MPG Office Trust Reports Third Quarter 2012 Financial Results

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MPG Office Trust Reports Third Quarter 2012 Financial Results

LOS ANGELES--(BUSINESS WIRE)-- MPG Office Trust, Inc. (NYS: MPG) , a Southern California-focused real estate investment trust, today reported results for the quarter ended September 30, 2012.

Significant Third Quarter Events

  • We had $158.6 million of cash as of September 30, 2012 (excluding restricted cash related to mortgages in default), of which $117.4 million was unrestricted and $41.2 million was restricted.
  • During third quarter 2012, we completed new leases and renewals for approximately 362,000 square feet, including our pro rata share of our joint venture properties. Included in that amount is the ten-year lease renewal with Wells Fargo Bank for approximately 291,000 square feet at the Wells Fargo Tower located in the Bunker Hill area of downtown Los Angeles. Wells Fargo has the option, exercisable over the next three years, to contract its office space by 89,000 square feet. Wells Fargo also has the option, exercisable over the next two years, to expand its office space by 25,000 square feet.
  • On July 9, 2012, we extended the maturity date of the mortgage loan secured by KPMG Tower for an additional one year, to October 9, 2013. In connection with the extension, we repaid $35.0 million of principal, which reduced the outstanding loan balance to $365.0 million. Additionally, we funded a $5.0 million leasing reserve and agreed to a full cash sweep of excess operating cash flow which began on September 9, 2012. Excess operating cash flow (cash flow after the funding of certain reserves, the payment of property operating expenses and the payment of debt service) is being applied to fund a $1.5 million capital expenditure reserve, to fund an additional $5.0 million into the leasing reserve, and thereafter, to reduce the outstanding principal balance of the loan. As of September 30, 2012, we have fully funded the capital expenditure reserve and have funded $0.6 million of the additional leasing reserve.
  • On July 12, 2012, we sold our interest in Stadium Gateway (a joint venture property in which we owned a 20% interest). We received net proceeds of approximately $1 million, including reimbursement of loan reserves.
  • During July 2012, Robert F. Maguire III and related entities redeemed a total of 5,176,251 noncontrolling common units of our Operating Partnership. At Mr. Maguire's request, we issued 4,494,220 shares of common stock in exchange for these units to a party not related to Mr. Maguire and 682,031 shares of common stock to Mr. Maguire directly. The redemption of these units and subsequent issuance of the common stock to a party not related to Mr. Maguire caused Robert F. Maguire III and related entities to fall below the 50% ownership requirement set forth in his contribution agreement. As a result, all tax indemnification obligations in favor of him and related entities, as well as all remaining limited partners, now expire on June 27, 2013. Therefore, pursuant to the terms of the contribution agreement, all restrictions on disposition relating to the following assets now expire on June 27, 2013: Gas Company Tower, US Bank Tower, KPMG Tower, Wells Fargo Tower and Plaza Las Fuentes.
  • On August 3, 2012, a trustee sale was held with respect to Glendale Center. As a result of the foreclosure, we were relieved of the obligation to repay the $125.0 million mortgage loan secured by the property as well as accrued contractual and default interest on the mortgage loan. In addition, we received a general release of claims under the loan documents pursuant to a previous in-place agreement with the special servicer.
  • On September 6, 2012, a trustee sale was held with respect to 500 Orange Tower. As a result of the foreclosure, we were relieved of the obligation to repay the $110.0 million mortgage loan secured by the property as well as accrued contractual and default interest on the mortgage loan. In addition, we received a general release of claims under the loan documents pursuant to a previous in-place agreement with the special servicer.

Subsequent Event

  • On October 1, 2012, a trustee sale was held with respect to Two California Plaza. As a result of the foreclosure, we were relieved of the obligation to repay the $470.0 million mortgage loan secured by the property as well as accrued contractual and default interest on the mortgage loan. In addition, we received a general release of claims under the loan documents pursuant to a previous in-place agreement with the special servicer.

Third Quarter 2012 Financial Results

Net income available to common stockholders for the quarter ended September 30, 2012 was $88.0 million, or $1.57 per share, compared to net income available to common stockholders of $25.6 million, or $0.51 per share, for the quarter ended September 30, 2011.

Our share of Funds from Operations (FFO) available to common stockholders for the quarter ended September 30, 2012 was $63.2 million, or $1.11 per diluted share, compared to $46.9 million, or $0.92 per diluted share, for the quarter ended September 30, 2011. Our share of FFO before specified items was $(6.2) million, or $(0.11) per share, for the quarter ended September 30, 2012 as compared to $(1.7) million, or $(0.04) per share, for the quarter ended September 30, 2011.

As of September 30, 2012, our office portfolio (excluding Properties in Default) was comprised of whole or partial interests in eight properties totaling approximately 7.9 million net rentable square feet, and on- and off-site structured parking plus surface parking totaling approximately 3.5 million square feet, which accommodates approximately 11,000 vehicles.

We will host a conference call and audio webcast, both open to the general public, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time) on Tuesday, November 6, 2012, to discuss the financial results of the third quarter and provide a company update. The conference call can be accessed by dialing (855) 374-0037 (Domestic) or (706) 758-3042 (International), ID number 45325331. The live conference call can be accessed via audio webcast at the Investor Relations section of our website, located at www.mpgoffice.com, or through Thomson Reuters at www.earnings.com. Our Supplemental Operating and Financial Data package is available at the Investor Relations section of our website, located at www.mpgoffice.com under "Financial Reports-Quarterly & Other Reports."

A replay of the conference call will be available approximately two hours following the call through November 9, 2012. To access this replay, dial (855) 859-2056 (Domestic) or (404) 537-3406 (International). The required passcode for the replay is ID number 45325331. The replay can also be accessed via audio webcast at the Investor Relations section of our website, located at www.mpgoffice.com, or through Thomson Reuters at www.earnings.com.

About MPG Office Trust, Inc.

MPG Office Trust, Inc. is the largest owner and operator of Class A office properties in the Los Angeles Central Business District. MPG Office Trust, Inc. is a full-service real estate company with substantial in-house expertise and resources in property management, leasing and financing. For more information on MPG Office Trust, visit our website at www.mpgoffice.com.

Business Risks

This press release contains forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, without limitation: risks associated with our liquidity situation, including our failure to obtain additional capital or extend or refinance debt maturities; risks associated with our failure to reduce our significant level of indebtedness; risks associated with the timing and consequences of loan defaults and non-core asset dispositions; risks associated with our loan modification and asset disposition efforts, including potential tax ramifications; risks associated with our ability to dispose of properties with potential value above the debt, if and when we decide to do so, at prices or terms set by or acceptable to us; general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases at favorable rates, dependence on tenants' financial condition, and competition from other developers, owners and operators of real estate); risks associated with the continued disruption of credit markets or a global economic slowdown; risks associated with the potential loss of key personnel (most importantly, members of senior management); risks associated with joint ventures; risks associated with our failure to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and possible adverse changes in tax and environmental laws; and potential liability for uninsured losses and environmental contamination.

For a further list and description of such risks and uncertainties, see our Annual Report on Form 10-K filed on March 15, 2012 with the Securities and Exchange Commission. The Company does not update forward-looking statements and disclaims any intention or obligation to update or revise them, whether as a result of new information, future events or otherwise.

  
MPG OFFICE TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 
September 30, 2012December 31, 2011
(Unaudited)
ASSETS
Investments in real estate$2,168,111$2,586,980
Less: accumulated depreciation(615,216)(659,408)
Investments in real estate, net1,552,8951,927,572
 
Cash and cash equivalents117,372117,969
Restricted cash72,97874,387
Rents and other receivables, net3,4024,796
Deferred rents51,25154,663
Deferred leasing costs and value of in-place leases, net56,76171,696
Deferred loan costs, net7,60510,056
Other assets4,9207,252
Assets associated with real estate held for sale 

14,000

 

Total assets$1,867,184 $2,282,391 
 
LIABILITIES AND DEFICIT
Liabilities:
Mortgage loans$2,464,084$3,045,995
Accounts payable and other liabilities110,524140,212
Excess distributions received from unconsolidated joint venture7,700
Acquired below-market leases, net14,037 24,110 
Total liabilities2,596,345 3,210,317 
 
Deficit:
Stockholders' Deficit:

7.625% Series A Cumulative Redeemable Preferred Stock,

$0.01 par value, $25.00 liquidation preference, 50,000,000 shares
authorized; 9,730,370 shares issued and outstanding

as of September 30, 2012 and December 31, 2011

9797
Common stock, $0.01 par value, 100,000,000 shares authorized;
57,120,182 and 50,752,941 shares issued and outstanding

as of September 30, 2012 and December 31, 2011, respectively

571508
Additional paid-in capital608,056703,436
Accumulated deficit and dividends(1,331,513)(1,504,759)
Accumulated other comprehensive income (loss)707 (15,166)
Total stockholders' deficit(722,082)(815,884)
Noncontrolling Interests:
Accumulated deficit and dividends(7,079)(118,049)
Accumulated other comprehensive income 6,007 
Total noncontrolling interests(7,079)(112,042)
Total deficit(729,161)(927,926)
Total liabilities and deficit$1,867,184 $2,282,391 
 
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MPG OFFICE TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except share and per share amounts)
  
For the Three Months EndedFor the Nine Months Ended
Sept. 30, 2012 Sept. 30, 2011Sept. 30, 2012 Sept. 30, 2011
Revenue:
Rental$38,352$41,149$113,851$123,879
Tenant reimbursements19,70720,53257,54260,148
Parking7,7258,19524,02724,395
Management, leasing and development services4142,5902,1964,715
Interest and other1,481 580 15,794 2,504 
Total revenue67,679 73,046 213,410 215,641 
 
Expenses:
Rental property operating and maintenance19,17817,43652,96851,075
Real estate taxes6,4396,52818,53918,949
Parking2,0132,0746,1356,524
General and administrative5,8615,25817,72117,257
Other expense1,8311,7946,0815,086
Depreciation and amortization19,10020,95857,61061,014
Impairment of long-lived assets2,121
Interest40,73342,845126,767124,985
Loss from early extinguishment of debt   164 
Total expenses95,155 96,893 287,942 285,054 
 
Loss from continuing operations before equity in

net income (loss) of unconsolidated joint venture

(27,476)(23,847)(74,532)(69,413)
Equity in net income (loss) of unconsolidated joint venture38 204 14,312 (129)
Loss from continuing operations(27,438)(23,643)(60,220)(69,542)
 
Discontinued Operations:
Loss from discontinued operations before gains on

settlement of debt and sale of real estate

(2,419)(18,736)(15,826)(65,629)
Gains on settlement of debt79,38362,531194,986190,380
Gains on sale of real estate45,483 10,215 66,707 73,844 
Income from discontinued operations122,447 54,010 245,867 198,595 
 
Net income95,00930,367185,647129,053
Net (income) attributable to noncontrolling
common units of our Operating Partnership
(2,373)(2,915)(11,252)(13,193)
Net income attributable to MPG Office Trust, Inc.92,63627,452174,395115,860
Preferred stock dividends(4,637)(4,637)(13,912)(14,169)
Preferred stock redemption discount 2,780  2,780 
Net income available to common stockholders$87,999 $25,595 $160,483 $104,471 
 
Basic income per common share:
Loss from continuing operations$(0.56)$(0.45)$(1.30)$(1.45)
Income from discontinued operations2.13 0.96 4.34 3.57 
Net income available to

common stockholders per share

$1.57 $0.51 $3.04 $2.12 
 
Weighted average number of common shares outstanding56,118,506 49,961,007 52,831,545 49,342,879 
 
Amounts attributable to MPG Office Trust, Inc.:
Loss from continuing operations$(26,596)$(20,439)$(54,779)$(59,910)
Income from discontinued operations119,232 47,891 229,174 175,770