2013, Griffin Land held twenty Stratton Farms residential lots. The book value for Griffin Land's Stratton Farms holdings, including land, design, development and legal costs, was approximately $1.1 million at November 30, 2013.

Other

        In fiscal 2013, Griffin Land leased approximately 512 acres of undeveloped land in Connecticut and Massachusetts to local farmers. Approximately 542 acres and 600 acres were leased to local farmers in fiscal 2012 and fiscal 2011, respectively. The revenue generated from the leasing of farmland is not material to Griffin Land's total revenue.

        Griffin Land is evaluating its other properties for 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

        As indicated above, Griffin and Imperial entered into the Purchase Agreement with Monrovia, effective January 8, 2014, pursuant to which Imperial's inventory and certain of its assets were sold to Monrovia for approximately $840,000 in cash (subject to certain adjustments) and a non-interest bearing note receivable (the "Promissory Note") of $4.25 million, with payments of $2.75 million due on June 1, 2014 and $1.5 million due on June 1, 2015. Pursuant to the Purchase Agreement, Griffin and Imperial agreed to indemnify Monrovia for any potential environmental liabilities relating to periods prior to the effective date of the Purchase Agreement.

        Concurrently with the entry into the Purchase Agreement, Imperial and River Bend Holdings, LLC, a wholly-owned subsidiary of Griffin, entered into the Imperial Lease with Monrovia, pursuant to which Monrovia agreed to lease Imperial's Connecticut production nursery for a ten-year period, with an option to extend for up to an additional fifteen years exercisable by Monrovia. The Imperial Lease provides for a net annual rent payable to Griffin of $500,000 for each of the first five years, with rent for subsequent years determined in accordance with the Imperial Lease. The Imperial Lease also grants Monrovia an option to purchase the land, land improvements and other operating assets that were used by Imperial in its Connecticut growing operations, during the first thirteen years of the lease period.

        Imperial's Florida farm is also being leased to another private company grower of landscape nursery plants. Imperial shut down its growing operations on its Florida farm in 2009 and entered into a six-year lease of that facility. The annual rent payable is $600,000 and the tenant has an option to purchase the facility any time during the lease term.

Investments

Centaur Media plc

        Centaur Media plc ("Centaur Media") is a publicly traded company listed on the London Stock Exchange. As of November 30, 2013, Griffin held 2,452,462 shares of Centaur Media and accounts for its investment in Centaur Media as an available-for-sale security. Accordingly, changes in the fair value of Griffin's investment in Centaur Media, including both changes in the stock price and changes in the

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foreign currency exchange rate, are not included in Griffin's net income but are included in Griffin's other comprehensive income. In fiscal 2013, Griffin sold 2,824,688 shares of its Centaur Media common stock, for total cash proceeds of approximately $2.5 million. Subsequent to the end of fiscal 2013, Griffin sold an additional 250,000 shares of Centaur Media for proceeds of approximately $250,000.

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. On January 18, 2013, Griffin sold its entire investment in SNHC for cash proceeds of approximately $3.4 million.

Employees

        As of November 30, 2013, Griffin employed 99 people on a full-time basis, including 72 employees in its landscape nursery business, 21 employees in its real estate business and 6 corporate employees. As a result of the Imperial Transaction, the employees of the landscape nursery business are no longer employed by Griffin. Most of the employees of the landscape nursery business were hired by Monrovia. 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.

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. In connection with the Imperial Transaction, Griffin expects to incur some costs to remediate a small area of the Connecticut farm that will be leased to Monrovia under the Imperial Lease. At this time, Griffin Land does not anticipate experiencing, in the next twelve months, any material expense in complying with such laws. Griffin

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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.

ITEM 1A.    RISK FACTORS.

        Griffin's real estate business has 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. Additional risks not currently known or currently deemed not to be material may also impact Griffin.

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;



•

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; and



•

A weak economy may limit sales of land intended for commercial/industrial use.

Downturn in the Residential Real Estate Market

        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.

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, Griffin Land's ability to retenant vacant space and have an adverse effect on rental rates.

        Griffin Land's real estate operations compete with other properties in the areas where it operates. 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.

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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 foot industrial building on a portion of Lehigh Valley Tradeport and in the fiscal 2013 fourth quarter, Griffin Land started construction on a 303,000 square foot industrial building in 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, in fiscal 2010 began acquiring properties in the Lehigh Valley of 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.

Governmental Regulations

        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 Associated with the Cost of Raw Materials and Energy Costs

        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 increase Griffin's building operating expenses and thereby lower Griffin Land's operating results.

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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, Griffin's President and Chief Operating Officer and John J. Kirby, Jr., a director of Griffin who is married to a member of the Cullman family, 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 46.6% of the outstanding common stock of Griffin as of November 30, 2013. There is an informal understanding that the persons and entities included in the Cullman and Ernst Group will vote together the shares owned by each of them. As a result, the Cullman and Ernst Group may effectively control the determination of Griffin's corporate and management policies and may limit other Griffin stockholders' ability to influence Griffin's corporate and management policies.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

        Not applicable.

ITEM 2.    PROPERTIES.

Land Holdings

        Griffin is a major landholder in the state of Connecticut, owning approximately 3,015 acres. Griffin also owns approximately 416 acres of land in Massachusetts, approximately 117 acres of land in Pennsylvania and approximately 1,066 acres in northern Florida. At November 30, 2013, the book value of land holdings owned by Griffin was approximately $30.2 million. Griffin believes the fair market value of such land is substantially in excess of its book value.

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

Land Holdings

Developed Properties

        As of November 30, 2013, 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:

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        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 10 to Griffin's consolidated financial statements for information concerning the mortgage debt associated with Griffin's properties.

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.

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PART II

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

Market Information

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

        On February 5, 2014, the number of record holders of common stock of Griffin was approximately 214, 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 $27.36 per share.

Dividend Policy

        In fiscal 2011, Griffin declared quarterly cash dividends of $0.10 per share. In the fourth quarter of fiscal 2011, 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 fiscal 2012 and fiscal 2013, Griffin declared an annual dividend of $0.20 per share in each year.

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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 November 29, 2008 to November 30, 2013. It is assumed in the graph that the value of each investment was $100 at November 29, 2008. Griffin is not aware of any other company that substantially participated in both the landscape nursery and real estate businesses during that period, 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 2009 through 2013 and balance sheet data as of the end of each fiscal year. The selected statement of operations data for fiscal 2011, fiscal 2012 and fiscal 2013 and the selected balance sheet data for fiscal 2012 and fiscal 2013 are derived from the audited consolidated financial statements included in Item 8 of this report. The selected statement of operations data for fiscal 2009 and fiscal 2010 and the balance sheet data for fiscal 2009, fiscal 2010 and fiscal 2011 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 Land & Nurseries, Inc. ("Griffin") reflect Griffin's real estate business which is conducted through its wholly-owned subsidiary, Griffin Land, LLC ("Griffin Land"), and Griffin's wholly-owned subsidiary in the landscape nursery business, Imperial Nurseries, Inc. ("Imperial"). Imperial's growing operations are reflected as a discontinued operation in Griffin's consolidated financial statements for all periods presented as a result of the sale (the "Imperial Sale") of Imperial's growing operations to Monrovia Connecticut, LLC ("Monrovia") and the lease of Imperial's Connecticut farm to Monrovia (the "Imperial Lease", and together with the Imperial Sale the "Imperial Transaction") that became effective January 8, 2014. In addition to the growing operations of Imperial, Griffin's results of discontinued operations also include the operating results and gain on the sale of the warehouse building that was owned by Griffin Land and sold in fiscal 2012.

        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:

        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 fair value using the average cost method for nursery stock, management may need to estimate the future recoverability of certain parts of the inventory that have not matured as planned. As of November 30, 2013, the fair value was the net realizable value based on the terms of the Imperial Sale.

        Investments:    Griffin classifies its investments in 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.

        Income taxes:    In accounting for income taxes under Financial Accounting Standards Board ("FASB") ASC 740, "Income Taxes," management estimates future taxable income from operations, the sale of appreciated assets, the remaining years before the expiration of loss credit carryforwards, future reversals of existing temporary differences and tax planning strategies in determining if it is more likely than not that Griffin will realize the benefits of its deferred tax assets.

        Impairment of long-lived assets:    Griffin reviews annually, as well as when conditions may indicate, its long-lived assets to determine if there are any indications of impairment, such as a prolonged vacancy in one of Griffin Land's rental properties. If indications of impairment are present, Griffin evaluates the carrying value of the assets in relation to undiscounted cash flows or the estimated fair value of the underlying assets. In connection with Griffin's real estate business, development costs that have been capitalized are reviewed periodically for future recoverability.

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        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 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

        In fiscal 2013, Griffin incurred a net loss of approximately $5.8 million as compared to net income of approximately $1.0 million in fiscal 2012. The net loss in fiscal 2013 as compared to net income in fiscal 2012 reflects a significant loss from discontinued operations partially offset by improved results from Griffin's continuing operations. Griffin incurred a loss from discontinued operations of approximately $7.7 million in fiscal 2013 as compared to income from discontinued operations of approximately $0.8 million in fiscal 2012. Griffin's income from continuing operations increased from approximately $0.2 million in fiscal 2012 to approximately $1.9 million in fiscal 2013.

        The increase of approximately $1.7 million in income from continuing operations in fiscal 2013 as compared to fiscal 2012 is principally due to gains in fiscal 2013 from the sale of Griffin's investment in Shemin Nurseries Holding Corp. ("SNHC") and from the sale of a portion of the common stock of Centaur Media plc ("Centaur") of approximately $3.4 million and approximately $1.1 million, respectively. The gains on the sale of these investments in fiscal 2013 were partially offset by a decrease in operating income of approximately $0.9 million in fiscal 2013 as compared to fiscal 2012. The lower operating income principally reflects a lower gain on property sales and higher general and administrative expenses in fiscal 2013 as compared to fiscal 2012, partially offset by higher profit from leasing operations in fiscal 2013 as compared to fiscal 2012.

        Griffin's discontinued operations in fiscal 2013 reflect the results of the growing operations of Imperial's landscape nursery business. The results from discontinued operations in fiscal 2012 and fiscal 2011 reflect Imperial's landscape nursery growing operations along with the results of operations and gain on the sale of Griffin Land's 308,000 square foot warehouse building (the "Manchester Warehouse") that was sold in January 2012. The loss from discontinued operations in fiscal 2013 as compared to income from discontinued operations in fiscal 2012 reflects a pretax charge of $10.4 million in fiscal 2013 to reduce the carrying value of Imperial's inventories to fair value, which is the net realizable value based on the terms of the Imperial Sale. Income from discontinued operations in fiscal 2012 includes a gain from the sale of the Manchester Warehouse that was sold in the fiscal 2012 first quarter partially offset by a loss from Imperial's landscape nursery business. The Manchester

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Warehouse was sold for cash proceeds of $16.0 million and a gain, before taxes, of approximately $2.9 million. Griffin Land had an operating profit from the Manchester Warehouse of approximately $0.2 million, before taxes, in fiscal 2012 prior to its sale.

Results of Operations

Fiscal 2013 Compared to Fiscal 2012

        Griffin's revenue increased from approximately $24.2 million in fiscal 2012 to approximately $25.5 million in fiscal 2013, reflecting an increase of approximately $1.6 million in rental revenue in fiscal 2013 as compared to fiscal 2012, partially offset by a decrease of approximately $0.3 million of revenue from property sales in fiscal 2013 as compared to fiscal 2012. The increase in rental revenue in fiscal 2013 as compared to fiscal 2012 is almost entirely due to higher occupancy in Griffin Land's rental properties in fiscal 2013 as compared to fiscal 2012. The net increase in rental revenue principally reflects: (a) an increase of approximately $2.1 million of rental revenue in fiscal 2013 due to leasing previously vacant space in buildings that were in service the entire year in both fiscal 2013 and fiscal 2012; and (b) an increase of approximately $0.5 million of rental revenue in fiscal 2013 from the commencement of a full building lease of the Lehigh Valley industrial building that was completed at the end of the fiscal 2012 third quarter; partially offset by (c) a decrease of approximately $0.9 million in rental revenue from leases that expired and were not renewed or terminated early.

        A summary of the square footage of Griffin Land's real estate portfolio is as follows:

        The increase in square footage leased as of November 30, 2013, as compared to December 1, 2012, reflects a new full building lease in fiscal 2013 for the approximately 228,000 square foot Lehigh Valley industrial building and the leasing of several other previously vacant spaces aggregating approximately 81,000 square feet (approximately 50,000 square feet of office/flex space and approximately 31,000 square feet of industrial/warehouse space) in fiscal 2013, partially offset by leases aggregating approximately 192,000 square feet that expired in fiscal 2013 and were not renewed or terminated early. The greater Hartford industrial market had been slow in recent years, but experienced some recovery in 2012 and 2013. Market activity for office/flex space in the north submarket of Hartford was slow in 2013, with overall vacancy, availability and asking rates remaining relatively flat. Griffin Land believes that it has been able to secure new leases for office/flex space because of its reputation as a stable, well capitalized company that maintains its properties to a high standard, meets its obligations and is able to deliver space to tenants timely and in accordance with the tenant's requirements and budget.

        Revenue from property sales decreased from approximately $5.8 million in fiscal 2012 to approximately $5.5 million in fiscal 2013. 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. Property sales in fiscal 2013 include the closing of the sale of approximately 90 acres of undeveloped land in Windsor, Connecticut (the "Windsor Land Sale") for cash proceeds of approximately $9.0 million (before transaction expenses) in the fiscal 2013 fourth quarter. Griffin Land is required, under the terms of the Windsor Land Sale, to construct roadways that will connect the land sold to existing town roadways. Accordingly, because of Griffin Land's continuing involvement with the land that was sold, the Windsor Land Sale is being accounted for under the percentage of completion method, under which the revenue and the gain on sale are recognized as the total costs related to the property sale are incurred. In fiscal 2013, Griffin Land recognized approximately $2.7 million of revenue from the Windsor Land Sale. The balance of the revenue from the Windsor Land Sale will be recognized as the costs of the

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required roadway construction are incurred, which is expected to be mostly in fiscal 2014. In addition to the revenue from the Windsor Land Sale, revenue from property sales in fiscal 2013 also included the recognition of approximately $2.3 million of previously deferred revenue from the sale of approximately 93 acres of undeveloped land in New England Tradeport ("Tradeport"), Griffin Land's industrial park in Windsor and East Granby, Connecticut, to Dollar Tree Distribution, Inc. (the "Dollar Tree Sale") that closed in fiscal 2012. As Griffin Land was required, under the terms of the Dollar Tree Sale, to construct a sewer line to service the property sold, Griffin Land accounted for the Dollar Tree Sale under the percentage of completion method. In addition to the recognition of previously deferred revenue on the Dollar Tree Sale, Griffin Land reported approximately $0.2 million of additional revenue from the Dollar Tree Sale in fiscal 2013 and also had a total of approximately $0.3 million of revenue from two smaller land sales. Property sales revenue in fiscal 2012 principally included the recognition of approximately $4.7 million of revenue from the Dollar Tree Sale and approximately $1.0 million of revenue from the sale of approximately 14 acres of undeveloped land in Windsor for cash.

        Operating expenses of rental properties increased from approximately $6.7 million in fiscal 2012 to approximately $7.5 million in fiscal 2013. The increase of approximately $0.8 million in operating expenses of rental properties principally reflects an increase of approximately $0.3 million of snow removal expenses and increases of approximately $0.1 million in both real estate taxes on rental properties and repair and maintenance expenses. The increase in snow removal expenses reflects the effect of the relatively mild winter weather in fiscal 2012, when there was a minimal amount of snowfall, as compared to a higher amount of snowfall in fiscal 2013.

        Depreciation and amortization expense increased from approximately $6.3 million in fiscal 2012 to approximately $6.7 million in fiscal 2013. The increase in depreciation and amortization expense of approximately $0.4 million in fiscal 2013 as compared to fiscal 2012 was due principally to an increase of approximately $0.3 million in fiscal 2013 on the 228,000 square foot Lehigh Valley industrial building that was completed and placed in service at the end of the fiscal 2012 third quarter, an increase of approximately $0.1 million related to new tenant improvements in several of Griffin Land's buildings and an increase of approximately $0.1 million in fiscal 2013 from accelerating depreciation on tenant improvements as a result of a tenant exercising its early lease termination option effective at the end of the fiscal 2013 third quarter. These increases in depreciation expense were partially offset by a decrease in depreciation expense of approximately $0.1 million in fiscal 2013 from certain tenant improvements becoming fully depreciated.

        Griffin's general and administrative expenses include both expenses that had previously been reflected as general corporate expense when Griffin's continuing operations included both the real estate and landscape nursery businesses and general and administrative expenses of Griffin Land. Griffin's general and administrative expenses increased from approximately $6.8 million in fiscal 2012 to approximately $7.8 million in fiscal 2013. The increase of approximately $1.0 million in general and administrative expenses principally reflects an increase of approximately $0.5 million in expenses related to Griffin's non-qualified deferred compensation plan, an increase of approximately $0.2 million in real estate taxes on undeveloped land and smaller increases in other general and administrative expenses that aggregate to approximately $0.3 million. The higher expenses of the non-qualified deferred compensation plan reflect the effect on participant balances of higher stock market performance in fiscal 2013 as compared to fiscal 2012.

        In fiscal 2013, the sale of Griffin's investment in SNHC was completed, with Griffin receiving cash proceeds of approximately $3.4 million. Because of the low carrying cost of its investment in SNHC, Griffin's gain on sale was approximately $3.4 million, essentially equal to the cash proceeds received. Also in fiscal 2013, Griffin sold 2,824,688 shares of its common stock of Centaur Media for cash proceeds of approximately $2.5 million. Griffin's gain from the sale of its Centaur Media common stock in fiscal 2013 was approximately $1.1 million. After the sales of Centaur Media common stock, Griffin owned 2,452,462 shares of Centaur Media common stock as of November 30, 2013. There were no sales of investments in fiscal 2012, however; fiscal 2012 did include investment income of approximately $0.6 million principally from a cash distribution from SNHC.

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        Griffin's interest expense increased from approximately $3.5 million in fiscal 2012 to approximately $3.8 million in fiscal 2013, principally due to approximately $0.6 million of interest being capitalized in fiscal 2012 as compared to only approximately $0.1 million of interest capitalized in fiscal 2013 and interest expense of approximately $0.1 million on a new nonrecourse mortgage loan entered into in fiscal 2013 on the new Lehigh Valley industrial building that became fully leased in fiscal 2013. Partially offsetting these increases was a decrease in interest expense of approximately $0.2 million in fiscal 2013 as compared to fiscal 2012 due to lower interest rates on mortgage loans with Webster Bank and First Niagara Bank that were refinanced in the fiscal 2012 fourth quarter and fiscal 2013 second quarter, respectively. Interest capitalized in fiscal 2012 was on the construction projects ongoing during that year, principally the Lehigh Valley industrial building that was built by Griffin Land.

        In fiscal 2013, Griffin incurred a loss on debt extinguishment of approximately $0.3 million, related to a loan modification agreement on a mortgage loan with First Niagara Bank due in January 2020 (the "2020 First Niagara Mortgage"). On April 1, 2013, Griffin Land and First Niagara Bank entered into an agreement that reduced the interest rate on the 2020 First Niagara Mortgage from a fixed rate of 5.25% to a variable rate of the one month LIBOR rate plus 2.5%. Because the difference between the present value of the future payments under the existing loan was greater than 10% of the present value of the payments under the modified loan, the loan modification was accounted for as a debt extinguishment. As such, all deferred costs related to the existing 2020 First Niagara Mortgage (approximately $0.2 million) and the fee paid to First Niagara Bank for the loan modification (approximately $0.1 million) are reflected as a loss on debt extinguishment. Concurrent with that agreement, Griffin also entered into an interest rate swap agreement with First Niagara Bank to fix the interest rate on the 2020 First Niagara Mortgage at 3.91% for the remainder of the loan term.

        Griffin's effective tax rate was 34.2% in fiscal 2013 as compared to an effective tax rate of 57.9% in fiscal 2012. The lower effective tax rate in fiscal 2013 as compared to fiscal 2012 reflects the impact of permanent differences between pretax income for book purposes and tax purposes being greater in fiscal 2012 than fiscal 2013 due to the lower amount of pretax income in fiscal 2012 as compared to fiscal 2013.

        The loss from discontinued operations, net of tax, of approximately $7.7 million in fiscal 2013, is entirely from the growing operations of the landscape nursery business. The income from discontinued operations, net of tax, of approximately $0.7 million in fiscal 2012 principally reflected the gain, net of tax, of approximately $1.5 million on the sale of the Manchester Warehouse and income from operations, net of tax, before the Manchester Warehouse was sold, partially offset by a loss, net of tax, from the growing operations of the landscape nursery business of approximately $0.9 million. The higher loss from the growing operations of the landscape nursery business in fiscal 2013 as compared to fiscal 2012 principally reflects a pretax charge of $10.4 million incurred in fiscal 2013 to reduce inventory that will be sold in the Imperial Sale to fair value, which is the net realizable value based on the terms of the Imperial Sale.

Fiscal 2012 Compared to Fiscal 2011

        Griffin's revenue increased from approximately $22.7 million in fiscal 2011 to approximately $24.2 million in fiscal 2012, reflecting an increase of approximately $1.8 million in revenue from property sales in fiscal 2012 as compared to fiscal 2011 partially offset by a decrease of approximately $0.2 million in rental revenue in fiscal 2012 as compared to fiscal 2011.

        The net decrease of approximately $0.2 million in rental revenue 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

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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 fiscal 2012 first quarter and is accounted for as a discontinued operation in Griffin's consolidated statements of operations in both fiscal 2012 and fiscal 2011, is as follows:

        The increase in total square footage of Griffin Land's real estate portfolio in fiscal 2012 reflected the construction, on speculation, of a 228,000 square foot industrial building in the Lehigh Valley of Pennsylvania in fiscal 2012. Excluding the new industrial building in the Lehigh Valley that was not leased as of December 1, 2012, Griffin Land's percentage of space leased as of December 1, 2012 would have been 82%. The increase in square footage leased in fiscal 2012 reflects several new leases aggregating 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 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 this 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 was 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 approximately19,000 square feet in one of Griffin Land's flex buildings in Griffin Center South effective August 31, 2013, two years earlier than the scheduled lease expiration.

        Property sales revenue in fiscal 2012 included the recognition of approximately $4.7 million of revenue from the Dollar Tree Sale, which is being accounted for under the percentage of completion method, and approximately $1.0 million from the sale of approximately 14 acres of undeveloped land in Windsor for cash. Property sales in fiscal 2011 reflected approximately $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 approximately $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.

        Operating expenses of rental properties decreased from approximately $7.2 million in fiscal 2011 to approximately $6.7 million in fiscal 2012. The decrease of approximately $0.5 million in operating expenses of rental properties principally reflected a decrease in snow removal expenses due to the relatively mild winter weather in fiscal 2012 as compared to the more severe winter weather in fiscal 2011.

        Depreciation and amortization expense of approximately $6.3 million in fiscal 2012 was essentially unchanged from fiscal 2011, as depreciation expense of approximately $0.1 million on the 228,000 square foot Lehigh Valley industrial building that was completed and placed in service at the end of the 2012 third quarter and an increase in depreciation expense of approximately $0.1 million related to new tenant improvements in several of Griffin Land's buildings were offset by a decrease in depreciation expense from certain tenant improvements becoming fully depreciated.

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        Griffin's general and administrative expenses were approximately $6.8 million in both fiscal 2012 and fiscal 2011. An increase of approximately $0.1 million in expenses related to Griffin's non-qualified deferred compensation plan in fiscal 2012 as compared to fiscal 2011 was offset by a net decrease of approximately $0.1 million in other general and administrative expenses.

        Griffin's interest expense decreased from approximately $4.2 million in fiscal 2011 to approximately $3.5 million in fiscal 2012. The decrease of approximately $0.7 million principally reflects approximately $0.6 million of interest capitalized in fiscal 2012 as compared to approximately $0.1 million of interest capitalized in fiscal 2011. Interest capitalized in fiscal 2012 was on the construction projects ongoing during that year, principally the Lehigh Valley industrial building that was being built by Griffin Land. Griffin's average outstanding debt in fiscal 2012 was approximately $60.3 million as compared to approximately $62.2 million in fiscal 2011, reflecting principal payments made on Griffin's nonrecourse mortgages in fiscal 2012.

        Griffin's effective tax rate was 57.9% in fiscal 2012 as compared to an effective tax rate of 17.8% in fiscal 2011. The higher effective tax rate in fiscal 2012 as compared to fiscal 2011 reflects: (a) the impact of permanent differences between book income and taxable income in fiscal 2012 being greater because of the relatively small amount of pretax income in fiscal 2012; and (b) the effect in fiscal 2011 of adjustments to 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 operated.

        The income from discontinued operations of approximately $0.8 million in fiscal 2012 principally reflected a gain of approximately $1.5 million, net of tax, on the sale of the Manchester Warehouse and income from operations of approximately $0.1 million, net of tax, before the Manchester Warehouse was sold in fiscal 2012, partially offset by a loss of approximately $0.9 million, net of tax, from the growing operations of the landscape nursery business. The loss, net of tax, from discontinued operations of approximately $1.2 million in fiscal 2011 reflected a loss of approximately $1.7 million, net of tax, from the growing operations the landscape nursery business partially offset by income from operations of approximately $0.5 million, net of tax, of the Manchester Warehouse.

Off Balance Sheet Arrangements

        Griffin does not have any off balance sheet arrangements.

Liquidity and Capital Resources

        Net cash used in operating activities was approximately $0.6 million in fiscal 2013 as compared to net cash provided by operating activities of approximately $1.9 million in fiscal 2012, principally reflecting a decrease of approximately $1.1 million from the net loss in fiscal 2013 as compared to net income in fiscal 2012 after factoring in the adjustments to reconcile net (loss) income to net cash used in or provided by operating activities, and approximately $1.4 million more cash used in operating activities as a result of changes in assets and liabilities in fiscal 2013 as compared to fiscal 2012. The increase in cash used as a result of changes in assets and liabilities principally reflects the timing of cash receipts and payments, including other current assets remaining essentially unchanged in fiscal 2013 as compared to a reduction in other current assets of approximately $1.4 million in fiscal 2012. The change in other current assets principally reflects fiscal 2012 including cash proceeds of approximately $0.7 million from the collection of a note receivable related to a land sale several years earlier and cash proceeds of approximately $0.5 million collected in fiscal 2012 from an insurance claim that was settled in fiscal 2011.

        Net cash used in investing activities was approximately $1.2 million in fiscal 2013 as compared to net cash provided by investing activities of approximately $3.0 million in fiscal 2012. The net cash used in investing activities in fiscal 2013 principally reflects approximately $13.5 million of cash used for additions to real estate assets, a net of approximately $2.8 million of cash deposited in escrow and

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approximately $0.1 million of cash used for additions to property and equipment, offset by approximately $9.4 million of proceeds from property sales, approximately $3.4 million of proceeds from the sale of SNHC and approximately $2.5 million of proceeds from the sale of Centaur Media common stock. The cash deposited into escrow reflects the approximately $8.9 million of proceeds from the Windsor Land Sale that were placed in escrow for a potential Section 1031 like-kind exchange and approximately $0.9 million of cash deposited in escrow that will be used for a portion of the road construction related to the Windsor Land Sale, offset by approximately $6.9 million of cash that was returned from escrow from the Dollar Tree Sale. The funds returned from escrow from the Dollar Tree Sale were used for the acquisition of undeveloped land in the Lehigh Valley of Pennsylvania (see below). In addition to the acquisition of undeveloped land in fiscal 2013, Griffin Land's additions to its real estate assets included approximately $2.9 million for tenant improvements related to new leases, approximately $1.4 million towards construction of a 303,000 square foot industrial building in the Lehigh Valley and approximately $0.8 million of expenditures for the construction of the sewer line related to the Dollar Tree Sale. The Lehigh Valley building under construction is expected to be completed in the fiscal 2014 second quarter, and a total of approximately $8.1 million is expected to be spent in fiscal 2014 to complete construction of this facility. In fiscal 2013, Griffin had approximately $0.1 million of additions to property and equipment, mostly for purchases of equipment at both Imperial and Griffin Land.

        The 49 acre parcel of undeveloped land acquired in fiscal 2013 will support the development of two industrial buildings totaling approximately 530,000 square feet. Griffin Land has recently received final approvals for such development plans.

        Net cash provided by investing activities of approximately $3.0 million in fiscal 2012 reflected net cash proceeds of approximately $23.4 million from property sales, which included approximately $15.5 million from the sale of the Manchester Warehouse 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, which was completed in fiscal 2013 with the acquisition of the land parcel in the Lehigh Valley (see above). 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 balance of approximately $0.3 million reflected as a return of capital and included in investing activities. Partially offsetting the cash received from property sales and the return of capital from SNHC was approximately $13.2 million of additions to real estate assets, principally for Griffin Land's construction, on speculation, of the 228,000 square foot industrial building on an undeveloped land parcel (known as Lehigh Valley Tradeport) in the Lehigh Valley of Pennsylvania that was acquired in 2010 and the site work for the second industrial building to be built in Lehigh Valley Tradeport. Griffin Land started construction of the second Lehigh Valley Tradeport industrial building in the fiscal 2013 fourth quarter (see above). In fiscal 2012 Griffin also had approximately $0.2 million of additions to property and equipment, mostly for purchases of equipment at Griffin Land and Imperial.

        Net cash provided by financing activities was approximately $5.7 million in fiscal 2013 as compared to net cash of approximately $2.2 million used in financing activities in fiscal 2012. The net cash provided by financing activities in fiscal 2013 reflects proceeds of $9.1 million from a new nonrecourse mortgage loan that closed in fiscal 2013 (see below) and cash of approximately $0.1 million received from the exercise of stock options. These were partially offset by approximately $1.9 million for payments of principal on Griffin Land's nonrecourse mortgages, a dividend payment of approximately $1.0 million for the dividend on Griffin's common stock that was declared in the fiscal 2012 fourth quarter and paid in the fiscal 2013 first quarter, approximately $0.4 million of debt issuance costs related to a new revolving credit agreement (see below) and the new nonrecourse mortgage loan, both of which closed in fiscal 2013, and approximately $0.1 million related to the modification of a mortgage loan with First Niagara Bank (see below). Net cash used in financing activities in fiscal 2012 reflected

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approximately $1.7 million for payments of principal on Griffin Land's nonrecourse mortgages, approximately $0.5 million for the payment of dividends and approximately $0.1 million of debt issuance costs, partially offset by approximately $0.1 million received from the exercise of stock options in fiscal 2012.

        On April 1, 2013, Griffin Land entered into a loan modification agreement for its 5.25% nonrecourse mortgage loan with First Niagara Bank due in January 2020 (the "2020 First Niagara Mortgage"). The loan modification agreement changed the interest rate on the 2020 First Niagara Mortgage from a fixed rate of 5.25% to a variable rate of the one month LIBOR rate plus 2.5%. The loan modification did not change the loan's collateral or maturity date. Griffin Land paid approximately $0.1 million for the loan modification, which included a fee paid to First Niagara and third party transaction costs. Concurrent with the loan modification, Griffin Land entered into an interest rate swap agreement with First Niagara Bank to fix the interest rate on the 2020 First Niagara Mortgage at 3.91% for the duration of the loan.

        On April 24, 2013, Griffin closed on a new $12.5 million revolving credit agreement with Webster Bank (the "Webster Credit Line"). The Webster Credit Line is for two years with an option for Griffin to extend the credit line for a third year. The Webster Credit Line replaced Griffin's $12.5 million credit line with Doral Bank (the "Doral Credit Line") that was scheduled to expire on May 1, 2013. Interest on the outstanding borrowings under the Webster Credit Line will be at the one month LIBOR rate plus 2.75%. Interest on outstanding borrowings under the Doral Credit Line was the higher of the prime rate plus 1.5% or 5.875%. The Webster Credit Line is collateralized by Griffin Land's properties in Griffin Center South, aggregating approximately 235,000 square feet and an approximately 48,000 square foot single-story office building in Griffin Center. These are the same properties that collateralized the Doral Credit Line. There were no borrowings under the Doral Credit Line in fiscal 2012 and fiscal 2013, and there have been no amounts borrowed under the Webster Credit Line as of the date of this Annual Report on Form 10-K.

        On August 28, 2013, a subsidiary of Griffin closed on a $9.1 million nonrecourse mortgage with First Niagara Bank (the "2023 First Niagara Mortgage"), collateralized by the 228,000 square foot Lehigh Valley industrial building that was constructed in fiscal 2012 and fully leased in fiscal 2013. Although this mortgage is nonrecourse, Griffin and its subsidiary entered into a master lease that is coterminous with the 2023 First Niagara Mortgage which would become effective if the full building tenant in that industrial building does not renew its five-year lease when it is scheduled to expire in fiscal 2018. The 2023 First Niagara Mortgage has a ten-year term with payments based on a twenty-five year amortization schedule. The interest rate for the 2023 First Niagara Mortgage is a floating rate of the one month LIBOR rate plus 1.95%. At the time Griffin closed on the First Niagara Mortgage, Griffin also entered into an interest rate swap agreement with First Niagara Bank for a notional principal amount of $9.1 million at inception to fix the interest rate on the 2023 First Niagara Mortgage at 4.79% for the term of the loan.

        Griffin expects to use substantially all of the proceeds from the 2023 First Niagara Mortgage for the construction, on speculation, of the approximately 303,000 square foot industrial building in the Lehigh Valley of Pennsylvania. Construction started in the fiscal 2013 fourth quarter with completion expected in the fiscal 2014 second quarter. This new building will be located in Lehigh Valley Tradeport on land contiguous to the 228,000 square foot industrial building that was built in fiscal 2012 and fully leased in fiscal 2013. Much of the site work for this new building was done in conjunction with the site work for the first building in Lehigh Valley Tradeport. Griffin Land expects to spend approximately $9.5 million on the construction of the shell of this new building.

        On January 8, 2014, Griffin and Imperial entered into the Purchase Agreement pursuant to which Imperial's inventory and certain of its assets were sold to Monrovia for approximately $840,000 in cash (subject to certain adjustments) and a non-interest bearing note receivable of $4.25 million, with

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payments of $2.75 million due on June 1, 2014 and $1.5 million due on June 1, 2015. The Promissory Note is secured by an irrevocable letter of credit. Concurrent with the entry into the Purchase Agreement, Imperial and River Bend Holdings, LLC, a wholly-owned subsidiary of Griffin, entered into the Imperial Lease with Monrovia, pursuant to which Monrovia agreed to lease Imperial's Connecticut production nursery for a ten-year period, with an option to extend for up to an additional fifteen years exercisable by Monrovia. The Imperial Lease grants Monrovia an option to purchase the land, land improvements and other operating assets that were used by Imperial in its Connecticut growing operations during the first thirteen years of the lease period for $10.5 million, or $7.0 million if only a certain portion of the land is purchased, subject in each case to certain adjustments and provisions as provided for in the Imperial Lease.

        The landscape nursery business is highly seasonal, with sales peaking in the spring during Griffin's fiscal second quarter. As a result of the seasonality of the landscape nursery business, Griffin's working capital requirements would increase each spring as Imperial required seasonal working capital to fund its operations. Imperial would generate cash in the second half of the year, principally due to the collection of accounts receivable from its spring sales. The absence of the need to fund Imperial's seasonal working capital needs as a result of the Imperial Transaction is expected to result in smaller seasonal changes in Griffin's working capital requirements.

        Griffin's payments (including principal and interest) under contractual obligations as of November 30, 2013 are as follows:

        In the near-term, Griffin plans to continue to invest in its real estate business, including the construction of buildings on its undeveloped land, the construction of new roads as required under land sale agreements, expenditures to build out interiors of its buildings as new leases are signed, infrastructure improvements required for future development of its real estate holdings and the potential acquisition of additional properties and/or undeveloped land parcels in New England or the mid-Atlantic states to expand the industrial/warehouse portion of Griffin Land's real estate business. 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 there is leased.

        As of November 30, 2013, Griffin had cash and cash equivalents of approximately $14.2 million and proceeds held in escrow of approximately $8.9 million. Management believes that its cash and cash equivalents, funds held in escrow and borrowing capacity under the Webster Credit Line will be sufficient to meet Griffin's 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

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properties. Griffin Land's real estate portfolio currently includes five buildings located in Connecticut aggregating approximately 411,000 square feet that are not mortgaged.

Forward-Looking Information

        The above information in Management's Discussion and Analysis of Financial Condition and Results of Operations includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although Griffin believes that its plans, intentions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such plans, intentions or expectations will be achieved, particularly with respect to the expected timing and costs of the construction of the new industrial building in the Lehigh Valley, leasing of currently vacant space, construction and leasing of additional facilities in the real estate business, mortgage financing on Griffin Land's unleveraged properties 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.

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 10 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 November 30, 2013, Griffin had a total of approximately $38.6 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 November 30, 2013.

        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 November 30, 2013 would have resulted in an approximately $0.2 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 (Loss) Income

(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 November 30, 2013, December 1, 2012 and December 3, 2011

(dollars in thousands)