MPG Office Trust's CEO Discusses Q2 2012 Results - Earnings Call Transcript

MPG Office Trust, Inc. (MPG)

Q2 2012 Earnings Call

July 24, 2012 11:00 a.m. ET

Executives

Peggy Moretti - Head, IR

David Weinstein - President and CEO

Fred Chin - Acting COO

Chris Norton - Head of Transactions

Jeanne Lazar – CAO

Analysts

Jordan Sadler - Keybanc Capital Markets

John Guinee – Stifel

Jed Reagan – Green Street Advisors

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, July 24, 2012.

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

Peggy Moretti

Good morning. During the course of today's call, management will make forward-looking statements regarding, among other things, projected 2012 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.

And now, I would like to turn the call over to David Weinstein, President and CEO.

David Weinstein

Good morning and thank you for joining our second quarter 2012 call. Fred Chin, our acting Chief Operating Officer is here with me along with Chris Norton, our Head of Transactions, Jeanne Lazar, Chief Accounting Officer and Peggy Moretti, our head of investor relations.

This quarter the company made significant progress towards exiting non-core assets addressing the KPMG tower debt maturity, eliminating contingent liabilities and improving our cash position. In April, we disposed the Brea Corporate Place and Brea Financial Commons pursuant to a deed-in-lieu of foreclosure agreement with the lender. As a result, the company was relieved of a $109 million of debt and received a general release of claims under the loan documents.

Also in April, Glendale Center was cooperatively placed into receivership. The agreement with the special servicer provides for a cooperative foreclosure and a general release of claims under the loan documents at the conclusion of the foreclosure process. The special servicer has commenced foreclosure proceedings on this asset and we expect these proceedings to be finalized in the third quarter of 2012 but there can be no assurance that the foreclosure proceedings will be completed in this timeframe.

In May, Two California Plaza was cooperatively placed into receivership. We entered into an agreement with the special servicer through which the company will temporarily remain the title holder of the asset until Two California Plaza is transferred to another party or there is a completed foreclosure, with a definitive outside exit date of December 31, 2012.

Pursuant to the agreement, we will receive a general release of claims under the loan documents at the time of our exit. In connection with this agreement, we paid approximately $1 million to the special servicer related to certain historical operational liabilities .

Also in May, we disposed of the City Tower development site located in Orange, California. We received net proceeds from this transaction of $7 million, which will be used for general corporate purposes.

Also in May, a trustee sale was held with respect to Stadium Towers Plaza. As a result of the foreclosure, the company was relieved of a $100 million of debt and received a general release of claims under the loan documents.

In June, 3800 Chapman was cooperatively placed in receivership. We entered into an agreement with the special servicer pursuant to which the company will temporarily remain the title holder of the asset until 3800 Chapman is transferred to another party or there is a completed foreclosure, with a definitive outside exit date of December 31, 2012.

Pursuant to the agreement, we will receive a general release of claims under the loan documents at the time of our exit. Also pursuant to the agreement, we received a release of all claims under the guaranty of partial payment related to the loan in return for a payment by the company of $2 million.

In July, we completed the one-year extension of the mortgage loan on KPMG Tower. The new maturity date is October 2013. The extension required a $35 million principal paydown, reducing the outstanding principal balance of $365 million. We also contributed $5 million to a leasing reserve. A full cash sweep goes into effect in September 2012 for the remaining term of the loan to first fund capital reserves and leasing reserves and then amortize the loan.

Also in July, we disposed of Stadium Gateway, a joint venture property of which we owned 20%. We received net proceeds from this transaction of approximately $1 million, including reimbursement of loan reserves which will be used for general corporate purposes.

As to leasing, during the second quarter 2012, we completed new leases and renewals for approximately 50,000 square feet, including our pro-rata share of our joint venture properties. Of note was an expansion with General Block (ph), an existing tenant at US Bank Tower for 11,266 square feet.

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