MPG Office Trust, Inc. ( MPG)

Q3 2011 Earnings Conference Call

November 1, 2011 11:00 ET

Executives

Peggy Moretti – Investor Relations

David Weinstein – President and Chief Executive Officer

Shant Koumriqian - Chief Financial Officer

Analysts

Jordan Sadler – KeyBanc Capital Markets

John Guinee – Stifel Nicolaus

Jay Hatfield – Infrastructure Capital Markets

Jed Regan – Green Street Advisory

Wilkes Graham – Compass Point

Presentation

Operator

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 call is being recorded today, November 1, 2011.

I would now like to turn the conference over to Ms. Peggy Moretti of MPG Office Trust. Please proceed.

Peggy Moretti – Investor Relations

Good morning. Thanks for joining us for our third quarter 2011 conference call. During the course of today’s call, management will make forward-looking statements regarding, among other things, projected 2011 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 expectations. MPG Office Trust does not intend to update these statements prior to our next quarterly earnings release, and we expressly disclaim any obligation 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.

Now, I would like to turn the call over to David Weinstein, our President and CEO. David?

David Weinstein – President and Chief Executive Officer

Good morning. Thank you for joining our third quarter call. Shant Koumriqian, our Chief Financial Officer is here with me, along with Fred Chin, our Acting Chief Operating Officer; Jon Abrams, our General Counsel; Chris Norton, our Head of Transactions and Peggy Moretti, our Executive Vice President of Investor Relations.

The company continued to make progress on a number of fronts during and subsequent to the third quarter. During the third quarter, such progress included a completion of a number of transactions which allowed us to improve our liquidity position and exited non-core assets. The transactions included, we entered into a $33.75 million mortgage loan secured by our Plaza Las Fuentes office property with East West Bank, the property’s largest tenant.

We exited City Tower on Orange County, which we relieved us of $140 million of mortgage debt. We exchanged approximately 1,390,000 million shares of common stock for approximately 270,000 shares of preferred stock in two privately negotiated transactions. The exchange ratio was 5.157 shares of common stock for each share preferred stock. Progress made by the company subsequent to the third quarter included the following.

As we announced yesterday, we entered into an agreement with Charter Hall Office REIT and Beacon Capital relating to the transfer by Charter Hall that interested in a joint venture with the company to an affiliate of Beacon Capital. The agreement specified the terms under which the company will consent to the transfer as well as the terms of the new joint venture agreement with Beacon. As part of the transfer, the existing joint venture will sell its interest in Wells Fargo Center located in Denver, Colorado and San Diego Tech Center located in San Diego, California to affiliate to Beacon. The company will sell its development rights at San Diego Tech Center to an affiliate of Beacon, and the company will receive a lump-sum payment and consideration for its agreement to terminate its right to receive certainties following the closing.

The terms of the new joint venture agreement with Beacon are substantially similar to the existing joint venture terms and included three-year lock-out during which time neither partner will have the right to exercise the marketing rights under the joint venture agreement. The agreement requires the company, Charter Hall, Beacon to join the market Stadium Gateway located in Anaheim, California for sale of the third-parties. Such marketing effort is expected to commence during the next two weeks. None of the parties are obligated to sell the asset if the sale price is unacceptable.

At the closing of the transfer and related transactions, the new joint venture between the company and Beacon will continue to own interest in each of one California Plaza located in downtown Los Angles, Cerritos Corporate Center located in Cerritos, California, and Stadium Gateway unless such asset is sold pursuant to the marketing efforts. Retaining our 20% interest in one California Plaza is consistent with our strategy of maintaining a dominant market position in downtown Los Angles.

The company expects to receive approximately $45 million in total net proceeds from the transactions excluding any proceeds of the sale of Stadium Gateway which will significantly improve our liquidity position. Any proceeds will be used for general corporate purposes.

The closing of the transfer and related transactions is expected to occur in the first quarter of 2012 and subject to customary closing conditions including obtaining lender and other third-party consents. We entered into a letter of intent to obtain $11.25 million of mezzanine financing on our Plaza Las Fuentes office property. The loan will bear interest at a fixed rate of 9.875%. The loan will mature in August 2016, but it’s pre-payable after June 30, 2013 with no pre-payment penalty of any kind. This coincides with the expiration of the tax protection agreements relating to this asset. While we expect to close this transaction, there can be no assurances that this will occur.

Read the rest of this transcript for free on seekingalpha.com

If you liked this article you might like

Analyst Lowers U.S. Auto Sales Forecast, Cuts Auto Supplier Ratings

Analyst Lowers U.S. Auto Sales Forecast, Cuts Auto Supplier Ratings

Analysts' Actions -- McDonald's, Oracle, EMC, Kohl's

Analysts' Actions -- McDonald's, Oracle, EMC, Kohl's

Analysts' Actions -- Alcoa, Papa John's, KeyCorp, Qualcomm

Analysts' Actions -- Alcoa, Papa John's, KeyCorp, Qualcomm

Analysts' Actions -- HP, Groupon, Louisiana-Pacific, WebMD, US Steel

Analysts' Actions -- HP, Groupon, Louisiana-Pacific, WebMD, US Steel

Analysts' Actions -- Twitter, Oracle, Analog Devices, Eastman Chemical

Analysts' Actions -- Twitter, Oracle, Analog Devices, Eastman Chemical