EX-99.2 3 mpg20130331ex992.htm EXHIBIT 99.2 MPG 2013.03.31 EX 99.2

Exhibit 99.2








Supplemental Operating and Financial Data
 
For the Quarter Ended
March 31, 2013



MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Table of Contents
 
 
 
 
 
 
 
 
 
 
 
PAGE
Corporate Data
 
Forward-Looking Statements
 
Quarterly Highlights
 
Investor Information
 
Common Stock Data
Consolidated Financial Results
 
Financial Highlights
 
Consolidated Balance Sheets
 
Consolidated Statements of Operations
 
Consolidated Statements of Discontinued Operations
 
Funds from Operations
 
Adjusted Funds from Operations
 
Reconciliation of Earnings before Interest, Taxes and Depreciation and Amortization and Adjusted Funds from Operations
 
Capital Structure
 
Debt Summary
 
Debt Maturities
Portfolio Data
 
Same Store Analysis
 
Portfolio Overview
 
Portfolio Overview — Leased Percentages and Weighted Average Remaining Lease Term
 
Adjusted Leased Percentages — Los Angeles Central Business District
 
Major Tenants — Los Angeles Central Business District
 
Portfolio Tenant Classification Description — Los Angeles Central Business District
 
Lease Expirations — Los Angeles Central Business District
 
Leasing Activity — Los Angeles Central Business District
 
Tenant Improvements and Leasing Commissions — Los Angeles Central Business District
 
Historical Capital Expenditures — Los Angeles Central Business District
 
Management Statements on Non-GAAP Supplemental Measures

MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 














Corporate Data


1
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Forward-Looking Statements
 
 
 
 
 
 
 
 
 
 

This supplemental package contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements presented herein are based on management’s beliefs and assumptions and information currently available to management. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. These risks and uncertainties include, without limitation: risks associated with our ability to consummate the proposed merger and the timing of the closing of the proposed merger; 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 Annual Report on Form 10-K filed on March 18, 2013 with the Securities and Exchange Commission (“SEC”). We do not update forward-looking statements and disclaim any intention or obligation to update or revise them, whether as a result of new information, future events or otherwise.



2
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Quarterly Highlights
 
 
 
 
 
 
 
 
 
 

MPG Office Trust, Inc. (the “Company”), a self-administered and self-managed real estate investment trust, is the largest owner and operator of Class A office properties in the Los Angeles Central Business District. We are a full-service real estate company with substantial in-house expertise and resources in property management, leasing and financing.

As of March 31, 2013, our office portfolio was comprised of six properties totaling approximately 6.6 million net rentable square feet, and on- and off‑site parking garages totaling approximately 2.6 million square feet, which accommodate 8,057 vehicles.

This Supplemental Operating and Financial Data package should be read in conjunction with our consolidated financial statements for the year ended December 31, 2012 in our Annual Report on Form 10-K filed on March 18, 2013 with the SEC. For more information on MPG Office Trust, visit our website at www.mpgoffice.com.


3
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Quarterly Highlights (continued)
 
 
 
 
 
 
 
 
 
 
Pending Asset Disposition:  
On March 11, 2013, we entered into an agreement with an affiliate of Overseas Union Enterprise Limited to sell US Bank Tower and the Westlawn off-site parking garage. The purchase price is $367.5 million. The transaction is expected to close on June 28, 2013, following the expiration of the tax protection period on June 27, 2013, subject to customary closing conditions. The buyer has made a $7.5 million non-refundable deposit. Net proceeds from the transaction are expected to be approximately $103 million and will be available for general corporate purposes, including potential loan re-balancing payments on our upcoming 2013 debt maturities at KPMG Tower and 777 Tower.
Leasing Activity:
During the first quarter of 2013, we completed new leases and renewals for approximately 379,000 square feet.
In January 2013, we executed a five-year lease extension with Gibson Dunn & Crutcher LLP, a prestigious international law firm ranked in the top 20 by American Lawyer. The firm occupies approximately 268,000 square feet at Wells Fargo Tower in downtown Los Angeles and the lease now expires in November 2022.
Unit Redemption:
On January 30, 2013, we issued 35,000 shares of common stock to Thomas MPG Holding, LLC in exchange for 35,000 non-controlling common units. Following the redemption, the Company owns approximately 99.8% of the Operating Partnership.
Subsequent Events:
Proposed Merger Transaction
On April 24, 2013, the Company and MPG Office, L.P. entered into a definitive merger agreement pursuant to which a newly formed fund controlled by Brookfield Office Properties Inc. agreed to acquire the Company.
Under the terms of the merger agreement, the holders of our common stock will receive $3.15 per 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.

 
Proposed Merger Transaction, continued
Additionally, a subsidiary of Brookfield will commence a tender offer to purchase, subject to certain conditions, all of our outstanding Series A preferred stock for $25.00 per share in cash, without interest. Any Series A 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 Series A preferred stock. If more than 66.6% of the outstanding Series A preferred stock is tendered, then Brookfield will have the right to convert all of the untendered Series A preferred stock at $25.00 per 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.
Merger-Related Litigation
Following the announcement of the merger, a putative class action lawsuit captioned Kim v. MPG Office Trust, Inc., et al., No. 24-C-13-002600, was filed in the Circuit Court of the State of Maryland in Baltimore, and two putative class action lawsuits captioned Coyne v. MPG Office Trust, Inc., et al., No. BC507342, and Masih v. MPG Office Trust, Inc., et al., No. BC507962, were filed in the Superior Court of the State of California in Los Angeles County. The complaints name as defendants MPG Office Trust, Inc., the members of its board of directors, MPG Office, L.P., Brookfield Office Properties Inc., Brookfield DTLA Fund Office Trust Investor Inc., Brookfield DTLA Fund Office Trust Inc., Brookfield DTLA Fund Properties LLC and Brookfield DTLA Inc., and allege that the MPG directors 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, MPG Office, L.P., aided and abetted those breaches of fiduciary duty. The complaints do not allege a cause of action against MPG Office Trust, Inc., and the California complaints do not allege a cause of action against MPG Office, 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.

4
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Investor Information
 
 
 
 
 
 
 
 
 
 

355 South Grand Avenue, Suite 3300
Los Angeles, CA 90071
Tel.  (213) 626-3300
Fax  (213) 687-4758
Senior Management
 
 
 
 
David L. Weinstein
President and Chief Executive Officer
Christopher M. Norton
Executive Vice President, General Counsel and Secretary
Peggy M. Moretti
Executive Vice President, Investor and Public Relations
 
 
 
& Chief Administrative Officer
 
 
 
 
 
 
Corporate
 
Investor Relations Contact:  Peggy M. Moretti at (213) 613-4558
Please visit our corporate website at: www.mpgoffice.com
 
Transfer Agent
 
Timing

American Stock Transfer & Trust Company, LLC
Operations Center
6201 15th Avenue
Brooklyn, NY  11219
(800) 937-5449 or info@amstock.com
www.amstock.com
 

Quarterly results for 2013 will be announced according to the following schedule:
 
Second Quarter
July 2013
 
Third Quarter
October 2013
 
Fourth Quarter
February 2014
 
 
 
 
Equity Research Coverage
 
 
 
 
 
Compass Point Research & Trading, LLC
Wilkes Graham
(202) 534-1386
 
Green Street Advisors
Michael Knott
(949) 640-8780
 
KeyBanc Capital Markets
Jordan Sadler
(917) 368-2280
 
Stifel, Nicolaus & Co., Inc.
John Guinee
(443) 224-1307

MPG Office Trust, Inc. is currently followed by the sell-side analysts listed above, with the exception of Green Street Advisors, which is an independent research firm.  This list may not be complete and is subject to change as firms add or delete coverage of our company.  Please note that any opinions, estimates, forecasts or predictions regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, estimates, forecasts or predictions of MPG Office Trust, Inc. or its management.  We are providing this listing as a service to our stockholders and do not by listing these firms imply our endorsement of or concurrence with such information, conclusions or recommendations.  Interested persons may obtain copies of analysts' reports on their own; we do not distribute these reports.  Various of these firms may from time-to-time own our stock and/or hold other long or short positions in our stock, and may provide compensated services to us.


5
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Common Stock Data
 
 
 
 
 
 
 
 
 
 

Our common stock is traded on the New York Stock Exchange under the symbol MPG. Selected information about our common stock for the past five quarters (based on NYSE prices) is as follows: 
 
2013
 
2012
 
1st Quarter
 
4th Quarter
 
3rd Quarter
 
2nd Quarter
 
1st Quarter
High price
$
3.25

 
$
3.52

 
$
3.81

 
$
2.47

 
$
2.80

Low price
$
2.47

 
$
2.50

 
$
2.00

 
$
1.66

 
$
1.96

Closing price
$
2.75

 
$
3.08

 
$
3.35

 
$
2.01

 
$
2.34

Closing common shares and noncontrolling common units of the
     Operating Partnership outstanding (in thousands)
57,444

 
57,370

 
57,291

 
57,254

 
57,202

Closing market value of common shares and noncontrolling common units
     of the Operating Partnership outstanding (in thousands)
$
157,971

 
$
176,700

 
$
191,924

 
$
115,081

 
$
133,852

 
 
 
 
 
 

 
 

 
 

Dividend Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

Common Stock
 
 
 
 
 
 
 
 
 
Dividend amount per share
(1)

 
(1)

 
(1)

 
(1)

 
(1)

 
 
 
 
 
 

 
 

 
 

Series A Preferred Stock
 
 
 
 
 
 
 
 
 
Dividend amount per share
(2)

 
(2)

 
(2)

 
(2)

 
(2)

__________
(1)
The Board of Directors did not declare a dividend on our common stock for the quarters ended March 31, 2013, December 31, September 30, June 30 and March 31, 2012. Due to our focus on preserving our unrestricted cash and the availability of net operating loss carryforwards to offset future taxable income, we do not expect to pay distributions on our common stock and Series A preferred stock in the foreseeable future.
(2)
The Board of Directors did not declare a dividend during the three months ended April 30 and January 31, 2013 and October 31, July 31 and April 30, 2012. Dividends on our Series A preferred stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.9064 per share. As of April 30, 2013, we have missed 18 quarterly dividend payments. The amount of dividends in arrears totals $83.5 million.

6
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 














Consolidated Financial Results

7
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Financial Highlights
(unaudited and in thousands, except share, per share, percentage and ratio amounts)

 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
Income Items:
 
 
 
 
 
 
 
 
 
Revenue (1)
$
45,015

 
$
45,476

 
$
47,164

 
$
46,104

 
$
59,214

Straight line rent
777

 
111

 
401

 
1,236

 
542

Fair value lease revenue (2)
731

 
898

 
950

 
976

 
999

Lease termination fees
—

 
—

 
—

 
70

 
67

Office property operating margin (3)
64.4
%
 
61.9
%
 
61.8
%
 
63.1
%
 
64.6
%
Net (loss) income available to common stockholders
$
(17,043
)
 
$
205,221

 
$
87,999

 
$
67,312

 
$
5,172

Net (loss) income available to common stockholders – basic
(0.29
)
 
3.56

 
1.57

 
1.32

 
0.10

Net (loss) income available to common stockholders – diluted
(0.29
)
 
3.52

 
1.57

 
1.32

 
0.10

Funds from operations (FFO) available to common stockholders (4)
$
(2,984
)
 
$
130,860

 
$
63,222

 
$
71,357

 
$
10,653

FFO per share – basic (4)
(0.05
)
 
2.27

 
1.13

 
1.39

 
0.21

FFO per share – diluted (4)
(0.05
)
 
2.24

 
1.11

 
1.38

 
0.21

FFO per share before specified items – basic (4)
(0.05
)
 
(0.11
)
 
(0.11
)
 
(0.22
)
 
0.18

FFO per share before specified items – diluted (4)
(0.05
)
 
(0.11
)
 
(0.11
)
 
(0.22
)
 
0.17

 
 
 
 
 
 

 
 

 
 

Ratios:
 
 
 
 
 
 
 
 
 
Interest coverage ratio (5)
1.10

 
9.80

 
4.45

 
3.66

 
2.10

Interest coverage ratio before specified items (6)
1.10

 
1.03

 
0.99

 
0.82

 
1.35

Fixed-charge coverage ratio (7)
0.92

 
8.22

 
3.91

 
3.27

 
1.88

Fixed-charge coverage ratio before specified items (8)
0.92

 
0.87

 
0.87

 
0.74

 
1.21

 
 
 
 
 
 

 
 

 
 

Capitalization:
 
 
 
 
 
 
 
 
 
Common stock price @ quarter end
$
2.75

 
$
3.08

 
$
3.35

 
$
2.01

 
$
2.34

Total debt
$
1,686,173

 
$
1,949,739

 
$
2,464,084

 
$
2,734,053

 
$
2,943,023

Preferred stock liquidation preference
243,259

 
243,259

 
243,259

 
243,259

 
243,259

Common equity value @ quarter end (9)
157,971

 
176,700

 
191,924

 
115,081

 
133,852

Total market capitalization
$
2,087,403

 
$
2,369,698

 
$
2,899,267

 
$
3,092,393

 
$
3,320,134

Company share of unconsolidated joint venture debt
—

 
—

 
47,512

 
57,289

 
57,458

Total combined market capitalization
$
2,087,403

 
$
2,369,698

 
$
2,946,779

 
$
3,149,682

 
$
3,377,592

Total debt / total market capitalization
80.8
%
 
82.3
%
 
85.0
%
 
88.4
%
 
88.6
%
Total combined debt / total combined market capitalization
80.8
%
 
82.3
%
 
85.2
%
 
88.6
%
 
88.8
%
Total debt plus liquidation preference / total market capitalization
92.4
%
 
92.5
%
 
93.4
%
 
96.3
%
 
96.0
%
Total combined debt plus liquidation preference / total combined
     market capitalization
92.4
%
 
92.5
%
 
93.5
%
 
96.3
%
 
96.0
%

8
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Financial Highlights (continued)
 
 
 
 
 
 
 
 
 
 
__________
(1)
Excludes revenue from discontinued operations of $8.2 million, $9.3 million, $22.9 million, $25.2 million and $32.3 million for the three months ended March 31, 2013 and December 31, September 30, June 30 and March 31, 2012, respectively.
(2)
Represents the net adjustment for above- and below-market leases, which are being amortized over the remaining term of the respective leases from the date of acquisition.
(3)
Calculated as follows: (rental, tenant reimbursement and parking revenues - rental property operating and maintenance, real estate taxes and parking expenses) / (rental, tenant reimbursement and parking revenues). Lease termination fees are reported as part of interest and other revenue in the consolidated statement of operations.
(4)
For a definition and discussion of FFO, see page 32. For a quantitative reconciliation of the differences between FFO and net (loss) income available to common stockholders, see page 14.
(5)
Calculated as earnings before interest, taxes, depreciation and amortization, or EBITDA, of $27,000, $255,440, $159,671, $152,967 and $92,950, respectively, divided by cash paid for interest of $24,528, $26,053, $35,863, $41,835 and $44,325, respectively. Cash paid for interest excludes default interest accrued totaling $0.4 million, $8.1 million, $9.7 million and $10.5 million related to defaulted mortgages for the three months ended December 31, September 30, June 30 and March 31, 2012, respectively. For a discussion of EBITDA, see page 34. For a quantitative reconciliation of the differences between EBITDA and net (loss) income , see page 17.
(6)
Calculated as Adjusted EBITDA of $27,000, $26,939, $35,545, $34,468 and $59,773, respectively, divided by cash paid for interest of $24,528, $26,053, $35,863, $41,835 and $44,325, respectively. For a discussion of Adjusted EBITDA, see page 34.
(7)
Calculated as EBITDA of $27,000, $255,440, $159,671, $152,967 and $92,950, respectively, divided by fixed charges of $29,379, $31,083, $40,882, $46,850 and $49,357, respectively.
(8)
Calculated as Adjusted EBITDA of $27,000, $26,939, $35,545, $34,468 and $59,773, respectively, divided by fixed charges of $29,379, $31,083, $40,882, $46,850 and $49,357, respectively.
(9)
Assumes 100% conversion of the noncontrolling common units of the Operating Partnership into shares of our common stock. Our limited partners have the right to redeem all or part of their noncontrolling common units at any time. At the time of redemption, we have the right to determine whether to redeem the noncontrolling common units for cash, based upon the fair value of an equivalent number of shares of our common stock at the time of redemption, or exchange them for shares of our common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distributions and similar events.


9
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Consolidated Balance Sheets
(unaudited and in thousands)

 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
Assets
 
 
 
 
 
 
 
 
 
Investments in real estate
$
1,372,040

 
$
1,709,570

 
$
2,168,111

 
$
2,341,262

 
$
2,467,034

Less: accumulated depreciation
(452,824
)
 
(541,614
)
 
(615,216
)
 
(640,368
)
 
(650,022
)
Investments in real estate, net
919,216

 
1,167,956

 
1,552,895

 
1,700,894

 
1,817,012

 
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash
179,629

 
192,474

 
190,350

 
227,586

 
234,510

Rents, deferred rents and other receivables, net
41,156

 
46,871

 
54,653

 
58,662

 
57,626

Deferred charges, net
49,249

 
57,247

 
64,366

 
69,303

 
75,638

Other assets
5,173

 
2,311

 
4,920

 
5,076

 
9,312

Assets associated with real estate held for sale
256,106

 
—

 
—

 
—

 
4,723

Total assets
$
1,450,529

 
$
1,466,859

 
$
1,867,184

 
$
2,061,521

 
$
2,198,821

 
 
 
 
 
 
 
 
 
 
Liabilities and Deficit
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Mortgage loans
$
1,686,173

 
$
1,949,739

 
$
2,464,084

 
$
2,734,053

 
$
2,943,023

Accounts payable and other liabilities
30,173

 
35,442

 
132,261

 
155,352

 
169,154

Obligations associated with real estate held for sale
264,745

 
—

 
—

 
—

 
—

Total liabilities
1,981,091

 
1,985,181

 
2,596,345

 
2,889,405

 
3,112,177

 
 
 
 
 
 
 
 
 
 
Deficit:
 
 
 
 
 
 
 
 
   

Stockholders’ Deficit:
 
 
 
 
 
 
 
 
   

Common and preferred stock and additional paid-in capital
605,838

 
609,257

 
608,724

 
702,604

 
704,485

Accumulated deficit and dividends
(1,134,085
)
 
(1,121,667
)
 
(1,331,513
)
 
(1,424,027
)
 
(1,495,473
)
Accumulated other comprehensive income (loss)
381

 
542

 
707

 
(7,320
)
 
(11,918
)
Total stockholders’ deficit
(527,866
)
 
(511,868
)
 
(722,082
)
 
(728,743
)
 
(802,906
)
Noncontrolling Interests
(2,696
)
 
(6,454
)
 
(7,079
)
 
(99,141
)
 
(110,450
)
Total deficit
(530,562
)
 
(518,322
)
 
(729,161
)
 
(827,884
)
 
(913,356
)
Total liabilities and deficit
$
1,450,529

 
$
1,466,859

 
$
1,867,184

 
$
2,061,521

 
$
2,198,821


10
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Consolidated Statements of Operations
(unaudited and in thousands)

 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
Revenue:
 
 
 
 
 
 
 
 
 
Rental
$
26,230

 
$
26,475

 
$
26,414

 
$
26,074

 
$
26,325

Tenant reimbursements
12,815

 
12,740

 
13,443

 
13,281

 
12,848

Parking
5,500

 
5,629

 
5,614

 
5,746

 
5,715

Management, leasing and development services
108

 
216

 
414

 
626

 
1,156

Interest and other
362

 
416

 
1,279

 
377

 
13,170

Total revenue
45,015

 
45,476

 
47,164

 
46,104

 
59,214

Expenses:
 
 
 
 
 
 
 
 
 
Rental property operating and maintenance
10,362

 
11,382

 
11,900

 
11,258

 
10,466

Real estate taxes
4,055

 
4,112

 
4,015

 
3,852

 
3,929

Parking
1,439

 
1,597

 
1,444

 
1,528

 
1,500

General and administrative
5,982

 
6,615

 
5,861

 
6,189

 
5,671

Other expense
65

 
1,979

 
815

 
2,025

 
195

Depreciation and amortization
11,901

 
12,335

 
12,440

 
12,732

 
12,476

Impairment of long-lived assets
—

 
—

 
—

 
—

 
2,121

Interest
22,206

 
22,571

 
23,677

 
26,498

 
26,515

Total expenses
56,010

 
60,591

 
60,152

 
64,082

 
62,873

Loss from continuing operations before equity in
     net income of unconsolidated joint venture and
     gain on sale of interest in unconsolidated joint venture
(10,995
)
 
(15,115
)
 
(12,988
)
 
(17,978
)
 
(3,659
)
Equity in net income of unconsolidated joint venture
—

 
29

 
38

 
45

 
14,229

Gain on sale of interest in unconsolidated joint venture
—

 
50,051

 
—

 
—

 
—

(Loss) income from continuing operations
(10,995
)
 
34,965

 
(12,950
)
 
(17,933
)
 
10,570

 
 
 
 

 
 

 
 

 
 

Discontinued Operations:
 
 
 
 
 
 
 
 
 
Loss from discontinued operations before
     gains on settlement of debt and sale of real estate
(1,454
)
 
(2,944
)
 
(16,907
)
 
(20,394
)
 
(18,432
)
Gains on settlement of debt
—

 
138,215

 
79,383

 
102,467

 
13,136

Gains on sale of real estate
—

 
40,235

 
45,483

 
16,032

 
5,192

(Loss) income from discontinued operations
(1,454
)
 
175,506

 
107,959

 
98,105

 
(104
)
Net (loss) income
$
(12,449
)
 
$
210,471

 
$
95,009

 
$
80,172

 
$
10,466


11
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Consolidated Statements of Operations (continued)
(unaudited and in thousands, except share and per share amounts)

 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
 
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(12,449
)
 
$
210,471

 
$
95,009

 
$
80,172

 
$
10,466

Net loss (income) attributable to common units of the Operating Partnership
43

 
(612
)
 
(2,373
)
 
(8,222
)
 
(657
)
Net (loss) income attributable to MPG Office Trust, Inc.
(12,406
)
 
209,859

 
92,636

 
71,950

 
9,809

Preferred stock dividends
(4,637
)
 
(4,638
)
 
(4,637
)
 
(4,638
)
 
(4,637
)
Net (loss) income available to common stockholders
$
(17,043
)
 
$
205,221

 
$
87,999

 
$
67,312

 
$
5,172

 
 
 
 
 
 
 
 
 
 
Basic (loss) income per common share:
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(0.27
)
 
$
0.52

 
$
(0.30
)
 
$
(0.39
)
 
$
0.10

(Loss) income from discontinued operations
(0.02
)
 
3.04

 
1.87

 
1.71

 
—

Net (loss) income available to common stockholders per share – basic
$
(0.29
)
 
$
3.56

 
$
1.57

 
$
1.32

 
$
0.10

Weighted average number of common shares outstanding
58,086,416

 
57,634,484

 
56,118,506

 
51,285,961

 
51,048,621

 
 
 
 
 
 
 
 
 
 
Diluted (loss) income per common share:
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(0.27
)
 
$
0.52

 
$
(0.30
)
 
$
(0.39
)
 
$
0.10

(Loss) income from discontinued operations
(0.02
)
 
3.00

 
1.87

 
1.71

 
—

Net (loss) income available to common stockholders per share – diluted
$
(0.29
)
 
$
3.52

 
$
1.57

 
$
1.32

 
$
0.10

Weighted average number of common and common equivalent
     shares outstanding
58,086,416

 
58,324,838

 
56,118,506

 
51,285,961

 
51,758,710



12
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Consolidated Statements of Discontinued Operations (1), (2)
(unaudited and in thousands)

 
 
For the Three Months Ended
 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
Revenue:
 
 
 
 
 
 
 
 
 
Rental
$
4,642

 
$
5,389

 
$
13,743

 
$
16,371

 
$
19,656

Tenant reimbursements
2,433

 
2,627

 
6,292

 
5,934

 
6,276

Parking
1,161

 
1,261

 
2,288

 
2,863

 
3,011

Interest and other
2

 
6

 
552

 
9

 
3,392

Total revenue
8,238

 
9,283

 
22,875

 
25,177

 
32,335

 
 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
 
Rental property operating and maintenance
2,924

 
3,404

 
7,937

 
7,782

 
8,269

Real estate taxes
1,067

 
1,137

 
2,624

 
2,755

 
3,139

Parking
355

 
372

 
613

 
662

 
639

Other expense
—

 
—

 
1,016

 
1,053

 
1,209

Depreciation and amortization
2,210

 
3,112

 
7,310

 
8,344

 
9,576

Interest
3,136

 
4,202

 
20,282

 
24,975

 
27,935

Total expenses
9,692

 
12,227

 
39,782

 
45,571

 
50,767

 
 
 
 
 
 
 
 
 
 
Loss from discontinued operations before
     gains on settlement of debt and sale of real estate
(1,454
)
 
(2,944
)
 
(16,907
)
 
(20,394
)
 
(18,432
)
Gains on settlement of debt
—

 
138,215

 
79,383

 
102,467

 
13,136

Gains on sale of real estate
—

 
40,235

 
45,483

 
16,032

 
5,192

(Loss) income from discontinued operations
$
(1,454
)
 
$
175,506

 
$
107,959

 
$
98,105

 
$
(104
)
_________
(1)
On March 11, 2013, we entered into an agreement to sell US Bank Tower and the Westlawn off-site parking garage. The transaction is expected to close on June 28, 2013, subject to customary closing conditions. The results of operations of US Bank Tower and the Westlawn off-site parking garage are included in discontinued operations for all periods presented.
(2)
We disposed of 700 North Central and 801 North Brand (both in first quarter 2012), Stadium Towers Plaza, Brea Corporate Place and Brea Financial Commons (all in second quarter 2012), Glendale Center and 500 Orange Tower (both in third quarter 2012), and Two California Plaza and 3800 Chapman (both in fourth quarter 2012). As a result, the results of operations of 700 North Central, 801 North Brand, Stadium Towers Plaza, Brea Corporate Place, Brea Financial Commons, Glendale Center, 500 Orange Tower, Two California Plaza and 3800 Chapman are included in discontinued operations through the quarter of their respective dispositions.

13
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Funds from Operations
(unaudited and in thousands, except share and per share amounts)

 
 
For the Three Months Ended
 
 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
Reconciliation of net (loss) income available to common stockholders to
     funds from operations:
 
 
 
 
 
 
 
 
 
Net (loss) income available to common stockholders
$
(17,043
)
 
$
205,221

 
$
87,999

 
$
67,312

 
$
5,172

 
 
 
 
 
 
 
 
 
 
 
Add:
Depreciation and amortization of real estate assets
14,094

 
15,430

 
19,733

 
21,060

 
22,035

 
Depreciation and amortization of real estate assets –
    unconsolidated joint venture (1)
—

 
635

 
671

 
660

 
1,465

 
Impairment writedown of depreciable real estate
—

 
—

 
—

 
—

 
2,121

 
Impairment writedowns of depreciable real estate –
    unconsolidated joint venture (1)
—

 
—

 
731

 
—

 
2,176

 
Net (loss) income attributable to common units of the Operating Partnership
(43
)
 
612

 
2,373

 
8,222

 
657

 
(Unallocated) allocated losses – unconsolidated joint venture (1)
—

 
(362
)
 
(1,097
)
 
(1,150
)
 
2,530

Deduct:
Gains on sale of real estate
—

 
40,235

 
45,483

 
16,032

 
5,192

 
Gain on sale of real estate – unconsolidated joint venture (1)
—

 
—

 
—

 
—

 
18,958

 
Gain on sale of interest in unconsolidated joint venture
—

 
50,051

 
—

 
—

 
—

Funds from operations available to common stockholders and unit holders (FFO) (2)
$
(2,992
)
 
$
131,250

 
$
64,927

 
$
80,072

 
$
12,006

Company share of FFO (3)
$
(2,984
)
 
$
130,860

 
$
63,222

 
$
71,357

 
$
10,653

FFO per share – basic
$
(0.05
)
 
$
2.27

 
$
1.13

 
$
1.39

 
$
0.21

FFO per share – diluted
$
(0.05
)
 
$
2.24

 
$
1.11

 
$
1.38

 
$
0.21

Weighted average number of common shares outstanding – basic
58,086,416

 
57,634,484

 
56,118,506

 
51,285,961

 
51,048,621

Weighted average number of common and common equivalent shares – diluted
58,086,416

 
58,324,838

 
57,068,266

 
51,870,380

 
51,758,710

Weighted average diluted shares and units
58,232,831

 
58,495,364

 
58,572,003

 
58,099,575

 
58,205,487

__________
(1)
Amount represents our 20% ownership interest in the unconsolidated joint venture. For the fourth quarter of 2012, amount represents our 20% ownership interest through December 21, 2012, the date we disposed of our interest in the joint venture.
(2)
For the definition and discussion of FFO, see page 32.
(3)
Based on a weighted average interest in the Operating Partnership of approximately 99.7% for the three months ended March 31, 2013, 99.7% for the three months ended December 31, 2012, 97.4% for the three months ended September 30, 2012, 89.1% for the three months ended June 30, 2012 and 88.7% for the three months ended March 31, 2012.

14
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Funds from Operations (continued)
(unaudited and in thousands, except share and per share amounts)

 
 
For the Three Months Ended
 
 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
Reconciliation of FFO to FFO before specified items: (1)
 
 
 
 
 
 
 
 
 
FFO available to common stockholders and unit holders
$
(2,992
)
 
$
131,250

 
$
64,927

 
$
80,072

 
$
12,006

Add:
Default interest accrued on defaulted mortgages
—

 
427

 
8,058

 
9,725

 
10,540

 
Writeoff of deferred financing costs related to defaulted mortgages
—

 
—

 
—

 
182

 
916

Deduct:
Gains on settlement of debt
—

 
138,215

 
79,383

 
102,467

 
13,136

 
(Loss) gain from early extinguishment of debt, net –
     unconsolidated joint venture (2)
—

 
—

 
(9
)
 
—

 
188

FFO before specified items
$
(2,992
)
 
$
(6,538
)
 
$
(6,389
)
 
$
(12,488
)
 
$
10,138

Company share of FFO before specified items (3)
$
(2,984
)
 
$
(6,519
)
 
$
(6,221
)
 
$
(11,129
)
 
$
8,995

FFO per share before specified items – basic
$
(0.05
)
 
$
(0.11
)
 
$
(0.11
)
 
$
(0.22
)
 
$
0.18

FFO per share before specified items – diluted
$
(0.05
)
 
$
(0.11
)
 
$
(0.11
)
 
$
(0.22
)
 
$
0.17

__________
(1)
For the definition and discussion of FFO before specified items, see page 32.
(2)
Amount represents our 20% ownership interest in the unconsolidated joint venture. For the fourth quarter of 2012, amount represents our 20% ownership interest through December 21, 2012, the date we disposed of our interest in the joint venture.
(3)
Based on a weighted average interest in the Operating Partnership of approximately 99.7% for the three ended March 31, 2013, 99.7% for the three months ended December 31, 2012, 97.4% for the three months ended September 30, 2012, 89.1% for the three months ended June 30, 2012 and 88.7% for the three months ended March 31, 2012.



15
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Adjusted Funds from Operations (1)
(unaudited and in thousands)

 
 
For the Three Months Ended
 
 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
FFO
 
$
(2,992
)
 
$
131,250

 
$
64,927

 
$
80,072

 
$
12,006

Add:
Non-real estate depreciation
17

 
17

 
17

 
16

 
17

 
Straight line ground lease expense
—

 
—

 
528

 
527

 
528

 
Amortization of deferred financing costs
814

 
827

 
803

 
814

 
824

 
Unrealized gain due to hedge ineffectiveness
—

 
—

 
(143
)
 
(336
)
 
(313
)
 
Default interest accrued on defaulted mortgages
—

 
427

 
8,058

 
9,725

 
10,540

 
Writeoff of deferred financing costs related to defaulted mortgages
—

 
—

 
—

 
182

 
916

 
Compensation cost for share-based awards
518

 
645

 
668

 
534

 
444

Deduct:
Gains on settlement of debt
—

 
138,215

 
79,383

 
102,467

 
13,136

 
Straight line rent
915

 
30

 
207

 
1,249

 
252

 
Straight line air space lease expense
7

 
7

 
7

 
6

 
7

 
Fair value lease revenue
916

 
1,141

 
2,206

 
2,295

 
2,370

 
Capitalized payments (2)
278

 
500

 
294

 
189

 
390

 
Capital lease principal payments
68

 
71

 
71

 
70

 
85

 
Scheduled principal payments on mortgage loans
146

 
140

 
135

 
133

 
135

 
Non-recoverable capital expenditures
81

 
177

 
524

 
217

 
240

 
Recoverable capital expenditures
1

 
82

 
85

 
25

 
119

 
2nd generation tenant improvements and leasing commissions (3)
2,822

 
2,543

 
73

 
28

 
496

 
Unconsolidated joint venture AFFO adjustments (4)
—

 
682

 
705

 
863

 
919

Adjusted funds from operations (AFFO)
$
(6,877
)
 
$
(10,422
)
 
$
(8,832
)
 
$
(16,008
)
 
$
6,813

__________
(1)
For the definition and computation method of AFFO, see page 33. For a quantitative reconciliation of the differences between AFFO and cash flows from operating activities, see page 17.
(2)
Includes capitalized leasing payroll.
(3)
Excludes 1st generation tenant improvements and leasing commissions of $0.6 million, $0.2 million, $0.1 million and $0.1 million for the three months ended March 31, 2013, December 31, September 30 and March 31, 2012, respectively.
(4)
Amount represents our 20% ownership interest in the unconsolidated joint venture. For the fourth quarter of 2012, amount represents our 20% ownership interest through December 21, 2012, the date we disposed of our interest in the joint venture.

16
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Reconciliation of Earnings before Interest, Taxes and Depreciation and Amortization (1) and Adjusted Funds from Operations (2)
(unaudited and in thousands)

 
 
 
For the Three Months Ended
 
 
March 31, 2013
 
December 31, 2012
 
September 30, 2012
 
June 30, 2012
 
March 31, 2012
Reconciliation of net (loss) income to earnings before interest, taxes and
     depreciation and amortization (EBITDA):
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(12,449
)
 
$
210,471

 
$
95,009

 
$
80,172

 
$
10,466

Add:
Interest expense (3)
25,342

 
26,773

 
43,959

 
51,473

 
54,450

 
Interest expense – unconsolidated joint venture (4)
—

 
560

 
652

 
777

 
1,857

 
Income tax (benefit) expense
(4
)
 
1,916

 
727

 
(41
)
 
130

 
Depreciation and amortization (5)
14,111

 
15,447

 
19,750

 
21,076

 
22,052

 
Depreciation and amortization – unconsolidated joint venture (4)
—

 
635

 
671

 
660

 
1,465

Deduct:
Unallocated (allocated) losses – unconsolidated joint venture (4)
—

 
362

 
1,097

 
1,150

 
(2,530
)
EBITDA
$
27,000

 
$
255,440

 
$
159,671

 
$
152,967

 
$
92,950

EBITDA
$
27,000

 
$
255,440

 
$
159,671

 
$
152,967

 
$
92,950

Add:
Impairment writedown of depreciable real estate
—

 
—

 
—

 
—

 
2,121

 
Impairment writedowns of depreciable real estate –
     unconsolidated joint venture (4)
—

 
—

 
731

 
—

 
2,176

Deduct:
Gains on settlement of debt
—

 
138,215

 
79,383

 
102,467

 
13,136

 
(Loss) gain from early extinguishment of debt, net –
     unconsolidated joint venture (4)
—

 
—

 
(9
)
 
—

 
188

 
Gains on sale of real estate
—

 
40,235

 
45,483

 
16,032

 
5,192

 
Gain on sale of real estate – unconsolidated joint venture (4)
—

 
—

 
—

 
—

 
18,958

 
Gain on sale of interest in unconsolidated joint venture
—

 
50,051

 
—

 
—

 
—

Adjusted EBITDA
$
27,000

 
$
26,939

 
$
35,545

 
$
34,468

 
$
59,773

Reconciliation of cash flows from operating activities to adjusted funds from
     operations (AFFO):
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
$
(3,398
)
 
$
(5,732
)
 
$
4,533

 
$
640

 
$
6,785

Changes in other assets and liabilities
(575
)
 
(1,888
)
 
(12,683
)
 
(16,378
)
 
883

Non-recoverable capital expenditures
(81
)
 
(177
)
 
(524
)
 
(217
)
 
(240
)
Recoverable capital expenditures
(1
)
 
(82
)
 
(85
)
 
(25
)
 
(119
)
2nd generation tenant improvements and leasing commissions (6)
(2,822
)
 
(2,543
)
 
(73
)
 
(28
)
 
(496
)
AFFO
$
(6,877
)
 
$
(10,422
)
 
$
(8,832
)
 
$
(16,008
)
 
$
6,813

_________
(1)
For the definition and discussion of EBITDA and Adjusted EBITDA, see page 34.
(2)
For the definition and discussion of AFFO, see page 33.
(3)
Includes interest expense of $3.1 million, $4.2 million, $20.3 million, $25.0 million and $27.9 million for the three months ended March 31, 2013 and December 31, September 30, June 30 and March 31, 2012, respectively, related to discontinued operations.
(4)
Amount represents our 20% ownership interest in the unconsolidated joint venture. For the fourth quarter 2012, amount represents our 20% ownership interest through December 21, 2012, the date we disposed of our interest in the joint venture.
(5)
Includes depreciation and amortization of $2.2 million, $3.1 million, $7.3 million, $8.3 million and $9.6 million for the three months ended March 31, 2013 and December 31, September 30, June 30 and March 31, 2012, respectively, related to discontinued operations.
(6)
Excludes 1st generation tenant improvements and leasing commissions of $0.6 million, $0.2 million, $0.1 million and $0.1 million for the three months ended March 31, 2013, December 31, September 30 and March 31, 2012, respectively.

17
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Capital Structure
 
 
 
 
 
 
 
 
 
 
Debt
(in thousands)
 
 
 
 
 
 
 
Balance as of
 
 
 
March 31, 2013
 
 
 
 
Mortgage loans
 
 
$
1,686,173

 
 
 
 
Equity
(in thousands)
 
 
 
 
 
Shares Outstanding
 
Total Liquidation
Preference (1)
 
 
 
 
Preferred stock
9,730

 
$
243,259

 
 
 
 
 
Shares & Units
Outstanding
 
Market Value (2)
 
 
 
 
Common stock
57,308

 
$
157,598

Noncontrolling common units of the Operating Partnership
136

 
373

Total common equity
57,444

 
$
157,971

Total consolidated market capitalization
 
 
$
2,087,403

__________
(1)
As of April 30, 2013, the amount of dividends in arrears on our Series A preferred stock totals $83.5 million. This amount is not included in the Liquidation Preference shown above.
(2)
Value based on the NYSE closing price of $2.75 on March 28, 2013.



18
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Debt Summary
(in thousands, except percentages)

  
 
Contractual
Maturity Date
 
Principal
Amount as of
March 31, 2013
 
% of
Debt
 
Interest
 Rate as of
March 31, 2013 (1)
Variable-Rate Debt
 
 
 
 
 
 
 
Plaza Las Fuentes mortgage loan (2)
August 9, 2016
 
$
32,885

 
1.69
%
 
4.50
%
KPMG Tower A-Note (3)
October 9, 2013
 
317,219

 
16.30
%
 
3.20
%
KPMG Tower B-Note (4)
October 9, 2013
 
44,200

 
2.27
%
 
5.30
%
Total variable-rate debt
 
 
394,304

 
20.26
%
 
3.55
%
 
 
 
 

 
 

 
 
Fixed-Rate Debt
 
 
 
 
 
 
 
Wells Fargo Tower
April 6, 2017
 
550,000

 
28.25
%
 
5.70
%
Gas Company Tower
August 11, 2016
 
458,000

 
23.53
%
 
5.10
%
777 Tower
November 1, 2013
 
273,000

 
14.02
%
 
5.84
%
US Bank Tower (5)
July 1, 2013
 
260,000

 
13.36
%
 
4.66
%
Plaza Las Fuentes mezzanine loan
August 9, 2016
 
11,250

 
0.58
%
 
9.88
%
Total fixed-rate debt
 
 
1,552,250

 
79.74
%
 
5.40
%
 
 
 
 

 
 

 
 
Total debt
 
 
1,946,554

 
100.00
%
 
5.03
%
Less: mortgage loan associated with real estate held for sale (5)
 
 
(260,000
)
 
 
 
 
Total debt – continuing operations
 
 
1,686,554

 
 
 
 
Debt discount
 
 
(381
)
 
 
 
 
Total debt – continuing operations, net
 
 
$
1,686,173

 
 
 
 
__________
(1)
The March 28, 2013 one-month LIBOR rate of 0.20% was used to calculate interest on the variable-rate loans.
(2)
This loan bears interest at a rate of the greater of 4.50%, or LIBOR plus 3.50%. As required by the Plaza Las Fuentes mezzanine loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.50%.
(3)
This loan bears interest at LIBOR plus 3.00%.
(4)
This loan bears interest at LIBOR plus 5.10%.
(5)
On March 11, 2013, we entered into an agreement to sell US Bank Tower. The transaction is expected to close on June 28, 2013, subject to customary closing conditions. Provided that the transaction closes as expected, the mortgage loan will be repaid at closing using proceeds from the transaction.


19
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Debt Maturities
(in thousands, except percentages)

 
 
2013
 
2014
 
2015
 
2016
 
2017
 
Total
Variable-Rate Debt
 
 
 
 
 
 
 
 
 
 
 
Plaza Las Fuentes mortgage loan
$
427

 
$
600

 
$
627

 
$
31,231

 
$
—

 
$
32,885

KPMG Tower A-Note
317,219

 
—

 
—

 
—

 
—

 
317,219

KPMG Tower B-Note
44,200

 
—

 
—

 
—

 
—

 
44,200

Total variable-rate debt
361,846

 
600

 
627

 
31,231

 
—

 
394,304

 
 
 
 
 
 
 
 
 
 
 
 
Fixed-Rate Debt
 
 
 
 
 
 
 
 
 
 
 
Wells Fargo Tower
—

 
—

 
—

 
—

 
550,000

 
550,000

Gas Company Tower
—

 
—

 
—

 
458,000

 
—

 
458,000

777 Tower
273,000

 
—

 
—

 
—

 
—

 
273,000

US Bank Tower (1)
260,000

 
—

 
—

 
—

 
—

 
260,000

Plaza Las Fuentes mezzanine loan
—

 
—

 
—

 
11,250

 
—

 
11,250

Total fixed-rate debt
533,000

 
—

 
—

 
469,250

 
550,000

 
1,552,250

Total debt
894,846

 
600

 
627

 
500,481

 
550,000

 
1,946,554

Less: mortgage loan associated with real estate held for sale (1)
(260,000
)
 
—

 
—

 
—

 
—

 
(260,000
)
Total debt – continuing operations
634,846

 
600

 
627

 
500,481

 
550,000

 
1,686,554

Debt discount
(381
)
 
—

 
—

 
—

 
—

 
(381
)
Total debt – continuing operations, net
$
634,465

 
$
600

 
$
627

 
$
500,481

 
$
550,000

 
$
1,686,173

Weighted average interest rate – total debt
4.54
%
 
4.50
%
 
4.50
%
 
5.17
%
 
5.70
%
 
5.03
%
Weighted average interest rate – total debt
     – continuing operations
4.49
%
 
4.50
%
 
4.50
%
 
5.17
%
 
5.70
%
 
5.08
%
__________
(1)
On March 11, 2013, we entered into an agreement to sell US Bank Tower. The transaction is expected to close on June 28, 2013, subject to customary closing conditions. Provided that the transaction closes as expected, the mortgage loan will be repaid at closing using proceeds from the transaction.



20
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 














Portfolio Data


21
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013


Same Store Analysis
(unaudited and in thousands, except percentages)

  
 
For the Three Months Ended March 31, (1)
 
2013
 
2012
 
% Change
 
 
 
 
 
 
Number of properties
5

 
5

 
 
Square feet as of March 31
5,154,849

 
5,136,359

 
 
Weighted average leased percentage (2)
84.5
%
 
87.3
%
 
 
 
 

 
 

 
 
GAAP
 
 
 
 
 
Breakdown of Net Operating Income:
 
 
 
 
 
Operating revenue
$
44,585

 
$
45,430

 
(1.9
)%
Operating expenses
15,832

 
15,867

 
(0.2
)%
Other expense
65

 
65

 
—
 %
Net operating income
$
28,688

 
$
29,498

 
(2.7
)%
 
 

 
 

 
 

CASH BASIS
 
 
 
 
 
Breakdown of Net Operating Income:
 
 
 
 
 
Operating revenue
$
43,077

 
$
43,889

 
(1.9
)%
Operating expenses
15,832

 
15,867

 
(0.2
)%
Other expense
72

 
72

 
—
 %
Net operating income
$
27,173

 
$
27,950

 
(2.8
)%
__________
(1)
Properties included in the Same Store analysis are the properties in our Total Portfolio, with the exception US Bank Tower, which was classified as held for sale as of March 31, 2013.
(2)
Represents weighted average leased amounts for our Same Store Portfolio.


22
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Portfolio Overview
 
 
 
 
 
 
 
 
 
 
 
Square Feet
 
Leased % and In-Place Rents
 
 
Number of
Buildings
 
Number of
Tenants
 
Year Built
 
Net
Building
Rentable
 
% of Net Rentable
 
% Leased
 
Total
Annualized
Rents (1)
 
Annualized
Rent
$/RSF (2)
Office Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LACBD
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gas Company Tower
 
1

 
16

 
1991
 
1,369,900

 
20.80
%
 
76.2
%
 
$
22,483,129

 
$
21.53

US Bank Tower (3)
 
1

 
54

 
1989
 
1,432,539

 
21.75
%
 
56.8
%
 
18,979,347

 
23.31

Wells Fargo Tower
 
2

 
50

 
1982
 
1,416,671

 
21.51
%
 
87.8
%
 
28,676,590

 
23.05

KPMG Tower
 
1

 
22

 
1983
 
1,154,306

 
17.52
%
 
91.4
%
 
26,767,398

 
25.37

777 Tower
 
1

 
33

 
1991
 
1,017,998

 
15.45
%
 
81.1
%
 
18,587,052

 
22.50

Total LACBD
 
6

 
175

 
 
 
6,391,414

 
97.03
%
 
78.0
%
 
115,493,516

 
23.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Plaza Las Fuentes
 
3

 
6

 
1989
 
195,974

 
2.97
%
 
100.0
%
 
5,096,699

 
26.01

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Office Properties
 
9

 
181

 
 
 
6,587,388

 
100.00
%
 
78.6
%
 
$
120,590,215

 
$
23.28

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LACBD Parking Properties
 
 
 
 
 
 
 
SQFT
 
Vehicle
Capacity
 
 
 
Annualized
Parking
Revenue (4)
 
Annualized
Parking
Revenue per
Vehicle
Capacity (5)
On-Site Parking
 
 
 
 
 
 
 
1,322,341

 
3,933

 
 
 
$
18,075,076

 
$
4,596

Off-Site Garages
 
 
 
 
 
 
 
1,285,165

 
4,124

 
 
 
8,627,199

 
2,092

Total LACBD Parking Properties
 
 
 
 
 
 
 
2,607,506

 
8,057

 


 
$
26,702,275

 
3,314

 
 
 
 
 
 
 
 
 

 
 

 
 
 
 

 
 

Total Office and Parking Properties
 
 
 
 
 
 
 
9,194,894

 


 


 


 
 
__________
(1)
Annualized rent represents the annualized monthly contractual rent under existing leases as of March 31, 2013. This amount reflects total base rent before any rent abatements as of March 31, 2013 and is shown on a net basis; thus, for any tenant under a partial gross lease, the expense stop, or under a fully gross lease, the current year operating expenses (which may be estimates as of such date), are subtracted from gross rent. Total abatements for leases in effect as of March 31, 2013 for the twelve months ending March 31, 2014 are approximately $7 million, or $1.34 per leased square foot.
(2)
Annualized rent per rentable square foot represents annualized rent as computed above, divided by leased square feet as of the same date.
(3)
On March 11, 2013, we entered into an agreement to sell US Bank Tower and the Westlawn off-site parking garage (which encompasses 363,906 square feet and has vehicle capacity of 1,047). The transaction is expected to close on June 28, 2013, subject to customary closing conditions.
(4)
Annualized parking revenue represents the annualized quarterly parking revenue as of March 31, 2013.
(5)
Annualized parking revenue per vehicle capacity represents the annualized parking revenue divided by vehicle capacity.

23
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Portfolio Overview — Leased Percentages and Weighted Average Remaining Lease Term
 
 
 
 
 
 
 
 
 
 
 
Weighted Average
Remaining Lease Term
(in years)
 
 
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
Q1 2013
 
Q4 2012
 
Q3 2012
 
Q2 2012
 
Q1 2012
Los Angeles Central Business District
 
 
 
 
 
 
 
 
 
 
 
Gas Company Tower
7.7
 
76.2
%
 
76.2
%
 
76.2
%
 
77.7
%
 
78.2
%
US Bank Tower (1)
3.9
 
56.8
%
 
56.6
%
 
56.5
%
 
55.4
%
 
54.6
%
Wells Fargo Tower
6.1
 
87.8
%
 
88.5
%
 
89.9
%
 
89.3
%
 
90.3
%
KPMG Tower
7.4
 
91.4
%
 
93.7
%
 
96.1
%
 
96.1
%
 
96.1
%
777 Tower
5.0
 
81.1
%
 
80.6
%
 
81.2
%
 
80.1
%
 
82.2
%
Total Los Angeles Central Business District
6.2
 
78.0
%
 
78.4
%
 
79.2
%
 
79.0
%
 
79.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
 
 
 
Plaza Las Fuentes
6.2
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Total Office Properties
6.2
 
78.6
%
 
79.0
%
 
79.8
%
 
79.6
%
 
80.0
%
__________
(1)
On March 11, 2013, we entered into an agreement to sell US Bank Tower. The transaction is expected to close on June 28, 2013, subject to customary closing conditions.


24
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Adjusted Leased Percentages — Los Angeles Central Business District
 
 
 
 
 
 
 
 
 
 
 
 
As of March 31, 2013
 
Expiring
Leased
Square
Feet, Net not
Expected to be
Renewed
during 2013
 
Adjusted
Leased
Percentage at
December 31, 2013 (1)
 
Expiring
Leased
Square
Feet, Net not
Expected to be
Renewed
during 2014
 
Adjusted
Leased
Percentage at
December 31, 2014 (1)
 
 
Net Building
Rentable
Square Feet
 
Vacant
Square Feet
 
Leased Percentage
 
Office Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gas Company Tower
 
1,369,900

 
325,705

 
76.2
%
 
(180,470
)
 
63.1
%
 
—

 
63.1
%
US Bank Tower (2)
 
1,432,539

 
618,416

 
56.8
%
 
(3,456
)
 
56.6
%
 
(9,843
)
 
55.9
%
Wells Fargo Tower
 
1,416,671

 
172,636

 
87.8
%
 
(130,224
)
(3)
78.6
%
 
(5,601
)
 
78.2
%
KPMG Tower
 
1,154,306

 
99,296

 
91.4
%
 
(71,258
)
 
85.2
%
 
(190,552
)
 
68.7
%
777 Tower
 
1,017,998

 
192,041

 
81.1
%
 
(71,274
)
 
74.1
%
 
—

 
74.1
%
 
 
6,391,414

 
1,408,094

 
78.0
%
 
(456,682
)
 
70.8
%
 
(205,996
)
 
67.6
%
__________
(1)
Adjusted leased percentages reflect known future tenant vacates/new tenant occupancies as of March 31, 2013. Does not include any conversations with existing or new tenants that would potentially increase or decrease vacant square footage. Actual leased percentages as of December 31, 2013 and 2014 could vary materially from the adjusted lease percentages shown in the above table due to factors such as future tenant non-renewals, early terminations or tenant defaults.
(2)
On March 11, 2013, we entered into an agreement to sell US Bank Tower. The transaction is expected to close on June 28, 2013, subject to customary closing conditions.
(3)
As of March 31, 2013, Wells Fargo Bank has the right to contract up to an additional 48,676 square feet, which has not been taken into account in this analysis.

25
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Major Tenants — Los Angeles Central Business District
 
 
 
 
 
 
 
 
 
 
 
Tenant
 
Annualized
Rent (1)
 
% of Total
LACBD
Annualized
Rent
 
Leased RSF
 
% of Total
LACBD
Leased
RSF
 
Weighted Average
Remaining Lease
Term in Months
 
S & P Credit Rating /
Nationally Recognized (2)
 
Rated Tenants ≥ $250,000 Annual Rent
 
 
 
 
 
 
 
 
 
 
 
 
1
Southern California Gas Company
 
$
7,837,467

 
6.8
%
 
412,679

 
8.3
%
 
153

 
A
2
Wells Fargo Bank, National Association
 
5,846,505

 
5.1
%
 
297,481

 
6.0
%
 
107

 
AA-
3
US Bank, National Association
 
4,184,355

 
3.6
%
 
154,304

 
3.1
%
 
27

 
AA-
4
National Union Fire Insurance Company of Pittsburg, PA
 
2,280,222

 
2.0
%
 
112,772

 
2.2
%
 
59

 
A
5
FTI Consulting, Inc.
 
1,058,803

 
0.9
%
 
42,420

 
0.8
%
 
56

 
BB+
6
Zurich American Insurance Company
 
975,304

 
0.8
%
 
44,332

 
0.9
%
 
119

 
AA-
7
UBS Financial Services, Inc.
 
859,370

 
0.7
%
 
34,722

 
0.7
%
 
83

 
A
8
Microsoft Corporation
 
799,656

 
0.7
%
 
36,348

 
0.7
%
 
4

 
AAA
9
Mitsubishi UFJ, Ltd
 
757,876

 
0.7
%
 
33,095

 
0.7
%
 
26

 
A+
10
Hartford Fire Insurance Co.
 
624,611

 
0.5
%
 
20,897

 
0.4
%
 
39

 
A
 
Other Rated Tenants ≥ $250,000 Annual Rent
 
2,040,799

 
1.8
%
 
77,830

 
1.6
%
 
17

 
 
 
Total Rated Tenants ≥ $250,000 Annual Rent
 
27,264,968

 
23.6
%
 
1,266,880

 
25.4
%
 
93

 
 
 
Total Investment Grade Tenants
 
$
29,283,662

 
25.4
%
 
1,344,036

 
27.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nationally Recognized Tenants ≥ $250,000 Annual Rent
11
Latham & Watkins LLP
 
9,936,016

 
8.6
%
 
397,991

 
8.0
%
 
116

 
4th Largest US Law Firm
12
Gibson, Dunn & Crutcher LLP
 
6,103,097

 
5.3
%
 
268,268

 
5.4
%
 
116

 
12th Largest US Law Firm
13
KPMG LLP
 
4,482,579

 
3.9
%
 
175,971

 
3.5
%
 
15

 
4th Largest US Accounting Firm
14
Marsh USA, Inc.
 
4,319,801

 
3.7
%
 
210,722

 
4.2
%
 
61

 
World’s Largest Insurance Broker
15
Munger, Tolles & Olson LLP
 
4,116,584

 
3.6
%
 
165,019

 
3.3
%
 
107

 
136th Largest US Law Firm
16
Sidley Austin LLP
 
4,092,514

 
3.5
%
 
192,457

 
3.9
%
 
111

 
8th Largest US Law Firm
17
Morrison & Foerster LLP
 
3,955,116

 
3.4
%
 
138,776

 
2.8
%
 
6

 
20th Largest US Law Firm
18
Oaktree Capital Management, L.P.
 
3,224,919

 
2.8
%
 
156,235

 
3.1
%
 
48

 
Investment Management Co.
19
Winston & Strawn LLP
 
2,624,017

 
2.3
%
 
91,170

 
1.8
%
 
53

 
33rd Largest US Law Firm
20
Bingham McCutchen, LLP
 
1,968,786

 
1.7
%
 
82,458

 
1.7
%
 
117

 
25th Largest US Law Firm
 
Other Nationally Recognized Tenants ≥ $250,000 Annual Rent
 
21,073,081

 
18.3
%
 
914,354

 
18.4
%
 
75

 
 
 
Total Nationally Recognized Tenants ≥ $250,000 Annual Rent
 
65,896,510

 
57.1
%
 
2,793,421

 
56.1
%
 
80

 
 
 
Total Nationally Recognized Tenants
 
66,788,714

 
57.8
%
 
2,835,970

 
56.9
%
 
 
 
 
 
Total Rated or Nationally Recognized Tenants ≥ $250,000 Annual Rent
 
$
93,161,478

 
80.7
%
 
4,060,301

 
81.5
%
 
84

 
 
 
Total Investment Grade or Nationally Recognized Tenants
 
$
96,072,376

 
83.2
%
 
4,180,006

 
83.9
%
 
 
 
 
__________
(1)
Annualized rent is calculated as contractual base rent under existing leases as of March 31, 2013. For those leases where rent has not yet commenced, the first month in which rent is to be received is used to determine annualized rent.
(2)
S&P credit ratings are as of March 31, 2013. Rankings of law firms are based on total gross revenue in 2011 as reported by American Lawyer Media’s LAW.com.


26
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Portfolio Tenant Classification Description — Los Angeles Central Business District (1)
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
 
Percentage of
Leased Square Feet
 
 
 
 
 
Legal Services
 
2,267,989

 
45.5
%
Finance and Insurance
 
1,177,448

 
23.6
%
Professional, Scientific and Technical Services (except Legal Services)
 
585,157

 
11.8
%
Utilities
 
412,679

 
8.3
%
Real Estate and Rental and Leasing
 
178,801

 
3.6
%
Information
 
153,229

 
3.1
%
Accommodation and Food Services
 
56,520

 
1.1
%
All Other
 
151,497

 
3.0
%
 
 
4,983,320

 
100.0
%
__________
(1)
Classifications are based on the North American Industrial Classification System (“NAICS”).

27
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Lease Expirations — Los Angeles Central Business District
 
 
 
 
 
 
 
 
 
 
Year
 
Number
of
Leases
 
Total Area in
Square Feet
Covered by 
Expiring Leases
 
Percentage
of Leased
Square Feet
 
Annualized
Rent
 
Percentage of
Annualized
Rent
 
Current Rent
per Square Foot (1)
 
Rent per
Square Foot
at Expiration (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013
 
47

 
598,066

 
12.0
%
 
$
14,517,623

 
12.6
%
 
$
24.27

 
$
24.31

2014
 
23

 
421,183

 
8.4
%
 
9,660,205

 
8.4
%
 
22.94

 
23.36

2015
 
33

 
491,236

 
9.9
%
 
12,065,612

 
10.4
%
 
24.56

 
26.10

2016
 
14

 
158,912

 
3.2
%
 
4,037,914

 
3.5
%
 
25.41

 
27.91

2017
 
26

 
600,923

 
12.1
%
 
14,364,294

 
12.4
%
 
23.90

 
27.14

2018
 
15

 
345,535

 
6.9
%
 
7,710,398

 
6.7
%
 
22.31

 
25.93

2019
 
11

 
212,706

 
4.3
%
 
5,330,730

 
4.6
%
 
25.06

 
31.86

2020
 
8

 
212,002

 
4.2
%
 
4,684,921

 
4.1
%
 
22.10

 
26.78

2021
 
6

 
233,557

 
4.7
%
 
5,111,510

 
4.4
%
 
21.89

 
30.04

2022
 
3

 
434,285

 
8.7
%
 
10,267,585

 
8.9
%
 
23.64

 
29.52

Thereafter
 
10

 
1,274,915

 
25.6
%
 
27,742,724

 
24.0
%
 
21.76

 
31.23

Total expiring leases
 
196

 
4,983,320

 
100.0
%
 
$
115,493,516

 
100.0
%
 
$
23.18

 
$
27.89

Currently available
 


 
1,408,094

 
 
 
 
 
 
 
 
 
 
Total rentable square feet
 
 
 
6,391,414

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leases Expiring in the Next 4 Quarters:
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 

2nd Quarter 2013
 
 
 
77,784

 
1.6
%
 
$
1,895,075

 
1.6
%
 
$
24.36

 
$
24.77

3rd Quarter 2013 (3)
 
 
 
460,987

 
9.2
%
 
11,262,038

 
9.8
%
 
24.43

 
24.32

4th Quarter 2013
 
 
 
59,295

 
1.2
%
 
1,360,510

 
1.2
%
 
22.94

 
23.60

1st Quarter 2014
 
 
 
51,073

 
1.0
%
 
1,302,988

 
1.1
%
 
25.51

 
26.20

 
 
 
 
649,139

 
13.0
%
 
$
15,820,611

 
13.7
%
 
$
24.37

 
$
24.46

__________
(1)
Current rent per leased square foot represents current base rent, divided by total leased square feet as of the same date.
(2)
Rent per leased square foot at expiration represents base rent, including any future rent steps, and thus represents the base rent that will be in place at lease expiration.
(3)
Includes tenants leasing on a month-to-month basis.

28
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Leasing Activity — Los Angeles Central Business District
 
 
 
 
 
 
 
 
 
 
 
 
For the
Three Months Ended
March 31, 2013
 
% Leased
 
 
 
 
Leased Square Feet as of December 31, 2012
5,010,221

 
78.4
 %
     Expirations
(405,712
)
 
(6.3
)%
     New Leases
30,353

 
0.5
 %
     Renewals
348,458

 
5.4
 %
Leased Square Feet as of March 31, 2013
4,983,320

 
78.0
 %
 
 
 
 
Change in Cash Rent (1), (2)
 

 
 

     Expiring Rate per Square Foot
 

 
$
26.95

     New / Renewed Rate per Square Foot
 

 
$
22.49

     Percentage Change
 

 
(16.5
)%
 
 
 
 
Change in GAAP Rent (2), (3)
 

 
 

     Expiring Rate per Square Foot
 

 
$
25.70

     New / Renewed Rate per Square Foot
 

 
$
21.87

     Percentage Change
 

 
(14.9
)%
 
 
 
 
Weighted Average Lease Term – New (in months)
 
 
43

Weighted Average Lease Term – Renewal (in months)
 
 
66

__________
(1)
Represents the difference between (i) initial market rents on new and renewed leases and (ii) the cash rents on those spaces immediately prior to expiration or termination.
(2)
Excludes new leases for space with more than twelve months of downtime and leases with early renewals commencing after March 31, 2014.
(3)
Represents estimated cash rent growth adjusted for straight-line rents in accordance with GAAP.


29
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Tenant Improvements and Leasing Commissions — Los Angeles Central Business District (1)
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Year Ended December 31,
 
March 31, 2013
 
2012
 
2011
 
2010
Renewals (2)
 
 
 
 
 
 
 
Number of leases
3

 
7

 
22

 
19

Square feet
330,663

 
318,956

 
316,101

 
670,496

Tenant improvement costs per square foot
$
7.22

 
$
49.50

 
$
17.42

 
$
27.67

Leasing commission costs per square foot
$
1.84

 
$
10.29

 
$
6.71

 
$
12.72

Total tenant improvements and leasing commissions
 

 
 

 
 

 
 

Costs per square foot
$
9.06

 
$
59.79

 
$
24.13

 
$
40.39

Costs per square foot per year
$
1.57

 
$
6.39

 
$
3.24

 
$
3.64

 
 
 
 
 
 
 
 

New/Modified Leases (3)
 

 
 

 
 

 
 

Number of leases
4

 
13

 
25

 
27

Square feet
21,719

 
73,616

 
229,476

 
444,497

Tenant improvement costs per square foot
$
16.90

 
$
15.96

 
$
25.57

 
$
8.52

Leasing commission costs per square foot
$
5.63

 
$
7.18

 
$
7.48

 
$
7.04

Total tenant improvements and leasing commissions
 

 
 

 
 

 
 

Costs per square foot
$
22.53

 
$
23.14

 
$
33.05

 
$
15.56

Costs per square foot per year
$
4.73

 
$
3.56

 
$
4.77

 
$
2.78

 
 
 
 
 
 
 
 

Total
 

 
 

 
 

 
 

Number of leases
7

 
20

 
47

 
46

Square feet
352,382

 
392,572

 
545,577

 
1,114,993

Tenant improvement costs per square foot
$
7.82

 
$
43.21

 
$
20.85

 
$
20.03

Leasing commission costs per square foot
$
2.08

 
$
9.70

 
$
7.04

 
$
10.46

Total tenant improvements and leasing commissions
 

 
 

 
 

 
 

Costs per square foot
$
9.90

 
$
52.91

 
$
27.89

 
$
30.49

Costs per square foot per year
$
1.74

 
$
6.00

 
$
3.86

 
$
3.43

__________
(1)
Based on leases executed during the period. Excludes leases to related parties, short-term leases and leases for raw space.
(2)
Does not include retained tenants that have relocated to new space or expanded into new space.
(3)
Includes retained tenants that have relocated or expanded into new space and lease modifications.



30
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Historical Capital Expenditures — Los Angeles Central Business District (1)
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
For the Year Ended December 31,
 
March 31, 2013
 
2012
 
2011
 
2010
 
 
 
 
 
 
 
 
Non-recoverable capital expenditures
$
80,874

 
$
1,080,833

 
$
1,586,618

 
$
893,525

Total square feet
6,391,414

 
6,389,906

 
6,374,550

 
6,343,594

Non-recoverable capital expenditures per square foot
$
0.01

 
$
0.17

 
$
0.25

 
$
0.14

 
 
 
 
 
 
 
 
Recoverable capital expenditures (2)
$
900

 
$
291,431

 
$
1,027,784

 
$
2,130,585

Total square feet
6,391,414

 
6,389,906

 
6,374,550

 
6,343,594

Recoverable capital expenditures per square foot
$
—

 
$
0.05

 
$
0.16

 
$
0.34

_________
(1)
Historical capital expenditures for each period shown reflect properties owned for the entire period. For properties disposed during the period, the capital expenditures are excluded for that period. Any capital expenditures incurred during the period of disposition are footnoted separately.
(2)
The amounts presented represent the total value of improvements in the period they are made. The annual amortization of capital leases, based on each asset’s useful life, as well as any financing costs, are generally billed to tenants on an annual basis as payments are made.


31
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Management Statements on Non-GAAP Supplemental Measures
 
 
 
 
 
 
 
 
 
 
 

Funds from Operations:

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 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).

FFO before specified items:

Management also uses FFO before specified items as a supplemental performance measure because gains or losses from early extinguishment of 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.




32
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Management Statements on Non-GAAP Supplemental Measures (continued)
 
 
 
 
 
 
 
 
 
 
 

FFO before specified items: (continued)

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.

Adjusted Funds from Operations:

We calculate adjusted funds from operations, or AFFO, by adding to or subtracting from FFO (i) non-cash operating revenues and expenses, (ii) capitalized operating expenditures such as leasing payroll, (iii) recurring and non-recurring capital expenditures required to maintain and re-tenant our properties, (iv) regular principal payments required to service our debt, and (v) 2nd generation tenant improvements and leasing commissions. Management uses AFFO as a supplemental liquidity measure because, when compared year over year, it assesses our ability to fund our dividend and distribution requirements from our operating activities. We also believe that, as a widely recognized measure of the liquidity of REITs, AFFO will be used by investors as a basis to assess our ability to fund dividend payments in comparison to other REITs.

However, because AFFO may exclude certain non-recurring capital expenditures and leasing costs, the utility of AFFO as a measure of our liquidity is limited. Additionally, other Equity REITs may not calculate AFFO using the method we do. As a result, our AFFO may not be comparable to such other Equity REITs’ AFFO. AFFO should be considered only as a supplement to cash flow from operating activities (as computed in accordance with GAAP) as a measure of our liquidity.

33
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2013

 
 
 
 
 
 
 
 
 
 
Management Statements on Non-GAAP Supplemental Measures (continued)
 
 
 
 
 
 
 
 
 
 
 

EBITDA:

Management uses EBITDA as an indicator of our ability to incur and service debt. We believe EBITDA is an appropriate supplemental measure for such purposes, because the amounts spent on interest are, by definition, available to pay interest, income tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up, and depreciation and amortization are non-cash charges. In addition, we believe EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of Equity REITs. However, because EBITDA is calculated before recurring cash charges including interest expense and income taxes, and is not adjusted for capital expenditures or other recurring cash requirements of our business, its utility as a measure of our liquidity is limited. Accordingly, EBITDA should not be considered an alternative to cash flow from operating activities (as computed in accordance with GAAP) as a measure of our liquidity. EBITDA should not be considered as an alternative to net income or loss as an indicator of our operating performance. Other Equity REITs may calculate EBITDA differently than we do; accordingly, our EBITDA may not be comparable to such other Equity REITs’ EBITDA.

Adjusted EBITDA:

Management also uses Adjusted EBITDA as a supplemental performance measure because gains or losses from early extinguishment of debt, impairment writedowns of depreciable real estate, gains on settlement of debt and gain on sale of interest in unconsolidated joint venture 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.

Impairment writedowns represent charges taken to write down depreciable real estate to estimated fair value when events or changes in circumstances indicate that the carrying amount may not be recoverable. In some instances, the disposition of properties impaired in prior periods may result in a gain on settlement of debt at the time of disposition. Management excludes impairment writedowns on depreciable real estate, gains on disposition of depreciable real estate, gains on settlement of debt and gain on sale of interest in unconsolidated joint venture from the calculation of Adjusted EBITDA because they relate to the financial statement impact of decisions made to dispose of property, whether in the period of disposition or in advance of disposition. These types of gains or losses create volatility in our earnings and make it difficult for investors to determine the earnings generated by our ongoing business operations.

Coverage Ratios:

We present interest and fixed charge coverage ratios as supplemental liquidity measures. Management uses these ratios as indicators of our financial flexibility to service current interest expense and debt amortization from current cash net operating income. In addition, we believe that these coverage ratios represent common metrics used by securities analysts, investors and other interested parties to evaluate our ability to service fixed cash payments. However, because these ratios are derived from EBITDA, their utility is limited by the same factors that limit the usefulness of EBITDA as a liquidity measure. Accordingly, our interest coverage ratio should not be considered as an alternative to cash flow from operating activities (as computed in accordance with GAAP) as a measure of our liquidity.

34