MPG Office Trust Reports First Quarter 2013 Financial Results

  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
 
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