MPG Office Trust Reports First Quarter 2013 Financial Results Business Wire LOS ANGELES -- May 8, 2013 MPGOfficeTrust, Inc. (NYSE: MPG), a SouthernCalifornia-focused real estate investment trust, today reported results for the quarter ended March31,2013. Significant First Quarter Events *We had $179.6million of cash as of March31,2013, of which $144.9million was unrestricted and $34.7million was restricted. *During the first quarter of 2013, we completed new leases and renewals for approximately 379,000square feet. *In January 2013, we executed a five-yearlease extension with GibsonDunn &Crutcher LLP, a prestigious international law firm ranked in the top 20 by American Lawyer. The firm occupies approximately 268,000square feet at WellsFargo Tower in downtown LosAngeles and the lease now expires in November 2022. *On January30,2013, we issued 35,000shares of common stock to ThomasMPG Holding, LLC in exchange for 35,000non-controlling common units. Following the redemption, theCompany owns approximately99.8% of MPGOffice, L.P. (the “OperatingPartnership”). *On March11,2013, we entered into an agreement with an affiliate of OverseasUnion EnterpriseLimited to sell USBank Tower and the Westlawn off-site parking garage. The purchase price is $367.5million. The transaction is expected to close on June28,2013, following the expiration of the tax protection period on June27,2013, subject to customary closing conditions. The buyer has made a $7.5million non-refundable deposit. Net proceeds from the transaction are expected to be approximately $103million and will be available for general corporate purposes, including potential loan re-balancing payments on our upcoming 2013 debt maturities at KPMGTower and 777Tower. Subsequent Events *On April24,2013, the Company and the Operating Partnership entered into a definitive merger agreement pursuant to which a newly formed fund controlled by BrookfieldOffice PropertiesInc. (“Brookfield”) agreed to acquire the Company. Under the terms of the merger agreement, the holders of our common stock will receive $3.15per 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 SeriesA preferred stock for $25.00per share in cash, without interest. Any SeriesA 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 SeriesA preferred stock. If more than 66.6% of the outstanding SeriesA preferred stock is tendered, then Brookfield will have the right to convert all of the untendered SeriesA preferred stock at $25.00per 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 Kimv.MPGOffice Trust,Inc., et al., No.24-C-13-002600, was filed in the Circuit Court of the State of Maryland in Baltimore, and twoputative class action lawsuits captioned Coynev.MPGOffice Trust,Inc., et al., No.BC507342, and Masihv.MPG Office Trust,Inc., etal., No.BC507962, were filed in the SuperiorCourt of the Stateof California in LosAngeles County. The complaints name as defendants MPGOffice Trust,Inc., the members of its board of directors, MPGOffice,L.P., BrookfieldOffice PropertiesInc., BrookfieldDTLA Fund Office Trust InvestorInc., BrookfieldDTLA Fund Office TrustInc., BrookfieldDTLA Fund PropertiesLLC and Brookfield DTLAInc., and allege that the MPGdirectors 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, MPGOffice, L.P., aided and abetted those breaches of fiduciary duty. The complaints do not allege a cause of action against MPGOffice Trust,Inc., and the California complaints do not allege a cause of action against MPGOffice, 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 March31,2013 was $(17.0)million, or $(0.29)per share, compared to net income available to common stockholders of $5.2million, or $0.10per diluted share, for the quarter ended March31,2012. Our share of Funds from Operations (FFO) available to common stockholders for the quarter ended March31,2013 was $(3.0)million, or $(0.05)per share, compared to $10.7million, or $0.21per diluted share, for the quarter ended March31,2012. As of March31,2013, our office portfolio was comprised of sixproperties totaling approximately 6.6million net rentable square feet, and on- and off-site parking garages totaling approximately 2.6millionsquare feet, which accommodate 8,057vehicles. About MPGOfficeTrust, Inc. MPGOfficeTrust, Inc. is the largest owner and operator of ClassA office properties in the LosAngeles Central Business District. MPGOfficeTrust, 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 MPGOfficeTrust, 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 proposedmerger and the timing of the closing of the proposedmerger; 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 AnnualReport on Form10-K filed on March18,2013 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 41,156 46,871 receivables, net Deferred charges, net 49,249 57,247 Other assets 5,173 2,311 Assets associated with real estate 256,106 — held for sale Total assets $ 1,450,529 $ 1,466,859 LIABILITIES AND DEFICIT Liabilities: Mortgage loans $ 1,686,173 $ 1,949,739 Accounts payable and other 30,173 35,442 liabilities Obligations associated with real 264,745 — estate held for sale 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 97 97 authorized; 9,730,370 shares issued and outstanding as of March 31, 2013 and December 31, 2012 Common stock, $0.01 par value, 100,000,000 shares authorized; 57,308,529 and 57,199,596 shares issued and outstanding 573 572 as of March 31, 2013 and December 31, 2012, respectively Additional paid-in capital 605,168 608,588 Accumulated deficit and dividends (1,134,085 ) (1,121,667 ) Accumulated other comprehensive 381 542 income 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 108 1,156 services Interest and other 362 13,170 Total revenue 45,015 59,214 Expenses: Rental property operating and 10,362 10,466 maintenance 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 (10,995 ) (3,659 ) net income of unconsolidated joint venture Equity in net income of unconsolidated — 14,229 joint venture (Loss) income from continuing operations (10,995 ) 10,570 Discontinued Operations: Loss from discontinued operations before gains on (1,454 ) (18,432 ) settlement of debt and sale of real estate 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 43 (657 ) common units of the Operating Partnership Net (loss) income attributable to MPG (12,406 ) 9,809 Office Trust, Inc. Preferred stock dividends (4,637 ) (4,637 ) Net (loss) income available to common $ (17,043 ) $ 5,172 stockholders 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 $ (0.29 ) $ 0.10 stockholders per share – basic Weighted average number of common shares 58,086,416 51,048,621 outstanding – basic 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 $ (0.29 ) $ 0.10 stockholders per share – diluted Weighted average number of common and 58,086,416 51,758,710 common equivalent shares – diluted 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 $ (17,043 ) $ 5,172 stockholders Add: Depreciation and amortization of 14,094 22,035 real estate assets Depreciation and amortization of real estate assets – — 1,465 unconsolidated joint venture (a) Impairment writedown of — 2,121 depreciable real estate Impairment writedown of depreciable real estate – — 2,176 unconsolidated joint venture (a) Net (loss) income attributable to common units of the (43 ) 657 Operating Partnership Allocated losses – — 2,530 unconsolidated joint venture (a) Deduct: Gains on sale of real estate — 5,192 Gain on sale of real estate – — 18,958 unconsolidated joint venture (a) Funds from operations available to common $ (2,992 ) $ 12,006 stockholders and unit holders (FFO) (b) 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 58,086,416 51,048,621 outstanding – basic Weighted average number of common and common 58,086,416 51,758,710 equivalent shares – diluted Reconciliation of FFO to FFO before specified items: (d) FFO available to common stockholders and $ (2,992 ) $ 12,006 unit holders (FFO) Add: Default interest accrued on — 10,540 defaulted mortgages Writeoff of deferred financing costs related to — 916 defaulted mortgages Deduct: Gains on settlement of debt — 13,136 Gain from early extinguishment of debt, net – — 188 unconsolidated joint venture (a) FFO before specified items $ (2,992 ) $ 10,138 Company share of FFO before specified $ (2,984 ) $ 8,995 items (c) FFO per share before specified items – $ (0.05 ) $ 0.18 basic FFO per share before specified items – $ (0.05 ) $ 0.17 diluted __________ For 2012, amount represents our 20% ownership interest through December (a) 21, 2012, the date we disposed of our interest in the unconsolidated joint venture. 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 (b) 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). Based on a weighted average interest in the Operating Partnership of (c) approximately 99.7% and 88.7% for the three months ended March 31, 2013 and 2012, respectively. Management also uses FFO before specified items as a supplemental performance measure because gains or losses from early extinguishment of (d) debt, default interest and gains on settlement of debt 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 from defaulted mortgages 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. Contact: MPG Office Trust, Inc. Peggy Moretti Executive Vice President, Investor and Public Relations (213) 613-4558
MPG Office Trust Reports First Quarter 2013 Financial Results
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