Exhibit 99.2
Supplemental Operating and Financial Data
For the Quarter Ended
March 31, 2011
MPG Office Trust, Inc.
Supplemental Operating and Financial Data
First Quarter 2011
| Table of Contents | ||||
| PAGE | ||
| Corporate Data | ||
| Forward-Looking Statements | ||
| Quarterly Highlights | ||
| Investor Information | ||
| Common Stock Data | ||
| Consolidated Financial Results | ||
| Financial Highlights | ||
| Consolidated Balance Sheets | ||
| MMO Unconsolidated Joint Venture Condensed Balance Sheets | ||
| Consolidated Statements of Operations | ||
| Consolidated Statements of Discontinued Operations | ||
| Consolidated Statements of Operations Related to Properties in Default | ||
| MMO Unconsolidated Joint Venture Statements of Operations | ||
| Funds from Operations | ||
| Adjusted Funds from Operations | ||
| Adjusted Funds from Operations Related to Properties in Default | ||
| Reconciliation of Earnings before Interest, Taxes and Depreciation and Amortization and Adjusted Funds From Operations | ||
| Capital Structure | ||
| Debt Summary | ||
| MMO Joint Venture Debt Summary | ||
| Debt Maturities | ||
| MMO Joint Venture Debt Maturities | ||
| Portfolio Data | ||
| Same Store Analysis | ||
| Portfolio Overview | ||
| Portfolio Geographic Distribution (Excluding Properties in Default) | ||
| Portfolio Overview — Leased Percentages and Weighted Average Remaining Lease Term | ||
| Major Tenants — Office Properties (Excluding Properties in Default) | ||
| Portfolio Tenant Classification Description (Excluding Properties in Default) | ||
| Lease Expirations — Wholly Owned Portfolio | ||
| Lease Expirations — Wholly Owned Portfolio (Los Angeles County) | ||
| Lease Expirations — Wholly Owned Portfolio (Orange County) | ||
| Lease Expirations — Properties in Default | ||
| Lease Expirations — MMO Joint Venture Portfolio | ||
| Leasing Activity — Total Portfolio | ||
| Leasing Activity — Los Angeles Central Business District | ||
| Leasing Activity — Orange County | ||
| Tenant Improvements and Leasing Commissions (Excluding Properties in Default) | ||
| Historical Capital Expenditures — Office Properties | ||
| Hotel Performance and Hotel Historical Capital Expenditures | ||
| Development Properties | ||
| Management Statements on Non-GAAP Supplemental Measures | ||
| Corporate Data | ||||
1
| Forward-Looking Statements | ||||
This supplemental package contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking statements presented herein are based on management’s beliefs and assumptions and information currently available to management. Such statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. These factors include, without limitation: 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 associated with the timing and consequences of loan defaults and related asset dispositions; risks associated with our loan modification efforts; risks associated with our liquidity situation; risks associated with our dependence on key personnel whose continued service is not guaranteed; risks associated with the continued or increased negative impact of the current credit crisis and global economic slowdown; risks associated with contingent guaranties by our Operating Partnership; 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; 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 management’s focus on asset dispositions, loan defaults, cash generation and general strategic matters; risks associated with joint ventures; potential liability for uninsured losses and environmental contamination; and 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.
For a further list and description of such risks and uncertainties, see our Annual Report on Form 10-K filed on March 16, 2011 with the Securities and Exchange Commission. We do not update forward-looking statements and disclaim any intention or obligation to update or revise them, whether as a result of new information, future events or otherwise.
2
| Quarterly Highlights | ||||
MPG Office Trust, Inc. (the “Company”), a self-administered and self-managed real estate investment trust, is the largest owner and operator of Class A office properties in the Los Angeles central business district and is primarily focused on owning and operating high-quality office properties in the Southern California market. We are a full-service real estate company with substantial in-house expertise and resources in property management, marketing, leasing and financing.
As of March 31, 2011, our office portfolio (including Properties in Default) was comprised of whole or partial interests in 24 properties totaling approximately 15 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 9 million square feet, which accommodates approximately 27,000 vehicles.
As used in this Supplemental Operating and Financial Data package, the term “Properties in Default” refers to our Stadium Towers Plaza, 2600 Michelson, 550 South Hope, 500 Orange Tower and City Tower properties, whose mortgage loans were in default as of March 31, 2011. We disposed of Park Place II (in third quarter 2010), and 207 Goode and Pacific Arts Plaza (both in fourth quarter 2010), which were previously classified as part of Properties in Default. The results of operations of Park Place II, 207 Goode and Pacific Arts Plaza are now included in discontinued operations for all periods presented.
In addition to the mortgage loans secured by the Properties in Default, the mortgage loan secured by Two California Plaza is also in default as of March 31, 2011. We have excluded Two California Plaza from the Properties in Default because our goal is to modify the loan with the special servicer rather than to dispose of the asset. We cannot assure you that we will be successful in modifying the loan, which may ultimately result in our inability to retain ownership of Two California Plaza.
This Supplemental Operating and Financial Data package should be read in conjunction with our consolidated financial statements for the year ended December 31, 2010 in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2011. For more information on MPG Office Trust, visit our website at www.mpgoffice.com.
3
| Quarterly Highlights (continued) | ||||
Asset Disposition: On January 27, 2011, we disposed of the 500 Orange Center development site located in Orange, California. We received proceeds from this transaction of $4.7 million, net of transaction costs. Debt: Following notices from us, the mortgage loans encumbering 700 North Central and 801 North Brand were transferred to special servicing in March 2011. The mortgage loans secured by these assets are not in default. Following notices from us, the mortgage loans encumbering U.S. Bank Tower and Wells Fargo Tower were transferred to special servicing in March 2011. This step permits us to engage in discussions with the respective special servicers. We also delivered a notice of imminent default in March 2011 to the master servicer for the mortgage loan on Gas Company Tower requesting it be placed into special servicing (which has not yet occurred). The mortgage loans secured by these assets are not in default. Following a notice from us, the mortgage loan encumbering Two California Plaza was transferred to special servicing. Subsequently in March 2011, our special purpose property-owning subsidiary that owns Two California Plaza defaulted on the mortgage loan. | Subsequent Events: On April 1, 2011, we completed the disposition of 701 North Brand located in Glendale, California to the property’s lender. As a result of the disposition, we were relieved of the obligation to repay the $33.8 million mortgage loan secured by the property and received cash consideration. On April 26, 2011, we disposed of 550 South Hope located in Los Angeles, California in cooperation with the special servicer on the mortgage loan. As a result of the disposition, we were relieved of the obligation to repay the $200.0 million mortgage loan secured by the property as well as contractual and default interest. On May 1, 2011, we extended our $109.0 million mortgage loan secured by Brea Corporate Place and Brea Financial Commons. The final maturity date of this loan is May 1, 2012, and there are no remaining extension options. No cash paydown was made to extend the loan, and the loan terms remain unchanged. On May 1, 2011, we repaid our $15.0 million unsecured term loan upon maturity using cash on hand. | |
4
| Investor Information | ||||
355 South Grand Avenue, Suite 3300
Los Angeles, CA 90071
Tel. (213) 626-3300
Fax (213) 687-4758
| Senior Management | |||
| David L. Weinstein | President and Chief Executive Officer | Jonathan L. Abrams | Senior Vice President, General Counsel and Secretary |
| Shant Koumriqian | Executive Vice President, Chief Financial Officer | Peter K. Johnston | Senior Vice President, Leasing |
| Peggy M. Moretti | Executive Vice President, Investor and Public Relations | Christopher M. Norton | Senior Vice President, Transactions |
| & Chief Administrative Officer | |||
| Corporate | |||
| Investor Relations Contact: Peggy M. Moretti at (213) 613-4558 | |||
Please visit our corporate website at: www.mpgoffice.com | |||
| Transfer Agent | Timing | ||
American Stock Transfer & Trust Company 59 Maiden Lane New York, NY 10038 (866) 668-6550 www.amstock.com | Quarterly results for 2011 will be announced according to the following schedule: | ||
| Second Quarter | August 2011 | ||
| Third Quarter | October 2011 | ||
| Fourth Quarter | February 2012 | ||
| Equity Research Coverage | |||
| Credit Suisse | Andrew Rosivach | (415) 249-7942 | |
| Deutsche Bank Securities, Inc. | Vincent Chao | (212) 250-6799 | |
| Goldman Sachs & Co. | Jay Haberman | (917) 343-4260 | |
| Green Street Advisors | Michael Knott | (949) 640-8780 | |
| KeyBanc Capital Markets | Jordan Sadler | (917) 368-2280 | |
| Raymond James Associates | Paul Puryear | (727) 567-2253 | |
| RBC Capital Markets | Dave Rodgers | (440) 715-2647 | |
| Robert W. Baird & Company | David Aubuchon | (314) 863-4235 | |
| Stifel, Nicolaus & Co., Inc. | John Guinee | (443) 224-1307 | |
MPG Office Trust, Inc. is currently followed by the sell-side analysts listed above, with the exception of Green Street Advisors, which is an independent research firm. This list may not be complete and is subject to change as firms add or delete coverage of our company. Please note that any opinions, estimates or forecasts regarding our historical or predicted performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of MPG Office Trust, Inc. or its management. We are providing this listing as a service to our stockholders and do not by listing these firms imply our endorsement of or concurrence with such information, conclusions or recommendations. Interested persons may obtain copies of analysts' reports on their own; we do not distribute these reports. Various of these firms may from time-to-time own our stock and/or hold other long or short positions in our stock, and may provide compensated services to us.
5
| Common Stock Data | ||||
Our common stock is traded on the New York Stock Exchange under the symbol MPG. Selected information about our common stock for the past five quarters (based on NYSE prices) is as follows:
| 2011 | 2010 | ||||||||||||||||||
| 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||||||
| High price | $ | 4.28 | $ | 3.08 | $ | 3.47 | $ | 4.60 | $ | 3.98 | |||||||||
| Low price | $ | 2.76 | $ | 1.98 | $ | 2.25 | $ | 2.38 | $ | 1.41 | |||||||||
| Closing price | $ | 3.71 | $ | 2.75 | $ | 2.50 | $ | 2.93 | $ | 3.08 | |||||||||
| Dividends per share – annualized | (1 | ) | (1 | ) | (1 | ) | (1 | ) | (1 | ) | |||||||||
| Closing dividend yield – annualized | (1 | ) | (1 | ) | (1 | ) | (1 | ) | (1 | ) | |||||||||
| Closing common shares and Operating Partnership units outstanding (in thousands) | 55,491 | 55,372 | 54,735 | 54,686 | 54,692 | ||||||||||||||
| Closing market value of common shares and Operating Partnership units outstanding (in thousands) | $ | 205,872 | $ | 152,274 | $ | 136,837 | $ | 160,229 | $ | 168,451 | |||||||||
| Dividend Information: | |||||||||||||||||||
| Common Stock | |||||||||||||||||||
| Dividend amount per share | (1 | ) | (1 | ) | (1 | ) | (1 | ) | (1 | ) | |||||||||
| Series A Preferred Stock | |||||||||||||||||||
| Dividend amount per share | (2 | ) | (2 | ) | (2 | ) | (2 | ) | (2 | ) | |||||||||
__________
| (1) | The Board of Directors did not declare a dividend on our common stock for the quarters ended March 31, 2011 and December 31, September 30, June 30 and March 31, 2010. There can be no assurance that we will make distributions on our common stock at historical levels or at all. |
| (2) | The Board of Directors did not declare a dividend on our Series A Preferred Stock during the three months ended April 30 and January 31, 2011 and October 31, July 31 and April 30, 2010. Dividends on our Series A Preferred Stock are cumulative, and therefore, will continue to accrue at an annual rate of $1.9064 per share. As of April 30, 2011, we have missed ten quarterly dividend payments totaling $47.7 million. |
6
| Consolidated Financial Results | ||||
7
Financial Highlights (unaudited and in thousands, except share, per share, percentage and ratio amounts) | ||||
| For the Three Months Ended | |||||||||||||||||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | |||||||||||||||
| Income Items: | |||||||||||||||||||
| Revenue (1) | $ | 95,854 | $ | 101,328 | $ | 101,913 | $ | 100,521 | $ | 103,134 | |||||||||
| Straight line rent | 460 | 1,092 | (43 | ) | 778 | 551 | |||||||||||||
| Fair value lease revenue (2) | 3,446 | 3,920 | 5,942 | 3,773 | 4,046 | ||||||||||||||
| Lease termination fees | 27 | — | 2,398 | — | 18 | ||||||||||||||
| Office property operating margin (3) | 63.1 | % | 61.6 | % | 62.9 | % | 64.5 | % | 65.6 | % | |||||||||
| Net (loss) income available to common stockholders | $ | (39,548 | ) | $ | (138,275 | ) | $ | (17,860 | ) | $ | (53,521 | ) | $ | 18,580 | |||||
| Net (loss) income available to common stockholders – basic | (0.81 | ) | (2.82 | ) | (0.36 | ) | (1.10 | ) | 0.38 | ||||||||||
| Funds from operations (FFO) available to common stockholders (4) | $ | (13,490 | ) | $ | (103,726 | ) | $ | (2,440 | ) | $ | (25,215 | ) | $ | 35,552 | |||||
| FFO per share – basic (4) | (0.28 | ) | (2.12 | ) | (0.05 | ) | (0.52 | ) | 0.73 | ||||||||||
| FFO per share – diluted (4) | (0.28 | ) | (2.12 | ) | (0.05 | ) | (0.52 | ) | 0.72 | ||||||||||
| FFO per share before specified items – basic (4) | (0.06 | ) | 0.02 | — | (0.01 | ) | 0.05 | ||||||||||||
| FFO per share before specified items – diluted (4) | (0.06 | ) | 0.02 | — | (0.01 | ) | 0.05 | ||||||||||||
| Ratios: | |||||||||||||||||||
| Interest coverage ratio (5) | 1.04 | (0.78 | ) | 1.52 | 0.78 | 2.20 | |||||||||||||
| Interest coverage ratio before specified items (6) | 1.04 | 1.14 | 1.13 | 1.08 | 1.13 | ||||||||||||||
| Fixed-charge coverage ratio (7) | 0.93 | (0.71 | ) | 1.38 | 0.71 | 2.00 | |||||||||||||
| Fixed-charge coverage ratio before specified items (8) | 0.93 | 1.03 | 1.03 | 0.98 | 1.02 | ||||||||||||||
| Capitalization: | |||||||||||||||||||
| Common stock price @ quarter end | $ | 3.71 | $ | 2.75 | $ | 2.50 | $ | 2.93 | $ | 3.08 | |||||||||
| Total consolidated debt | $ | 3,578,627 | $ | 3,576,493 | $ | 3,894,266 | $ | 3,992,724 | $ | 4,035,451 | |||||||||
| Preferred stock liquidation preference | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | ||||||||||||||
| Common equity value @ quarter end (9) | 205,872 | 152,274 | 136,837 | 160,229 | 168,451 | ||||||||||||||
| Total consolidated market capitalization | $ | 4,034,499 | $ | 3,978,767 | $ | 4,281,103 | $ | 4,402,953 | $ | 4,453,902 | |||||||||
| Company share of MMO joint venture debt | 138,842 | 138,993 | 160,355 | 160,510 | 160,663 | ||||||||||||||
| Total combined market capitalization | $ | 4,173,341 | $ | 4,117,760 | $ | 4,441,458 | $ | 4,563,463 | $ | 4,614,565 | |||||||||
| Total consolidated debt / total consolidated market capitalization | 88.7 | % | 89.9 | % | 91.0 | % | 90.7 | % | 90.6 | % | |||||||||
| Total combined debt / total combined market capitalization | 89.1 | % | 90.2 | % | 91.3 | % | 91.0 | % | 90.9 | % | |||||||||
| Total consolidated debt plus liquidation preference / total consolidated market capitalization | 94.9 | % | 96.2 | % | 96.8 | % | 96.4 | % | 96.2 | % | |||||||||
| Total combined debt plus liquidation preference / total combined market capitalization | 95.1 | % | 96.3 | % | 96.9 | % | 96.5 | % | 96.3 | % | |||||||||
8
| Financial Highlights (continued) | ||||
__________
| (1) | Excludes revenue from discontinued operations of approximately $4.5 million, $10.5 million, $8.8 million and $13.3 million for the three months ended December 31, September 30, June 30 and March 31, 2010, respectively. |
| (2) | Represents the net adjustment for above- and below-market leases, which are being amortized over the remaining term of the respective leases from the date of acquisition. |
| (3) | Calculated as follows: (rental, tenant reimbursement and parking revenues - rental property operating and maintenance, real estate taxes and parking expenses) / (rental, tenant reimbursement and parking revenues). Lease termination fees are reported as part of interest and other revenue in the consolidated statements of operations. |
| (4) | For a definition and discussion of FFO, see page 48. For a quantitative reconciliation of the differences between FFO and net (loss) income, see page 16. |
| (5) | Calculated as earnings before interest, taxes and depreciation and amortization and preferred dividends, or EBITDA, of $54,035, $(44,217), $87,299, $46,041 and $134,085, respectively, divided by cash paid for interest of $52,117, $56,353, $57,369, $58,900 and $60,894, respectively. Cash paid for interest excludes default interest accrued totaling $10.1 million, $10.5 million, $9.9 million, $10.5 million and $10.4 million related to mortgages in default for the three months ended March 31, 2011 and December 31, September 30, June 30 and March 31, 2010, respectively. For a discussion of EBITDA, see page 50. For a quantitative reconciliation of the differences between EBITDA and net (loss) income, see page 19. |
| (6) | Calculated as Adjusted EBITDA of $54,035, $64,118, $64,953, $63,594 and $68,752, respectively, divided by cash paid for interest of $52,117, $56,353, $57,369, $58,900 and $60,894, respectively. For a discussion of Adjusted EBITDA, see page 50. |
| (7) | Calculated as EBITDA of $54,035, $(44,217), $87,299, $46,041 and $134,085, respectively, divided by fixed charges of $58,050, $62,461, $63,146, $65,042 and $67,128, respectively. |
| (8) | Calculated as Adjusted EBITDA of $54,035, $64,118, $64,953, $63,594 and $68,752, respectively, divided by fixed charges of $58,050, $62,461, $63,146, $65,042 and $67,128, respectively. |
| (9) | Assumes 100% conversion of the limited partnership units in our Operating Partnership into shares of our common stock. Our limited partners have the right to redeem all or part of their Operating Partnership units at any time. At the time of redemption, we have the right to determine whether to redeem the Operating Partnership units for cash, based upon the fair market value of an equivalent number of shares of our common stock at the time of redemption, or exchange them for shares of our common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of stock rights, specified extraordinary distribution and similar events. |
.
9
Consolidated Balance Sheets (unaudited and in thousands) | ||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | |||||||||||||||
| Assets | |||||||||||||||||||
| Investments in real estate | $ | 3,060,737 | $ | 3,063,186 | $ | 3,532,695 | $ | 3,630,535 | $ | 3,668,916 | |||||||||
| Less: accumulated depreciation | (690,953 | ) | (668,328 | ) | (685,244 | ) | (680,262 | ) | (655,892 | ) | |||||||||
| Investments in real estate, net | 2,369,784 | 2,394,858 | 2,847,451 | 2,950,273 | 3,013,024 | ||||||||||||||
| Cash, cash equivalents and restricted cash | 171,260 | 189,659 | 214,073 | 216,808 | 229,279 | ||||||||||||||
| Rents, deferred rents and other receivables, net | 67,009 | 68,237 | 75,972 | 77,320 | 76,510 | ||||||||||||||
| Deferred charges, net | 99,608 | 105,283 | 113,315 | 116,938 | 122,514 | ||||||||||||||
| Other assets | 17,304 | 12,975 | 16,591 | 16,544 | 23,892 | ||||||||||||||
| Assets associated with real estate held for sale | — | — | — | — | 52,099 | ||||||||||||||
| Total assets | $ | 2,724,965 | $ | 2,771,012 | $ | 3,267,402 | $ | 3,377,883 | $ | 3,517,318 | |||||||||
| Liabilities and Deficit | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||
| Mortgage and other loans | $ | 3,578,627 | $ | 3,576,493 | $ | 3,894,266 | $ | 3,992,724 | $ | 4,035,451 | |||||||||
| Accounts payable, accrued interest payable and other liabilities | 188,418 | 196,015 | 221,184 | 208,029 | 191,959 | ||||||||||||||
| Acquired below-market leases, net | 40,111 | 44,026 | 49,163 | 62,618 | 67,815 | ||||||||||||||
| Obligations associated with real estate held for sale | — | — | — | — | 52,656 | ||||||||||||||
| Total liabilities | 3,807,156 | 3,816,534 | 4,164,613 | 4,263,371 | 4,347,881 | ||||||||||||||
| Deficit: | |||||||||||||||||||
| Stockholders’ Deficit: | |||||||||||||||||||
| Common and preferred stock and additional paid-in capital | 705,105 | 703,145 | 705,862 | 704,129 | 703,343 | ||||||||||||||
| Accumulated deficit and dividends | (1,629,743 | ) | (1,594,407 | ) | (1,460,333 | ) | (1,446,663 | ) | (1,397,328 | ) | |||||||||
| Accumulated other comprehensive loss | (27,879 | ) | (29,079 | ) | (34,582 | ) | (36,422 | ) | (36,727 | ) | |||||||||
| Total stockholders’ deficit | (952,517 | ) | (920,341 | ) | (789,053 | ) | (778,956 | ) | (730,712 | ) | |||||||||
| Noncontrolling Interests: | |||||||||||||||||||
| Common units of our Operating Partnership | (129,674 | ) | (125,181 | ) | (108,158 | ) | (106,532 | ) | (99,851 | ) | |||||||||
| Total deficit | (1,082,191 | ) | (1,045,522 | ) | (897,211 | ) | (885,488 | ) | (830,563 | ) | |||||||||
| Total liabilities and deficit | $ | 2,724,965 | $ | 2,771,012 | $ | 3,267,402 | $ | 3,377,883 | $ | 3,517,318 | |||||||||
10
MMO Unconsolidated Joint Venture Condensed Balance Sheets (1) (unaudited and in thousands) | ||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | |||||||||||||||
| Assets | |||||||||||||||||||
| Investments in real estate | $ | 970,875 | $ | 968,931 | $ | 1,055,538 | $ | 1,051,355 | $ | 1,049,896 | |||||||||
| Less: accumulated depreciation | (157,675 | ) | (150,943 | ) | (163,204 | ) | (156,142 | ) | (148,632 | ) | |||||||||
| Investments in real estate, net | 813,200 | 817,988 | 892,334 | 895,213 | 901,264 | ||||||||||||||
| Cash and cash equivalents, including restricted cash | 20,151 | 18,955 | 24,751 | 21,243 | 21,882 | ||||||||||||||
| Rents, deferred rents and other receivables, net | 23,410 | 22,701 | 21,641 | 21,392 | 20,535 | ||||||||||||||
| Deferred charges, net | 29,278 | 27,875 | 28,309 | 30,086 | 31,809 | ||||||||||||||
| Other assets | 2,610 | 2,474 | 3,063 | 3,832 | 4,697 | ||||||||||||||
| Total assets | $ | 888,649 | $ | 889,993 | $ | 970,098 | $ | 971,766 | $ | 980,187 | |||||||||
| Liabilities and Members’ Equity | |||||||||||||||||||
| Mortgage loans | $ | 694,209 | $ | 694,966 | $ | 801,776 | $ | 802,551 | $ | 803,317 | |||||||||
| Accounts payable, accrued interest payable and other liabilities | 22,458 | 23,001 | 32,397 | 27,619 | 29,297 | ||||||||||||||
| Acquired below-market leases, net | 2,448 | 2,762 | 3,120 | 3,531 | 3,980 | ||||||||||||||
| Total liabilities | 719,115 | 720,729 | 837,293 | 833,701 | 836,594 | ||||||||||||||
| Members’ equity | 169,534 | 169,264 | 132,805 | 138,065 | 143,593 | ||||||||||||||
| Total liabilities and members’ equity | $ | 888,649 | $ | 889,993 | $ | 970,098 | $ | 971,766 | $ | 980,187 | |||||||||
__________
| (1) | We own 20% of the Maguire Macquarie Office (“MMO”) joint venture. |
11
Consolidated Statements of Operations (unaudited and in thousands, except share and per share amounts) | ||||
| For the Three Months Ended | |||||||||||||||||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | |||||||||||||||
| Revenue: | |||||||||||||||||||
| Rental | $ | 58,032 | $ | 59,410 | $ | 61,139 | $ | 61,309 | $ | 62,481 | |||||||||
| Tenant reimbursements | 21,862 | 24,876 | 22,436 | 22,483 | 23,344 | ||||||||||||||
| Hotel operations | 4,988 | 5,602 | 4,867 | 4,956 | 5,237 | ||||||||||||||
| Parking | 9,636 | 9,876 | 9,559 | 10,465 | 10,886 | ||||||||||||||
| Management, leasing and development services | 999 | 1,365 | 1,281 | 1,062 | 961 | ||||||||||||||
| Interest and other | 337 | 199 | 2,631 | 246 | 225 | ||||||||||||||
| Total revenue | 95,854 | 101,328 | 101,913 | 100,521 | 103,134 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Rental property operating and maintenance | 22,109 | 25,414 | 23,521 | 22,619 | 22,330 | ||||||||||||||
| Hotel operating and maintenance | 3,573 | 3,779 | 3,485 | 3,543 | 3,747 | ||||||||||||||
| Real estate taxes | 8,146 | 7,882 | 8,264 | 8,062 | 8,039 | ||||||||||||||
| Parking | 2,768 | 2,844 | 2,814 | 2,747 | 2,852 | ||||||||||||||
| General and administrative | 6,691 | 906 | 8,073 | 6,517 | 7,607 | ||||||||||||||
| Other expense | 1,752 | 1,779 | 1,530 | 1,593 | 1,439 | ||||||||||||||
| Depreciation and amortization | 27,862 | 28,837 | 29,412 | 28,968 | 30,962 | ||||||||||||||
| Impairment of long-lived assets | — | 210,122 | — | — | — | ||||||||||||||
| Interest | 62,628 | 61,704 | 61,376 | 58,037 | 57,634 | ||||||||||||||
| Total expenses | 135,529 | 343,267 | 138,475 | 132,086 | 134,610 | ||||||||||||||
| Loss from continuing operations before equity in net (loss) income of unconsolidated joint venture and gain on sale of real estate | (39,675 | ) | (241,939 | ) | (36,562 | ) | (31,565 | ) | (31,476 | ) | |||||||||
| Equity in (loss) income of unconsolidated joint venture | (312 | ) | 304 | 204 | 196 | 201 | |||||||||||||
| Gain on sale of real estate | — | — | — | — | 16,591 | ||||||||||||||
| Loss from continuing operations | (39,987 | ) | (241,635 | ) | (36,358 | ) | (31,369 | ) | (14,684 | ) | |||||||||
| Discontinued Operations: | |||||||||||||||||||
| Loss from discontinued operations before gains on settlement of debt and sale of real estate | — | (8,486 | ) | (2,910 | ) | (24,807 | ) | (8,507 | ) | ||||||||||
| Gains on settlement of debt | — | 97,978 | 9,030 | — | 49,121 | ||||||||||||||
| Gain on sale of real estate | — | — | 14,689 | — | — | ||||||||||||||
| Income (loss) from discontinued operations | — | 89,492 | 20,809 | (24,807 | ) | 40,614 | |||||||||||||
| Net (loss) income | (39,987 | ) | (152,143 | ) | (15,549 | ) | (56,176 | ) | 25,930 | ||||||||||
| Net loss (income) attributable to common units of our Operating Partnership | 5,205 | 18,634 | 2,455 | 7,421 | (2,584 | ) | |||||||||||||
| Net (loss) income attributable to MPG Office Trust, Inc. | (34,782 | ) | (133,509 | ) | (13,094 | ) | (48,755 | ) | 23,346 | ||||||||||
| Preferred stock dividends | (4,766 | ) | (4,766 | ) | (4,766 | ) | (4,766 | ) | (4,766 | ) | |||||||||
| Net (loss) income available to common stockholders | $ | (39,548 | ) | $ | (138,275 | ) | $ | (17,860 | ) | $ | (53,521 | ) | $ | 18,580 | |||||
| Basic (loss) income per common share: | |||||||||||||||||||
| Loss from continuing operations | $ | (0.81 | ) | $ | (4.43 | ) | $ | (0.73 | ) | $ | (0.65 | ) | $ | (0.35 | ) | ||||
| Income (loss) from discontinued operations | — | 1.61 | 0.37 | (0.45 | ) | 0.73 | |||||||||||||
| Net (loss) income available to common stockholders per share | $ | (0.81 | ) | $ | (2.82 | ) | $ | (0.36 | ) | $ | (1.10 | ) | $ | 0.38 | |||||
| Weighted average number of common shares outstanding | 49,016,989 | 48,981,822 | 48,874,308 | 48,692,588 | 48,534,283 | ||||||||||||||
12
Consolidated Statements of Discontinued Operations (unaudited and in thousands) | ||||
| For the Three Months Ended | |||||||||||||||
| December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | ||||||||||||
| Revenue: | |||||||||||||||
| Rental | $ | 2,464 | $ | 3,751 | $ | 6,404 | $ | 10,166 | |||||||
| Tenant reimbursements | 1,025 | 1,535 | 1,879 | 1,996 | |||||||||||
| Parking | 265 | 346 | 417 | 1,063 | |||||||||||
| Interest and other | 817 | 4,846 | 68 | 84 | |||||||||||
| Total revenue | 4,571 | 10,478 | 8,768 | 13,309 | |||||||||||
| Expenses: | |||||||||||||||
| Rental property operating and maintenance | 1,729 | 1,908 | 2,199 | 3,155 | |||||||||||
| Real estate taxes | 536 | 928 | 1,229 | 1,456 | |||||||||||
| Parking | 207 | 130 | 209 | 348 | |||||||||||
| Depreciation and amortization | 1,323 | 2,070 | 2,677 | 4,102 | |||||||||||
| Impairment of long-lived assets | 4,457 | 1,373 | 17,447 | — | |||||||||||
| Interest | 4,805 | 6,979 | 9,708 | 12,376 | |||||||||||
| Loss from early extinguishment of debt | — | — | 106 | 379 | |||||||||||
| Total expenses | 13,057 | 13,388 | 33,575 | 21,816 | |||||||||||
| Loss from discontinued operations before gains on settlement of debt and sale of real estate | (8,486 | ) | (2,910 | ) | (24,807 | ) | (8,507 | ) | |||||||
| Gains on settlement of debt | 97,978 | 9,030 | — | 49,121 | |||||||||||
| Gain on sale of real estate | — | 14,689 | — | — | |||||||||||
| Income (loss) from discontinued operations | $ | 89,492 | $ | 20,809 | $ | (24,807 | ) | $ | 40,614 | ||||||
13
Consolidated Statements of Operations Related to Properties in Default (1) (unaudited and in thousands) | ||||
| For the Three Months Ended | |||||||||||||||||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | |||||||||||||||
| Revenue: | |||||||||||||||||||
| Rental | $ | 8,066 | $ | 9,258 | $ | 9,869 | $ | 9,887 | $ | 10,368 | |||||||||
| Tenant reimbursements | 1,357 | 2,191 | 1,537 | 1,489 | 1,479 | ||||||||||||||
| Parking | 657 | 702 | 594 | 729 | 773 | ||||||||||||||
| Interest and other | 61 | 44 | 46 | 53 | 74 | ||||||||||||||
| Total revenue | 10,141 | 12,195 | 12,046 | 12,158 | 12,694 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Rental property operating and maintenance | 3,192 | 3,511 | 3,518 | 3,393 | 3,148 | ||||||||||||||
| Real estate taxes | 1,119 | 1,034 | 1,158 | 1,134 | 1,135 | ||||||||||||||
| Parking | 225 | 232 | 294 | 241 | 237 | ||||||||||||||
| Depreciation and amortization | 3,259 | 3,507 | 3,737 | 3,728 | 3,693 | ||||||||||||||
| Interest (2) | 17,761 | 18,223 | 17,497 | 16,217 | 16,523 | ||||||||||||||
| Total expenses | 25,556 | 26,507 | 26,204 | 24,713 | 24,736 | ||||||||||||||
| Loss from operations related to Properties in Default | $ | (15,415 | ) | $ | (14,312 | ) | $ | (14,158 | ) | $ | (12,555 | ) | $ | (12,042 | ) | ||||
__________
| (1) | Properties in Default include the following: Stadium Towers Plaza, 2600 Michelson, 550 South Hope, 500 Orange Tower and City Tower. As of the date of this report, the mortgage loans on these properties are in default. |
| (2) | Includes default interest totaling $8.3 million for the three months ended March 31, 2011, default interest totaling $8.4 million for the three months ended December 31, 2010, default interest totaling $7.0 million and the writeoff of deferred financing costs totaling $0.7 million for the three months ended September 30, 2010, default interest totaling $6.6 million for the three months ended June 30, 2010, and default interest totaling $6.4 million and the writeoff of deferred financing costs totaling $0.6 million for the three months ended March 31, 2010. |
14
MMO Unconsolidated Joint Venture Statements of Operations (unaudited and in thousands) | ||||
| For the Three Months Ended | |||||||||||||||||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | |||||||||||||||
| Revenue: | |||||||||||||||||||
| Rental | $ | 18,497 | $ | 17,710 | $ | 18,471 | $ | 18,529 | $ | 18,547 | |||||||||
| Tenant reimbursements | 5,870 | 6,219 | 6,056 | 5,318 | 5,344 | ||||||||||||||
| Parking | 1,513 | 1,472 | 1,516 | 1,573 | 1,488 | ||||||||||||||
| Interest and other | 6 | 50 | 4 | 20 | 5 | ||||||||||||||
| Total revenue | 25,886 | 25,451 | 26,047 | 25,440 | 25,384 | ||||||||||||||
| Expenses: | |||||||||||||||||||
| Rental property operating and maintenance | 6,300 | 6,647 | 5,994 | 5,849 | �� | 5,972 | |||||||||||||
| Real estate taxes | 3,171 | 2,890 | 3,345 | 3,380 | 3,072 | ||||||||||||||
| Parking | 362 | 422 | 504 | 335 | 364 | ||||||||||||||
| Depreciation and amortization | 8,507 | 8,981 | 8,477 | 8,939 | 8,830 | ||||||||||||||
| Interest | 9,156 | 9,679 | 9,550 | 9,456 | 9,361 | ||||||||||||||
| Other | 1,219 | 1,343 | 1,218 | 1,969 | 1,263 | ||||||||||||||
| Total expenses | 28,715 | 29,962 | 29,088 | 29,928 | 28,862 | ||||||||||||||
| Loss from continuing operations | (2,829 | ) | (4,511 | ) | (3,041 | ) | (4,488 | ) | (3,478 | ) | |||||||||
| Income (loss) from discontinued operations | — | 40,969 | (2,219 | ) | (2,030 | ) | (1,587 | ) | |||||||||||
| Net (loss) income | $ | (2,829 | ) | $ | 36,458 | $ | (5,260 | ) | $ | (6,518 | ) | $ | (5,065 | ) | |||||
| Company share (1) | $ | (566 | ) | $ | 7,292 | $ | (1,052 | ) | $ | (1,304 | ) | $ | (1,013 | ) | |||||
| Intercompany eliminations | 254 | 245 | 256 | 248 | 252 | ||||||||||||||
| Unallocated (allocated) losses | — | (7,233 | ) | 1,000 | 1,252 | 962 | |||||||||||||
| Equity in net (loss) income of unconsolidated joint venture | $ | (312 | ) | $ | 304 | $ | 204 | $ | 196 | $ | 201 | ||||||||
_________
| (1) | Amount represents our 20% ownership interest in the MMO joint venture. |
15
Funds from Operations (unaudited and in thousands, except share and per share amounts) | ||||
| For the Three Months Ended | ||||||||||||||||||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | ||||||||||||||||
Reconciliation of net (loss) income available to common stockholders to funds from operations: | ||||||||||||||||||||
| Net (loss) income available to common stockholders | $ | (39,548 | ) | $ | (138,275 | ) | $ | (17,860 | ) | $ | (53,521 | ) | $ | 18,580 | ||||||
| Add: | Depreciation and amortization of real estate assets | 27,787 | 30,084 | 31,406 | 31,569 | 34,988 | ||||||||||||||
Depreciation and amortization of real estate assets – unconsolidated joint venture (1) | 1,701 | 1,888 | 1,823 | 1,913 | 1,898 | |||||||||||||||
| Net (loss) income attributable to common units of our Operating Partnership | (5,205 | ) | (18,634 | ) | (2,455 | ) | (7,421 | ) | 2,584 | |||||||||||
| Allocated (unallocated) losses – unconsolidated joint venture (1) | — | 7,233 | (1,000 | ) | (1,252 | ) | (962 | ) | ||||||||||||
| Deduct: | Gains on sale of real estate | — | — | 14,689 | — | 16,591 | ||||||||||||||
| Funds from operations available to common stockholders and unit holders (FFO) (2) | $ | (15,265 | ) | $ | (117,704 | ) | $ | (2,775 | ) | $ | (28,712 | ) | $ | 40,497 | ||||||
| Company share of FFO (3) | $ | (13,490 | ) | $ | (103,726 | ) | $ | (2,440 | ) | $ | (25,215 | ) | $ | 35,552 | ||||||
| FFO per share – basic | $ | (0.28 | ) | $ | (2.12 | ) | $ | (0.05 | ) | $ | (0.52 | ) | $ | 0.73 | ||||||
| FFO per share – diluted | $ | (0.28 | ) | $ | (2.12 | ) | $ | (0.05 | ) | $ | (0.52 | ) | $ | 0.72 | ||||||
| Weighted average number of common shares outstanding – basic | 49,016,989 | 48,981,822 | 48,874,308 | 48,692,588 | 48,534,283 | |||||||||||||||
| Weighted average number of common and common equivalent shares outstanding – diluted | 50,237,641 | 49,619,851 | 49,507,077 | 49,442,240 | 49,197,833 | |||||||||||||||
| Weighted average diluted shares and units | 56,684,418 | 56,149,712 | 56,116,486 | 56,101,775 | 55,872,406 | |||||||||||||||
| Reconciliation of FFO to FFO before specified items: (2) | ||||||||||||||||||||
| FFO available to common stockholders and unit holders (FFO) | $ | (15,265 | ) | $ | (117,704 | ) | $ | (2,775 | ) | $ | (28,712 | ) | $ | 40,497 | ||||||
| Add: | Loss from early extinguishment of debt | — | — | — | 106 | 379 | ||||||||||||||
| Default interest accrued on mortgages in default | 10,078 | 10,533 | 9,902 | 10,541 | 10,363 | |||||||||||||||
| Writeoff of deferred financing costs related to mortgages in default | 1,626 | — | 713 | — | 562 | |||||||||||||||
| Impairment of long-lived assets | — | 214,579 | 1,373 | 17,447 | — | |||||||||||||||
| Impairment of long-lived assets – unconsolidated joint venture (1) | — | 572 | — | — | — | |||||||||||||||
| Deduct: | Gains on settlement of debt | — | 97,978 | 9,030 | — | 49,121 | ||||||||||||||
| Gain on settlement of debt – unconsolidated joint venture (1) | — | 8,838 | — | — | — | |||||||||||||||
| FFO before specified items | $ | (3,561 | ) | $ | 1,164 | $ | 183 | $ | (618 | ) | $ | 2,680 | ||||||||
| Company share of FFO before specified items (3) | $ | (3,147 | ) | $ | 1,026 | $ | 161 | $ | (543 | ) | $ | 2,353 | ||||||||
| FFO per share before specified items – basic | $ | (0.06 | ) | $ | 0.02 | $ | — | $ | (0.01 | ) | $ | 0.05 | ||||||||
| FFO per share before specified items – diluted | $ | (0.06 | ) | $ | 0.02 | $ | — | $ | (0.01 | ) | $ | 0.05 | ||||||||
| (1) | Amount represents our 20% ownership interest in the MMO joint venture. |
| (2) | For the definition and discussion of FFO and FFO before specified items, see page 48. |
| (3) | Based on a weighted average interest in our Operating Partnership of approximately 88.4% for the three months ended March 31, 2011, 88.1% for the three months ended December 31, 2010, 87.9% for the three months ended September 30, 2010 and 87.8% for all other periods presented. |
16
Adjusted Funds from Operations (1) (unaudited and in thousands) | ||||
| For the Three Months Ended | ||||||||||||||||||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | ||||||||||||||||
| FFO | $ | (15,265 | ) | $ | (117,704 | ) | $ | (2,775 | ) | $ | (28,712 | ) | $ | 40,497 | ||||||
| Add: | Non-real estate depreciation | 75 | 76 | 76 | 76 | 76 | ||||||||||||||
| Straight line ground lease expense | 511 | 511 | 511 | 512 | 511 | |||||||||||||||
| Amortization of deferred financing costs | 954 | 988 | 1,321 | 1,298 | 1,393 | |||||||||||||||
| Unrealized (gain) loss due to hedge ineffectiveness | (308 | ) | 783 | 1,244 | 93 | 80 | ||||||||||||||
| Default interest accrued on mortgages in default | 10,078 | 10,533 | 9,902 | 10,541 | 10,363 | |||||||||||||||
| Writeoff of deferred financing costs related to mortgages in default | 1,626 | — | 713 | — | 562 | |||||||||||||||
| Non-cash stock compensation | 1,998 | (2,502 | ) | 1,932 | 927 | 945 | ||||||||||||||
| Impairment of long-lived assets | — | 214,579 | 1,373 | 17,447 | — | |||||||||||||||
| Loss from early extinguishment of debt | — | — | — | 106 | 379 | |||||||||||||||
| Deduct: | Gains on settlement of debt | — | 97,978 | 9,030 | — | 49,121 | ||||||||||||||
| Straight line rent | 460 | 988 | (73 | ) | 1,029 | 2,761 | ||||||||||||||
| Fair value lease revenue | 3,446 | 3,946 | 5,988 | 3,820 | 4,579 | |||||||||||||||
| Capitalized payments (2) | 624 | 637 | 1,004 | 1,638 | 2,013 | |||||||||||||||
| Capital lease principal payments | 132 | 277 | 251 | 278 | 340 | |||||||||||||||
| Scheduled principal payments on mortgage loans | 900 | 900 | 600 | 940 | 965 | |||||||||||||||
| Non-recoverable capital expenditures | 149 | 347 | 638 | 77 | 199 | |||||||||||||||
| Recoverable capital expenditures | 363 | 265 | 779 | 607 | 810 | |||||||||||||||
| Hotel improvements, equipment upgrades and replacements | 776 | 661 | 88 | 57 | 68 | |||||||||||||||
| 2nd generation tenant improvements and leasing commissions (3), (4) | 1,848 | 3,229 | 5,123 | 1,032 | 1,353 | |||||||||||||||
| MMO joint venture AFFO adjustments (5) | 583 | 8,829 | 913 | 584 | 723 | |||||||||||||||
| Adjusted funds from operations (AFFO) | $ | (9,612 | ) | $ | (10,793 | ) | $ | (10,044 | ) | $ | (7,774 | ) | $ | (8,126 | ) | |||||
__________
| (1) | For the definition and computation method of AFFO, see page 49. For a quantitative reconciliation of the differences between AFFO and cash flows from operating activities, see page 19. |
| (2) | Includes capitalized leasing and development payroll, and capitalized interest. |
| (3) | Excludes 1st generation tenant improvements and leasing commissions of $0.2 million, $0.8 million, $2.8 million, $1.6 million and $1.2 million for the three months ended March 31, 2011 and December 31, September 30, June 30 and March 31, 2010, respectively. |
| (4) | Excludes tenant improvements and leasing commissions paid using cash reserves that were funded through loan proceeds upon acquisition or debt refinancing of $0.5 million, $0.2 million, $0.6 million, $0.3 million and $1.0 million for the three months ended March 31, 2011 and December 31, September 30, June 30 and March 31, 2010, respectively. |
| (5) | Amount represents our 20% ownership interest in the MMO joint venture. |
17
Adjusted Funds from Operations Related to Properties in Default (1) (unaudited and in thousands) | ||||
| For the Three Months Ended | ||||||||||||||||||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | ||||||||||||||||
| FFO | $ | (12,156 | ) | $ | 80,011 | $ | (2,232 | ) | $ | (24,049 | ) | $ | (11,712 | ) | ||||||
| Add: | Amortization of deferred financing costs | — | — | 18 | 27 | 26 | ||||||||||||||
| Writeoff of deferred financing costs | — | — | 713 | — | 562 | |||||||||||||||
| Default interest accrued | 8,250 | 10,533 | 9,902 | 10,541 | 10,363 | |||||||||||||||
| Impairment of long-lived assets | — | 4,457 | 1,373 | 10,688 | — | |||||||||||||||
| Deduct: | Gains on settlement of debt | — | 97,978 | 9,030 | — | — | ||||||||||||||
| Straight line rent | 530 | 1,114 | (151 | ) | — | 1,997 | ||||||||||||||
| Fair value lease revenue | 789 | 1,168 | 1,624 | 1,413 | 1,583 | |||||||||||||||
| Capitalized payments (2) | — | — | — | 939 | 1,128 | |||||||||||||||
| Non-recoverable capital expenditures | — | 31 | — | 21 | — | |||||||||||||||
| Recoverable capital expenditures | — | — | — | — | — | |||||||||||||||
| 2nd generation tenant improvements and leasing commissions | — | — | — | — | 7 | |||||||||||||||
| Adjusted funds from operations related to Properties in Default | $ | (5,225 | ) | $ | (5,290 | ) | $ | (729 | ) | $ | (5,166 | ) | $ | (5,476 | ) | |||||
__________
| (1) | For purposes of this schedule, Properties in Default include the following: Stadium Towers Plaza, Park Place II, 2600 Michelson, Pacific Arts Plaza, 550 South Hope, 500 Orange Tower, City Tower and 207 Goode. In July 2010, we disposed of Park Place II, in October 2010, we disposed of 207 Goode and in December 2010, we disposed of Pacific Arts Plaza. |
| (2) | Includes regular principal payments related to the Park Place II mortgage loan and capitalized interest related to 207 Goode. |
18
Reconciliation of Earnings before Interest, Taxes and Depreciation and Amortization (1) and Adjusted Funds from Operations (2) (unaudited and in thousands) | ||||
| For the Three Months Ended | ||||||||||||||||||||
| March 31, 2011 | December 31, 2010 | September 30, 2010 | June 30, 2010 | March 31, 2010 | ||||||||||||||||
| Reconciliation of net (loss) income to earnings before interest, taxes and depreciation and amortization (EBITDA): | ||||||||||||||||||||
| Net (loss) income | $ | (39,987 | ) | $ | (152,143 | ) | $ | (15,549 | ) | $ | (56,176 | ) | $ | 25,930 | ||||||
| Add: | Interest expense (3) | 62,628 | 66,509 | 68,355 | 67,745 | 70,010 | ||||||||||||||
| Interest expense – unconsolidated joint venture (4) | 1,831 | 2,136 | 2,188 | 2,166 | 2,145 | |||||||||||||||
| Depreciation and amortization (5) | 27,862 | 30,160 | 31,482 | 31,645 | 35,064 | |||||||||||||||
| Depreciation and amortization – unconsolidated joint venture (4) | 1,701 | 1,888 | 1,823 | 1,913 | 1,898 | |||||||||||||||
| Deduct: | Unallocated losses from unconsolidated joint venture (4) | — | (7,233 | ) | 1,000 | 1,252 | 962 | |||||||||||||
| EBITDA | $ | 54,035 | $ | (44,217 | ) | $ | 87,299 | $ | 46,041 | $ | 134,085 | |||||||||
| EBITDA | $ | 54,035 | $ | (44,217 | ) | $ | 87,299 | $ | 46,041 | $ | 134,085 | |||||||||
| Add: | Loss from early extinguishment of debt | — | — | — | 106 | 379 | ||||||||||||||
| Impairment of long-lived assets | — | 214,579 | 1,373 | 17,447 | — | |||||||||||||||
| Impairment of long-lived assets – unconsolidated joint venture (4) | — | 572 | — | — | — | |||||||||||||||
| Deduct: | Gains on settlement of debt | — | 97,978 | 9,030 | — | 49,121 | ||||||||||||||
| Gain on settlement of debt – unconsolidated joint venture (4) | — | 8,838 | — | — | — | |||||||||||||||
| Gains on sale of real estate | — | — | 14,689 | — | 16,591 | |||||||||||||||
| Adjusted EBITDA | $ | 54,035 | $ | 64,118 | $ | 64,953 | $ | 63,594 | $ | 68,752 | ||||||||||
| Reconciliation of cash flows from operating activities to adjusted funds from operations (AFFO): | ||||||||||||||||||||
| Cash flows from operating activities | $ | (19,188 | ) | $ | 4,295 | $ | 6,348 | $ | 10,966 | $ | 436 | |||||||||
| Changes in other assets and liabilities | 12,712 | (10,586 | ) | (9,764 | ) | (16,967 | ) | (6,132 | ) | |||||||||||
| Non-recoverable capital expenditures | (149 | ) | (347 | ) | (638 | ) | (77 | ) | (199 | ) | ||||||||||
| Recoverable capital expenditures | (363 | ) | (265 | ) | (779 | ) | (607 | ) | (810 | ) | ||||||||||
| Hotel improvements, equipment upgrades and replacements | (776 | ) | (661 | ) | (88 | ) | (57 | ) | (68 | ) | ||||||||||
| 2nd generation tenant improvements and leasing commissions (6), (7) | (1,848 | ) | (3,229 | ) | (5,123 | ) | (1,032 | ) | (1,353 | ) | ||||||||||
| AFFO | $ | (9,612 | ) | $ | (10,793 | ) | $ | (10,044 | ) | $ | (7,774 | ) | $ | (8,126 | ) | |||||
__________
| (1) | For the definition and discussion of EBITDA and Adjusted EBITDA, see page 50. |
| (2) | For the definition and discussion of AFFO, see page 49. |
| (3) | Includes interest expense of $4.8 million, $7.0 million, $9.7 million and $12.4 million for the three months ended December 31, September 30, June 30 and March 31, 2010, respectively, related to discontinued operations. |
| (4) | Amount represents our 20% ownership interest in the MMO joint venture. |
| (5) | Includes depreciation and amortization of $1.3 million, $2.1 million, $2.7 million and $4.1 million for the three months ended December 31, September 30, June 30 and March 31, 2010, respectively, related to discontinued operations. |
| (6) | Excludes 1st generation tenant improvements and leasing commissions of $0.2 million, $0.8 million, $2.8 million, $1.6 million and $1.2 million for the three months ended March 31, 2011 and December 31, September 30, June 30 and March 31, 2010, respectively. |
| (7) | Excludes tenant improvements and leasing commissions paid using cash reserves that were funded through loan proceeds upon acquisition or debt refinancing of $0.5 million, $0.2 million, $0.6 million, $0.3 million and $1.0 million for the three months ended March 31, 2011 and December 31, September 30, June 30 and March 31, 2010, respectively. |
19
| Capital Structure | ||||
| Debt | ||||||
| (in thousands) | ||||||
| Balance as of | ||||||
| March 31, 2011 | ||||||
| Mortgage and other loans | $ | 3,578,627 | ||||
| Company share of MMO joint venture debt | 138,842 | |||||
| Total combined debt | $ | 3,717,469 | ||||
| Equity | ||||||
| (in thousands) | ||||||
| Shares Outstanding | Total Liquidation Preference | |||||
| Preferred stock | 10,000 | $ | 250,000 | |||
Shares & Units Outstanding | Market Value (1) | |||||
| Common stock | 49,044 | $ | 181,954 | |||
| Noncontrolling common units of our Operating Partnership | 6,447 | 23,918 | ||||
| Total common equity | 55,491 | $ | 205,872 | |||
| Total consolidated market capitalization | $ | 4,034,499 | ||||
| Total combined market capitalization (2) | $ | 4,173,341 | ||||
__________
| (1) | Value based on the NYSE closing price of $3.71 on March 31, 2011. |
| (2) | Includes our share of MMO joint venture debt. |
20
Debt Summary (in thousands, except percentages) | ||||
| Maturity Date | Principal Amount as of March 31, 2011 | % of Debt | Interest Rate as of March 31, 2011 (1) | ||||||||
| Floating-Rate Debt | |||||||||||
| Unsecured term loan (2) | May 1, 2011 | $ | 15,000 | 0.42 | % | 3.99 | % | ||||
| Variable-Rate Mortgage Loans: | |||||||||||
| Plaza Las Fuentes (3) | September 29, 2011 | 79,200 | 2.21 | % | 3.99 | % | |||||
| Brea Corporate Place (4) | May 1, 2012 | 70,468 | 1.97 | % | 2.19 | % | |||||
| Brea Financial Commons (4) | May 1, 2012 | 38,532 | 1.08 | % | 2.19 | % | |||||
| Total variable-rate mortgage loans | 188,200 | 5.26 | % | 2.95 | % | ||||||
| Variable-Rate Swapped to Fixed-Rate Loan: | |||||||||||
| KPMG Tower (5) | October 9, 2012 | 400,000 | 11.17 | % | 7.16 | % | |||||
| Total floating-rate debt | 603,200 | 16.85 | % | 5.77 | % | ||||||
| Fixed-Rate Debt | |||||||||||
| Wells Fargo Tower | April 6, 2017 | 550,000 | 15.36 | % | 5.68 | % | |||||
| Gas Company Tower | August 11, 2016 | 458,000 | 12.79 | % | 5.10 | % | |||||
| 777 Tower | November 1, 2013 | 273,000 | 7.63 | % | 5.84 | % | |||||
| US Bank Tower | July 1, 2013 | 260,000 | 7.26 | % | 4.66 | % | |||||
| Glendale Center | August 11, 2016 | 125,000 | 3.49 | % | 5.82 | % | |||||
| 801 North Brand | April 6, 2015 | 75,540 | 2.11 | % | 5.73 | % | |||||
| The City – 3800 Chapman | May 6, 2017 | 44,370 | 1.24 | % | 5.93 | % | |||||
| 701 North Brand (6) | October 1, 2016 | 33,750 | 0.94 | % | 5.87 | % | |||||
| 700 North Central | April 6, 2015 | 27,460 | 0.77 | % | 5.73 | % | |||||
| Total fixed-rate debt | 1,847,120 | 51.59 | % | 5.44 | % | ||||||
| Total debt, excluding mortgages in default | 2,450,320 | 68.44 | % | 5.52 | % | ||||||
| Mortgages in Default | |||||||||||
| Two California Plaza (7) | May 6, 2017 | 470,000 | 13.13 | % | 10.50 | % | |||||
| 550 South Hope (8) (9) | May 6, 2017 | 200,000 | 5.59 | % | 10.67 | % | |||||
| City Tower (8) | May 10, 2017 | 140,000 | 3.91 | % | 10.85 | % | |||||
| 500 Orange Tower (8) | May 6, 2017 | 110,000 | 3.07 | % | 10.88 | % | |||||
| 2600 Michelson (8) | May 10, 2017 | 110,000 | 3.07 | % | 10.69 | % | |||||
| Stadium Towers Plaza (8) | May 11, 2017 | 100,000 | 2.79 | % | 10.78 | % | |||||
| Total mortgages in default | 1,130,000 | 31.56 | % | 10.65 | % | ||||||
| Total consolidated debt | 3,580,320 | 100.00 | % | 7.14 | % | ||||||
| Debt discount | (1,693 | ) | |||||||||
| Total consolidated debt, net | $ | 3,578,627 | |||||||||
21
| Debt Summary (continued) | ||||
__________
| (1) | The March 31, 2011 one-month LIBOR rate of 0.24% was used to calculate interest on the variable-rate loans. |
| (2) | This loan bears interest at a variable rate of LIBOR plus 3.75%. This loan was repaid upon maturity on May 1, 2011. |
| (3) | This loan bears interest at a variable rate of LIBOR plus 3.75%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 4.75% during the loan term, excluding extension periods. Two one-year extensions are available at our option, subject to certain conditions, some of which we may be unable to fulfill. |
| (4) | This loan bears interest at a rate of LIBOR plus 1.95%. As required by the loan agreement, we have entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 6.50% during the loan term. This loan was extended until May 1, 2012. |
| (5) | This loan bears interest at a rate of LIBOR plus 1.60%. We have entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR rate at 5.564%. |
| (6) | We disposed of 701 North Brand on April 1, 2011. |
| (7) | On March 7, 2011, our special purpose property-owning subsidiary that owns Two California Plaza defaulted on the mortgage loan secured by the property. The interest rate shown for this loan is the default rate as defined in the loan agreement. The special servicer has the contractual right to accelerate the maturity of the debt but has not done so. If we are successful in modifying the mortgage loan, the settlement date and treatment of principal will be as set forth in the modified loan agreement. |
| (8) | Our special purpose property-owning subsidiary that owns this property is in default for failing to make debt service payments due under this loan. The interest rate shown for this loan is the default rate as defined in the loan agreement. The special servicer has the contractual right to accelerate the maturity of the debt but has not done so. The actual settlement date of the loan will depend upon when the property is disposed of either by the Company or the special servicer, as applicable. Management does not intend to settle this amount with unrestricted cash. We expect that this amount will be settled in a non-cash manner at the time of disposition. |
| (9) | We disposed of 550 South Hope on April 26, 2011. |
22
MMO Joint Venture Debt Summary (in thousands, except percentages) | ||||
Maturity Date | Principal Amount as of March 31, 2011 | % of Debt | Interest Rate as of March 31, 2011 (1) | ||||||||
| Fixed-Rate Debt | |||||||||||
| Wells Fargo Center (Denver, CO) | April 6, 2015 | $ | 276,000 | 39.86 | % | 5.26 | % | ||||
| One California Plaza | July 1, 2011 | 136,556 | 19.72 | % | 4.73 | % | |||||
| San Diego Tech Center | April 11, 2015 | 133,000 | 19.21 | % | 5.70 | % | |||||
| Cerritos Corporate Center | February 1, 2016 | 94,868 | 13.70 | % | 5.54 | % | |||||
| Stadium Gateway | February 1, 2016 | 52,000 | 7.51 | % | 5.66 | % | |||||
| Total fixed-rate debt | 692,424 | 100.00 | % | 5.31 | % | ||||||
| Debt premium, net of discount | 1,785 | ||||||||||
| Total joint venture debt, net | $ | 694,209 | |||||||||
| Our portion of joint venture debt (1) | $ | 138,842 | |||||||||
__________
| (1) | We own 20% of the MMO joint venture. |
23
Debt Maturities (in thousands, except percentages) | ||||
| 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | Total | |||||||||||||||||||||
| Floating-Rate Debt | |||||||||||||||||||||||||||
| Unsecured term loan (1) | $ | 15,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 15,000 | |||||||||||||
| Variable-Rate Mortgage Loans: | |||||||||||||||||||||||||||
| Plaza Las Fuentes (2) | 79,200 | — | — | — | — | — | 79,200 | ||||||||||||||||||||
| Brea Corporate Place | — | 70,468 | — | — | — | — | 70,468 | ||||||||||||||||||||
| Brea Financial Commons | — | 38,532 | — | — | — | — | 38,532 | ||||||||||||||||||||
| Total variable-rate mortgage loans | 79,200 | 109,000 | — | — | — | — | 188,200 | ||||||||||||||||||||
| Variable-Rate Swapped to Fixed-Rate Loan: | |||||||||||||||||||||||||||
| KPMG Tower | — | 400,000 | — | — | — | — | 400,000 | ||||||||||||||||||||
| Total floating-rate debt | 94,200 | 509,000 | — | — | — | — | 603,200 | ||||||||||||||||||||
| Fixed-Rate Debt | |||||||||||||||||||||||||||
| Wells Fargo Tower | — | — | — | — | — | 550,000 | 550,000 | ||||||||||||||||||||
| Gas Company Tower | — | — | — | — | — | 458,000 | 458,000 | ||||||||||||||||||||
| 777 Tower | — | — | 273,000 | — | — | — | 273,000 | ||||||||||||||||||||
| US Bank Tower | — | — | 260,000 | — | — | — | 260,000 | ||||||||||||||||||||
| Glendale Center | — | — | — | — | — | 125,000 | 125,000 | ||||||||||||||||||||
| 801 North Brand | — | — | — | — | 75,540 | — | 75,540 | ||||||||||||||||||||
| The City – 3800 Chapman | — | — | — | — | — | 44,370 | 44,370 | ||||||||||||||||||||
| 701 North Brand (3) | — | — | — | — | — | 33,750 | 33,750 | ||||||||||||||||||||
| 700 North Central | — | — | — | — | 27,460 | — | 27,460 | ||||||||||||||||||||
| Total fixed-rate debt | — | — | 533,000 | — | 103,000 | 1,211,120 | 1,847,120 | ||||||||||||||||||||
Total debt, excluding mortgages in default | 94,200 | 509,000 | 533,000 | — | 103,000 | 1,211,120 | 2,450,320 | ||||||||||||||||||||
| Debt discount | — | — | (1,693 | ) | — | — | — | (1,693 | ) | ||||||||||||||||||
Total debt, excluding mortgages in default, net | 94,200 | 509,000 | 531,307 | — | 103,000 | 1,211,120 | 2,448,627 | ||||||||||||||||||||
| Mortgages in Default | |||||||||||||||||||||||||||
| Two California Plaza (4) | — | — | — | — | — | 470,000 | 470,000 | ||||||||||||||||||||
| 550 South Hope (5) (6) | — | — | — | — | — | 200,000 | 200,000 | ||||||||||||||||||||
| City Tower (5) | — | — | — | — | — | 140,000 | 140,000 | ||||||||||||||||||||
| 500 Orange Tower (5) | — | — | — | — | — | 110,000 | 110,000 | ||||||||||||||||||||
| 2600 Michelson (5) | — | — | — | — | — | 110,000 | 110,000 | ||||||||||||||||||||
| Stadium Towers Plaza (5) | — | — | — | — | — | 100,000 | 100,000 | ||||||||||||||||||||
| Total mortgages in default | — | — | — | — | — | 1,130,000 | 1,130,000 | ||||||||||||||||||||
| Total consolidated debt, net | $ | 94,200 | $ | 509,000 | $ | 531,307 | $ | — | $ | 103,000 | $ | 2,341,120 | $ | 3,578,627 | |||||||||||||
Weighted average interest rate, excluding mortgages in default | 3.99 | % | 6.10 | % | 5.27 | % | — | % | 5.73 | % | 5.49 | % | 5.52 | % | |||||||||||||
Weighted average interest rate, mortgages in default | — | % | — | % | — | % | — | % | — | % | 10.65 | % | 10.65 | % | |||||||||||||
| Weighted average interest rate, consolidated | 3.99 | % | 6.10 | % | 5.27 | % | — | % | 5.73 | % | 7.98 | % | 7.14 | % | |||||||||||||
__________
| (1) | This loan was repaid upon maturity on May 1, 2011. |
| (2) | Two one-year extensions are available at our option, subject to certain conditions, some of which we may be unable to fulfill. |
| (3) | We disposed of 701 North Brand on April 1, 2011. |
| (4) | Amounts shown in the table above for mortgages in default reflect contractual maturity dates per the loan agreements. The special servicers have the contractual right to accelerate the maturity dates of the debt but have not done so. If we are successful in modifying the mortgage loan, the settlement date and treatment of principal will be as set forth in the modified loan agreement. |
| (5) | Amounts shown in the table above for mortgages in default reflect contractual maturity dates per the loan agreements. The special servicers have the contractual right to accelerate the maturity dates of the debt but have not done so. The actual settlement date of the loan will depend upon when the property is disposed of either by the Company or the special servicer, as applicable. Management does not intend to settle this amount with unrestricted cash. We expect that this amount will be settled in a non-cash manner at the time of disposition. |
| (6) | We disposed of 550 South Hope on April 26, 2011. |
24
MMO Joint Venture Debt Maturities (in thousands, except percentages) | ||||
| 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | Total | |||||||||||||||||||||
| Fixed-Rate Debt | |||||||||||||||||||||||||||
| Wells Fargo Center (Denver, CO) | $ | — | $ | — | $ | — | $ | — | $ | 276,000 | $ | — | $ | 276,000 | |||||||||||||
| One California Plaza | 136,556 | — | — | — | — | — | 136,556 | ||||||||||||||||||||
| San Diego Tech Center | — | — | — | — | 133,000 | — | 133,000 | ||||||||||||||||||||
| Cerritos Corporate Center | 922 | 1,330 | 1,406 | 1,486 | 1,570 | 88,154 | 94,868 | ||||||||||||||||||||
| Stadium Gateway | — | — | — | — | — | 52,000 | 52,000 | ||||||||||||||||||||
| 137,478 | 1,330 | 1,406 | 1,486 | 410,570 | 140,154 | 692,424 | |||||||||||||||||||||
| Debt premium, net of discount | — | — | — | — | 1,785 | — | 1,785 | ||||||||||||||||||||
| Total joint venture debt, net | $ | 137,478 | $ | 1,330 | $ | 1,406 | $ | 1,486 | $ | 412,355 | $ | 140,154 | $ | 694,209 | |||||||||||||
| Weighted average interest rate | 4.74 | % | 5.54 | % | 5.54 | % | 5.54 | % | 5.40 | % | 5.58 | % | 5.31 | % | |||||||||||||
25
| Portfolio Data | ||||
26
Same Store Analysis (unaudited and in thousands, except percentages) | ||||
| For the Three Months Ended March 31, (1) | ||||||||||
| 2011 | 2010 | % Change | ||||||||
| Total Same Store Portfolio | ||||||||||
| Number of properties | 14 | 14 | ||||||||
| Square feet as of March 31 | 9,462,979 | 9,401,471 | ||||||||
| Percentage of wholly-owned Office Portfolio | 100.0 | % | 100.0 | % | ||||||
| Weighted average leased percentage (2) | 83.5 | % | 84.7 | % | ||||||
| GAAP | ||||||||||
| Breakdown of Net Operating Income: | ||||||||||
| Operating revenue | $ | 79,508 | $ | 84,172 | (5.5 | )% | ||||
| Operating expenses | 28,446 | 28,655 | (0.7 | )% | ||||||
| Other expense | 1,264 | 1,264 | — | % | ||||||
| Net operating income | $ | 49,798 | $ | 54,253 | (8.2 | )% | ||||
| CASH BASIS | ||||||||||
| Breakdown of Net Operating Income: | ||||||||||
| Operating revenue | $ | 76,922 | $ | 81,359 | (5.5 | )% | ||||
| Operating expenses | 28,446 | 28,656 | (0.7 | )% | ||||||
| Other expense | 743 | 743 | — | % | ||||||
| Net operating income | $ | 47,733 | $ | 51,960 | (8.1 | )% | ||||
__________
| (1) | Properties included in the Same Store analysis are the properties in our Office Portfolio, with the exception of the Properties in Default and our joint venture properties. |
| (2) | Represents weighted average leased amounts for the Same Store Portfolio. |
27
| Portfolio Overview | ||||
| Property by Submarket | Square Feet | Leased % and In-Place Rents | |||||||||||||||||||||||||||||||||
| Property | Number of Buildings | Number of Tenants | Year Built / Renovated | Ownership % | Net Building Rentable | Effective (1) | % of Net Rentable | % Leased | Total Annualized Rents (2) | Effective Annualized Rents (2) | Annualized Rent $/RSF (3) | ||||||||||||||||||||||||
| Office Properties | |||||||||||||||||||||||||||||||||||
| Los Angeles County | |||||||||||||||||||||||||||||||||||
| Los Angeles Central Business District: | |||||||||||||||||||||||||||||||||||
| Gas Company Tower | 1 | 17 | 1991 | 100 | % | 1,349,169 | 1,349,169 | 10.42 | % | 94.6 | % | $ | 34,835,671 | $ | 34,835,671 | $ | 27.30 | ||||||||||||||||||
| US Bank Tower | 1 | 54 | 1989 | 100 | % | 1,431,808 | 1,431,808 | 11.06 | % | 58.5 | % | 19,443,113 | 19,443,113 | 23.22 | |||||||||||||||||||||
| Wells Fargo Tower | 2 | 56 | 1982 | 100 | % | 1,400,531 | 1,400,531 | 10.82 | % | 92.6 | % | 28,586,764 | 28,586,764 | 22.04 | |||||||||||||||||||||
| Two California Plaza | 1 | 58 | 1992 | 100 | % | 1,327,835 | 1,327,835 | 10.26 | % | 81.1 | % | 21,975,487 | 21,975,487 | 20.40 | |||||||||||||||||||||
| KPMG Tower | 1 | 21 | 1983 | 100 | % | 1,147,421 | 1,147,421 | 8.87 | % | 95.5 | % | 26,225,833 | 26,225,833 | 23.94 | |||||||||||||||||||||
| 777 Tower | 1 | 34 | 1991 | 100 | % | 1,014,665 | 1,014,665 | 7.84 | % | 79.4 | % | 17,881,379 | 17,881,379 | 22.19 | |||||||||||||||||||||
| One California Plaza | 1 | 27 | 1985 | 20 | % | 1,022,876 | 204,575 | 7.90 | % | 77.2 | % | 16,654,906 | 3,330,981 | 21.10 | |||||||||||||||||||||
| Total LACBD Submarket | 8 | 267 | 8,694,305 | 7,876,004 | 67.17 | % | 82.6 | % | 165,603,153 | 152,279,228 | 23.07 | ||||||||||||||||||||||||
| Tri-Cities Submarket: | |||||||||||||||||||||||||||||||||||
| Glendale Center | 2 | 4 | 1973/1996 | 100 | % | 396,000 | 396,000 | 3.06 | % | 93.8 | % | 8,640,473 | 8,640,473 | 23.26 | |||||||||||||||||||||
| 801 North Brand | 1 | 30 | 1987 | 100 | % | 282,788 | 282,788 | 2.19 | % | 83.2 | % | 4,851,790 | 4,851,790 | 20.61 | |||||||||||||||||||||
| 701 North Brand | 1 | 13 | 1978 | 100 | % | 131,129 | 131,129 | 1.01 | % | 97.2 | % | 2,286,548 | 2,286,548 | 17.95 | |||||||||||||||||||||
| 700 North Central | 1 | 12 | 1979 | 100 | % | 134,168 | 134,168 | 1.04 | % | 66.7 | % | 1,560,481 | 1,560,481 | 17.45 | |||||||||||||||||||||
| Plaza Las Fuentes | 3 | 7 | 1989 | 100 | % | 193,254 | 193,254 | 1.49 | % | 93.9 | % | 5,348,886 | 5,348,886 | 29.47 | |||||||||||||||||||||
| Total Tri-Cities Submarket | 8 | 66 | 1,137,339 | 1,137,339 | 8.79 | % | 88.4 | % | 22,688,178 | 22,688,178 | 22.57 | ||||||||||||||||||||||||
| Cerritos Office Submarket: | |||||||||||||||||||||||||||||||||||
| Cerritos – Phase I | 1 | 1 | 1999 | 20 | % | 221,968 | 44,394 | 1.71 | % | 100.0 | % | 6,317,209 | 1,263,442 | 28.46 | |||||||||||||||||||||
| Cerritos – Phase II | 1 | — | 2001 | 20 | % | 104,567 | 20,913 | 0.81 | % | 100.0 | % | 2,482,421 | 496,484 | 23.74 | |||||||||||||||||||||
| Total Cerritos Submarket | 2 | 1 | 326,535 | 65,307 | 2.52 | % | 100.0 | % | 8,799,630 | 1,759,926 | 26.95 | ||||||||||||||||||||||||
| Total Los Angeles County | 18 | 334 | 10,158,179 | 9,078,650 | 78.48 | % | 83.8 | % | $ | 197,090,961 | $ | 176,727,332 | $ | 23.16 | |||||||||||||||||||||
28
| Portfolio Overview (continued) | ||||
| Property by Submarket | Square Feet | Leased % and In-Place Rents | |||||||||||||||||||||||||||||||||
| Property | Number of Buildings | Number of Tenants | Year Built / Renovated | Ownership % | Net Building Rentable | Effective (1) | % of Net Rentable | % Leased | Total Annualized Rents (2) | Effective Annualized Rents (2) | Annualized Rent $/RSF (3) | ||||||||||||||||||||||||
| Office Properties | |||||||||||||||||||||||||||||||||||
| Orange County | |||||||||||||||||||||||||||||||||||
| Central Orange Submarket: | |||||||||||||||||||||||||||||||||||
| 3800 Chapman | 1 | 2 | 1984 | 100 | % | 158,767 | 158,767 | 1.23 | % | 75.9 | % | $ | 2,642,465 | $ | 2,642,465 | $ | 21.94 | ||||||||||||||||||
| Stadium Gateway | 1 | 7 | 2001 | 20 | % | 272,826 | 54,565 | 2.10 | % | 72.2 | % | 4,326,348 | 865,270 | 21.98 | |||||||||||||||||||||
| Total Central Orange Submarket | 2 | 9 | 431,593 | 213,332 | 3.33 | % | 73.5 | % | 6,968,813 | 3,507,735 | 21.96 | ||||||||||||||||||||||||
| Other: | |||||||||||||||||||||||||||||||||||
| Brea Corporate Place | 2 | 22 | 1987 | 100 | % | 329,904 | 329,904 | 2.55 | % | 73.9 | % | 3,607,569 | 3,607,569 | 14.79 | |||||||||||||||||||||
| Brea Financial Commons | 3 | 2 | 1987 | 100 | % | 165,540 | 165,540 | 1.28 | % | 90.7 | % | 3,035,782 | 3,035,782 | 20.23 | |||||||||||||||||||||
| Total Other | 5 | 24 | 495,444 | 495,444 | 3.83 | % | 79.5 | % | 6,643,351 | 6,643,351 | 16.86 | ||||||||||||||||||||||||
| Total Orange County | 7 | 33 | 927,037 | 708,776 | 7.16 | % | 76.7 | % | $ | 13,612,164 | $ | 10,151,086 | $ | 19.14 | |||||||||||||||||||||
| San Diego County | |||||||||||||||||||||||||||||||||||
| Sorrento Mesa Submarket: | |||||||||||||||||||||||||||||||||||
| San Diego Tech Center | 11 | 23 | 1984/1986 | 20 | % | 645,449 | 129,090 | 4.99 | % | 81.3 | % | $ | 10,437,173 | $ | 2,087,435 | $ | 19.89 | ||||||||||||||||||
| Total San Diego County | 11 | 23 | 645,449 | 129,090 | 4.99 | % | 81.3 | % | $ | 10,437,173 | $ | 2,087,435 | $ | 19.89 | |||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Denver, CO – Downtown Submarket: | |||||||||||||||||||||||||||||||||||
| Wells Fargo Center – Denver | 1 | 39 | 1983 | 20 | % | 1,212,205 | 242,441 | 9.37 | % | 93.0 | % | $ | 22,254,328 | $ | 4,450,865 | $ | 19.75 | ||||||||||||||||||
| Total Other | 1 | 39 | 1,212,205 | 242,441 | 9.37 | % | 93.0 | % | $ | 22,254,328 | $ | 4,450,865 | $ | 19.75 | |||||||||||||||||||||
| Total Office Properties | 37 | 429 | 12,942,870 | 10,158,957 | 100.00 | % | 84.0 | % | $ | 243,394,626 | $ | 193,416,718 | $ | 22.39 | |||||||||||||||||||||
| Effective Office Properties | 10,158,957 | 83.7 | % | $ | 22.75 | ||||||||||||||||||||||||||||||
29
| Portfolio Overview (continued) | ||||
| Property by Submarket | Square Feet | Leased % and In-Place Rents | |||||||||||||||||||||||||||||||||
| Property | Number of Buildings | Number of Tenants | Year Built / Renovated | Ownership % | Net Building Rentable | Effective (1) | % of Net Rentable | % Leased | Total Annualized Rents (2) | Effective Annualized Rents (2) | Annualized Rent $/RSF (3) | ||||||||||||||||||||||||
| Properties in Default | |||||||||||||||||||||||||||||||||||
| 550 South Hope Street | 1 | 34 | 1991 | 100 | % | 565,738 | 565,738 | 80.8 | % | $ | 8,699,903 | $ | 8,699,903 | $ | 19.04 | ||||||||||||||||||||
| 2600 Michelson | 1 | 18 | 1986 | 100 | % | 309,742 | 309,742 | 50.2 | % | 2,405,389 | 2,405,389 | 15.48 | |||||||||||||||||||||||
| Stadium Towers Plaza | 1 | 20 | 1988 | 100 | % | 258,575 | 258,575 | 44.4 | % | 2,329,853 | 2,329,853 | 20.29 | |||||||||||||||||||||||
| 500 Orange Tower | 3 | 28 | 1987 | 100 | % | 335,898 | 335,898 | 66.7 | % | 4,063,090 | 4,063,090 | 18.15 | |||||||||||||||||||||||
| City Tower | 1 | 24 | 1988 | 100 | % | 412,839 | 412,839 | 77.4 | % | 6,785,839 | 6,785,839 | 21.23 | |||||||||||||||||||||||
| Total Properties in Default | 7 | 124 | 1,882,792 | 1,882,792 | 67.5 | % | $ | 24,284,074 | $ | 24,284,074 | $ | 19.11 | |||||||||||||||||||||||
| Total Office and Properties in Default | 14,825,662 | 12,041,749 | 81.9 | % | |||||||||||||||||||||||||||||||
| Effective Office and Properties in Default | 12,041,749 | 81.1 | % | ||||||||||||||||||||||||||||||||
| Hotel Property | SQFT | Effective SQFT | Number of Rooms | ||||||||||||||||||||||||||||||||
Westin® Hotel, Pasadena, CA | 100 | % | 266,000 | 266,000 | 350 | ||||||||||||||||||||||||||||||
| Total Office, Properties in Default and Hotel Properties | 15,091,662 | 12,307,749 | |||||||||||||||||||||||||||||||||
| Parking Properties | SQFT | Effective SQFT | Vehicle Capacity | Effective Vehicle Capacity | Annualized Parking Revenue (4) | Effective Annualized Parking Revenue (5) | Effective Annualized Parking Revenue per Vehicle Capacity (6) | ||||||||||||||||||||||||||||
| On-Site Parking | 5,457,967 | 3,965,609 | 15,917 | 11,469 | $ | 32,982,963 | $ | 28,140,501 | $ | 2,454 | |||||||||||||||||||||||||
| Off-Site Garages | 1,714,435 | 1,714,435 | 5,729 | 5,729 | 9,368,301 | 9,368,301 | 1,635 | ||||||||||||||||||||||||||||
| Properties in Default | 1,626,436 | 1,626,436 | 5,425 | 5,425 | 2,629,597 | 2,629,597 | 485 | ||||||||||||||||||||||||||||
| Total Parking Properties | 8,798,838 | 7,306,480 | 27,071 | 22,623 | $ | 44,980,861 | $ | 40,138,399 | 1,774 | ||||||||||||||||||||||||||
| Total Office, Properties in Default, Hotel and Parking Properties | 23,890,500 | 19,614,229 | |||||||||||||||||||||||||||||||||
__________
| (1) | Includes 100% of our consolidated portfolio and 20% of our MMO joint venture portfolio. |
| (2) | Annualized rent represents the annualized monthly contractual rent under existing leases as of March 31, 2011. 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. |
| (3) | 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. |
| (4) | Annualized parking revenue represents the annualized quarterly parking revenue as of March 31, 2011. |
| (5) | Effective annualized parking revenue represents the annualized quarterly parking revenue as of March 31, 2011 adjusted to include 100% of our consolidated portfolio and 20% of our MMO joint venture portfolio. |
| (6) | Effective annualized parking revenue per vehicle capacity represents the effective annualized parking revenue divided by the effective vehicle capacity. |
30
| Portfolio Geographic Distribution (Excluding Properties in Default) (1) | ||||
__________
| (1) | The Portfolio Geographic Distribution is based on effective net rentable square feet for our Office Properties and includes our pro-rata share of the MMO joint venture. |
31
| Portfolio Overview — Leased Percentages and Weighted Average Remaining Lease Term | ||||
Ownership ( % ) | Weighted Average Remaining Lease Term (in years) | ||||||||||||||||||
| % Leased | |||||||||||||||||||
| Q1 2011 | Q4 2010 | Q3 2010 | Q2 2010 | Q1 2010 | |||||||||||||||
| Office Properties | |||||||||||||||||||
| Gas Company Tower | 100 | % | 8.4 | 94.6 | % | 94.6 | % | 92.6 | % | 92.5 | % | 92.5 | % | ||||||
| US Bank Tower | 100 | % | 4.6 | 58.5 | % | 57.9 | % | 57.5 | % | 54.3 | % | 62.2 | % | ||||||
| Wells Fargo Tower | 100 | % | 4.2 | 92.6 | % | 94.3 | % | 94.4 | % | 94.3 | % | 94.1 | % | ||||||
| Two California Plaza | 100 | % | 3.9 | 81.1 | % | 81.9 | % | 82.0 | % | 83.9 | % | 83.8 | % | ||||||
| KPMG Tower | 100 | % | 7.8 | 95.5 | % | 94.3 | % | 93.9 | % | 93.8 | % | 93.9 | % | ||||||
| 777 Tower | 100 | % | 4.9 | 79.4 | % | 79.6 | % | 77.4 | % | 75.3 | % | 75.6 | % | ||||||
| One California Plaza | 20 | % | 4.3 | 77.2 | % | 76.6 | % | 76.5 | % | 76.5 | % | 76.2 | % | ||||||
| Glendale Center | 100 | % | 3.4 | 93.8 | % | 93.8 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
| 801 North Brand | 100 | % | 1.8 | 83.2 | % | 82.3 | % | 82.3 | % | 81.7 | % | 81.4 | % | ||||||
| 701 North Brand (1) | 100 | % | 3.4 | 97.2 | % | 97.2 | % | 97.2 | % | 97.2 | % | 97.2 | % | ||||||
| 700 North Central | 100 | % | 2.8 | 66.7 | % | 66.7 | % | 73.4 | % | 73.4 | % | 75.5 | % | ||||||
| Plaza Las Fuentes | 100 | % | 7.7 | 93.9 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
| Cerritos – Phase I | 20 | % | 3.5 | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
| Cerritos – Phase II | 20 | % | 5.2 | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
| 3800 Chapman | 100 | % | 4.2 | 75.9 | % | 75.9 | % | 75.9 | % | 75.9 | % | 75.9 | % | ||||||
| Stadium Gateway | 20 | % | 4.1 | 72.2 | % | 72.2 | % | 72.2 | % | 88.0 | % | 88.0 | % | ||||||
| Brea Corporate Place | 100 | % | 3.2 | 73.9 | % | 73.9 | % | 73.3 | % | 71.6 | % | 71.6 | % | ||||||
| Brea Financial Commons | 100 | % | 3.1 | 90.7 | % | 90.7 | % | 90.7 | % | 90.7 | % | 90.7 | % | ||||||
| San Diego Tech Center | 20 | % | 3.6 | 81.3 | % | 82.3 | % | 78.5 | % | 79.3 | % | 80.0 | % | ||||||
| Wells Fargo Center – Denver | 20 | % | 6.3 | 93.0 | % | 92.5 | % | 92.0 | % | 92.4 | % | 91.7 | % | ||||||
| Total Office Properties | 5.2 | 84.0 | % | 84.2 | % | 83.7 | % | 83.7 | % | 84.5 | % | ||||||||
| Effective Office Properties (2) | 5.3 | 83.7 | % | 83.9 | % | 83.6 | % | 83.1 | % | 84.3 | % | ||||||||
| Properties in Default | |||||||||||||||||||
| 550 South Hope Street (3) | 100 | % | 5.1 | 80.8 | % | 81.5 | % | 82.0 | % | 80.7 | % | 82.7 | % | ||||||
| 2600 Michelson | 100 | % | 3.7 | 50.2 | % | 60.5 | % | 60.5 | % | 72.2 | % | 67.5 | % | ||||||
| Stadium Towers Plaza | 100 | % | 2.2 | 44.4 | % | 46.2 | % | 46.2 | % | 45.0 | % | 48.9 | % | ||||||
| 500 Orange Tower | 100 | % | 4.1 | 66.7 | % | 69.0 | % | 69.1 | % | 67.2 | % | 67.9 | % | ||||||
| City Tower | 100 | % | 2.2 | 77.4 | % | 78.2 | % | 78.2 | % | 80.0 | % | 79.8 | % | ||||||
| Total Properties in Default | 3.8 | 67.5 | % | 70.3 | % | 70.4 | % | 71.8 | % | 72.3 | % | ||||||||
| Total Office Properties and Properties in Default | 5.1 | 81.9 | % | 82.4 | % | 82.0 | % | 82.2 | % | 83.0 | % | ||||||||
| Total Effective Office Properties and Properties in Default (2) | 5.1 | 81.1 | % | 81.8 | % | 81.5 | % | 81.4 | % | 82.4 | % | ||||||||
__________
| (1) | We disposed of this property on April 1, 2011. |
| (2) | Includes 100% of our consolidated portfolio and 20% of our MMO joint venture portfolio. |
| (3) | We disposed of this property on April 26, 2011. |
32
| Major Tenants — Office Properties (Excluding Properties in Default) | ||||
| Tenant | Number of Locations | Annualized Rent (1) | % of Annualized Rent | Leased Square Feet | % of Leased Square Feet of Effective Portfolio | Weighted Average Remaining Lease Term in Months | S & P Credit Rating / National Recognition (2) | ||||||||||||||
| Rated | |||||||||||||||||||||
| 1 | Southern California Gas Company | 1 | $ | 18,417,787 | 9.5 | % | 527,916 | 6.2 | % | 139 | A | ||||||||||
| 2 | Wells Fargo Bank (3) | 2 | 7,482,534 | 3.9 | % | 385,759 | 4.5 | % | 43 | AA- | |||||||||||
| 3 | Bank of America (3) | 5 | 5,118,654 | 2.6 | % | 223,006 | 2.6 | % | 26 | A+ | |||||||||||
| 4 | AT&T (3) | 4 | 4,490,396 | 2.3 | % | 180,349 | 2.1 | % | 32 | A- | |||||||||||
| 5 | US Bank, National Association | 2 | 4,030,442 | 2.1 | % | 157,488 | 1.9 | % | 50 | AA- | |||||||||||
| 6 | Disney Enterprises | 1 | 3,706,960 | 1.9 | % | 163,444 | 1.9 | % | 63 | A | |||||||||||
| 7 | FNMA (Fannie Mae) | 1 | 2,364,304 | 1.2 | % | 61,655 | 0.7 | % | 83 | AAA | |||||||||||
| 8 | Home Depot | 1 | 2,327,207 | 1.2 | % | 99,706 | 1.2 | % | 26 | BBB+ | |||||||||||
| 9 | American Home Assurance | 1 | 1,953,024 | 1.0 | % | 112,042 | 1.3 | % | 29 | A | |||||||||||
| 10 | Raytheon | 1 | 1,561,471 | 0.8 | % | 78,056 | 0.9 | % | 31 | A- | |||||||||||
| Total Rated / Weighted Average (3), (4) | 51,452,779 | 26.5 | % | 1,989,421 | 23.3 | % | 67 | ||||||||||||||
| Total Investment Grade Tenants (3) | $ | 68,080,297 | 35.2 | % | 2,770,182 | 32.6 | % | ||||||||||||||
| Nationally Recognized | |||||||||||||||||||||
| 11 | Latham & Watkins LLP | 2 | 9,422,841 | 4.9 | % | 397,991 | 4.7 | % | 140 | 3rd Largest US Law Firm | |||||||||||
| 12 | Gibson, Dunn & Crutcher LLP | 1 | 6,464,056 | 3.3 | % | 268,268 | 3.2 | % | 80 | 14th Largest US Law Firm | |||||||||||
| 13 | Deloitte & Touche LLP | 1 | 5,085,290 | 2.6 | % | 290,588 | 3.4 | % | 48 | Largest US Accounting Firm | |||||||||||
| 14 | Marsh USA, Inc. | 1 | 4,319,801 | 2.2 | % | 210,722 | 2.5 | % | 85 | World’s Largest Insurance Broker | |||||||||||
| 15 | Morrison & Foerster LLP | 1 | 3,885,728 | 2.0 | % | 138,776 | 1.6 | % | 30 | 21st Largest US Law Firm | |||||||||||
| 16 | Sidley Austin LLP | 1 | 3,859,712 | 2.0 | % | 192,457 | 2.3 | % | 153 | 6th Largest US Law Firm | |||||||||||
| 17 | Munger, Tolles & Olson LLP | 1 | 3,789,495 | 2.0 | % | 165,019 | 1.9 | % | 131 | 132nd Largest US Law Firm | |||||||||||
| 18 | KPMG LLP | 1 | 3,688,892 | 1.9 | % | 175,971 | 2.1 | % | 39 | 4th Largest US Accounting Firm | |||||||||||
| 19 | PricewaterhouseCoopers LLP | 1 | 2,990,625 | 1.5 | % | 160,784 | 1.9 | % | 26 | 3rd Largest US Accounting Firm | |||||||||||
| 20 | Bingham McCutchen LLP | 1 | 2,826,035 | 1.5 | % | 104,712 | 1.2 | % | 22 | 24th Largest US Law Firm | |||||||||||
| Total Nationally Recognized / Weighted Average (3), (4) | 46,332,475 | 23.9 | % | 2,105,288 | 24.8 | % | 84 | ||||||||||||||
| Total Nationally Recognized Tenants (3) | 82,670,803 | 42.7 | % | 3,739,608 | 44.0 | % | |||||||||||||||
| Total / Weighted Average (3), (4) | $ | 97,785,254 | 50.4 | % | 4,094,709 | 48.1 | % | 76 | |||||||||||||
| Total Investment Grade or Nationally Recognized Tenants (3) | $ | 150,751,100 | 77.9 | % | 6,509,790 | 76.6 | % | ||||||||||||||
__________
| (1) | Annualized base rent is calculated as monthly contractual base rent under existing leases as of March 31, 2011, 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) | S&P credit ratings are as of March 31, 2011. Rankings of law firms are based on total gross revenue in 2009 as reported by American Lawyer Media’s LAW.com. |
| (3) | Includes 20% of annualized rent and leased square footage for our MMO joint venture properties. |
| (4) | The weighted average calculation is based on the effective net rentable square feet leased by each tenant, which reflects our pro-rata share of our MMO joint venture. |
33
| Portfolio Tenant Classification Description (Excluding Properties in Default) (1), (2) | ||||
__________
| (1) | Percentages are based upon effective leased square feet. |
| (2) | Classifications are based on the “North American Industrial Classification System” (NAICS). |
34
| Lease Expirations — Wholly Owned Portfolio | ||||
| Year | Total Area in Square Feet Covered by Expiring Leases | Percentage of Aggregate Square Feet | Annualized Rent | Percentage of Annualized Rent | Current Rent per Square Foot (1) | Rent per Square Foot at Expiration (2) | |||||||||||||||
| Available | 2,166,920 | 19.1 | % | ||||||||||||||||||
| 2011 | 1,029,153 | 9.1 | % | $ | 23,896,684 | 11.6 | % | $ | 23.22 | $ | 23.29 | ||||||||||
| 2012 | 703,378 | 6.2 | % | 16,092,167 | 7.8 | % | 22.88 | 23.65 | |||||||||||||
| 2013 | 1,877,082 | 16.6 | % | 41,942,715 | 20.4 | % | 22.34 | 23.85 | |||||||||||||
| 2014 | 799,731 | 7.1 | % | 15,607,305 | 7.6 | % | 19.52 | 22.00 | |||||||||||||
| 2015 | 933,985 | 8.2 | % | 19,326,847 | 9.4 | % | 20.69 | 22.78 | |||||||||||||
| 2016 | 506,985 | 4.5 | % | 10,383,028 | 5.1 | % | 20.48 | 20.67 | |||||||||||||
| 2017 | 1,036,310 | 9.1 | % | 22,695,711 | 11.1 | % | 21.90 | 23.54 | |||||||||||||
| 2018 | 486,644 | 4.3 | % | 11,102,596 | 5.4 | % | 22.81 | 28.17 | |||||||||||||
| 2019 | 276,736 | 2.4 | % | 6,302,521 | 3.1 | % | 22.77 | 29.04 | |||||||||||||
| 2020 | 276,126 | 2.4 | % | 5,650,335 | 2.8 | % | 20.46 | 25.58 | |||||||||||||
| Thereafter | 1,252,721 | 11.0 | % | 32,206,406 | 15.7 | % | 25.71 | 31.29 | |||||||||||||
| 11,345,771 | 100.0 | % | $ | 205,206,315 | 100.0 | % | $ | 22.36 | $ | 24.72 | |||||||||||
| Leases Expiring in the Next 4 Quarters: | |||||||||||||||||||||
| 2nd Quarter 2011 | 144,022 | 1.3 | % | $ | 2,964,611 | 1.4 | % | $ | 20.58 | $ | 20.58 | ||||||||||
| 3rd Quarter 2011 (3) | 397,419 | 3.5 | % | 8,168,259 | 4.0 | % | 20.55 | 20.63 | |||||||||||||
| 4th Quarter 2011 | 487,712 | 4.3 | % | 12,763,814 | 6.2 | % | 26.17 | 26.26 | |||||||||||||
| 1st Quarter 2012 | 175,120 | 1.5 | % | 3,805,555 | 1.9 | % | 21.73 | 21.98 | |||||||||||||
| 1,204,273 | 10.6 | % | $ | 27,702,239 | 13.5 | % | $ | 23.00 | $ | 23.10 | |||||||||||
__________
| (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. |
35
Lease Expirations — Wholly Owned Portfolio Los Angeles County | ||||
| Year | Total Area in Square Feet Covered by Expiring Leases | Percentage of Aggregate Square Feet | Annualized Rent | Percentage of Annualized Rent | Current Rent per Square Foot (1) | Rent per Square Foot at Expiration (2) | |||||||||||||||
| Available | 1,523,801 | 16.2 | % | ||||||||||||||||||
| 2011 | 813,112 | 8.7 | % | $ | 19,876,040 | 11.0 | % | $ | 24.44 | $ | 24.50 | ||||||||||
| 2012 | 617,137 | 6.6 | % | 14,258,006 | 7.9 | % | 23.10 | 23.89 | |||||||||||||
| 2013 | 1,417,526 | 15.1 | % | 31,552,554 | 17.5 | % | 22.26 | 23.60 | |||||||||||||
| 2014 | 588,127 | 6.3 | % | 12,165,007 | 6.8 | % | 20.68 | 23.12 | |||||||||||||
| 2015 | 849,478 | 9.1 | % | 18,015,585 | 10.0 | % | 21.21 | 23.24 | |||||||||||||
| 2016 | 392,544 | 4.2 | % | 8,972,331 | 5.0 | % | 22.86 | 22.25 | |||||||||||||
| 2017 | 966,147 | 10.3 | % | 21,545,686 | 11.9 | % | 22.30 | 23.99 | |||||||||||||
| 2018 | 440,858 | 4.7 | % | 10,439,685 | 5.8 | % | 23.68 | 28.69 | |||||||||||||
| 2019 | 261,836 | 2.8 | % | 6,012,865 | 3.3 | % | 22.96 | 29.59 | |||||||||||||
| 2020 | 271,946 | 2.9 | % | 5,607,423 | 3.1 | % | 20.62 | 25.70 | |||||||||||||
| Thereafter | 1,231,994 | 13.1 | % | 31,891,146 | 17.7 | % | 25.89 | 31.56 | |||||||||||||
| 9,374,506 | 100.0 | % | $ | 180,336,328 | 100.0 | % | $ | 22.97 | $ | 25.43 | |||||||||||
| Leases Expiring in the Next 4 Quarters: | |||||||||||||||||||||
| 2nd Quarter 2011 | 126,590 | 1.4 | % | $ | 2,613,374 | 1.4 | % | $ | 20.64 | $ | 20.64 | ||||||||||
| 3rd Quarter 2011 (3) | 280,195 | 3.0 | % | 5,873,520 | 3.3 | % | 20.96 | 21.07 | |||||||||||||
| 4th Quarter 2011 | 406,327 | 4.3 | % | 11,389,146 | 6.3 | % | 28.03 | 28.06 | |||||||||||||
| 1st Quarter 2012 | 151,669 | 1.6 | % | 3,346,051 | 1.9 | % | 22.06 | 22.34 | |||||||||||||
| 964,781 | 10.3 | % | $ | 23,222,091 | 12.9 | % | $ | 24.07 | $ | 24.16 | |||||||||||
__________
| (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. |
36
Lease Expirations — Wholly Owned Portfolio Orange County | ||||
| Year | Total Area in Square Feet Covered by Expiring Leases | Percentage of Aggregate Square Feet | Annualized Rent | Percentage of Annualized Rent | Current Rent per Square Foot (1) | Rent per Square Foot at Expiration (2) | |||||||||||||||
| Available | 643,119 | 32.6 | % | ||||||||||||||||||
| 2011 | 216,041 | 11.0 | % | $ | 4,020,643 | 16.2 | % | $ | 18.61 | $ | 18.75 | ||||||||||
| 2012 | 86,241 | 4.4 | % | 1,834,161 | 7.4 | % | 21.27 | 21.93 | |||||||||||||
| 2013 | 459,556 | 23.3 | % | 10,390,162 | 41.8 | % | 22.61 | 24.59 | |||||||||||||
| 2014 | 211,604 | 10.7 | % | 3,442,298 | 13.8 | % | 16.27 | 18.90 | |||||||||||||
| 2015 | 84,507 | 4.3 | % | 1,311,263 | 5.3 | % | 15.52 | 18.15 | |||||||||||||
| 2016 | 114,441 | 5.8 | % | 1,410,697 | 5.7 | % | 12.33 | 15.26 | |||||||||||||
| 2017 | 70,163 | 3.6 | % | 1,150,026 | 4.6 | % | 16.39 | 17.30 | |||||||||||||
| 2018 | 45,786 | 2.3 | % | 662,911 | 2.7 | % | 14.48 | 23.19 | |||||||||||||
| 2019 | 14,900 | 0.8 | % | 289,656 | 1.1 | % | 19.44 | 19.44 | |||||||||||||
| 2020 | 4,180 | 0.2 | % | 42,912 | 0.2 | % | 10.27 | 17.40 | |||||||||||||
| Thereafter | 20,727 | 1.0 | % | 315,258 | 1.2 | % | 15.21 | 15.00 | |||||||||||||
| 1,971,265 | 100.0 | % | $ | 24,869,987 | 100.0 | % | $ | 18.73 | $ | 20.54 | |||||||||||
| Leases Expiring in the Next 4 Quarters: | |||||||||||||||||||||
| 2nd Quarter 2011 | 17,432 | 0.9 | % | $ | 351,238 | 1.4 | % | $ | 20.15 | $ | 20.15 | ||||||||||
| 3rd Quarter 2011 (3) | 117,224 | 6.0 | % | 2,294,739 | 9.2 | % | 19.58 | 19.58 | |||||||||||||
| 4th Quarter 2011 | 81,385 | 4.1 | % | 1,374,666 | 5.6 | % | 16.89 | 17.27 | |||||||||||||
| 1st Quarter 2012 | 23,451 | 1.1 | % | 459,505 | 1.8 | % | 19.59 | 19.70 | |||||||||||||
| 239,492 | 12.1 | % | $ | 4,480,148 | 18.0 | % | $ | 18.71 | $ | 18.85 | |||||||||||
___________
| (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. |
37
| Lease Expirations — Properties in Default (1) | ||||
| Year | Total Area in Square Feet Covered by Expiring Leases | Percentage of Aggregate Square Feet | Annualized Rent | Percentage of Annualized Rent | Current Rent per Square Foot (2) | Rent per Square Foot at Expiration (3) | |||||||||||||||
| Available | 612,210 | 32.5 | % | ||||||||||||||||||
| 2011 | 164,981 | 8.8 | % | $ | 3,278,766 | 13.5 | % | $ | 19.87 | $ | 19.93 | ||||||||||
| 2012 | 134,724 | 7.2 | % | 2,821,043 | 11.6 | % | 20.94 | 21.41 | |||||||||||||
| 2013 | 274,043 | 14.6 | % | 6,324,776 | 26.0 | % | 23.08 | 25.06 | |||||||||||||
| 2014 | 198,522 | 10.5 | % | 3,133,157 | 12.9 | % | 15.78 | 18.18 | |||||||||||||
| 2015 | 120,767 | 6.4 | % | 1,965,808 | 8.1 | % | 16.28 | 18.31 | |||||||||||||
| 2016 | 66,581 | 3.5 | % | 821,791 | 3.4 | % | 12.34 | 15.18 | |||||||||||||
| 2017 | 154,159 | 8.2 | % | 2,845,678 | 11.7 | % | 18.46 | 20.75 | |||||||||||||
| 2018 | 77,268 | 4.1 | % | 1,510,536 | 6.2 | % | 19.55 | 25.76 | |||||||||||||
| 2019 | 54,084 | 2.9 | % | 1,177,964 | 4.9 | % | 21.78 | 26.88 | |||||||||||||
| 2020 | 4,180 | 0.2 | % | 42,912 | 0.2 | % | 10.27 | 17.40 | |||||||||||||
| Thereafter | 21,273 | 1.1 | % | 361,643 | 1.5 | % | 17.00 | 27.52 | |||||||||||||
| 1,882,792 | 100.0 | % | $ | 24,284,074 | 100.0 | % | $ | 19.11 | $ | 21.24 | |||||||||||
| Leases Expiring in the Next 4 Quarters: | |||||||||||||||||||||
| 2nd Quarter 2011 | 16,065 | 0.9 | % | $ | 334,916 | 1.4 | % | $ | 20.85 | $ | 20.85 | ||||||||||
| 3rd Quarter 2011 (4) | 97,791 | 5.2 | % | 1,932,398 | 7.9 | % | 19.76 | 19.76 | |||||||||||||
| 4th Quarter 2011 | 51,125 | 2.7 | % | 1,011,452 | 4.2 | % | 19.78 | 19.96 | |||||||||||||
| 1st Quarter 2012 | 34,141 | 1.8 | % | 655,564 | 2.7 | % | 19.20 | 19.34 | |||||||||||||
| 199,122 | 10.6 | % | $ | 3,934,330 | 16.2 | % | $ | 19.76 | $ | 19.83 | |||||||||||
__________
| (1) | All Properties in Default are located in Orange County, except for 550 South Hope, which is located in the LACBD. Currently, there are 108,900 square feet available for lease at 550 South Hope, with 47,930 square feet, 52,251 square feet, 22,708 square feet, 63,435 square feet, 42,264 square feet and 228,250 square feet scheduled to expire in 2011, 2012, 2013, 2014, 2015 and thereafter, respectively. |
| (2) | Current rent per leased square foot represents current base rent, divided by total square footage under lease as of the same date. |
| (3) | 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. |
| (4) | Includes tenants leasing on a month-to-month basis. |
38
| Lease Expirations — MMO Joint Venture Portfolio | ||||
| Year | Total Area in Square Feet Covered by Expiring Leases | Percentage of Aggregate Square Feet | Annualized Rent | Percentage of Annualized Rent | Current Rent per Square Foot (1) | Rent per Square Foot at Expiration (2) | |||||||||||||||
| Available | 515,608 | 14.8 | % | ||||||||||||||||||
| 2011 | 266,169 | 7.7 | % | $ | 4,954,847 | 7.9 | % | $ | 18.62 | $ | 18.65 | ||||||||||
| 2012 | 306,595 | 8.8 | % | 6,544,649 | 10.5 | % | 21.35 | 21.66 | |||||||||||||
| 2013 | 243,501 | 7.0 | % | 5,612,096 | 9.0 | % | 23.05 | 25.16 | |||||||||||||
| 2014 | 805,332 | 23.1 | % | 17,551,076 | 28.1 | % | 21.79 | 24.00 | |||||||||||||
| 2015 | 242,209 | 7.0 | % | 4,690,948 | 7.5 | % | 19.37 | 22.25 | |||||||||||||
| 2016 | 260,986 | 7.5 | % | 4,875,307 | 7.8 | % | 18.68 | 18.08 | |||||||||||||
| 2017 | 25,787 | 0.8 | % | 478,969 | 0.8 | % | 18.57 | 26.18 | |||||||||||||
| 2018 | 97,820 | 2.8 | % | 1,975,671 | 3.1 | % | 20.20 | 28.44 | |||||||||||||
| 2019 | — | — | % | — | — | % | — | — | |||||||||||||
| 2020 | 544,249 | 15.6 | % | 11,914,754 | 19.1 | % | 21.89 | 30.01 | |||||||||||||
| Thereafter | 171,635 | 4.9 | % | 3,874,068 | 6.2 | % | 22.57 | 29.97 | |||||||||||||
| 3,479,891 | 100.0 | % | $ | 62,472,385 | 100.0 | % | $ | 21.08 | $ | 24.26 | |||||||||||
| Leases Expiring in the Next 4 Quarters: | |||||||||||||||||||||
| 2nd Quarter 2011 | 9,994 | 0.3 | % | $ | 147,823 | 0.2 | % | $ | 14.79 | $ | 14.79 | ||||||||||
| 3rd Quarter 2011 (3) | 83,770 | 2.4 | % | 1,582,247 | 2.5 | % | 18.89 | 18.91 | |||||||||||||
| 4th Quarter 2011 | 172,405 | 5.0 | % | 3,224,777 | 5.2 | % | 18.70 | 18.76 | |||||||||||||
| 1st Quarter 2012 | 153,234 | 4.4 | % | 2,957,030 | 4.8 | % | 19.30 | 19.42 | |||||||||||||
| 419,403 | 12.1 | % | $ | 7,911,877 | 12.7 | % | $ | 18.86 | $ | 18.94 | |||||||||||
__________
| (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. |
39
| Leasing Activity — Total Portfolio | ||||
| Total Portfolio | Effective Portfolio (1) | |||||||||||
For the Three Months Ended March 31, 2011 | % Leased | For the Three Months Ended March 31, 2011 | % Leased | |||||||||
| Leased Square Feet as of December 31, 2010 | 12,214,356 | 82.4 | % | 9,846,572 | 81.8 | % | ||||||
| Expirations | (319,411 | ) | (2.2 | )% | (221,412 | ) | (1.9 | )% | ||||
| New Leases | 42,912 | 0.3 | % | 30,510 | 0.2 | % | ||||||
| Renewals | 205,277 | 1.4 | % | 116,038 | 1.0 | % | ||||||
| Leased Square Feet as of March 31, 2011 | 12,143,134 | 81.9 | % | 9,771,708 | 81.1 | % | ||||||
Cash Rent Growth (2), (3) | ||||||||||||
| Expiring Rate per Square Foot | $ | 23.93 | ||||||||||
| New / Renewed Rate per Square Foot | $ | 15.74 | ||||||||||
| Percentage Change | (34.2 | )% | ||||||||||
GAAP Rent Growth (3), (4) | ||||||||||||
| Expiring Rate per Square Foot | $ | 22.28 | ||||||||||
| New / Renewed Rate per Square Foot | $ | 16.22 | ||||||||||
| Percentage Change | (27.2 | )% | ||||||||||
| Weighted Average Lease Term – New (in months) | 68 | |||||||||||
| Weighted Average Lease Term – Renewal (in months) | 36 | |||||||||||
__________
(1) Includes 100% of our consolidated portfolio and 20% of our MMO joint venture properties.
(2) Represents the difference between (i) initial market rents on new and renewed leases and (ii) the cash rents on those spaces immediately prior to the expiration or termination.
(3) Excludes new and renewed leases for spaces with more than twelve months of downtime and early renewals commencing after March 31, 2012.
(4) Represents estimated cash rent growth adjusted for straight-line rents in accordance with GAAP.
40
| Leasing Activity — Los Angeles Central Business District | ||||
| Total Portfolio | Effective Portfolio (1) | |||||||||||
| For the Three Months Ended March 31, 2011 | % Leased | For the Three Months Ended March 31, 2011 | % Leased | |||||||||
| Leased Square Feet as of December 31, 2010 | 7,648,520 | 82.6 | % | 7,021,478 | 83.2 | % | ||||||
| Expirations | (54,581 | ) | (0.6 | )% | (54,581 | ) | (0.6 | )% | ||||
| New Leases | 27,197 | 0.3 | % | 22,765 | 0.3 | % | ||||||
| Renewals | 13,679 | 0.1 | % | 13,679 | 0.1 | % | ||||||
| Leased Square Feet as of March 31, 2011 | 7,634,815 | 82.4 | % | 7,003,341 | 83.0 | % | ||||||
Cash Rent Growth (2), (3) | ||||||||||||
| Expiring Rate per Square Foot | $ | 38.23 | ||||||||||
| New / Renewed Rate per Square Foot | $ | 32.21 | ||||||||||
| Percentage Change | (15.7 | )% | ||||||||||
GAAP Rent Growth (3), (4) | ||||||||||||
| Expiring Rate per Square Foot | $ | 36.87 | ||||||||||
| New / Renewed Rate per Square Foot | $ | 34.62 | ||||||||||
| Percentage Change | (6.1 | )% | ||||||||||
| Weighted Average Lease Term – New (in months) | 68 | |||||||||||
| Weighted Average Lease Term – Renewal (in months) | 49 | |||||||||||
__________
(1) Includes 100% of our consolidated portfolio and 20% of our MMO joint venture properties.
(2) Represents the difference between (i) initial market rents on new and renewed leases and (ii) the cash rents on those spaces immediately prior to the expiration or termination.
(3) Excludes new and renewed leases for spaces with more than twelve months of downtime and early renewals commencing after March 31, 2012.
(4) Represents estimated cash rent growth adjusted for straight-line rents in accordance with GAAP.
41
| Leasing Activity — Orange County | ||||
Total Portfolio | Effective Portfolio (1) | |||||||||||
| For the Three Months Ended March 31, 2011 | % Leased | For the Three Months Ended March 31, 2011 | % Leased | |||||||||
| Leased Square Feet as of December 31, 2010 | 1,572,882 | 70.1 | % | 1,415,403 | 69.9 | % | ||||||
| Expirations | (127,372 | ) | (5.7 | )% | (127,372 | ) | (6.3 | )% | ||||
| New Leases | 534 | 0.1 | % | 534 | — | % | ||||||
| Renewals | 78,951 | 3.5 | % | 78,951 | 3.9 | % | ||||||
| Leased Square Feet as of March 31, 2011 | 1,524,995 | 68.0 | % | 1,367,516 | 67.5 | % | ||||||
Cash Rent Growth (2), (3) | ||||||||||||
| Expiring Rate per Square Foot | $ | 23.48 | ||||||||||
| New / Renewed Rate per Square Foot | $ | 11.14 | ||||||||||
| Percentage Change | (52.6 | )% | ||||||||||
GAAP Rent Growth (3), (4) | ||||||||||||
| Expiring Rate per Square Foot | $ | 21.49 | ||||||||||
| New / Renewed Rate per Square Foot | $ | 11.31 | ||||||||||
| Percentage Change | (47.4 | )% | ||||||||||
| Weighted Average Lease Term – New (in months) | 36 | |||||||||||
| Weighted Average Lease Term – Renewal (in months) | 40 | |||||||||||
__________
(1) Includes 100% of our consolidated portfolio and 20% of our MMO joint venture properties.
(2) Represents the difference between (i) initial market rents on new and renewed leases and (ii) the cash rents on those spaces immediately prior to the expiration or termination.
(3) Excludes new and renewed leases for spaces with more than twelve months of downtime and early renewals commencing after March 31, 2012.
(4) Represents estimated cash rent growth adjusted for straight-line rents in accordance with GAAP.
42
| Tenant Improvements and Leasing Commissions (Excluding Properties in Default) (1), (2), (3) | ||||
| For the Three Months Ended | For the Year Ended December 31, | ||||||||||||||
| March 31, 2011 | 2010 | 2009 | 2008 | ||||||||||||
| Renewals (4) | |||||||||||||||
| Number of leases | 12 | 46 | 79 | 130 | |||||||||||
| Square feet | 52,109 | 913,468 | 554,506 | 664,524 | |||||||||||
| Tenant improvement costs per square foot (5) | $ | 2.77 | $ | 20.95 | $ | 9.09 | $ | 13.95 | |||||||
| Leasing commission costs per square foot | $ | 4.37 | $ | 11.06 | $ | 6.11 | $ | 5.53 | |||||||
| Total tenant improvements and leasing commissions | |||||||||||||||
| Costs per square foot | $ | 7.14 | $ | 32.01 | $ | 15.20 | $ | 19.48 | |||||||
| Costs per square foot per year | $ | 2.15 | $ | 3.42 | $ | 2.60 | $ | 4.36 | |||||||
| New/Modified Leases (6) | |||||||||||||||
| Number of leases | 9 | 64 | 83 | 163 | |||||||||||
| Square feet | 28,422 | 607,565 | 617,522 | 1,115,055 | |||||||||||
| Tenant improvement costs per square foot (5) | $ | 17.31 | $ | 10.09 | $ | 19.36 | $ | 41.97 | |||||||
| Leasing commission costs per square foot | $ | 10.06 | $ | 6.36 | $ | 6.19 | $ | 10.11 | |||||||
| Total tenant improvements and leasing commissions | |||||||||||||||
| Costs per square foot | $ | 27.37 | $ | 16.45 | $ | 25.55 | $ | 52.08 | |||||||
| Costs per square foot per year | $ | 4.54 | $ | 3.07 | $ | 3.73 | $ | 5.98 | |||||||
| Total | |||||||||||||||
| Number of leases | 21 | 110 | 162 | 293 | |||||||||||
| Square feet | 80,531 | 1,521,033 | 1,172,028 | 1,779,579 | |||||||||||
| Tenant improvement costs per square foot (5) | $ | 7.90 | $ | 16.61 | $ | 14.50 | $ | 31.51 | |||||||
| Leasing commission costs per square foot | $ | 6.38 | $ | 9.18 | $ | 6.15 | $ | 8.40 | |||||||
| Total tenant improvements and leasing commissions | |||||||||||||||
| Costs per square foot | $ | 14.28 | $ | 25.79 | $ | 20.65 | $ | 39.91 | |||||||
| Costs per square foot per year | $ | 3.34 | $ | 3.32 | $ | 3.24 | $ | 5.60 | |||||||
__________
| (1) | Excludes activity related to Properties in Default for the three months ended March 31, 2011, the year ended December 31, 2010 and the three months ended September 30 and December 31, 2009. |
| (2) | Based on leases executed during the period. Excludes leases to related parties, short-term leases less than six months, and leases for raw space. |
| (3) | Tenant improvement and leasing commission information reflects 100% of the consolidated portfolio and 20% of the MMO joint venture properties. |
| (4) | Does not include retained tenants that have relocated to new space or expanded into new space. |
| (5) | Tenant improvements include improvements and lease concessions. |
| (6) | Includes retained tenants that have relocated or expanded into new space and lease modifications. |
43
| Historical Capital Expenditures — Office Properties (1) | ||||
| For the Three Months Ended | For the Year Ended December 31, | ||||||||||||||
| March 31, 2011 | 2010 | 2009 | 2008 | ||||||||||||
| Consolidated | |||||||||||||||
| Non-recoverable capital expenditures (2) | $ | 148,628 | $ | 1,261,014 | $ | 2,952,146 | $ | 10,571,743 | |||||||
| Total square feet | 11,345,771 | 11,345,392 | 12,956,305 | 15,498,637 | |||||||||||
| Non-recoverable capital expenditures per square foot | $ | 0.01 | $ | 0.11 | $ | 0.23 | $ | 0.68 | |||||||
| Unconsolidated | |||||||||||||||
| Non-recoverable capital expenditures (3) | $ | 118,070 | $ | 293,578 | $ | 295,925 | $ | 220,946 | |||||||
| Total square feet (4) | 630,671 | 630,699 | 710,922 | 635,670 | |||||||||||
| Non-recoverable capital expenditures per square foot | $ | 0.19 | $ | 0.47 | $ | 0.42 | $ | 0.35 | |||||||
| Consolidated | |||||||||||||||
| Recoverable capital expenditures (5) | $ | 362,555 | $ | 2,461,255 | $ | 1,388,207 | $ | 1,197,266 | |||||||
| Total square feet | 11,345,771 | 11,345,392 | 12,956,305 | 15,498,637 | |||||||||||
| Recoverable capital expenditures per square foot | $ | 0.03 | $ | 0.22 | $ | 0.11 | $ | 0.08 | |||||||
| Unconsolidated | |||||||||||||||
| Recoverable capital expenditures (3), (5) | $ | — | $ | 12,282 | $ | 18,610 | $ | 30,524 | |||||||
| Total square feet (4) | 630,671 | 630,699 | 710,922 | 635,670 | |||||||||||
| Recoverable capital expenditures per square foot | $ | — | $ | 0.02 | $ | 0.03 | $ | 0.05 | |||||||
_________
| (1) | Historical capital expenditures for each period shown reflect properties owned for the entire period. For properties sold during each period, the capital expenditures will be excluded for that period. Any capital expenditures incurred during the period of disposition will be footnoted separately. |
| (2) | For 2008, excludes $6.4 million of non-recoverable capital expenditures as a result of discretionary renovation costs of $6.1 million at KPMG Tower and $0.3 million of planned renovation costs at Lantana Media Campus. |
| (3) | Amount represents our 20% ownership interest in our MMO joint venture. |
| (4) | The square footage of Cerritos Corporate Center Phases I and II is deducted from the total square feet amount as the tenants pay for all capital expenditures. |
| (5) | Recoverable capital improvements, such as equipment upgrades, are generally financed through capital leases. 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. |
44
| Hotel Performance and Hotel Historical Capital Expenditures | ||||
Hotel Performance
| For the Three Months Ended March 31, | |||||||||||
Westin® Hotel, Pasadena, CA | 2011 | 2010 | Percent Change | ||||||||
| Occupancy | 73.4 | % | 71.7 | % | 2.4 | % | |||||
| Average daily rate | $ | 154.97 | $ | 160.85 | (3.7 | )% | |||||
| Revenue per available room (REVPAR) | $ | 113.82 | $ | 115.25 | (1.2 | )% | |||||
| Hotel net operating income | $ | 1,415,405 | $ | 1,489,843 | (5.0 | )% | |||||
Hotel Historical Capital Expenditures
| For the Three Months Ended March 31, | For the Year Ended December 31, | |||||||||||||||||||
Westin® Hotel, Pasadena, CA | 2011 | 2010 | 2010 | 2009 | 2008 | |||||||||||||||
| Hotel improvements and equipment replacement | $ | 775,856 | $ | 67,843 | $ | 874,246 | $ | 1,003,384 | $ | 699,531 | ||||||||||
| Total hotel revenue | $ | 4,988,200 | $ | 5,236,713 | $ | 20,662,203 | $ | 20,622,570 | $ | 26,615,726 | ||||||||||
| Hotel improvements as a percentage of hotel revenue | 15.6 | % | 1.3 | % | 4.2 | % | 4.9 | % | 2.6 | % | ||||||||||
45
| Development Properties | ||||
| As of March 31, 2011 | |||||||||
| Location | Developable Square Feet (1) | Structured Parking Square Feet | Type of Planned Development | ||||||
| Development Properties | |||||||||
| Los Angeles County | |||||||||
| 755 South Figueroa | Los Angeles, CA | 930,000 | 266,000 | Office | |||||
| Glendale Center – Phase II | Glendale, CA | 264,000 | 158,000 | Mixed Use | |||||
| Total Los Angeles County | 1,194,000 | 424,000 | |||||||
| Orange County | |||||||||
| Brea Financial Commons/Brea Corporate Place (2) | Brea, CA | 550,000 | 784,000 | Office, Mixed Use | |||||
| City Tower II (3) | Orange, CA | 465,000 | 696,000 | Office | |||||
| Total Orange County | 1,015,000 | 1,480,000 | |||||||
| San Diego County | |||||||||
| San Diego Tech Center (4), (5) | Sorrento Mesa, CA | 1,320,000 | 1,674,000 | Office | |||||
| Total | 3,529,000 | 3,578,000 | |||||||
| Development Properties Encumbered by Defaulted Mortgages | |||||||||
| Orange County | |||||||||
| 2600 Michelson (6) | Irvine, CA | 270,000 | 154,000 | Office | |||||
| Stadium Tower II (7) | Anaheim, CA | 282,000 | 367,000 | Office | |||||
| Total | 552,000 | 521,000 | |||||||
46
| Development Properties (continued) | ||||
__________
| (1) | The developable square feet presented represents the office, retail, hotel and residential footages that we estimate can be developed on the referenced property. |
| (2) | The developable square feet presented represents management’s estimate of the development potential for the referenced property based on the allowed density under current zoning and capacity considerations for the site still under planning review. |
| (3) | The developable square feet presented represents management’s estimate of the development potential for the referenced property based on the allowed density under a Conditional Use Permit obtained for the property in 2001, which has since expired. |
| (4) | Land held for development was not contributed to our joint venture with Charter Hall Group. |
| (5) | The third phase contemplates the demolition of 120,000 square feet of existing space. |
| (6) | This development site is currently in receivership, along with the 2600 Michelson office building. |
| (7) | This development site is currently in receivership, along with the Stadium Towers Plaza office building. |
47
| Management Statements on Non-GAAP Supplemental Measures | ||||
Funds from Operations:
Fund 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 or loss (as computed in accordance with U.S. generally accepted accounting principles, 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 of operations, the utility of FFO as a measure of our performance is limited. Other Equity REITs may not calculate FFO in accordance with the NAREIT 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 or loss as a measure of our performance. FFO should not be used as a measure of our liquidity, nor is it indicative of funds available to meet our cash needs, including our ability to pay dividends or make distributions. FFO also should not be used as a supplement to or substitute for cash flows from operating activities (as computed in accordance with GAAP).
FFO before specified items:
Management also uses FFO before specified items as a supplemental performance measure because losses from early extinguishment of debt, default interest, the impairment of long-lived assets and gains on settlement of debt create significant earnings volatility which in turn results in less comparability between reporting periods and less predictability regarding future earnings potential.
Losses from early extinguishment of debt represent costs to extinguish debt prior to the stated maturity and the writeoff of unamortized loan costs on the date of extinguishment. 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.
48
| Management Statements on Non-GAAP Supplemental Measures (continued) | ||||
FFO before specified items: (continued)
As of March 31, 2011, the mortgage loans on the following properties were in default: Stadium Towers Plaza, 500 Orange Tower and City Tower in Central Orange County, 2600 Michelson in Irvine, and 550 South Hope and Two California Plaza in Downtown Los Angeles. 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 mortgages in default as well as the writeoff of deferred financing costs related to the mortgage loans on these properties from the calculation of FFO before specified items since these charges are a direct result of management’s decision to dispose of property other than by sale or modify the loan (in the case of Two California Plaza). Management views these charges as costs to complete the disposition of the related properties or the modification of the loan.
Impairment of long-lived assets represents charges taken to write down depreciable real estate assets to estimated fair value when events or changes in circumstances indicate that the carrying amount may not be recoverable. In some instances, the disposition of properties impaired in prior periods may result in a gain on settlement of debt at the time of disposition. 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 gains from property dispositions, impairment losses and gains on settlement of debt from the calculation of FFO before specified items because they relate to the financial statement impact of decisions made to dispose of property, 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.
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 and development payroll and interest expense, (iii) recurring and non-recurring capital expenditures required to maintain and re-tenant our properties, (iv) regular principal payments required to service our debt, and (v) 2nd generation tenant improvements and leasing commissions. Management uses AFFO as a supplemental liquidity measure because, when compared year over year, it assesses our ability to fund our dividend and distribution requirements from our operating activities. We also believe that, as a widely recognized measure of the liquidity of REITs, AFFO will be used by investors as a basis to assess our ability to fund dividend payments in comparison to other REITs.
However, because AFFO may exclude certain non-recurring capital expenditures and leasing costs, the utility of AFFO as a measure of our liquidity is limited. Additionally, other Equity REITs may not calculate AFFO using the method we do. As a result, our AFFO may not be comparable to such other Equity REITs’ AFFO. AFFO should be considered only as a supplement to cash flows from operating activities (as computed in accordance with GAAP) as a measure of our liquidity.
49
| Management Statements on Non-GAAP Supplemental Measures (continued) | ||||
EBITDA:
Management uses EBITDA as an indicator of our ability to incur and service debt. We believe EBITDA is an appropriate supplemental measure for such purposes, because the amounts spent on interest are, by definition, available to pay interest, income tax expense is inversely correlated to interest expense because tax expense goes down as deductible interest expense goes up, and depreciation and amortization are non-cash charges. In addition, we believe EBITDA is frequently used by securities analysts, investors and other interested parties in the evaluation of Equity REITs. However, because EBITDA is calculated before recurring cash charges including interest expense and income taxes, and is not adjusted for capital expenditures or other recurring cash requirements of our business, its utility as a measure of our liquidity is limited. Accordingly, EBITDA should not be considered an alternative to cash flows from operating activities (as computed in accordance with GAAP) as a measure of our liquidity. EBITDA should not be considered as an alternative to net (loss) income as an indicator of our operating performance. Other Equity REITs may calculate EBITDA differently than we do; accordingly, our EBITDA may not be comparable to such other Equity REITs’ EBITDA.
Adjusted EBITDA:
Management also uses Adjusted EBITDA as a supplemental performance measure because losses from early extinguishment of debt, the impairment of long-lived assets and gains on settlement of debt create significant earnings volatility which in turn results in less comparability between reporting periods and less predictability regarding future earnings potential.
Losses from early extinguishment of debt represent costs to extinguish debt prior to the stated maturity and the writeoff of unamortized loan costs on the date of extinguishment. 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 charges taken to write down depreciable real estate assets to estimated fair value when events or changes in circumstances indicate that the carrying amount may not be recoverable. In some instances, the disposition of properties impaired in prior periods may result in a gain on settlement of debt at the time of disposition. Management excludes gains from property dispositions, impairment losses and gains on settlement of debt from the calculation of Adjusted EBITDA because they relate to the financial statement impact of decisions made to dispose of property, whether in the period of disposition or in advance of disposition. These types of gains or losses create volatility in our earnings and make it difficult for investors to determine the earnings generated by our ongoing business operations.
50
| Management Statements on Non-GAAP Supplemental Measures (continued) | ||||
Coverage Ratios:
We present interest and fixed charge coverage ratios as supplemental liquidity measures. Management uses these ratios as indicators of our financial flexibility to service current interest expense and debt amortization from current cash net operating income. In addition, we believe that these coverage ratios represent common metrics used by securities analysts, investors and other interested parties to evaluate our ability to service fixed cash payments. However, because these ratios are derived from EBITDA, their utility is limited by the same factors that limit the usefulness of EBITDA as a liquidity measure. Accordingly, our interest coverage ratio should not be considered as an alternative to cash flows from operating activities (as computed in accordance with GAAP) as a measure of our liquidity.
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