MPG Office Trust, Inc. Q2 2010 Earnings Call Transcript

MPG Office Trust, Inc. Q2 2010 Earnings Call Transcript
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MPG Office Trust, Inc. (MPG)

Q2 2010 Earnings Call Transcript

August 10, 2010 11:00 am ET

Executives

Peggy Moretti – EVP, Investor and Public Relations and Chief Administrative Officer

Nelson Rising – President and CEO

Shant Koumriqian – CFO

Analysts

John Guinee – Stifel

Suzanne Kim – Credit Suisse

Wilkes Graham – Compass Point

Jordan Sadler – KeyBanc Capital

Brian Chindurly – BAM

Enrique Torres – Green Street Advisors

Patricia Fox [ph]

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to the MPG Office Trust conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

As a reminder, this conference is being recorded today, August 10, 2010. I would now like to turn the conference over to Ms. Peggy Moretti of MPG Office Trust. Please proceed.

Peggy Moretti

Good morning. Thank you for joining us for our second quarter 2010 earnings conference call. During the course of today's call, management will make forward-looking statements regarding, among other things, projected 2010 results of operations, leasing, competitive conditions, financing and cash. The company's projections are affected by many factors outside of its control.

For a discussion of such factors, please refer to the company's most recent annual report on Form 10-K under the caption risk factors. The forward-looking statements on today's call are based on the company's current projections. MPG office trust does not intend to update these prior to our next quarterly earnings release. And we expressly disclaim any obligations to make any such update.

Our supplemental package along with information required under SEC Regulation G may be accessed in the Investor Relations section of the MPG Office Trust website at www.mpgoffice.com. And now I'd like to turn the call over to Nelson Rising, President and Chief Executive Officer.

Nelson Rising

Good morning and thank you all for joining us for our call today. First, I'll spend a few minutes dealing with our financial results for the quarter. Our net loss for second quarter 2010 was $53.5 million or $1.10 per share, which compares favorably to the net loss of $380.5 million or $7.95 per share for the quarter ended June 30, 2009.

Our earnings for the second quarter of 2010 were negatively impacted by impairment charges for the write-down of 207 Goode and the sale of 17885 Von Karman. When we look at year to date through June 30, 2010, our net loss was $34.9 million or $0.72 per share and, again, this compares very favorably to the net loss of $434 million or $9.08 for the six months ending June 30, 2009.

Shant will add color to these results during the Q&A section of our call. I'd like to spend a few minutes talking about our liquidity. As you know, this has been a very major focus for us ever since I became CEO 25 months ago.

At the end of the second quarter, we had cash on hand of $183 million, $113 million of this – of which, rather, was restricted for specific purposes, including swap collateral, prepaid rents, leasing commissions and tenant improvement reserves as well as property taxes – property tax and insurance reserves. And $71 million of this cash was unrestricted and has been available rather for us for general corporate purposes.

This is $21 million less than the restricted cash we had on hand at the end of the first quarter and that $21 million was expended again, as part of our continuing strategy to deal with debt maturities. We made a principle payment of approximately $10 million on the 207 Goode construction loan. In exchange for this, lender agreed to substantially eliminate a $47.8 million repayment guarantee and we are now marketing the property for sale for the lender.

We expended $3 million as payment made on Von Karman's construction loan to facilitate the disposition of this property. As a result of the deed in lieu of foreclosure, we were relieved of the obligation to pay the remaining $24.5 million balance due on this loan. And then $7.5 million of the unrestricted cash was used to pay down the Griffin Tower repurchase facility that had been extended during the first quarter.

So again, we ended up the quarter with $71 million in unrestricted cash, down from $92 million the previous quarter, but those funds were expended, as I said, in our existing strategy. Also during the quarter, we extended the maturity on our $109 million mortgage loan secured by Brea Corporate Center and Brea Corporate Place until May 1, 2011.

No cash was required for this pay down – no cash pay down was required rather, to obtain this extension. In addition, the lender released us from a debt service guarantee after the property achieved debt service coverage ratio for two consecutive quarters. That again is one more example of a debt service guarantee that's now been eliminated.

We have a debt maturity on Plaza Las Fuentes on September 28, 2010. We have the right to an extension under this loan and we'll be addressing this maturity later on this month.

And then additionally, during the quarter, in the continuation of our effort to focus on our core assets, we sold Mission City Corporate Center in San Diego. And the buyer assumed the $52 million mortgage loan, thereby eliminating more debt from our balance sheet.

We were really pleased with the activities we had this quarter and for the year, so to date in leasing. We were able to complete 327,000 square feet of lease renewals and new leases in the second quarter and combine that with the 300,000 square feet of leasing in the first quarter, brings our total at June 30 to 627,000 square feet.

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