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MPG Office Trust swings to a third-quarter profit

The largest office landlord in downtown Los Angeles earned $25.6 million in the third quarter, compared with a loss of $17.9 million a year earlier, on property sales and debt forgiveness.

November 01, 2011|By Roger Vincent, Los Angeles Times

MPG Office Trust, the largest office landlord in downtown Los Angeles, reported a third-quarter profit propelled by property sales and debt forgiveness.

The Los Angeles real estate investment trust, which also owns several buildings in Orange and San Diego counties, finished the quarter that ended Sept. 30 with earnings of $25.6 million, or 51 cents a share. In the same period a year earlier, MPG lost $17.9 million, or 36 cents a share. Revenue was $84 million, down 3%.

"Fundamentals in downtown L.A. continue to be challenging and MPG's ho-hum operating results reflect those head winds," said analyst Michael Knott of Green Street Advisors.

Third-quarter earnings got a boost with the July disposal of City Tower in Orange County that relieved the company of paying a $140-million mortgage loan secured by the property. MPG also took out a $33.8-million loan in August on its Plaza Las Fuentes office building in Pasadena.

MPG, which owns the 72-story U.S. Bank Tower and other trophy properties in downtown Los Angeles, has been shedding assets that it doesn't consider part of its core portfolio. The company reported having $176 million in cash at the end of the quarter, of which $106.8 million was unrestricted.

"MPG needs every penny of improved liquidity as it faces a large 2012 debt maturity and continued large tenant incentive packages," Knott said. A deal announced Monday to transfer ownership stakes in a handful of properties to MPG's joint venture partners should bring in $45 million in cash by next year.

"That gives MPG breathing room and a source of strength," said analyst Craig Silvers, president of Bricks & Mortar Capital. "They can better negotiate debt deals as well as new leases."

Funds from operations, a key measure for real estate investment trusts, were $43.6 million, or 76 cents a share, compared with negative $2.8 million, or 5 cents a share, a year earlier.

MPG is in default on five properties, including Two Cal Plaza in downtown Los Angeles. MPG was able to raise rents by 4% on new leases signed during the quarter.

Shares of MPG closed up 4 cents at $2.39 before earnings were released.

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