MPG Office Trust Reports First Quarter 2013 Financial Results

MPG Office Trust Reports First Quarter 2013 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 March 31, 2013.

Significant First Quarter Events

  • We had $179.6 million of cash as of March 31, 2013, of which $144.9 million was unrestricted and $34.7 million was restricted.

  • During the first quarter of 2013, we completed new leases and renewals for approximately 379,000 square feet.

  • In January 2013, we executed a five-year lease extension with Gibson Dunn & Crutcher LLP, a prestigious international law firm ranked in the top 20 by American Lawyer. The firm occupies approximately 268,000 square feet at Wells Fargo Tower in downtown Los Angeles and the lease now expires in November 2022.

  • On January 30, 2013, we issued 35,000 shares of common stock to Thomas MPG Holding, LLC in exchange for 35,000 non-controlling common units. Following the redemption, the Company owns approximately 99.8% of MPG Office, L.P. (the "Operating Partnership").

  • On March 11, 2013, we entered into an agreement with an affiliate of Overseas Union Enterprise Limited to sell US Bank Tower and the Westlawn off-site parking garage. The purchase price is $367.5 million. The transaction is expected to close on June 28, 2013, following the expiration of the tax protection period on June 27, 2013, subject to customary closing conditions. The buyer has made a $7.5 million non-refundable deposit. Net proceeds from the transaction are expected to be approximately $103 million and will be available for general corporate purposes, including potential loan re-balancing payments on our upcoming 2013 debt maturities at KPMG Tower and 777 Tower.


Subsequent Events

  • On April 24, 2013, the Company and the Operating Partnership entered into a definitive merger agreement pursuant to which a newly formed fund controlled by Brookfield Office Properties Inc. ("Brookfield") agreed to acquire the Company.

    Under the terms of the merger agreement, the holders of our common stock will receive $3.15 per share in cash at the closing of the merger. In connection with the merger agreement, Brookfield has entered into a guarantee with respect to the obligations of its affiliates under the merger agreement.

    Additionally, a subsidiary of Brookfield will commence a tender offer to purchase, subject to certain conditions, all of our outstanding Series A preferred stock for $25.00 per share in cash, without interest. Any Series A preferred stock that is not tendered will be converted in the merger into new preferred shares with rights, terms and conditions substantially identical to the rights terms and conditions of the outstanding Series A preferred stock. If more than 66.6% of the outstanding Series A preferred stock is tendered, then Brookfield will have the right to convert all of the untendered Series A preferred stock at $25.00 per share in cash, without interest, but only if such conversion complies with applicable law and the Company's charter in all respects at the time of conversion.

    The merger is expected to close in the third quarter of 2013. The completion of the merger transaction is subject to approval of the Company's common stockholders, receipt of certain consents from the Company's lenders and other customary closing conditions.

  • Following the announcement of the merger, a putative class action lawsuit captioned Kim v. MPG Office Trust, Inc., et al., No. 24-C-13-002600, was filed in the Circuit Court of the State of Maryland in Baltimore, and two putative class action lawsuits captioned Coyne v. MPG Office Trust, Inc., et al., No. BC507342, and Masih v. MPG Office Trust, Inc., et al., No. BC507962, were filed in the Superior Court of the State of California in Los Angeles County. The complaints name as defendants MPG Office Trust, Inc., the members of its board of directors, MPG Office, L.P., Brookfield Office Properties Inc., Brookfield DTLA Fund Office Trust Investor Inc., Brookfield DTLA Fund Office Trust Inc., Brookfield DTLA Fund Properties LLC and Brookfield DTLA Inc., and allege that the MPG directors breached their fiduciary duties in connection with the proposed merger by failing to maximize the value of MPG and ignoring or failing to protect against conflicts of interest, and that the Brookfield defendants, and in the case of the Maryland action, MPG Office, L.P., aided and abetted those breaches of fiduciary duty. The complaints do not allege a cause of action against MPG Office Trust, Inc., and the California complaints do not allege a cause of action against MPG Office, L.P. The complaints seek an injunction against the proposed merger, rescission or rescissory damages in the event it has been consummated, an award of fees and costs, including attorneys' and experts' fees, and other relief.

First Quarter 2013 Financial Results

Net loss available to common stockholders for the quarter ended March 31, 2013 was $(17.0) million, or $(0.29) per share, compared to net income available to common stockholders of $5.2 million, or $0.10 per diluted share, for the quarter ended March 31, 2012.

Our share of Funds from Operations (FFO) available to common stockholders for the quarter ended March 31, 2013 was $(3.0) million, or $(0.05) per share, compared to $10.7 million, or $0.21 per diluted share, for the quarter ended March 31, 2012.

As of March 31, 2013, our office portfolio was comprised of six properties totaling approximately 6.6 million net rentable square feet, and on- and off-site parking garages totaling approximately 2.6 million square feet, which accommodate 8,057 vehicles.

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 ability to consummate the proposed merger and the timing of the closing of the proposed merger; 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; 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 market value of our properties, 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 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 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 18, 2013 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)

March 31, 2013

December 31, 2012

(Unaudited)

ASSETS

Investments in real estate

$

1,372,040

$

1,709,570

Less: accumulated depreciation

(452,824

)

(541,614

)

Investments in real estate, net

919,216

1,167,956

Cash and cash equivalents

144,951

151,664

Restricted cash

34,678

40,810

Rents, deferred rents and other receivables, net

41,156

46,871

Deferred charges, net

49,249

57,247

Other assets

5,173

2,311

Assets associated with real estate held for sale

256,106

Total assets

$

1,450,529

$

1,466,859

LIABILITIES AND DEFICIT

Liabilities:

Mortgage loans

$

1,686,173

$

1,949,739

Accounts payable and other liabilities

30,173

35,442

Obligations associated with real estate held for sale

264,745

Total liabilities

1,981,091

1,985,181

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 March 31, 2013 and December 31, 2012

97

97

Common stock, $0.01 par value, 100,000,000 shares authorized;
57,308,529 and 57,199,596 shares issued and outstanding

as of March 31, 2013 and December 31, 2012, respectively

573

572

Additional paid-in capital

605,168

608,588

Accumulated deficit and dividends

(1,134,085

)

(1,121,667

)

Accumulated other comprehensive income

381

542

Total stockholders' deficit

(527,866

)

(511,868

)

Noncontrolling Interests:

Accumulated deficit and dividends

(2,696

)

(6,454

)

Total deficit

(530,562

)

(518,322

)

Total liabilities and deficit

$

1,450,529

$

1,466,859

MPG OFFICE TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except share and per share amounts)

For the Three Months Ended

March 31, 2013

March 31, 2012

Revenue:

Rental

$

26,230

$

26,325

Tenant reimbursements

12,815

12,848

Parking

5,500

5,715

Management, leasing and development services

108

1,156

Interest and other

362

13,170

Total revenue

45,015

59,214

Expenses:

Rental property operating and maintenance

10,362

10,466

Real estate taxes

4,055

3,929

Parking

1,439

1,500

General and administrative

5,982

5,671

Other expense

65

195

Depreciation and amortization

11,901

12,476

Impairment of long-lived assets

2,121

Interest

22,206

26,515

Total expenses

56,010

62,873

Loss from continuing operations before equity in

net income of unconsolidated joint venture

(10,995

)

(3,659

)

Equity in net income of unconsolidated joint venture

14,229

(Loss) income from continuing operations

(10,995

)

10,570

Discontinued Operations:

Loss from discontinued operations before gains on

settlement of debt and sale of real estate

(1,454

)

(18,432

)

Gains on settlement of debt

13,136

Gains on sale of real estate

5,192

Loss from discontinued operations

(1,454

)

(104

)

Net (loss) income

(12,449

)

10,466

Net loss (income) attributable to noncontrolling
common units of the Operating Partnership

43

(657

)

Net (loss) income attributable to MPG Office Trust, Inc.

(12,406

)

9,809

Preferred stock dividends

(4,637

)

(4,637

)

Net (loss) income available to common stockholders

$

(17,043

)

$

5,172

MPG OFFICE TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (continued)

(Unaudited; in thousands, except share and per share amounts)

For the Three Months Ended

March 31, 2013

March 31, 2012

Basic (loss) income per common share:

(Loss) income from continuing operations

$

(0.27

)

$

0.10

Loss from discontinued operations

(0.02

)

Net (loss) income available to common stockholders per share - basic

$

(0.29

)

$

0.10

Weighted average number of common shares outstanding - basic

58,086,416

51,048,621

Diluted (loss) income per common share:

(Loss) income from continuing operations

$

(0.27

)

$

0.10

Loss from discontinued operations

(0.02

)

Net (loss) income available to common stockholders per share - diluted

$

(0.29

)

$

0.10

Weighted average number of common and
common equivalent shares - diluted

58,086,416

51,758,710

Amounts attributable to MPG Office Trust, Inc.:

(Loss) income from continuing operations

$

(10,956

)

$

9,901

Loss from discontinued operations

(1,450

)

(92

)

$

(12,406

)

$

9,809

MPG OFFICE TRUST, INC.

FUNDS FROM OPERATIONS

(Unaudited; in thousands, except share and per share amounts)

For the Three Months Ended

March 31, 2013

March 31, 2012

Reconciliation of net (loss) income available to common

stockholders to funds from operations:

Net (loss) income available to common stockholders

$

(17,043

)

$

5,172

Add:

Depreciation and amortization of real estate assets

14,094

22,035

Depreciation and amortization of real estate assets -
unconsolidated joint venture (a)

1,465

Impairment writedown of depreciable real estate

2,121

Impairment writedown of depreciable real estate -

unconsolidated joint venture (a)

2,176

Net (loss) income attributable to common units of the
Operating Partnership

(43

)

657

Allocated losses - unconsolidated joint venture (a)

2,530

Deduct:

Gains on sale of real estate

5,192

Gain on sale of real estate -
unconsolidated joint venture (a)

18,958

Funds from operations available to common

stockholders and unit holders (FFO) (b)

$

(2,992

)

$

12,006

Company share of FFO (c)

$

(2,984

)

$

10,653

FFO per share - basic

$

(0.05

)

$

0.21

FFO per share - diluted

$

(0.05

)

$

0.21

Weighted average number of common shares
outstanding - basic

58,086,416

51,048,621

Weighted average number of common and common

equivalent shares - diluted

58,086,416

51,758,710

Reconciliation of FFO to FFO before specified items: (d)