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MPG Office Trust Reports Fourth Quarter 2012 Financial Results

Stocks in this article: MPG

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)

       
December 31, 2012 December 31, 2011
(Unaudited)
ASSETS
Investments in real estate $ 1,709,570 $ 2,586,980
Less: accumulated depreciation (541,614 ) (659,408 )
Investments in real estate, net 1,167,956 1,927,572
 
Cash and cash equivalents 151,664 117,969
Restricted cash 40,810 74,387
Rents and other receivables, net 1,037 4,796
Deferred rents 45,834 54,663
Deferred leasing costs and value of in-place leases, net 50,470 71,696
Deferred loan costs, net 6,777 10,056
Other assets 2,311 7,252
Assets associated with real estate held for sale   14,000  
Total assets $ 1,466,859   $ 2,282,391  
 
LIABILITIES AND DEFICIT
Liabilities:
Mortgage loans $ 1,949,739 $ 3,045,995
Accounts payable and other liabilities 30,313 140,212
Acquired below-market leases, net 5,129   24,110  
Total liabilities 1,985,181   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 December 31, 2012 and 2011

97 97

Common stock, $0.01 par value, 100,000,000 shares authorized; 57,199,596 and 50,752,941 shares issued and outstanding

as of December 31, 2012 and 2011, respectively

572 508
Additional paid-in capital 608,588 703,436
Accumulated deficit and dividends (1,121,667 ) (1,504,759 )
Accumulated other comprehensive income (loss) 542   (15,166 )
Total stockholders’ deficit (511,868 ) (815,884 )
Noncontrolling Interests:
Accumulated deficit and dividends (6,454 ) (118,049 )
Accumulated other comprehensive income   6,007  
Total noncontrolling interests (6,454 ) (112,042 )
Total deficit (518,322 ) (927,926 )
Total liabilities and deficit $ 1,466,859   $ 2,282,391  
 

MPG OFFICE TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

       
For the Three Months Ended For the Year Ended
Dec. 31, 2012     Dec. 31, 2011 Dec. 31, 2012     Dec. 31, 2011
Revenue:
Rental $ 31,134 $ 32,006 $ 123,643 $ 133,852
Tenant reimbursements 15,250 16,326 62,134 65,057
Parking 6,867 6,796 27,354 27,346
Management, leasing and development services 216 2,096 2,412 6,811
Interest and other 420   155   15,628   1,895  
Total revenue 53,887   57,379   231,171   234,961  
 
Expenses:
Rental property operating and maintenance 14,402 14,633 56,658 55,940
Real estate taxes 5,193 4,821 20,108 20,007
Parking 1,968 1,831 7,526 7,825
General and administrative 6,615 6,909 24,336 24,166
Other expense 1,979 96 5,014 2,137
Depreciation and amortization 15,224 15,724 61,466 65,051
Impairment of long-lived assets 2,121
Interest 25,777 29,816 112,041 117,907
Loss from early extinguishment of debt       164  
Total expenses 71,158   73,830   289,270   293,197  
 
Loss from continuing operations before equity in

net income (loss) of unconsolidated joint venture and gain on sale of interest in unconsolidated joint venture

(17,271 ) (16,451 ) (58,099 ) (58,236 )
Equity in net income (loss) of unconsolidated joint venture 29 203 14,341 74
Gain on sale of interest in unconsolidated joint venture 50,051     50,051    
Income (loss) from continuing operations 32,809   (16,248 ) 6,293   (58,162 )
 
Discontinued Operations:
Loss from discontinued operations before gains on

settlement of debt and sale of real estate

(788 ) (14,578 ) (50,318 ) (107,835 )
Gains on settlement of debt 138,215 333,201 190,380
Gains on sale of real estate 40,235     106,942   73,844  
Income (loss) from discontinued operations 177,662   (14,578 ) 389,825   156,389  
 
Net income (loss) 210,471 (30,826 ) 396,118 98,227

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

(612 ) 3,985   (11,864 ) (9,208 )
Net income (loss) attributable to MPG Office Trust, Inc. 209,859 (26,841 ) 384,254 89,019
Preferred stock dividends (4,638 ) (4,637 ) (18,550 ) (18,806 )
Preferred stock redemption discount       2,780  
Net income (loss) available to common stockholders $ 205,221   $ (31,478 ) $ 365,704   $ 72,993  
 

MPG OFFICE TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (continued)

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

       
For the Three Months Ended For the Year Ended
Dec. 31, 2012     Dec. 31, 2011 Dec. 31, 2012     Dec. 31, 2011
Basic income (loss) per common share:
Income (loss) from continuing operations $ 0.49 $ (0.37 ) $ (0.17 ) $ (1.32 )
Income (loss) from discontinued operations 3.07   (0.25 ) 6.94   2.79  
Net income (loss) available to

common stockholders per share

$ 3.56   $ (0.62 ) $ 6.77   $ 1.47  
 
Weighted average number of common shares outstanding – basic 57,634,484   50,676,545   54,043,655   49,682,202  
 
Diluted income (loss) per common share:
Income (loss) from continuing operations $ 0.48 $ (0.37 ) $ (0.17 ) $ (1.32 )
Income (loss) from discontinued operations 3.04   (0.25 ) 6.94   2.79  
Net income (loss) available to

common stockholders per share

$ 3.52   $ (0.62 ) $ 6.77   $ 1.47  
 

Weighted average number of common and common equivalent shares outstanding – diluted

58,324,838   50,676,545   54,043,655   49,682,202  
 
Amounts attributable to MPG Office Trust, Inc.:
Income (loss) from continuing operations $ 32,725 $ (13,901 ) $ 8,968 $ (49,360 )
Income (loss) from discontinued operations 177,134   (12,940 ) 375,286   138,379  
$ 209,859   $ (26,841 ) $ 384,254   $ 89,019  
 

MPG OFFICE TRUST, INC.

FUNDS FROM OPERATIONS

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

       
For the Three Months Ended For the Year Ended
Dec. 31, 2012     Dec. 31, 2011 Dec. 31, 2012     Dec. 31, 2011

Reconciliation of net income (loss) available to common stockholders to funds from operations:

Net income (loss) available to common stockholders $ 205,221 $ (31,478 ) $ 365,704 $ 72,993
Add: Depreciation and amortization of real estate assets 15,430 23,124 78,258 102,457

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

635 1,737 3,431 6,911
Impairment writedowns of depreciable real estate 2,121 23,218

Impairment writedowns of depreciable real estate – unconsolidated joint venture (a)

819 2,907 819

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

612 (3,985 ) 11,864 9,208
Unallocated losses – unconsolidated joint venture (a) (362 ) (1,380 ) (79 ) (2,530 )
Deduct: Gains on sale of real estate 40,235 106,942 73,844

Gains on sale of real estate – unconsolidated joint venture (a)

18,958

Gain on sale of interest in unconsolidated joint venture

50,051     50,051    
Funds from operations available to common

stockholders and unit holders (FFO) (b)

$ 131,250   $ (11,163 ) $ 288,255   $ 139,232  
Company share of FFO (c) (d) $ 130,860   $ (9,909 ) $ 276,092   $ 123,230  
FFO per share – basic $ 2.27   $ (0.20 ) $ 5.11   $ 2.48  
FFO per share – diluted $ 2.24   $ (0.20 ) $ 5.06   $ 2.45  

Weighted average number of common shares outstanding – basic

57,634,484   50,676,545   54,043,655   49,682,202  

Weighted average number of common and common

equivalent shares outstanding – diluted

58,324,838   51,120,752   54,531,562   50,319,551  
 
Reconciliation of FFO to FFO before specified items: (e)
FFO available to common stockholders and unit holders (FFO) $ 131,250 $ (11,163 ) $ 288,255 $ 139,232
Add: Loss from early extinguishment of debt 399
Default interest accrued on mortgages in default 427 10,005 28,750 43,299

Writeoff of deferred financing costs related to mortgages in default

1,098 1,759
Deduct: Gains on settlement of debt 138,215 333,201 190,380

Gain from early extinguishment of debt, net – unconsolidated joint venture (a)

179
Preferred stock redemption discount       2,780  
FFO before specified items $ (6,538 ) $ (1,158 ) $ (15,277 ) $ (8,471 )
Company share of FFO before specified items (c) (d) $ (6,519 ) $ (1,028 ) $ (14,874 ) $ (7,498 )
FFO per share before specified items – basic $ (0.11 ) $

(0.02

) $ (0.28 ) $ (0.15 )
FFO per share before specified items – diluted $ (0.11 ) $ (0.02 ) $ (0.28 ) $ (0.15 )

___________

(a)     Amount represents our 20% ownership interest in the unconsolidated joint venture. For 2012, amount represents our 20% ownership interest through December 21, 2012, the date we disposed of our interest in the joint venture.
 
(b) Funds from operations, or FFO, is a widely recognized measure of REIT performance. We calculate FFO in accordance with the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT. The White Paper defines FFO as net income or loss (as computed in accordance with U.S. generally accepted accounting principles, or GAAP), excluding extraordinary items (as defined by GAAP), gains from disposition of depreciable real estate and impairment writedowns of depreciable real estate, plus real estate-related depreciation and amortization (including capitalized leasing costs and tenant allowances or improvements). Adjustments for the unconsolidated joint venture are calculated to reflect FFO on the same basis.
 
Management uses FFO as a supplemental performance measure because, in excluding real estate-related depreciation and amortization, impairment writedowns of depreciable real estate and gains from disposition of depreciable real estate, it provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We also believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs.
 
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our properties that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results of operations, the utility of FFO as a measure of our performance is limited. Other Equity REITs may not calculate FFO in accordance with the NAREIT White Paper and, accordingly, our FFO may not be comparable to such other Equity REITs’ FFO. As a result, FFO should be considered only as a supplement to net income or loss as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to meet our cash needs, including our ability to pay dividends or make distributions. FFO also should not be used as a supplement to or substitute for cash flow from operating activities (as computed in accordance with GAAP).
 
(c) Based on a weighted average interest in our Operating Partnership of approximately 99.7% and 88.8% for the three months ended December 31, 2012 and 2011, respectively.
 
(d) Based on a weighted average interest in our Operating Partnership of approximately 93.8% and 88.5% for the years ended December 31, 2012 and 2011, respectively.
 
(e) Management also uses FFO before specified items as a supplemental performance measure because gains or losses from early extinguishment of debt, default interest, gains on settlement of debt and preferred stock redemptions create significant earnings volatility which in turn results in less comparability between reporting periods and less predictability regarding future earnings potential.
 
Losses from early extinguishment of debt represent costs to extinguish debt prior to the stated maturity and the writeoff of unamortized loan costs on the date of extinguishment, while gains from early extinguishment of debt represent the writeoff of unamortized debt premium on the date of extinguishment. The decision to extinguish debt prior to its maturity generally results from (i) the early repayment of debt associated with properties disposed or (ii) the restructuring or replacement of property-level financing to accommodate property dispositions. Consequently, management views these gains or losses as costs to complete the disposition of properties.
 
We have excluded default interest accrued on mortgages in default as well as the writeoff of deferred financing costs related to defaulted mortgage loans from the calculation of FFO before specified items since these charges are a direct result of management’s decision to dispose of property other than by sale. Management views these charges as costs to complete the disposition of the related properties.
 
Management excludes gains on settlement of debt from the calculation of FFO before specified items because they relate to the financial statement impact of decisions made to dispose of property. These types of gains create volatility in our earnings and make it difficult for investors to determine the funds generated by our ongoing business operations.
 
Preferred stock redemption discount represents the excess of the carrying amount of our Series A preferred stock over the fair value of the consideration transferred to the holders of our Series A preferred stock at the time of exchange, which is added to net income (loss) available to common stockholders in the calculation of earnings per share. We have excluded preferred stock redemptions from the calculation of FFO before specified items since these transactions are non-cash in nature and at the discretion of management. These types of gains create volatility in our earnings and make it difficult for investors to determine the funds generated by our ongoing operations.




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