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The Company announced its Board of Directors has approved management's plan to seek to dispose of four former EOP/Blackstone assets and two other assets in cooperation with lenders as well as Park Place I and certain parking areas and development rights. During the quarter ended June 30, 2009, the Company recorded a non-cash impairment charge of approximately $345 million associated with these assets.
Nelson Rising, President and Chief Executive Officer, stated, "We remain sharply focused on our liquidity issues. We believe a successfully executed Board-approved plan will eliminate the adverse effect these assets have had on the Company's cash position."
Asset Initiative
The Company's Board of Directors has approved the disposal of Park Place I and certain parking areas and development rights as well as the following assets as part of its asset disposition plan:
-- 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.
The Company has contacted the master servicers of the mortgage loans encumbering the properties named above and has apprised them that it will no longer continue to fund the cash shortfall associated with the respective mortgages. The Company intends to work cooperatively with the master and special servicers and has expressed a willingness to continue to manage the properties until such time the CMBS special servicer appoints a receiver. The Company has a practice of working collaboratively with lenders and over the last year has completed a number of transactions that achieved favorable results for all parties.
Significant Second Quarter Events
-- On June 2, 2009, we disposed of City Parkway located in Orange, California. We have no further obligations with respect to the property-level debt and eliminated a master lease obligation on the property.
-- On June 12, 2009, we reached an agreement with our counterparty to terminate a forward-starting interest rate swap on the Lantana construction loan for $11.3 million.
-- On June 13, 2009, we extended the maturity date of our Lantana Media Campus construction loan to September 30, 2009. We have the option to extend the maturity date of this loan to June 13, 2010, subject to certain conditions.
-- On June 15, 2009, we disposed of 3161 Michelson, which is located within the Park Place campus in Irvine, California. The Company has no further obligations with respect to the property-level debt and eliminated significant master lease obligations. Additionally, our Operating Partnership has no further obligation to guarantee the repayment of the construction loan.
-- During the quarter, we completed new leases and renewals for approximately 452,000 square feet (including our pro rata share of our joint venture properties), including a new lease for approximately 82,500 square feet with U.S. Bank at 3121 Michelson located in Irvine, California.
Significant Subsequent Events
-- Subsequent to quarter end, we entered into loan modifications to amend the financial covenants of our Plaza Las Fuentes mortgage and Lantana Media Campus construction loan effective as of June 30, 2009. We made certain principal paydowns and agreed to other changes to the loan agreements, as described in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009. These loan modifications provide us with greater operating flexibility, particularly with respect to the disposition of non-core assets.
-- On August 6, 2009, the Company entered into a deed in lieu of foreclosure with the lender to dispose of Park Place I. Additionally, we have entered into an agreement to sell certain parking areas together with related development rights under which we have received a non-refundable deposit.
Second Quarter 2009 Financial Results
-- Net loss available to common stockholders for the quarter ended June 30, 2009 was $(380.5) million, or $(7.95) per share, compared to a net loss available to common stockholders of $(110.6) million, or $(2.32) per share, for the quarter ended June 30, 2008. Our earnings in the second quarter of 2009 were negatively impacted by non-cash impairment charges totaling $384.7 million recorded in connection with the properties included in the Company's Asset Disposition Program, City Parkway, which was disposed of during the quarter and the writeoff of assets related to our investment in DH Von Karman Maguire, LLC. Additionally, our earnings were negatively impacted by $8.3 million due to a non-cash impairment charge recorded in our Maguire Macquarie joint venture in connection with the Quintana Campus in Irvine. Our earnings in the second quarter of 2008 were negatively impacted by a $51.9 million impairment charge recorded in connection with the disposition of Main Plaza and $17.5 million of costs associated with our review of strategic alternatives and management changes.
-- Our share of Funds from Operations (FFO) available to common stockholders for the quarter ended June 30, 2009 was $(339.7) million, or $(7.10) per diluted share, compared to $(56.4) million, or $(1.18) per diluted share, for the quarter ended June 30, 2008. Our share of FFO before specified items was $3.7 million, or $0.08 per diluted share, for the quarter ended June 30, 2009 as compared to $4.5 million, or $0.09 per diluted share, for the quarter ended June 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 June 30, 2009 was 47,836,591 due to our net loss position. Our diluted number of common and common equivalent shares outstanding used to calculate FFO for the quarter ended June 30, 2009 was 47,837,083.
As of June 30, 2009, our portfolio was comprised of whole or partial interests in approximately 32 million square feet, consisting of 33 office and retail properties totaling approximately 19 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 almost 41,000 vehicles. We have one project under development that totals approximately 189,000 square feet of office space. We also own undeveloped land that we believe can support up to approximately 8 million square feet of office, hotel, retail, and residential development and approximately 8 million square feet of structured parking.
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 Monday, August 10, 2009, to discuss the financial results of the second 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 24118207. 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 August 13, 2009. To access this replay, dial (800) 642-1687 (Domestic) or (706) 645-9291 (International). The required passcode for the replay is ID number 24118207. 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 our announced asset disposition program; risks associated with our 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 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)
June 30, 2009 December 31, 2008
(Unaudited)
ASSETS
Investments in real estate $ 4,559,872 $ 5,026,688
Less: accumulated depreciation (666,092 ) (604,302 )
Net investments in real estate 3,893,780 4,422,386
Cash and cash equivalents 63,736 80,502
Restricted cash 159,487 199,664
Rents and other receivables, net 10,938 15,044
Deferred rents 70,284 62,229
Due from affiliates 2,984 1,665
Deferred leasing costs and value of in-place leases, net 139,132 153,660
Deferred loan costs, net 26,564 30,496
Acquired above-market leases, net 11,514 19,503
Other assets 13,882 19,663
Investment in unconsolidated joint ventures - 11,606
Assets associated with real estate held for sale - 182,597
Total assets $ 4,392,301 $ 5,199,015
LIABILITIES AND DEFICIT
Liabilities:
Mortgage and other secured loans $ 4,600,771 $ 4,714,090
Accounts payable and other liabilities 171,173 216,920
Capital leases payable 3,294 4,146
Acquired below-market leases, net 91,015 112,173
Obligations associated with real estate held for sale - 171,348
Total liabilities 4,866,253 5,218,677
Deficit:
Stockholders' Deficit:
Preferred stock, $0.01 par value, 50,000,000 shares authorized; 100 100
7.625% Series A Cumulative Redeemable Preferred Stock, $25.00
liquidation preference, 10,000,000 shares issued and outstanding
Common stock, $0.01 par value, 100,000,000 shares authorized; 480 480
47,967,645 and 47,974,955 shares issued and outstanding at June
30, 2009 and December 31, 2008, respectively
Additional paid-in capital 699,351 696,260
Accumulated deficit and dividends (1,082,577 ) (656,606 )
Accumulated other comprehensive loss, net (35,451 ) (59,896 )
Total stockholders' deficit (418,097 ) (19,662 )
Noncontrolling Interests:
Common units of our Operating Partnership (55,855 ) -
Total deficit (473,952 ) (19,662 )
Total liabilities and deficit $ 4,392,301 $ 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 Six Months Ended
June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008
Revenue:
Rental $ 86,240 $ 83,238 $ 169,222 $ 166,873
Tenant reimbursements 26,537 26,000 54,364 54,185
Hotel operations 5,148 6,986 10,142 13,867
Parking 12,711 13,239 25,794 26,911
Management, leasing and development services 1,747 1,857 3,777 3,814
Interest and other 2,393 3,208 3,546 6,700
Total revenue 134,776 134,528 266,845 272,350
Expenses:
Rental property operating and maintenance 31,739 30,081 61,969 61,552
Hotel operating and maintenance 3,481 4,567 6,930 8,982
Real estate taxes 12,885 13,039 25,566 25,580
Parking 3,807 3,589 7,875 7,353
General and administrative 7,914 27,071 16,178 43,745
Other expense 1,639 1,405 3,143 2,933
Depreciation and amortization 45,664 44,834 90,057 91,309
Impairment of long-lived assets 344,540 - 344,540 -
Interest 61,018 61,145 140,264 123,670
Total expenses 512,687 185,731 696,522 365,124
Loss from continuing operations before equity in net loss of (377,911 ) (51,203 ) (429,677 ) (92,774 )
unconsolidated joint venture and gain on sale of real estate
Equity in net loss of unconsolidated joint venture (9,120 ) (388 ) (10,859 ) (664 )
Gain on sale of real estate - - 20,350 -
Loss from continuing operations (387,031 ) (51,591 ) (420,186 ) (93,438 )
Discontinued Operations:
Loss from discontinued operations before gain on sale of real (41,577 ) (61,135 ) (67,212 ) (70,603 )
estate
Gain on sale of real estate - - 2,170 -
Loss from discontinued operations (41,577 ) (61,135 ) (65,042 ) (70,603 )
Net loss (428,608 ) (112,726 ) (485,228 ) (164,041 )
Net loss attributable to common units of our Operating Partnership 52,924 6,864 60,420 14,354
Net loss attributable to Maguire Properties, Inc. (375,684 ) (105,862 ) (424,808 ) (149,687 )
Preferred stock dividends (4,766 ) (4,766 ) (9,532 ) (9,532 )
Net loss available to common stockholders $ (380,450 ) $ (110,628 ) $ (434,340 ) $ (159,219 )
Basic and diluted loss per common share:
Loss from continuing operations $ (7.19 ) $ (1.11 ) $ (7.89 ) $ (1.98 )
Loss from discontinued operations (0.76 ) (1.21 ) (1.19 ) (1.39 )
Net loss available to common stockholders per share $ (7.95 ) $ (2.32 ) $ (9.08 ) (3.37 )
Weighted average number of common shares outstanding 47,836,591 47,615,421 47,812,444 47,298,976
Amounts attributable to Maguire Properties, Inc.:
Loss from continuing operations $ (339,184 ) $ (48,299 ) $ (367,709 ) $ (83,921 )
Loss from discontinued operations (36,500 ) (57,563 ) (57,099 ) (65,766 )
$ (375,684 ) $ (105,862 ) $ (424,808 ) $ (149,687 )
MAGUIRE PROPERTIES, INC.
FUNDS FROM OPERATIONS
(Unaudited and in thousands, except share and per share amounts)
For the Three Months Ended For the Six Months Ended
June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008
Reconciliation of net loss to funds from operations:
Net loss available to common stockholders $ (380,450 ) $ (110,628 ) $ (434,340 ) $ (159,219 )
Add: Depreciation and amortization of real estate assets 46,183 50,888 91,709 103,883
Depreciation and amortization of real estate assets - 2,008 2,377 5,320 4,680
unconsolidated joint venture (a)
Net loss attributable to common units of our Operating Partnership (52,924 ) (6,864 ) (60,420 ) (14,354 )
Unallocated losses - unconsolidated joint venture (a) (1,785 ) - (1,785 ) -
Deduct: Gains on sale of real estate - - 22,520 -
Funds from operations available to common stockholders and unit $ (386,968 ) $ (64,227 ) $ (422,036 ) $ (65,010 )
holders (FFO) (b)
Company share of FFO (c) (d) $ (339,712 ) $ (56,383 ) $ (370,498 ) $ (57,061 )
FFO per share - basic $ (7.10 ) $ (1.18 ) $ (7.75 ) $ (1.21 )
FFO per share - diluted $ (7.10 ) $ (1.18 ) $ (7.75 ) $ (1.21 )
Weighted average number of common shares outstanding - basic 47,836,591 47,615,421 47,812,444 47,298,976
Weighted average number of common and common equivalent shares 47,837,083 47,875,984 47,813,342 47,587,431
outstanding - diluted
Reconciliation of FFO to FFO before specified items: (e)
FFO available to common stockholders and unit holders (FFO) $ (386,968 ) $ (64,227 ) $ (422,036 ) $ (65,010 )
Add: Loss from early extinguishment of debt included in discontinued 377 - 588 -
operations
Unrealized loss on forward-starting interest rate swap (15,255 ) - - -
Realized loss on forward-starting interest rate swap 11,340 - 11,340 -
Impairment of long-lived assets included in continuing operations 344,540 - 344,540 -
Impairment of long-lived assets included in discontinued operations 40,133 51,898 63,633 51,898
Impairment of long-lived assets included in unconsolidated 10,050 - 10,050 -
operations joint venture (a)
Costs associated with strategic alternatives and management changes - 17,490 - 23,892
(f)
FFO before specified items $ 4,217 $ 5,161 $ 8,115 $ 10,780
Company share of FFO before specified items (c) (d) $ 3,702 $ 4,531 $ 7,124 $ 9,400
FFO per share before specified items - basic $ 0.08 $ 0.10 $ 0.15 $ 0.20
FFO per share before specified items - diluted $ 0.08 $ 0.09 $ 0.15 $ 0.20
__________
(a) Amount represents our 20% ownership interest in our joint venture
with Macquarie Office Trust.
(b) 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 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).
(c) Based on a weighted average interest in our Operating Partnership of
approximately 87.8% for both the three months ended June 30, 2009
and 2008, respectively.
(d) Based on a weighted average interest in our Operating Partnership of
approximately 87.8% and 87.2% for the six months ended June 30, 2009
and 2008, respectively.
(e) Management also uses FFO before specified items as a supplemental
performance measure because losses from early extinguishment of debt
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.
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.
(f) Additionally, during the first and second quarters of 2008, we have
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 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. 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.
Maguire Properties, Inc. Peggy Moretti, 213-613-4558 Senior Vice President, Investor and Public Relations
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