Exhibit 99.2
| Supplemental Operating and Financial Data For the Quarter Ended March 31, 2004 |
Maguire Properties, Inc.
First Quarter 2004
| | | | | |
CORPORATE DATA | | PAGE |
| |
| Company Background | | | 4 | |
| Investor Information | | | 5 | |
| Common Stock Data | | | 6 | |
| |
CONSOLIDATED FINANCIAL RESULTS | | | | |
| |
| Financial Highlights | | | 8 | |
| Consolidated and Combined Balance Sheets | | | 9 | |
| Consolidated and Combined Statements of Operations | | | 10 | |
| Funds From Operations | | | 11 | |
| Adjusted Funds From Operations | | | 12 | |
| Reconciliation of Earnings Before Interest, Taxes and Depreciation and Amortization and Adjusted Funds From Operations | | | 13 | |
| Capital Structure | | | 14 | |
| Debt Summary | | | 15 | |
| |
PORTFOLIO DATA | | | | |
| |
| Portfolio Overview - Square Footage | | | 17 | |
| Portfolio Listing - Occupancy and In-Place Rents | | | 18 | |
| Major Tenants | | | 19 | |
| Portfolio Tenant Classification Description | | | 20 | |
| Lease Expiration | | | 21 | |
| Leasing Activity | | | 22 | |
| Tenant Concessions and Leasing Commissions | | | 23 | |
| Historical Capital Expenditures | | | 24 | |
| Office Market Overview | | | 25 | |
| Hotel Performance and Historical Capital Expenditures | | | 26 | |
| Option and Undeveloped Properties | | | 27 | |
| Management Statements on Non-GAAP Supplemental Measures | | | 28 | |
This supplemental package contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, you should exercise caution in interpreting and relying on these statements as they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and could materially affect actual results, performance or achievements. These factors include, without limitation, the ability to enter into new leases or renew leases on favorable terms, dependence on tenants’ financial condition, the uncertainties of real estate development and acquisition activity, the ability to effectively integrate acquisitions, the costs and availability of financing, the effects of local economic and market conditions, regulatory and tax law changes and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission.
2
Maguire Properties, Inc.
First Quarter 2004
CORPORATE DATA
3
Maguire Properties, Inc.
First Quarter 2004
COMPANY BACKGROUND
Maguire Properties, Inc. (the “Company”), a self-administered and self-managed real estate investment trust, is one of the largest owners, managers and developers of first-class office properties in the Los Angeles metropolitan area, with a significant presence in three submarkets: Los Angeles Central Business District, Tri-Cities (Pasadena, Burbank and Glendale) and Cerritos. The Company’s predecessor was founded in 1965 by Robert F. Maguire III and has developed over 30 million square feet of office properties nationally.
On June 27, 2003, we closed our initial public offering of 36,510,000 shares of common stock raising over $693 million in gross proceeds. On July 8, 2003, we issued an additional 5,476,500 shares of common stock as a result of the exercise of the underwriters’ over-allotment option. We received an additional $104 million of gross proceeds.
On August 29, 2003, we completed the acquisition of the remaining interests that we did not already own in Glendale Center, consisting of BankAmerica Realty Services Inc.’s 70% interest and Disney Enterprises’ distribution participation interest in the property. We also completed the defeasance of the existing $37 million property mortgage. As a result of this transaction, we now hold a 100% interest in the property.
On October 15, 2003, we completed an $80 million, 10-year interest-only mortgage financing at a fixed rate of 5.73% for Glendale Center.
On November 6, 2003, we completed the acquisition One California Plaza in Los Angeles from Metropolitan Life Insurance Company. The purchase price was approximately $225.0 million, which was funded through cash on hand and a $146.3 million seven-year mortgage loan at a fixed interest rate of 4.73% provided by Metropolitan Life Insurance Company.
On January 15, 2004, we completed the offering of 10 million shares of 7.625% Series A Cumulative Redeemable Preferred Stock (liquidation preference $25.00 per share) for total gross proceeds of $250 million, including the exercise of the underwriters’ over-allotment option. We intend to use the proceeds from the offering for investment and general corporate purposes.
On April 14, 2004, we completed the acquisition of Park Place in Orange County, California from an affiliate of Blackstone Real Estate Advisors. The purchase price was approximately $260.0 million including the assumption of existing mortgage and mezzanine financing of approximately $164.0 million. The remainder was funded through proceeds of the 7.625% Series A Cumulative Redeemable Preferred Stock offering.
We currently own a portfolio, including Park Place, totaling approximately 12.4 million feet consisting of ten office properties with approximately 8.8 million net rentable square feet, one 350-room hotel with 266,000 square feet, and total on and off-site parking of approximately 3.3 million feet, accommodating a capacity of over 12,000 vehicles. We also own an undeveloped two-acre land parcel adjacent to an existing office property that we believe can support approximately 300,000 net rentable square feet of office development.
On May 1, 2004, we hired William H. Flaherty as our new Senior Vice President of Leasing.
This Supplemental Operating and Financial Data package supplements the information provided in our quarterly and annual reports filed with the Securities and Exchange Commission (SEC). Additional information about us and our properties is also available at our website www.maguireproperties.com.
4
Maguire Properties, Inc.
First Quarter 2004
INVESTOR INFORMATION
333 South Grand Avenue
Suite 400
Los Angeles, CA 90071
(213) 626-3300
(213) 687-4758 (fax)
- SENIOR MANAGEMENT -
| | | | | | | |
| Robert F. Maguire III | | Chairman of the Board and Co-CEO | | William H. Flaherty | | SVP, Leasing |
| Richard I. Gilchrist | | President and Co-CEO | | Robert P. Goodwin | | SVP, Development |
| Dallas E. Lucas | | Executive Vice President, Chief Financial Officer | | Daniel F. Gifford | | SVP, Asset Management |
| Mark T. Lammas | | SVP, General Counsel | | Timothy H. Walker | | SVP, Marketing |
| Javier F. Bitar | | SVP, Finance | | Peggy M. Moretti | | VP, Investor Relations |
- CORPORATE -
Investor Relations Contact: Peggy M. Moretti (213) 626-3300
Please visit our corporate website at: www.maguireproperties.com
EQUITY RESEARCH COVERAGE
| | | | | |
| A.G. Edwards & Sons | | David AuBuchon | | (314) 955-5452 |
| Banc of America Securities | | Lee Schalop | | (212) 847-5677 |
| Deutsche Bank Alex. Brown | | John Perry | | (212) 250-5182 |
| Green Street Advisors | | Jim Sullivan | | (949) 640-8780 |
| Legg Mason | | David Fick | | (410) 454-5018 |
| Lehman Brothers | | David Shulman | | (212) 526-3413 |
| Raymond James & Associates | | Paul Puryear | | (727) 567-3800 |
| RBC Capital Markets | | Jay Leupp | | (415) 633-8588 |
| Salomon Smith Barney | | Jonathan Litt | | (212) 816-0231 |
| UBS Warburg | | Keith Mills | | (212) 713-3098 |
| Wachovia Securities | | Christopher Haley | | (443) 263-6773 |
TRANSFER AGENT
Continental Stock Transfer and Trust Company
17 Battery Place
8th Floor
New York, NY 10004
(212) 845-3215
TIMING
Quarterly results for 2004 will be announced according to the following anticipated schedule:
| | | |
| First Quarter | | Early May |
| Second Quarter | | Early August |
| Third Quarter | | Early November |
| Fourth Quarter | | Early February |
5
Maguire Properties, Inc.
First Quarter 2004
COMMON STOCK DATA (NYSE: MPG)
Maguire Properties’ common stock is traded primarily on the New York Stock Exchange under the symbol: MPG. MPG’s common stock since the initial public offering on June 24, 2003 has had the following characteristics (based on New York Stock Exchange closing prices):
| | | | | | | | | | | | | | | | | |
| | | 1st Quarter 2004
| | | 4th Quarter 2003
| | | 3rd Quarter 2003
| | | 2nd Quarter 2003 (1)
| |
| High Price | | $ | 25.60 | | | $ | 24.46 | | | $ | 20.65 | | | $ | 19.40 | |
| Low Price | | $ | 22.55 | | | $ | 20.32 | | | $ | 19.30 | | | $ | 19.00 | |
| Closing Price | | $ | 25.60 | | | $ | 24.30 | | | $ | 20.50 | | | $ | 19.25 | |
| Dividends per share - Annualized | | $ | 1.60 | | | $ | 1.60 | | | $ | 1.60 | (2) | | | N/A | |
| Closing Dividend Yield - Annualized | | | 6.25 | % | | | 6.58 | % | | | 7.80 | % | | | N/A | |
| Closing Common Shares and Limited Partnership Units Outstanding (thousands) | | | 53,645 | | | | 53,645 | | | | 53,645 | | | | 48,168 | |
| Closing Market Value of Common Shares and Limited Partnership Units Outstanding (thousands) | | $ | 1,373,315 | | | $ | 1,303,576 | | | $ | 1,099,723 | | | $ | 927,246 | |
| (1) | | MPG’s common stock from June 25, 2003 through June 30, 2003 (based on New York Stock Exchange closing prices). |
| |
| (2) | | This dividend consists of our regular quarterly dividend of $0.40 per common share for the period from July 1, 2003 through September 30, 2003. An additional amount of $0.0176 per common share covering the period from the completion of our initial public offering on June 27, 2003 through June 30, 2003 was included in the dividend declared during the third quarter. |
DIVIDENDS PER SHARE
| | | | | | | | | | | | | | | | | |
| | | 1st Quarter 2004
| | | 4th Quarter 2003
| | | 3rd Quarter 2003
| | | | | |
Common Stock | | | | | | | | | | | | | | | | |
| Amount | | $ | 0.4000 | | | $ | 0.4000 | | | $ | 0.4176 | (3) | | | | |
| Declared | | March 15, 2004 | | | December 15, 2003 | | | September 15, 2003 | | | | | |
| Record | | March 31, 2004 | | | December 31, 2003 | | | September 30, 2003 | | | | | |
| Paid | | April 30, 2004 | | | January 30, 2004 | | | October 31, 2003 | | | | | |
Preferred Stock | | | | | | | | | | | | | | | | |
| Amount | | $ | 0.51892 | (4) | | | | | | | | | | | | |
| Declared | | March 15, 2004 | | | | | | | | | | | | | |
| Record | | March 31, 2004 | | | | | | | | | | | | | |
| Paid | | April 30, 2004 | | | | | | | | | | | | | |
| (3) | | Includes $0.0176 per common share covering the period from the completion of our initial public offering on June 27, 2003 through June 30, 2003. |
| |
| (4) | | Includes $0.04236 per preferred share covering the period from the completion of our preferred stock offering on January 23, 2004 through January 31, 2004. |
6
Maguire Properties, Inc.
First Quarter 2004
CONSOLIDATED FINANCIAL RESULTS
7
Maguire Properties, Inc.
First Quarter 2004
FINANCIAL HIGHLIGHTS
(unaudited and in thousands, except per share amounts)
| | | | | | | | | | | | | |
| | | Three Months Ended | | | Three Months Ended | | | Three Months Ended | |
| | | March 31, 2004
| | | December 31, 2003
| | | September 30, 2003
| |
Income Items: | | | | | | | | | | | | |
| Revenue (1) | | $ | 73,091 | | | $ | 70,208 | | | $ | 62,523 | |
| Straight line rent | | $ | 1,399 | | | $ | 726 | | | $ | 713 | |
| Fair value lease revenue (2) | | $ | 598 | | | $ | 916 | | | $ | 567 | |
| Lease termination fees | | $ | 274 | | | $ | – | | | $ | – | |
| Office property operating margin (3) | | | 65.8 | % | | | 65.0 | % | | | 67.0 | % |
| Net income allocable to common shareholders | | $ | 5,928 | | | $ | 8,030 | | | $ | 7,196 | |
| |
| Funds from operations (FFO) available to common shareholders (4) | | $ | 19,435 | | | $ | 21,227 | | | $ | 18,064 | |
| FFO per common share - basic and diluted (4) | | $ | 0.46 | | | $ | 0.50 | | | $ | 0.43 | |
| FFO per common share before loss from early extinguishment of debt - basic and diluted (4) | | $ | 0.46 | | | $ | 0.50 | | | $ | 0.48 | |
| Net income per common share - basic and diluted | | $ | 0.14 | | | $ | 0.19 | | | $ | 0.17 | |
| Dividends declared per common share | | $ | 0.40 | | | $ | 0.40 | | | $ | 0.42 | |
| Dividends declared per preferred share | | $ | 0.52 | | | $ | – | | | $ | – | |
| |
Ratios: | | | | | | | | | | | | |
| Interest coverage ratio (5) | | | 3.20 | | | | 3.24 | | | | 3.27 | |
| Fixed-charge coverage ratio (6) | | | 2.47 | | | | 3.18 | | | | 3.19 | |
| FFO payout ratio (7) | | | 87.1 | % | | | 80.0 | % | | | 97.6 | % |
| AFFO payout ratio (8) | | | 98.8 | % | | | 85.6 | % | | | 93.6 | % |
| |
Capitalization: | | | | | | | | | | | | |
| Total consolidated debt | | $ | 1,211,250 | | | $ | 1,211,250 | | | $ | 985,000 | |
| Preferred stock @ quarter end | | $ | 250,000 | | | $ | – | | | $ | – | |
| Common stock price @ quarter end | | $ | 25.60 | | | $ | 24.30 | | | $ | 20.50 | |
| Common equity value @ quarter end (9) | | $ | 1,373,315 | | | $ | 1,303,576 | | | $ | 1,099,724 | |
| Total market capitalization | | $ | 2,834,565 | | | $ | 2,514,826 | | | $ | 2,084,724 | |
| Debt / total market capitalization | | | 42.7 | % | | | 48.2 | % | | | 47.2 | % |
| Debt plus preferred stock / total market capitalization | | | 51.6 | % | | | 48.2 | % | | | 47.2 | % |
| (1) | | Includes gross revenue from hotel operations of $5,199, $5,144 and $4,392 for the three months ended March 31, 2004, December 31, 2003 and September 30, 2003, respectively. |
| |
| (2) | | Represents the net adjustment for above and below market leases which are being amortized over the term of the respective leases at the investment date. |
| |
| (3) | | Calculated as follows: (rental, tenant reimbursement and parking revenues - rental property operating and maintenance expense, real estate taxes and parking expenses) / rental, tenant reimbursement and parking revenues. |
| |
| (4) | | For a definition and discussion of FFO, see page 28. For a quantitative reconciliation of the differences between FFO and net income, see page 11. |
| |
| (5) | | Calculated as earnings before interest, taxes and depreciation and amortization and preferred dividends, or EBITDA, of $42,250, $40,528 and $34,424, respectively divided by cash interest expense of $13,221, $12,500 and $10,525, respectively, see page 15. For a discussion of EBITDA, see page 29. For a quantitative reconciliation of the differences between EBITDA and net income, see page 13. |
| |
| (6) | | Calculated as EBITDA of $42,250, $40,528 and $34,424, respectively divided by fixed charges of $17,095, $12,764 and $10,786, see page 15. |
| |
| (7) | | Calculated as dividend declared per share divided by FFO per share. |
| |
| (8) | | Calculated as common stock dividends and distributions declared of $21,458, $21,458 and $22,402, respectively, divided by AFFO of $21,722, $25,084 and $23,923, respectively. For a definition and discussion of AFFO, see page 28. For a quantitative reconciliation of the differences between AFFO and FFO, see page 12. |
| |
| (9) | | Assuming 100% conversion of the limited partnership units in the operating partnership into shares of our common stock. |
8
Maguire Properties, Inc.
First Quarter 2004
CONSOLIDATED AND COMBINED BALANCE SHEETS
(in thousands)
| | | | | | | | | | | | | | | | | |
| | | March 31, 2004
| | | December 31, 2003
| | | September 30, 2003
| | | June 30, 2003
| |
| | | (unaudited) | | | | | | | (unaudited) | | | (unaudited) | |
| |
Assets | | | | | | | | | | | | | | | | |
| Investment in real estate, net | | $ | 1,542,365 | | | $ | 1,553,449 | | | $ | 1,336,509 | | | $ | 1,267,527 | |
| Cash and cash equivalents including restricted cash | | | 309,442 | | | | 82,899 | | | | 92,918 | | | | 95,288 | |
| Rents, deferred rents and other receivables | | | 26,730 | | | | 24,623 | | | | 23,220 | | | | 16,517 | |
| Deferred charges, net | | | 93,686 | | | | 98,567 | | | | 89,401 | | | | 68,227 | |
| Other assets | | | 24,846 | | | | 15,649 | | | | 22,266 | | | | 16,840 | |
| | |
| | |
| | |
| | |
| |
Total assets | | $ | 1,997,069 | | | $ | 1,775,187 | | | $ | 1,564,314 | | | $ | 1,464,399 | |
| | |
| | |
| | |
| | |
| |
| |
Liabilities and stockholders’ equity and owners’ deficit | | | | | | | | | | | | | | | | |
| Loans payable | | | 1,211,250 | | | $ | 1,211,250 | | | $ | 985,000 | | | $ | 985,000 | |
| Losses and distributions in excess of investments in real estate entities and loans payable to such entities | | | – | | | | – | | | | – | | | | 16,172 | |
| Dividends and distributions payable | | | 25,059 | | | | 21,458 | | | | 22,402 | | | | – | |
| Accounts payable, accrued interest payable and other liabilities | | | 61,900 | | | | 64,753 | | | | 74,718 | | | | 73,086 | |
| Acquired lease obligations | | | 43,988 | | | | 45,724 | | | | 42,855 | | | | 39,380 | |
| | |
| | |
| | |
| | |
| |
Total liabilities | | | 1,342,197 | | | | 1,343,185 | | | | 1,124,975 | | | | 1,113,638 | |
| | |
| | |
| | |
| | |
| |
| |
| Minority interests | | | 84,917 | | | | 88,578 | | | | 90,082 | | | | 80,097 | |
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Stockholders’ equity and owners’ deficit | | | | | | | | | | | | | | | | |
| Common and preferred stock and additional paid in capital | | | 647,282 | | | $ | 406,559 | | | $ | 407,427 | | | $ | 321,933 | |
| Accumulated deficit and dividends | | | (77,014 | ) | | | (65,884 | ) | | | (56,854 | ) | | | (46,242 | ) |
| Unearned and accrued stock compensation, net | | | (3,294 | ) | | | (3,800 | ) | | | (5,389 | ) | | | (5,997 | ) |
| Accumulated other comprehensive income, net | | | 2,981 | | | | 6,549 | | | | 4,073 | | | | 970 | |
| | |
| | |
| | |
| | |
| |
Total stockholders’ equity and owners’ deficit | | | 569,955 | | | | 343,424 | | | | 349,257 | | | | 270,664 | |
| | |
| | |
| �� | |
| | |
| |
Total liabilities and stockholders’ equity and owners’ deficit | | $ | 1,997,069 | | | $ | 1,775,187 | | | $ | 1,564,314 | | | $ | 1,464,399 | |
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| | |
| | |
| | |
| |
9
Maguire Properties, Inc.
First Quarter 2004
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(in thousands, except for per share amounts )
(unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended
|
| | | March 31, 2004
| | | December 31, 2003
| | | September 30, 2003
| | | June 30, 2003 (1)
| |
| |
Revenue: | | | | | | | | | | | | | | | | |
| Rental | | $ | 38,841 | | | $ | 37,792 | | | $ | 33,986 | | | $ | 15,640 | |
| Tenant reimbursements | | | 19,860 | | | | 18,535 | | | | 16,070 | | | | 6,462 | |
| Hotel operations | | | 5,199 | | | | 5,144 | | | | 4,392 | | | | 4,425 | |
| Parking | | | 7,643 | | | | 7,133 | | | | 6,371 | | | | 2,824 | |
| Management, leasing and development services to affiliates | | | 697 | | | | 1,425 | | | | 1,313 | | | | 882 | |
| Other | | | 851 | | | | 179 | | | | 391 | | | | 2,015 | |
| | |
| | |
| | |
| | |
| |
Total revenue | | | 73,091 | | | | 70,208 | | | | 62,523 | | | | 32,248 | |
| | |
| | |
| | |
| | |
| |
| |
Expenses: | | | | | | | | | | | | | | | | |
| Rental property operating and maintenance | | | 15,295 | | | | 14,427 | | | | 12,599 | | | | 6,529 | |
| Hotel operating and maintenance | | | 3,711 | | | | 3,495 | | | | 3,287 | | | | 3,422 | |
| Real estate taxes | | | 5,320 | | | | 5,874 | | | | 4,757 | | | | 1,575 | |
| Parking expenses | | | 2,079 | | | | 1,965 | | | | 1,680 | | | | 871 | |
| General and administrative | | | 3,763 | | | | 3,398 | | | | 3,028 | | | | 17,780 | |
| Depreciation and amortization | | | 17,082 | | | | 16,711 | | | | 13,696 | | | | 6,280 | |
| Interest | | | 14,110 | | | | 13,716 | | | | 11,650 | | | | 13,596 | |
| Loss from early extinguishment of debt | | | – | | | | – | | | | 2,431 | | | | 50,996 | |
| Other | | | 673 | | | | 521 | | | | 286 | | | | 11,325 | |
| | |
| | |
| | |
| | |
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Total expenses | | | 62,033 | | | | 60,107 | | | | 53,414 | | | | 112,374 | |
| | |
| | |
| | |
| | |
| |
| |
| Income (loss) before equity in net income (loss) of real estate entities and minority interests | | | 11,058 | | | | 10,101 | | | | 9,109 | | | | (80,126 | ) |
| Equity in net (loss) income of real estate entities | | | – | | | | – | | | | (31 | ) | | | 760 | |
| | |
| | |
| | |
| | |
| |
| Income (loss) before minority interests | | | 11,058 | | | | 10,101 | | | | 9,078 | | | | (79,366 | ) |
| Minority interests | | | 1,529 | | | | 2,071 | | | | 1,882 | | | | (13,553 | ) |
| | |
| | |
| | |
| | |
| |
Net income (loss) | | | 9,529 | | | | 8,030 | | | | 7,196 | | | | (65,813 | ) |
| Preferred stock dividends | | | 3,601 | | | | – | | | | – | | | | – | |
| | |
| | |
| | |
| | |
| |
Net income (loss) allocable to common shareholders | | $ | 5,928 | | | $ | 8,030 | | | $ | 7,196 | | | $ | (65,813 | ) |
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| | |
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| | |
| |
Net income per common share – basic and diluted | | $ | 0.14 | | | $ | 0.19 | | | $ | 0.17 | | | | | |
| | |
| | |
| | |
| | | | | |
Weighted-average shares outstanding – basic | | | 42,329,921 | | | | 42,329,921 | | | | 41,913,231 | | | | | |
| | |
| | |
| | |
| | | | | |
Weighted-average shares outstanding – diluted | | | 42,578,570 | | | | 42,496,536 | | | | 41,974,245 | | | | | |
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| | |
| | | | | |
| (1) | | Represents combined operating results for Maguire Properties, Inc. for the four day period from June 27, 2003 to June 30, 2003 and the Maguire Properties Predecessor for the period from April 1, 2003 to June 26, 2003. The operating results for the quarter ended June 30, 2003 are not comparable to future expected operating results of the company since they include various IPO-related charges. |
10
Maguire Properties, Inc.
First Quarter 2004
FUNDS FROM OPERATIONS(1)
(in thousands, except for per share amounts )
(unaudited)
| | | | | | | | | | | | | |
| | | Three Months Ended | | | Three Months Ended | | | Three Months Ended | |
| | | March 31, 2004
| | | December 31, 2003
| | | September 30, 2003
| |
Reconciliation of net income to funds from operations: | | | | | | | | | | | | |
| Net income allocable to common shareholders | | $ | 5,928 | | | $ | 8,030 | | | $ | 7,196 | |
| Adjustments: | | | | | | | | | | | | |
| Minority interests | | | 1,529 | | | | 2,071 | | | | 1,882 | |
| Real estate depreciation and amortization | | | 16,991 | | | | 16,599 | | | | 13,584 | |
| Share of real estate depreciation and amortization of an unconsolidated property | | | – | | | | – | | | | 117 | |
| | |
| | |
| | |
| |
| Funds from operations allocable to common shareholders and unitholders (FFO) | | $ | 24,448 | | | $ | 26,700 | | | $ | 22,779 | |
| | |
| | |
| | |
| |
Company share of FFO(2) | | $ | 19,435 | | | $ | 21,227 | | | $ | 18,064 | |
| | |
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| | |
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| FFO per share - basic and diluted | | $ | 0.46 | | | $ | 0.50 | | | $ | 0.43 | (3) |
| | |
| | |
| | |
| |
| | | | | | | | | | | | | |
| Weighted-average shares outstanding - basic | | | 42,329,921 | | | | 42,329,921 | | | | 41,913,231 | |
| | |
| | |
| | |
| |
| Weighted-average shares outstanding - diluted | | | 42,578,570 | | | | 42,496,536 | | | | 41,974,245 | |
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| (1) | | For the definition and discussion of FFO, see page 28. |
| |
| (2) | | Based on a weighted-average 79.50%, 79.50% and 79.30% interest in operating partnership for three months ended March 31, 2004, December 31, 2003 and September 30, 2003, respectively. |
| |
| (3) | | Funds from operations for the three months ended September 30, 2003 was decreased by $2,431, which represents a loss on the extinguishment of debt resulting from the defeasance of the Glendale Center mortgage in connection with the acquisition of interests in the property.
Absent the impact of this item, FFO per share would have been $0.48, calculated as above. |
11
Maguire Properties, Inc.
First Quarter 2004
ADJUSTED FUNDS FROM OPERATIONS(1)
(unaudited and in thousands)
| | | | | | | | | | | | | |
| | | Three Months Ended | | | Three Months Ended | | | Three Months Ended | |
| | | March 31, 2004
| | | December 31, 2003
| | | September 30, 2003
| |
FFO | | $ | 24,448 | | | $ | 26,700 | | | $ | 22,779 | |
| Non-real estate depreciation | | | 91 | | | | 112 | | | | 112 | |
| Amortization of deferred financing fees | | | 1,014 | | | | 974 | | | | 1,125 | |
| Accretion (amortization) of interest rate swap sold | | | (125 | ) | | | 239 | | | | – | |
| Non-cash stock compensation | | | 636 | | | | 608 | | | | 608 | |
| Loss from early extinguishment of debt | | | – | | | | – | | | | 2,431 | |
| Straight-line rents | | | (1,399 | ) | | | (726 | ) | | | (713 | ) |
| Fair value lease revenue | | | (598 | ) | | | (916 | ) | | | (567 | ) |
| Capital lease principal payments | | | (273 | ) | | | (261 | ) | | | (261 | ) |
| Capitalized leasing payroll | | | (236 | ) | | | (227 | ) | | | (294 | ) |
| Non-recoverable capital expenditures | | | (237 | ) | | | (31 | ) | | | (6 | ) |
| Recoverable capital expenditures | | | (184 | ) | | | (4 | ) | | | (248 | ) |
| Hotel improvements, equipment upgrades and replacements (2) | | | (13 | ) | | | (193 | ) | | | (114 | ) |
| 2nd generation tenant improvements and leasing commissions (3) | | | (1,402 | ) | | | (1,191 | ) | | | (929 | ) |
| | |
| | |
| | |
| |
Adjusted funds from operations (AFFO) | | $ | 21,722 | | | $ | 25,084 | | | $ | 23,923 | |
| | |
| | |
| | |
| |
| (1) | | For the definition and computation method of AFFO, see page 28. For a quantitative reconciliation of the differences between AFFO and cash flow from operating activities, see page 13. |
| |
| (2) | | Excludes $0.7 million of expenditures for the three months ended March 31, 2004 related to the renovation of the hotel. See page 26. |
| |
| (3) | | Excludes 2nd generation tenant improvements and leasing commissions of $6.7 million, $8.0 million and $14.6 million, for the three months ended March 31, 2004, December 31, 2003 and September 30, 2003, respectively that were fully reserved in connection with the Offering. Also excludes 1st generation tenant improvements and leasing commissions of $0.9 million, $0.2 million and $0, for the three months ended March 31, 2004, December 31, 2003 and September 30, 2003, respectively. |
12
Maguire Properties, Inc.
First Quarter 2004
RECONCILIATION OF
EARNINGS BEFORE INTEREST, TAXES AND DEPRECIATION AND AMORTIZATION(1)
AND ADJUSTED FUNDS FROM OPERATIONS(2)
(unaudited and in thousands)
| | | | | | | | | | | | | |
| | | Three Months Ended | | | Three Months Ended | | | Three Months Ended | |
| | | March 31, 2004
| | | December 31, 2003
| | | September 30, 2003
| |
Reconciliation of net income to earnings before interest, taxes and depreciation and amortization (EBITDA): | | | | | | | | | | | | |
Net Income | | $ | 9,529 | | | $ | 8,030 | | | $ | 7,196 | |
| Add: minority interest | | | 1,529 | | | | 2,071 | | | | 1,882 | |
| interest expense | | | 14,110 | | | | 13,716 | | | | 11,650 | |
| depreciation and amortization | | | 17,082 | | | | 16,711 | | | | 13,696 | |
| | |
| | |
| | |
| |
EBITDA | | $ | 42,250 | | | $ | 40,528 | | | $ | 34,424 | |
| | |
| | |
| | |
| |
| (1) | | For the definition and discussion of EBITDA, see page 29. |
| | | | | | | | | | | | | |
Reconciliation of cash flows from operating activities to adjusted funds from operations (AFFO): | | | | | | |
| | | | | | | | | | | | | |
Cash flows from operating activities | | $ | 19,980 | | | $ | 10,937 | | | $ | 5,762 | |
| Distributions received from real estate entity | | | – | | | | – | | | | (144 | ) |
| Share of depreciation and amortization of an unconsolidated property | | | – | | | | – | | | | (117 | ) |
| Equity in net loss of real estate entity | | | – | | | | – | | | | (31 | ) |
| Defeasance payment on early extinguishment of debt | | | – | | | | – | | | | 6,747 | |
| Changes in other assets and liabilities | | | 3,578 | | | | 15,566 | | | | 13,003 | |
| Non-recoverable capital expenditures | | | (237 | ) | | | (31 | ) | | | (6 | ) |
| Recoverable capital expenditures | | | (184 | ) | | | (4 | ) | | | (248 | ) |
| Hotel improvements, equipment upgrades and replacements | | | (13 | ) | | | (193 | ) | | | (114 | ) |
| 2nd generation tenant improvements and leasing commissions | | | (1,402 | ) | | | (1,191 | ) | | | (929 | ) |
| | |
| | |
| | |
| |
AFFO | | $ | 21,722 | | | $ | 25,084 | | | $ | 23,923 | |
| | |
| | |
| | |
| |
| (2) | | For the definition and discussion of adjusted funds from operations, see page 28. |
13
Maguire Properties, Inc.
First Quarter 2004
CAPITAL STRUCTURE
Consolidated Debt
(in thousands)
| | | | | |
| | | Aggregate Principal | |
| | | March 31, 2004
| |
| Mortgage and Other Secured Loans Payable | | $ | 1,211,250 | |
| Secured Credit Facility | | | – | |
| | |
| |
Total Debt | | $ | 1,211,250 | |
| | |
| |
Equity
(in thousands)
| | | | | | | | | |
| | | Shares | | | Total Liquidation | |
| | | Outstanding
| | | Preference
| |
Preferred Stock | | | 10,000 | | | | 250,000 | |
| | | | | | | | | |
| | | Shares & Units | | | | |
| | | Outstanding
| | | Market Value (1)
| |
| Common Stock | | | 42,646 | | | $ | 1,091,730 | |
| Operating Partnership Units | | | 10,999 | | | | 281,585 | |
| | |
| | |
| |
Total Common Equity | | | 53,645 | | | $ | 1,373,315 | |
| | |
| | |
| |
Total Market Capitalization | | | | | | $ | 2,834,565 | |
| | | | | | |
| |
| (1) | | Value based on March 31, 2004 closing price of $25.60. |
14
Maguire Properties, Inc.
First Quarter 2004
DEBT SUMMARY
Consolidated Debt Analysis
(in thousands)
| | | | | | | | | | | | | | | | | |
| | | | | | | Principal Balance as of | | | | | | | Interest Rate as of | |
| | | Maturity Date
| | | March 31, 2004
| | | % of Debt
| | March 31, 2004
|
Floating Rate Debt | | | | | | | | | | | | | | | | |
| Gas Company Tower & 808 South Olive | | | | | | $ | 280,000 | | | | 23.12% | | | | 3.70% | |
| Floating rate debt | | July 7, 2008 | | | 30,000 | | | | 2.48% | | | | 7.67% | |
| Interest rate swapped debt | | July 6, 2007 | | | 250,000 | | | | 20.64% | | | | 3.23% | |
| KPMG Tower | | August 31, 2005 | | | 195,000 | | | | 16.10% | | | | 2.97% | |
| Credit Facility | | June 27, 2006 | | | — | | | | 0.00% | | | | 3.03% | |
| Interest rate swapped debt | | | | | | | (250,000 | ) | | | (20.64)% | | | | 3.23% | |
| | | | | | |
|
Total Unhedged Floating Rate Debt | | | | | | $ | 225,000 | | | | 18.58% | | | | 3.60% | |
| | | | | | | | | | | | | | | | | |
Fixed Rate and Hedged Variable Rate Debt | | | | | | | | | | | | | | | | |
| US Bank Tower | | July 1, 2013 | | | 260,000 | | | | 21.47% | | | | 4.66% | |
| Wells Fargo Tower | | July 1, 2010 | | | 250,000 | | | | 20.64% | | | | 4.68% | |
| One California Plaza | | December 1, 2010 | | | 146,250 | | | | 12.07% | | | | 4.73% | |
| Glendale Center | | November 1, 2013 | | | 80,000 | | | | 6.60% | | | | 5.73% | |
| Interest rate swapped debt | | | | | | | 250,000 | | | | 20.64% | | | | 3.23% | |
| | | | | | |
|
Total Fixed Rate and Hedged Variable Rate Debt | | | | | | $ | 986,250 | | | | 81.42% | | | | 4.40% | |
| | | | | | |
|
Total Consolidated Debt | | | | | | $ | 1,211,250 | | | | 100.00% | | | | 4.25% | |
| | | | | | |
|
Credit Facility
(in thousands)
| | | | | | | | | | | | | |
| | | Maximum Available
| | | Currently Available
| | | Drawn
| |
Secured Line of Credit | | $ | 100,000 | | | $ | 84,100 | | | $ | 0 | |
|
Debt Maturities
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property
| | 2004
| | | 2005
| | | 2006
| | | 2007
| | | 2008
| | | Thereafter
| | | Total
| |
| US Bank Tower | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 260,000 | | | $ | 260,000 | |
| Gas Company Tower | | | — | | | | — | | | | — | | | | 250,000 | (2) | | | 30,000 | (3) | | | — | | | | 280,000 | |
| Wells Fargo Tower | | | — | | | | — | | | | 1,507 | | | | 3,815 | | | | 3,967 | | | | 240,711 | | | | 250,000 | |
| KPMG Tower | | | — | | | | 195,000 | (1) | | | — | | | | — | | | | — | | | | — | | | | 195,000 | |
| One California Plaza | | | — | | | | — | | | | — | | | | 239 | | | | 2,825 | | | | 143,186 | | | | 146,250 | |
| Glendale Center | | | — | | | | — | | | | — | | | | — | | | | — | | | | 80,000 | | | | 80,000 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Total | | $ | — | | | $ | 195,000 | | | $ | 1,507 | | | $ | 254,054 | | | $ | 36,792 | | | $ | 723,897 | | | $ | 1,211,250 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Weighted Average Rates | | | 0.00 | % | | | 2.97 | % | | | 0.00 | % | | | 3.23 | % | | | 7.67 | % | | | 4.80 | % | | | 4.25 | % |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| (1) | | Two one-year extension options available. (2) A one-year extension option available for $250,000. |
| |
| (3) | | Maturity accelerated to 2007 if the Gas Company Tower mortgage and junior mezzanine debt is not extended to 2008. |
| | | | | |
| Interest coverage (a) | | | 3.20 | |
| Fixed-charge coverage (b) | | | 2.47 | |
| Debt to total market capitalization (c) | | | 42.7 | % |
| Debt plus preferred stock to total market capitalization (d) | | | 51.6 | % |
| (a) | | EBITDA divided by cash interest expense. Cash interest expense relates to indebtedness and capital leases less amortized deferred financing fees and amortization of the sold interest rate swap. |
| |
| (b) | | Same as (a) except denominator includes scheduled debt principal payments, capital lease principal payments and preferred dividends. |
| |
| (c) | | Mortgage debt and other loans divided by mortgage debt and other loans plus preferred stock and the market value of outstanding common stock and operating partnership units, assuming the conversion of operating partnership units into shares of our common stock. |
| |
| (d) | | Same as (c) except numerator includes preferred stock. |
15
Maguire Properties, Inc.
First Quarter 2004
PORTFOLIO DATA
16
Maguire Properties, Inc.
First Quarter 2004
PORTFOLIO OVERVIEW - SQUARE FOOTAGE
Rentable Square Feet of Office Properties by Location
| | | | | |
| | | Property SF
| |
| Los Angeles Central Business District | | | | |
| US Bank Tower | | | 1,374,883 | |
| Gas Company Tower & 808 South Olive | | | 1,335,964 | |
| Wells Fargo Tower | | | 1,382,092 | |
| KPMG Tower | | | 1,124,192 | |
| One California Plaza | | | 982,260 | |
| | |
| |
| Total Los Angeles Central Business District | | | 6,199,391 | |
| | |
| |
| Tri-Cities | | | | |
| Pasadena - Plaza Las Fuentes | | | 185,376 | |
| Glendale - Glendale Center | | | 382,888 | |
| | |
| |
| Total Tri-Cities | | | 568,264 | |
| | |
| |
| Cerritos | | | | |
| Cerritos Corporate Center - Phase I | | | 221,968 | |
| Cerritos Corporate Center - Phase II | | | 104,567 | |
| | |
| |
| Total Cerritos | | | 326,535 | |
| | |
| |
| | |
| |
Total Office Properties | | | 7,094,190 | (1) |
| | |
| |
Hotel Property
| | | | | | | | | | | | | |
| | | | | | | Number of Rooms
| | | Hotel SF
| |
| Westin Hotel, Pasadena, CA | | | | | | 350
| | | 266,000
| |
| Garage Properties |
|
| | | | | | | Vehicle | | | | |
| | | | | | | Capacity
| | | Garage SF
| |
| On-Site Parking | | | | | | | | | | | | |
| US Bank Tower | | | | | | | 513 | | | | 230,650 | |
| Gas Company Tower | | | | | | | 1,161 | | | | 319,581 | |
| Wells Fargo Tower | | | | | | | 1,393 | | | | 426,926 | |
| KPMG Tower | | | | | | | 820 | | | | 251,313 | |
| One California Plaza | | | | | | | 1,313 | | | | 176,500 | |
| Glendale Center | | | | | | | 1,400 | | | | 486,287 | |
| Cerritos Corporate Center - Phase I | | | | | | | 769 | | | | 221,856 | |
| Cerritos Corporate Center - Phase II | | | | | | | 696 | | | | 194,434 | |
| Off-Site Garages | | | | | | | | | | | | |
| 808 South Olive Garage | | | | | | | 928 | | | | 345,933 | |
| Westlawn Garage | | | | | | | 1,047 | | | | 363,906 | |
| X-2 Garage | | | | | | | 774 | | | | 248,248 | |
| | | | | | |
| | |
| |
Total Garage Properties | | | | | | | 10,814 | (2) | | | 3,265,634 | |
| | | | | | |
| | |
| |
| | | | | | | | | | |
| |
Total Portfolio | | | | | | | | | | | 10,625,824 | |
| | | | | | | | | | |
| |
| (1) | | Increased from 7,091,270 square feet at December 31, 2003 due to additional 2,920 square feet from remeasurement of new and renewed leases. |
| |
| (2) | | Actual vehicles under monthly contract are 12,316 due to oversell factor. |
17
Maguire Properties, Inc.
First Quarter 2004
PORTFOLIO LISTING - OCCUPANCY AND IN-PLACE RENTS
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Annualized | | | Annualized Rent | |
Property
| | Sub-Market
| | Square Feet
| | | % Leased
| | Rent (1)
| | | $/RSF (2)
| |
| US Bank Tower | | Los Angeles Central Business District | | | 1,374,883 | | | | 90.4 | % | | $ | 35,812,903 | | | $ | 28.80 | |
| Gas Company Tower | | Los Angeles Central Business District | | | 1,335,964 | | | | 98.2 | % | | | 34,705,941 | | | | 26.46 | |
| Wells Fargo Tower | | Los Angeles Central Business District | | | 1,382,092 | | | | 82.8 | % | | | 21,765,010 | | | | 19.01 | |
| KPMG Tower | | Los Angeles Central Business District | | | 1,124,192 | | | | 86.8 | % | | | 19,198,227 | | | | 19.68 | |
| One California Plaza | | Los Angeles Central Business District | | | 982,260 | | | | 92.1 | % | | | 13,846,820 | | | | 15.31 | |
| Plaza Las Fuentes | | Tri-Cities | | | 185,376 | | | | 89.7 | % | | | 3,086,844 | | | | 18.57 | |
| Glendale Center | | Tri-Cities | | | 382,888 | | | | 100.0 | % | | | 7,416,764 | | | | 19.37 | |
| Cerritos - Phase I | | Cerritos Office | | | 221,968 | | | | 100.0 | % | | | 5,367,540 | | | | 24.18 | |
| Cerritos - Phase II | | Cerritos Office | | | 104,567 | | | | 100.0 | % | | | 2,141,371 | | | | 20.48 | |
| | | | | | |
| | |
| |
| | |
| |
Total/Weighted Average | | | | | 7,094,190 | | | | 91.0 | % | | $ | 143,341,420 | | | $ | 22.20 | |
| | | | | | |
| | |
| |
| | |
| |
| | | | | | | | | | | | | | | | | | | | | |
| | | % Leased | | % Leased | | % Leased | | % Leased | | % Leased |
| | | Q1 2004
| | Q4 2003
| | Q3 2003
| | Q2 2003
| | Q1 2003
|
| US Bank Tower | | | 90.4 | % | | | 90.4 | % | | | 90.4 | % | | | 90.6 | % | | | 81.5 | % |
| Gas Company Tower | | | 98.2 | % | | | 96.4 | % | | | 96.1 | % | | | 96.1 | % | | | 93.0 | % |
| Wells Fargo Tower | | | 82.8 | % | | | 83.6 | % | | | 88.9 | % | | | 89.2 | % | | | 84.4 | % |
| KPMG Tower | | | 86.8 | % | | | 87.0 | % | | | 87.8 | % | | | 90.2 | % | | | 95.8 | % |
| One California Plaza | | | 92.1 | % | | | 91.0 | % | | | 92.9 | % | | | 92.9 | % | | | 92.0 | % |
| Plaza Las Fuentes | | | 89.7 | % | | | 91.3 | % | | | 95.8 | % | | | 94.1 | % | | | 94.1 | % |
| Glendale Center | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 96.8 | % | | | 96.8 | % |
| Cerritos - Phase I | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
| Cerritos - Phase II | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % | | | 100.0 | % |
| | |
| |
| |
| |
| |
|
Total Portfolio | | | 91.0 | % | | | 90.8 | % | | | 92.2 | % | | | 92.5 | % | | | 89.9 | % |
| | |
| |
| |
| |
| |
|
| (1) | | Annualized rent represents the annualized monthly contractual rent under existing leases as of March 31, 2004. This amount reflects total base rent before any one-time or non-recurring rent abatements but after annually recurring rent credits 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. |
| | |
| (2) | | Annualized rent per rentable square foot represents annualized rent as computed above, divided by the total square footage under lease as of the same date. |
18
Maguire Properties, Inc.
First Quarter 2004
MAJOR TENANTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | % of Aggregate | | Weighted Average | | | |
| | | | | Number of | | | Annualized | | | % of Total | | Total Leased | | | Leased Square Feet | | Remaining Lease Term | | | S & P Credit Rating / |
| | | Tenant
| | Locations
| | | Rent (1)
| | | Annualized Rent
| | Square Feet
| | | of Existing Portfolio
| | in Months
| | | National Recognition (3)
|
| | Rated | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1 | | Southern California Gas Company | | 1 | | | $ | 16,807,927 | | | | 11.7 | % | | | 576,516 | | | | 8.9 | % | | 91 | | | A |
| 2 | | Wells Fargo Bank | | 2 | | | | 10,593,312 | | | | 7.4 | % | | | 432,855 | | | | 6.7 | % | | 71 | | | AA |
| 3 | | Sempra (Pacific Enterprises) | | 1 | | | | 8,504,539 | | | | 5.9 | % | | | 225,756 | | | | 3.5 | % | | 75 | | | A |
| 4 | | AT&T Wireless | | 2 | | | | 7,508,911 | | | | 5.2 | % | | | 326,535 | | | | 5.1 | % | | 113 | | | BBB |
| 5 | | Los Angeles Unified School District | | 1 | | | | 4,978,817 | | | | 3.5 | % | | | 260,498 | | | | 4.0 | % | | 26 | | | AA- |
| 6 | | Bank of America | | 3 | | | | 3,685,009 | | | | 2.6 | % | | | 205,352 | | | | 3.2 | % | | 71 | | | AA- |
| 7 | | Disney Enterprises | | 1 | | | | 3,085,885 | | | | 2.1 | % | | | 156,215 | | | | 2.4 | % | | 87 | | | BBB+ |
| 8 | | US Bank | | 1 | | | | 2,440,483 | | | | 1.7 | % | | | 121,645 | | | | 1.9 | % | | 135 | | | AA- |
| 9 | | Time Warner Entertainment | | 1 | | | | 1,653,549 | | | | 1.2 | % | | | 70,134 | | | | 1.1 | % | | 25 | | | BBB+ |
| | | | | | | |
| | | | | | |
| | | | | | |
| | | |
| | Total Rated / Weighted Average (2) | | | | | | | 59,258,432 | | | | 41.3 | % | | | 2,375,506 | | | | 36.8 | % | | 80 | | | |
| | | | | | | |
| | | | | | |
| | | | | | |
| | | |
| | Unrated - Nationally Recognized | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 10 | | Latham & Watkins | | 2 | | | | 10,038,237 | | | | 7.0 | % | | | 361,524 | | | | 5.6 | % | | 78 | | | 4th Largest US Law Firm |
| 11 | | Morrison & Foerster | | 1 | | | | 7,009,070 | | | | 4.9 | % | | | 192,775 | | | | 3.0 | % | | 91 | | | 21st Largest US Law Firm |
| 12 | | Gibson Dunn & Crutcher | | 1 | | | | 6,986,210 | | | | 4.9 | % | | | 268,268 | | | | 4.1 | % | | 164 | | | 15th Largest US Law Firm |
| 13 | | Jones, Day, Reavis & Pogue | | 1 | | | | 4,982,380 | | | | 3.5 | % | | | 152,166 | | | | 2.4 | % | | 31 | | | 3rd Largest US Law Firm |
| 14 | | White & Case | | 1 | | | | 3,792,160 | | | | 2.6 | % | | | 94,804 | | | | 1.5 | % | | 92 | | | 9th Largest US Law Firm |
| 15 | | Munger Tolles & Olson | | 1 | | | | 3,624,162 | | | | 2.5 | % | | | 125,623 | | | | 1.9 | % | | 35 | | | Prominent Regional Law Firm |
| 16 | | KPMG | | 2 | | | | 3,149,374 | | | | 2.2 | % | | | 198,426 | | | | 3.1 | % | | 109 | | | 4th Largest US Accounting Firm |
| 17 | | Bingham McCutchen | | 2 | | | | 3,008,958 | | | | 2.1 | % | | | 155,285 | | | | 2.4 | % | | 65 | | | 29th Largest US Law Firm |
| 18 | | Sidley Austin Brown & Wood | | 1 | | | | 2,104,200 | | | | 1.5 | % | | | 142,463 | | | | 2.2 | % | | 57 | | | 5th Largest US Law Firm |
| 19 | | Skadden, Arps, Slate, Meagher & Flom | | 1 | | | | 1,977,028 | | | | 1.4 | % | | | 152,576 | | | | 2.4 | % | | 92 | | | Largest US Law Firm |
| 20 | | Morgan, Lewis & Bockius | | 2 | | | | 1,903,157 | | | | 1.3 | % | | | 104,643 | | | | 1.6 | % | | 95 | | | 17th Largest US Law Firm |
| | | | | | | |
| | | | | | |
| | | | | | |
| | | |
| | Total Unrated / Weighted Average (2) | | | | | | | 48,574,936 | | | | 33.9 | % | | | 1,948,553 | | | | 30.2 | % | | 88 | | | |
| | | | | | | |
| | | | | | |
| | | | | | |
| | | |
| | | | | | | |
| | | | | | |
| | | | | | |
| | | |
| | Total / Weighted Average (2) | | | | | | $ | 107,833,368 | | | | 75.2 | % | | | 4,324,059 | | | | 67.0 | % | | 84 | | | |
| | | | | | | |
| | | | | | |
| | | | | | |
| | | |
| (1) | | Annualized base rent is calculated as monthly contractual base rent under existing leases as of March 31, 2004, multiplied by 12; for those leases where rent has not yet commenced, the first month in which rent is to be received is used to determine annualized base rent. |
| |
| (2) | | The weighted average calculation is based on the net rentable square feet leased by each tenant. |
| |
| (3) | | S&P credit ratings are as of March 31, 2004, and rankings of law firms are based on total gross revenue in 2002 as reported by American Lawyer Media’s LAW.com. |
19
Maguire Properties, Inc.
First Quarter 2004
20
Maguire Properties, Inc.
First Quarter 2004
LEASE EXPIRATIONS
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Percentage | | | | | | | | |
| | | Total Area in | | | Percentage | | | | | | | of Gross and | | | | | | | Rent per | |
| | | Square Feet Covered | | | of Aggregate | | | Annualized | | | Annualized | | | Current Rent | | | Square Foot | |
Year
| | by Expiring Leases
| | | Square Feet
| | | Rent
| | | Rent
| | | per Square Foot (1)
| | | at Expiration (2)
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Available | | | 638,415 | | | | 9.0% | | | | | | | | | | | | | | | | | |
| 2004 | | | 169,482 | | | | 2.4% | | | | 3,358,980 | | | | 2.3% | | | | 19.82 | | | | 19.82 | |
| 2005 | | | 605,904 | | | | 8.5% | | | | 13,990,386 | | | | 9.8% | | | | 23.09 | | | | 22.93 | |
| 2006 | | | 820,467 | | | | 11.6% | | | | 17,871,037 | | | | 12.5% | | | | 21.78 | | | | 22.28 | |
| 2007 | | | 449,992 | | | | 6.3% | | | | 9,529,174 | | | | 6.6% | | | | 21.18 | | | | 23.35 | |
| 2008 | | | 324,066 | | | | 4.6% | | | | 5,302,635 | | | | 3.7% | | | | 16.36 | | | | 16.70 | |
| 2009 | | | 432,387 | | | | 6.1% | | | | 11,009,597 | | | | 7.7% | | | | 25.46 | | | | 26.01 | |
| 2010 | | | 433,123 | | | | 6.1% | | | | 12,040,523 | | | | 8.4% | | | | 27.80 | | | | 30.14 | |
| 2011 | | | 1,208,761 | | | | 17.1% | | | | 27,437,985 | | | | 19.2% | | | | 22.70 | | | | 28.87 | |
| 2012 | | | 258,037 | | | | 3.6% | | | | 4,469,202 | | | | 3.1% | | | | 17.32 | | | | 22.67 | |
| 2013 | | | 722,115 | | | | 10.2% | | | | 15,060,609 | | | | 10.5% | | | | 20.86 | | | | 20.19 | |
| Thereafter | | | 1,031,441 | | | | 14.5% | | | | 23,271,292 | | | | 16.2% | | | | 22.56 | | | | 24.31 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Total | | | 7,094,190 | | | | 100.0% | | | $ | 143,341,420 | | | | 100.0% | | | $ | 22.20 | | | $ | 24.01 | |
| |
| | |
| | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Leases Expiring in the Next 4 Quarters: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| 2nd Quarter 2004 | | | 37,605 | | | | 0.5% | | | $ | 743,643 | | | | 0.5% | | | $ | 19.78 | | | $ | 19.78 | |
| 3rd Quarter 2004 (3) | | | 79,651 | | | | 1.1% | | | $ | 1,243,012 | | | | 0.8% | | | $ | 15.61 | | | $ | 15.61 | |
| 4th Quarter 2004 | | | 52,226 | | | | 0.8% | | | $ | 1,372,325 | | | | 1.0% | | | $ | 26.28 | | | $ | 26.28 | |
| 1st Quarter 2005 | | | 218,954 | | | | 3.1% | | | $ | 6,978,454 | | | | 4.9% | | | $ | 31.87 | | | $ | 31.87 | |
|
| (1) | | Current rent per leased square foot represents current base rent, divided by total square footage under lease 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. |
21
Maguire Properties, Inc.
First Quarter 2004
LEASING ACTIVITY
| | | | | | | | | |
| | | For the | | | | |
| | | Three Months Ended | | | | |
| | | March 31, 2004
| | | % Leased
| |
Leased Square Feet as of December 31, 2003 | | | 6,435,836 | | | | 90.8% | |
| Expirations | | | (139,111 | ) | | | (2.0)% | |
| New Leases | | | 90,968 | | | | 1.3% | |
| Renewals | | | 68,082 | | | | 0.9% | |
| | |
| | |
| |
Leased Square Feet as of March 31, 2004 | | | 6,455,775 | | | | 91.0% | |
| | |
| | |
| |
Cash Rent Growth(1) | | | | | | | | |
| Expiring Rate per Square Foot | | | | | | $ | 15.44 | |
| New / Renewed Rate per Square Foot | | | | | | $ | 18.58 | |
| Percentage Increase | | | | | | | 20.3% | |
GAAP Rent Growth(2) | | | | | | | | |
| Expiring Rate per Square Foot | | | | | | $ | 16.65 | |
| New / Renewed Rate per Square Foot | | | | | | $ | 20.47 | |
| Percentage Increase | | | | | | | 23.0% | |
Weighted Average Lease Term - New (in months) | | | | | | | 92 | |
Weighted Average Lease Term - Renewal (in months) | | | | | | | 38 | |
| (1) | | Represents the difference between (i) initial market rents on new and renewed leases and (ii) the cash rents on those leases immediately prior to the expiration or termination. Excludes new and renewed leases for spaces with more than six months of downtime. |
| |
| (2) | | Represents estimated cash rent growth adjusted for straight-line rents in accordance with GAAP. |
22
Maguire Properties, Inc.
First Quarter 2004
TENANT CONCESSIONS and LEASING COMMISSIONS(1)
| | | | | | | | | | | | | | | | | | | | | |
| | | Q1 2004
| | | 2003
| | | 2002
| | | 2001
| | | 2000
| |
Renewals (2) | | | | | | | | | | | | | | | | | | | | |
| Number of Leases | | | 5 | | | | 17 | | | | 19 | | | | 14 | | | | 14 | |
| Square Feet | | | 68,082 | | | | 142,326 | | | | 330,096 | | | | 395,332 | | | | 193,990 | |
| Tenant Concession Costs per Square Foot | | $ | 28.88 | | | $ | 21.87 | | | $ | 2.01 | | | $ | 1.11 | | | $ | 11.14 | |
| Leasing Commission Costs per Square Foot (3) | | | 9.03 | | | | 1.99 | | | | 5.35 | | | | 1.67 | | | | 5.94 | |
Total Tenant Concession and Leasing Commission
Costs per Square Foot | | $ | 37.91 | | | $ | 23.86 | | | $ | 7.36 | | | $ | 2.78 | | | $ | 17.08 | |
| Costs per Square Foot per Year | | $ | 5.21 | | | $ | 2.45 | | | $ | 1.74 | | | $ | 1.32 | | | $ | 1.60 | |
| | | | | | | | | | | | | | | | | | | | | |
New / Modified Leases(4) (5) | | | | | | | | | | | | | | | | | | | | |
| Number of Leases | | | 10 | | | | 40 | | | | 17 | | | | 29 | | | | 31 | |
| Square Feet | | | 90,968 | | | | 861,703 | | | | 152,237 | | | | 387,028 | | | | 328,894 | |
| Tenant Concession Costs per Square Foot | | $ | 19.40 | | | $ | 47.12 | | | $ | 32.76 | | | $ | 25.36 | | | $ | 33.34 | |
| Leasing Commission Costs per Square Foot (3) | | | 5.31 | | | | 4.43 | | | | 7.72 | | | | 8.24 | | | | 5.92 | |
Total Tenant Concession and Leasing Commission
Costs per Square Foot | | $ | 24.71 | | | $ | 51.55 | | | $ | 40.48 | | | $ | 33.60 | | | $ | 39.26 | |
| Costs per Square Foot per Year | | $ | 3.24 | | | $ | 8.05 | | | $ | 5.62 | | | $ | 4.25 | | | $ | 7.17 | |
| | | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | | | | | | | |
| Number of Leases | | | 15 | | | | 57 | | | | 36 | | | | 43 | | | | 45 | |
| Square Feet | | | 159,050 | | | | 1,004,029 | | | | 482,333 | | | | 782,360 | | | | 522,884 | |
| Tenant Concession Costs per Square Foot | | $ | 23.46 | | | $ | 43.54 | | | $ | 11.71 | | | $ | 13.11 | | | $ | 25.11 | |
| Leasing Commission Costs per Square Foot (3) | | | 6.90 | | | | 4.08 | | | | 6.10 | | | | 4.92 | | | | 5.93 | |
Total Tenant Concession and Leasing Commission
Costs per Square Foot | | $ | 30.36 | | | $ | 47.62 | | | $ | 17.81 | | | $ | 18.03 | | | $ | 31.04 | |
| Costs per Square Foot per Year | | $ | 4.06 | | | $ | 6.73 | | | $ | 3.44 | | | $ | 3.62 | | | $ | 4.19 | |
| (1) | | Based on leases executed during the period. Excludes leases of related parties and excludes build out costs for raw space. |
| | | In conjunction with the offering, leasing reserves were established for tenant concessions and leasing commissions related to leases executed as of May 30, 2003. |
| |
| (2) | | Does not include retained tenants that have relocated to new space or expanded into new space. |
| |
| (3) | | Leasing commission costs exclude any commission paid to related parties. |
| |
| (4) | | Includes retained tenants that have relocated or expanded into new space and lease modifications. |
| |
| (5) | | Includes costs for lease modifications related to Gibson Dunn & Crutcher for 268,268 sf effective July 1, 2003, Morrison & Foerster for 138,776 sf effective July 1, 2004, and White & Case for 59,402 sf effective July 1, 2004. |
23
Maguire Properties, Inc.
First Quarter 2004
HISTORICAL CAPITAL EXPENDITURES
Office Properties(1)
| | | | | | | | | | | | | | | | | |
| | | Q1 2004
| | | 2003
| | | 2002
| | | 2001
| |
| Non-recoverable Capital Expenditures | | $ | 236,805 | | | $ | 151,512 | | | $ | 813,239 | | | $ | 804,588 | |
| Total Square Feet (2) | | | 6,767,655 | | | | 6,764,735 | | | | 6,701,701 | | | | 6,658,786 | |
| Non-recoverable Capital Expenditures per Square Foot | | $ | 0.03 | | | $ | 0.02 | | | $ | 0.12 | | | $ | 0.12 | |
Recoverable Capital Expenditures (3) | | $ | 183,851 | | | $ | 1,346,274 | | | $ | 6,677,588 | | | $ | 2,620,791 | |
| Total Square Feet (2) | | | 6,767,655 | | | | 6,764,735 | | | | 6,701,701 | | | | 6,658,786 | |
| Recoverable Capital Expenditures per Square Foot | | $ | 0.03 | | | $ | 0.20 | | | $ | 1.00 | | | $ | 0.39 | |
| (1) | | All periods presented include historical capital expenditures for One California Plaza, which we acquired on November 6, 2003. |
| |
| (2) | | The square footage of Cerritos is deducted from the total square feet amount as the tenant pays for all capital expenditure activities. |
| |
| (3) | | Recoverable capital improvements, such as equipment upgrades, are generally financed through a capital lease. The annual amortization, 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. The amounts presented represent the total value of the improvements in the year they are made. |
24
Maguire Properties, Inc.
First Quarter 2004
OFFICE MARKET OVERVIEW
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Q1 2004
| | 2003
| | 2002
| | 2001
|
| | | | | Annual | | Direct | | Overall | | Annual | | Direct | | Overall | | Annual | | Direct | | Overall | | Annual | | Direct | | Overall |
| | | Lease | | Rent | | Vacancy | | Vacancy | | Rent | | Vacancy | | Vacancy | | Rent | | Vacancy | | Vacancy | | Rent | | Vacancy | | Vacancy |
Submarket
| | Type (1)
| | PSF (2)
| | Rate
| | Rate (3)
| | PSF (2)
| | Rate
| | Rate (3)
| | PSF (2)
| | Rate
| | Rate (3)
| | PSF (2)
| | Rate
| | Rate (3)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LACBD | | NNN (4) | | $ | 17.42 | | | | 15.5 | % | | | 18.3 | % | | $ | 17.56 | | | | 17.8 | % | | | 20.7 | % | | $ | 17.56 | | | | 16.4 | % | | | 19.6 | % | | $ | 17.15 | | | | 12.9 | % | | | 16.9 | % |
| Bunker Hill | | NNN | | | 19.22 | | | | 8.2 | % | | | 11.7 | % | | | 19.60 | | | | 7.1 | % | | | 10.5 | % | | | 20.40 | | | | 8.0 | % | | | 13.8 | % | | | 21.70 | | | | 4.8 | % | | | 8.2 | % |
| Tri-Cities (5) | | FSG | | | 26.94 | | | | 13.9 | % | | | 15.4 | % | | | 27.05 | | | | 12.9 | % | | | 14.7 | % | | | 27.86 | | | | 12.1 | % | | | 18.7 | % | | | 26.83 | | | | 10.8 | % | | | 16.3 | % |
| Cerritos | | FSG | | | 23.40 | | | | 13.0 | % | | | 13.0 | % | | | 24.36 | | | | 11.0 | % | | | 11.4 | % | | | 24.84 | | | | 15.4 | % | | | 16.0 | % | | | 20.88 | | | | 4.7 | % | | | 10.9 | % |
Source: Cushman & Wakefield
| (1) | | NNN = Triple Net Lease; FSG = Full Service Gross Lease |
| |
| (2) | | This data represents the weighted average asking rent per square foot for available space. |
| |
| (3) | | This data represents the overall vacancy rate which includes sublease vacancy. |
| |
| (4) | | The NNN rental rates for LACBD are based on estimated annual operating expenses applied to buildings offered for lease on a triple net basis. |
| |
| (5) | | Tri-Cities excludes North Hollywood and Pasadena East. |
25
Maguire Properties, Inc.
First Quarter 2004
HOTEL PERFORMANCE
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Percent | | | | |
Westin Hotel, Pasadena, CA (1)
| | Q1 2004
| | | Q1 2003
| | | Change
| | | | |
| | | | | | | | | | | | | | | | | |
| Occupancy | | | 78.6 | % | | | 75.9 | % | | | 3.6 | % | | | | |
| | | | | | | | | | | | | | | | | |
| Average Daily Rate | | $ | 139.82 | | | $ | 120.29 | | | | 16.2 | % | | | | |
| | | | | | | | | | | | | | | | | |
| Revenue Per Available Room (REVPAR) | | $ | 109.89 | | | $ | 91.35 | | | | 20.3 | % | | | | |
| | | | | | | | | | | | | | | | | |
| Hotel Net Operating Income (in thousands) (2) | | $ | 1,398,851 | | | $ | 830,238 | | | | 68.5 | % | | | | |
HOTEL HISTORICAL CAPITAL EXPENDITURES
| | | | | | | | | | | | | | | | | |
Westin Hotel, Pasadena, CA (1)
| | Q1 2004
| | | 2003
| | | 2002
| | | 2001
| |
| | | | | | | | | | | | | | | | | |
| Hotel Improvements, Equipment Upgrades and Replacements | | $ | 727,732 | (3) | | $ | 1,393,598 | (3) | | $ | 760,044 | | | $ | 546,543 | |
| | | | | | | | | | | | | | | | | |
| Total Hotel Revenue | | $ | 5,199,447 | | | $ | 18,449,302 | | | $ | 20,005,000 | | | $ | 19,345,688 | |
| | | | | | | | | | | | | | | | | |
| Hotel Improvements as a Percentage of Hotel Revenue | | | 14.0 | % | | | 7.6 | % | | | 3.8 | % | | | 2.8 | % |
| (1) | | The Westin Hotel was operated under a Doubletree flag until it was rebranded on December 20, 2002. |
| |
| (2) | | Includes air space lease expense of $89,739 per quarter and excludes hotel capital expenditures reserve. |
| |
| (3) | | The Westin Hotel is undergoing certain renovations through December 2005. The re-branding, upgrading and renovation costs are estimated at $13 million, of which $3.5 million will be funded by Westin and the remainder of which will be financed out of current and future furniture, fixture and equipment reserves and potentially from borrowings under our revolving credit facility. For the first quarter of 2004 and the year 2003, renovation costs, which are included in Hotel Improvements, Equipment Upgrades and Replacements, were $715,036 and $953,257, respectively. |
26
Maguire Properties, Inc.
First Quarter 2004
OPTION AND UNDEVELOPED PROPERTIES
| | | | | | | | | | | | | | | | | |
| | | | | | | | | As of March 31, 2004
|
| | | | | Percentage | | | | | | Developed / Developable | | | |
Property
| | Location
| | Leased
| | Acreage
| | Square Feet
| | | Status
|
| | | | | | | | | | | | | | | | | |
Option Properties(1)- | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| 1733 Ocean Avenue | | Santa Monica, CA | | | 40% | | | | N/A | | | | 91,398 | | | Construction Complete |
| | | | | | | | | | | | | | | | | |
| Western Asset Plaza | | Pasadena, CA | | | 76% | | | | N/A | | | | 256,987 | | | Complete |
| | | | | | | | | | | | | | | | | |
| Water’s Edge I (2) | | Los Angeles, CA | | | 100% | | | | N/A | | | | 245,530 | | | Complete |
| | | | | | | | | | | | | | | | | |
| Water’s Edge II (2) | | Los Angeles, CA | | | N/A | | | | 2 | | | | 130,000 | | | Undeveloped |
| | | | | | | | | | | | | | | | | |
Undeveloped Owned Properties - | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Glendale Center - Phase II | | Glendale, CA | | | N/A | | | | 2 | | | | 300,000 | | | Undeveloped |
| | | | | | | | | | | | |
| | | |
| | | | | | | | | Total | | | 1,023,915 | | | |
| | | | | | | | | | | | |
| | | |
| (1) | | We hold options at various terms for these properties as more fully described in our prospectus dated June 24, 2003. |
| |
| (2) | | We hold an option on a one-eighth partnership interest in these two properties. |
27
Maguire Properties, Inc.
First Quarter 2004
MANAGEMENT STATEMENTS ON NON-GAAP SUPPLEMENTAL MEASURES
Funds from Operations:
We calculate funds from operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, or NAREIT, FFO represents net income (loss) (computed in accordance with accounting principles generally accepted in the United States of America, or GAAP), excluding gains (or losses) from sales of property, extraordinary items, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO as a supplemental performance measure because, in excluding real estate related depreciation and amortization, gains (or losses) from property dispositions and extraordinary items, 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. Accordingly, 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 (computed in accordance with GAAP).
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 and interest expense, (iii) recurring capital expenditures required to maintain and re-tenant our properties and (iv) regular principal payments required to service our debt. 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 in a consistent manner, accordingly, our AFFO may not be comparable to such other equity REITs’ AFFO. AFFO should be considered only as a supplement to cash flows from operating activities (computed in accordance with GAAP) as a measure of our liquidity.
28
Maguire Properties, Inc.
First Quarter 2004
MANAGEMENT STATEMENTS ON NON-GAAP SUPPLEMENTAL MEASURES – continued
EBITDA:
We believe that earnings before interest, income taxes, depreciation and amortization, or EBITDA, is a useful supplemental performance measure. 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 be considered only as supplement to cash flows from operating activities (computed in accordance with GAAP) as a measure of our liquidity. EBITDA is not a measure of our financial performance and should not be considered as an alternative to net income as an indicator of our operating performance. Other equity REITs may calculate EBITDA differently than we do; accordingly, our EBITDA may not comparable to such other REITs’ EBITDA.
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 be considered only as a supplement to cash flows from operating activities (computed in accordance with GAAP) as a measure of our liquidity.
29
