Maguire Properties Reports Third Quarter 2009 Financial Results
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LOS ANGELES--(BUSINESS WIRE)-- Maguire Properties, Inc. (NYSE: MPG), a Southern California-focused real estate investment trust reported results for the quarter ended September 30, 2009.
Significant Third Quarter Events
-- As previously announced on August 10, 2009, six special purpose
property-owning subsidiaries are or will be in default on their mortgage
loans. The defaults occurred as a result of the board of directors
approving management's plan to cease funding cash shortfalls at these
properties. The properties are Stadium Towers in Central Orange County,
Park Place II in Irvine, 2600 Michelson in Irvine, Pacific Arts Plaza in
Costa Mesa, 550 South Hope in Downtown Los Angeles, and 500 Orange Tower
in Central Orange County. During the third quarter, we accrued default
interest totaling $4.6 million as well as regular scheduled interest
totaling $7.3 million related to properties currently in default, both
of which are unpaid as of September 30, 2009.
-- On August 11, 2009, we completed a deed in lieu of foreclosure with the
lender to dispose of Park Place I. Additionally, we closed the sale of
certain parking areas together with related development rights
associated with the Park Place campus for $17.0 million. We received net
proceeds of $16.5 million, which we intend to use for general corporate
purposes. We recorded a $4.2 million impairment charge during the third
quarter in connection with this disposition.
-- In September 2009, we extended the maturity date of our Lantana Media
Campus construction loan to June 13, 2010.
-- During the quarter, we completed new leases and renewals for
approximately 300,000 square feet (including our pro rata share of our
joint venture properties).
Significant Subsequent Events
-- On September 15, 2009, we entered into an agreement to sell 130 State
College located in Orange County for $6.5 million. We received net
proceeds totaling approximately $6 million, which we intend to use for
general corporate purposes. This transaction closed on October 30, 2009.
During the third quarter, we recorded a $5.9 million non-cash impairment
charge related to the disposition of this property.
Third Quarter 2009 Financial Results
-- Net loss available to common stockholders for the quarter ended
September 30, 2009 was $(46.8) million, or $(0.97) per share, compared
to a net loss available to common stockholders of $(72.5) million, or $
(1.52) per share, for the quarter ended September 30, 2008. Our earnings
in the third quarter of 2009 were negatively impacted by impairment
charges totaling $10.1 million recorded in connection with the
dispositions of Park Place I and 130 State College, $4.6 million of
default interest accrued on properties currently in default and $1.5
million of severance-related charges. Our earnings in the third quarter
of 2008 were negatively impacted by impairment charges totaling $21.8
million recorded in connection with the dispositions of City Plaza and
1920 and 2010 Main Plaza.
-- Our share of Funds from Operations (FFO) available to common
stockholders for the quarter ended September 30, 2009 was $(11.7)
million, or $(0.24) per share, compared to $(20.2) million, or $(0.42)
per share, for the quarter ended September 30, 2008. Our share of FFO
before specified items was $2.8 million, or $0.06 per diluted share, for
the quarter ended September 30, 2009 as compared to $1.8 million, or
$0.04 per diluted share, for the quarter ended September 30, 2008.
The weighted average number of common and common equivalent shares used to calculate basic and diluted earnings per share for the quarter ended September 30, 2009 was 48,285,111 due to our net loss position. Our diluted number of common and common equivalent shares outstanding used to calculate FFO for the quarter ended September 30, 2009 was 48,592,128.
As of September 30, 2009, our portfolio was comprised of whole or partial interests in approximately 30 million square feet, consisting of 33 office and retail properties totaling approximately 18 million net rentable square feet, one 350-room hotel with 266,000 square feet, and on- and off-site structured parking plus surface parking totaling approximately 12 million square feet, which accommodates approximately 38,000 vehicles. We have one recently completed development project that totals approximately 188,000 square feet of office space. We also own undeveloped land that we believe can support up to approximately 4 million square feet of office and mixed-use development and approximately 5 million square feet of structured parking, excluding development sites that will be disposed of along with our Stadium Towers Plaza, Pacific Arts Plaza and 2600 Michelson properties.
We will host a conference call and audio webcast, both open to the general public, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time) on Tuesday, November 3, 2009, to discuss the financial results of the third quarter and provide a company update. The conference call can be accessed by dialing (866) 394-8461 (Domestic) or (706) 758-3042 (International), ID number 37672624. The live conference call can be accessed via audio webcast at the Investor Relations section of our website, located at www.maguireproperties.com, or through CCBN at www.fulldisclosure.com.
A replay of the conference call will be available approximately two hours following the call through November 6, 2009. To access this replay, dial (800) 642-1687 (Domestic) or (706) 645-9291 (International). The required passcode for the replay is ID number 37672624. The replay can also be accessed via audio webcast at the Investor Relations section of our website, located at www.maguireproperties.com, or through CCBN at www.fulldisclosure.com.
About Maguire Properties, Inc.
Maguire Properties, Inc. is the largest owner and operator of Class A office properties in the Los Angeles central business district and is primarily focused on owning and operating high-quality office properties in the Southern California market. Maguire Properties, Inc. is a full-service real estate company with substantial in-house expertise and resources in property management, marketing, leasing, acquisitions, development and financing. For more information on Maguire Properties, visit our website at www.maguireproperties.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: risks associated with management's focus on asset dispositions, loan defaults, cash generation and general strategic matters; risks associated with the timing and consequences of loan defaults and related asset dispositions; risks associated with contingent guarantees by our Operating Partnership; risks associated with our liquidity situation; risks associated with the negative impact of the current credit crisis and economic slowdown; general risks affecting the real estate industry (including, without limitation, 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 availability and terms of financing and the use of debt to fund acquisitions and developments; risks associated with our ability to dispose of properties, if and when we decide to do so, at prices or terms set by or acceptable to us; risks and uncertainties affecting property development and construction; risks associated with increases in interest rates, volatility in the securities markets and contraction in the credit markets affecting our ability to extend or refinance existing loans as they come due; risks associated with joint ventures; potential liability for uninsured losses and environmental contamination; risks associated with our potential failure to qualify as a REIT under the Internal Revenue Code of 1986, as amended, and possible adverse changes in tax and environmental laws; and risks associated with our dependence on key personnel whose continued service is not guaranteed.
For a further list and description of such risks and uncertainties, see our Annual Report on Form 10-K/A filed on April 30, 2009 and our Quarterly Report on Form 10-Q filed on August 10, 2009 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.
MAGUIRE PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
Sept. 30, 2009 December 31, 2008
(Unaudited)
ASSETS
Investments in real estate $ 4,337,009 $ 5,026,688
Less: accumulated depreciation (647,581 ) (604,302 )
Net investments in real estate 3,689,428 4,422,386
Cash and cash equivalents 61,696 80,502
Restricted cash 160,413 199,664
Rents and other receivables, net 9,260 15,044
Deferred rents 72,203 62,229
Due from affiliates 2,130 1,665
Deferred leasing costs and value of in-place 129,974 153,660
leases, net
Deferred loan costs, net 24,514 30,496
Acquired above-market leases, net 9,705 19,503
Other assets 12,582 19,663
Investment in unconsolidated joint ventures -- 11,606
Assets associated with real estate held for -- 182,597
sale
Total assets $ 4,171,905 $ 5,199,015
LIABILITIES AND DEFICIT
Liabilities:
Mortgage and other secured loans $ 4,421,913 $ 4,714,090
Accounts payable and other liabilities 185,756 216,920
Capital leases payable 2,953 4,146
Acquired below-market leases, net 84,013 112,173
Obligations associated with real estate held -- 171,348
for sale
Total liabilities 4,694,635 5,218,677
Deficit:
Stockholders' Deficit:
Preferred stock, $0.01 par value, 50,000,000
shares authorized; 7.625% Series A Cumulative
Redeemable Preferred Stock, $25.00 100 100
liquidation preference, 10,000,000 shares
issued and outstanding
Common stock, $0.01 par value, 100,000,000
shares authorized; 47,945,363 and 47,974,955 480 480
shares issued and outstanding at September
30, 2009 and December 31, 2008, respectively
Additional paid-in capital 700,530 696,260
Accumulated deficit and dividends (1,125,223 ) (656,606 )
Accumulated other comprehensive loss, net (36,659 ) (59,896 )
Total stockholders' deficit (460,772 ) (19,662 )
Noncontrolling Interests:
Common units of our Operating Partnership (61,958 ) --
Total deficit (522,730 ) (19,662 )
Total liabilities and deficit $ 4,171,905 $ 5,199,015
MAGUIRE PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except share and per share amounts)
For the Three Months Ended For the Nine Months Ended
Sept. 30, 2009 Sept. 30, 2008 Sept. 30, 2009 Sept. 30, 2008
Revenue:
Rental $ 78,528 $ 74,596 $ 234,802 $ 227,442
Tenant 28,483 27,359 82,460 80,817
reimbursements
Hotel operations 4,916 6,301 15,058 20,168
Parking 12,422 12,354 37,203 37,781
Management,
leasing and 1,550 1,518 5,327 5,332
development
services
Interest and 430 1,740 3,214 7,707
other
Total revenue 126,329 123,868 378,064 379,247
Expenses:
Rental property
operating and 29,509 28,166 85,325 83,322
maintenance
Hotel operating 3,371 4,102 10,301 13,084
and maintenance
Real estate 10,908 10,912 34,241 34,243
taxes
Parking 3,529 4,002 11,118 11,195
General and 8,603 9,052 24,781 52,797
administrative
Other expense 1,556 1,574 4,699 4,507
Depreciation and 37,729 40,475 121,283 125,085
amortization
Impairment of
long-lived 5,900 -- 242,457 --
assets
Interest 68,114 59,859 203,555 178,704
Loss from early
extinguishment -- 1,463 -- 1,463
of debt
Total expenses 169,219 159,605 737,760 504,400
Loss from
continuing
operations
before equity in
net loss of (42,890 ) (35,737 ) (359,696 ) (125,153 )
unconsolidated
joint venture
and gain on sale
of real estate
Equity in net
loss of 229 (98 ) (10,630 ) (762 )
unconsolidated
joint venture
Gain on sale of -- -- 20,350 --
real estate
Loss from
continuing (42,661 ) (35,835 ) (349,976 ) (125,915 )
operations
Discontinued
Operations:
Loss from
discontinued
operations (5,919 ) (31,923 ) (186,002 ) (105,884 )
before gain on
sale of real
estate
Gain on sale of -- -- 2,170 --
real estate
Loss from
discontinued (5,919 ) (31,923 ) (183,832 ) (105,884 )
operations
Net loss (48,580 ) (67,758 ) (533,808 ) (231,799 )
Net loss
attributable to
common units of 6,517 -- 66,937 14,354
our Operating
Partnership
Net loss
attributable to (42,063 ) (67,758 ) (466,871 ) (217,445 )
Maguire
Properties, Inc.
Preferred stock (4,766 ) (4,766 ) (14,298 ) (14,298 )
dividends
Net loss
available to $ (46,829 ) $ (72,524 ) $ (481,169 ) $ (231,743 )
common
stockholders
Basic and
diluted loss per
common share:
Loss from
continuing $ (0.86 ) $ (0.85 ) $ (6.66 ) $ (2.76 )
operations
Loss from
discontinued (0.11 ) (0.67 ) (3.36 ) (2.12 )
operations
Net loss
available to
common $ (0.97 ) $ (1.52 ) $ (10.02 ) $ (4.88 )
stockholders per
share
Weighted average
number of common 48,285,111 47,773,575 48,021,209 47,458,332
shares
outstanding
Amounts
attributable to
Maguire
Properties,
Inc.:
Loss from
continuing $ (36,867 ) $ (35,835 ) $ (305,489 ) $ (116,711 )
operations
Loss from
discontinued (5,196 ) (31,923 ) (161,382 ) (100,734 )
operations
$ (42,063 ) $ (67,758 ) $ (466,871 ) $ (217,445 )
MAGUIRE PROPERTIES, INC.
FUNDS FROM OPERATIONS
(Unaudited and in thousands, except share and per share amounts)
For the Three Months For the Nine Months Ended
Ended
Sept. 30, Sept. 30, Sept. 30, 2009 Sept. 30, 2008
2009 2008
Reconciliation of net
loss available to
common stockholders to
funds from operations:
Net loss available to $ (46,829) $ (72,524) $ (481,169) $ (231,743)
common stockholders
Depreciation and
Add: amortization of 39,038 46,881 130,747 150,764
real estate
assets
Depreciation and
amortization of
real estate 2,141 2,675 7,461 7,355
assets -
unconsolidated
joint venture (a)
Net loss
attributable to
common units of (6,517) -- (66,937) (14,354)
our Operating
Partnership
Unallocated
losses - (1,160) -- (2,945) --
unconsolidated
joint venture (a)
Deduct: Gains on sale -- -- 22,520 --
of real estate
Funds from operations
available to common $ (13,327) $ (22,968) $ (435,363) $ (87,978)
stockholders and unit
holders (FFO) (b)
Company share of FFO $ (11,699) $ (20,158) $ (382,197) $ (77,219)
(c) (d)
FFO per share - basic $ (0.24) $ (0.42) $ (7.96) $ (1.63)
FFO per share - diluted $ (0.24) $ (0.42) $ (7.96) $ (1.63)
Weighted average number
of common shares 48,285,111 47,773,575 48,021,209 47,458,332
outstanding - basic
Weighted average number
of common and common 48,592,128 47,778,955 48,149,165 47,671,355
equivalent shares
outstanding - diluted
Reconciliation of FFO
to FFO before specified
items: (e)
FFO available to common
stockholders and unit $ (13,327) $ (22,968) $ (435,363) $ (87,978)
holders (FFO)
Loss from early
extinguishment of
Add: debt included in -- 1,463 -- 1,463
continuing
operations
Loss from early
extinguishment of
debt included in 263 1,801 851 1,801
discontinued
operations
Realized loss on
forward-starting -- -- 11,340 --
interest rate
swap
Default interest
accrued on 4,561 -- 4,561 --
properties in
default
Severance-related 1,526 -- 1,526 --
charges
Impairment of
long-lived assets
included in 5,900 -- 242,457 --
continuing
operations
Impairment of
long-lived assets
included in 4,231 21,796 175,847 73,694
discontinued
operations
Impairment of
long-lived assets
included in -- -- 10,050 --
unconsolidated
joint venture (a)
Costs associated
with strategic
alternatives and -- -- -- 23,892
management
changes (f)
FFO before specified $ 3,154 $ 2,092 $ 11,269 $ 12,872
items
Company share of FFO
before specified items $ 2,769 $ 1,836 $ 9,893 $ 11,236
(c) (d)
FFO per share before $ 0.06 $ 0.04 $ 0.21 $ 0.24
specified items - basic
FFO per share before
specified items - $ 0.06 $ 0.04 $ 0.21 $ 0.24
diluted
__________
(a) Amount represents our 20% ownership interest in our joint venture with
Macquarie Office Trust.
Funds from Operations, or FFO, is a widely recognized measure of REIT
performance. We calculate FFO as defined by the National Association of
Real Estate Investment Trusts, or NAREIT. FFO represents net income (loss)
(as computed in accordance with accounting principles generally accepted in
(b) the United States of America, or GAAP), excluding gains from disposition of
property (but including impairments and provisions for losses on property
held for sale), plus real estate-related depreciation and amortization
(including capitalized leasing costs and tenant allowances or
improvements). Adjustments for our 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 and gains from
property dispositions, 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 from 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 definition 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 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 fund 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 our Operating Partnership of
(c) approximately 87.8% for both the three months ended September 30, 2009 and
2008, respectively.
Based on a weighted average interest in our Operating Partnership of
(d) approximately 87.8% and 87.4% for the nine months ended September 30, 2009
and 2008, respectively.
Management also uses FFO before specified items as a supplemental
performance measure because losses from early extinguishment of debt,
(e) default interest and the impairment of long-lived assets 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 write off of unamortized loan costs on
the date of extinguishment. The decision to extinguish debt prior to its
maturity generally results from (i) the assumption of debt in connection
with property acquisitions that is priced or structured at less than
desirable terms (for example, a variable interest rate instead of a fixed
interest rate), (ii) short-term bridge financing obtained in connection
with the acquisition of a property or portfolio of properties until such
time as the company completes its long-term financing strategy, (iii) the
early repayment of debt associated with properties disposed of, or (iv) the
restructuring or replacement of property or corporate-level financing to
accommodate property acquisitions. Consequently, management views these
losses as costs to complete the respective acquisition or disposition of
properties.
During the third quarter of 2009, we announced a plan to cease funding cash
shortfalls at certain properties. As a result, six special purpose
property-owning subsidiaries are or will be in default on their mortgage
loans: Stadium Towers in Central Orange County, Park Place II in Irvine,
2600 Michelson in Irvine, Pacific Arts Plaza in Costa Mesa, 550 South Hope
in Downtown Los Angeles, and 500 Orange Tower in Central Orange County. We
are accruing interest on the defaulted mortgage loans at the default rate
per the applicable loan agreements. We have excluded default interest
accrued on Properties in Default from the calculation of FFO before
specified items since this charge is a direct result of management's
decision to dispose of property other than by sale. Management views
default interest as a cost to complete the disposition of the related
properties.
Impairment of long-lived assets represents non-cash charges taken to write
down depreciable real estate assets to fair value estimated when events or
changes in circumstances indicate that the carrying amount may not be
recoverable. Per the NAREIT definition of FFO, gains from property
dispositions are excluded from the calculation of FFO; however, impairment
losses are required to be included. Management excludes both gains on
disposal and impairment losses from the calculation of FFO before specified
items because they both 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 funds generated by our ongoing business operations.
Additionally, during the nine months ended September 30, 2008, we excluded
from the calculation of FFO costs associated with our review of strategic
alternatives and management changes, primarily contractual separation
obligations for our former senior executives, and exit costs and tenant
improvement writeoffs related to the 1733 Ocean lease. These costs are
(f) associated with the Special Committee's review of strategic alternatives,
including the potential sale of our company, and the resulting management
changes made after the Special Committee concluded its review. The Special
Committee was dissolved in May 2008. Management views these costs as
non-recurring and believes that including these costs in the calculation of
FFO would make it difficult for investors to determine funds generated by
our ongoing business operations.
Source: Maguire Properties, Inc.
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