MPG Office Trust Inc.
), a real estate investment trust (REIT), has recently sold its
3800 Chapman office building in the city of Orange, California,
to an unnamed seller. The asset sale is part of its strategic
plan to own and manage a core set of high-quality assets and
simultaneously increase its liquidity.
The divestiture has enabled the company to eliminate $44.4
million of mortgage debt and accrued contractual and default
interest associated with the property. At the same time, MPG
Office Trust was relieved of any outstanding claim under the loan
documents pursuant to an in-place agreement with the special
servicer of the mortgage loan.
The divested property is strategically located in the heart of
the city in close proximity to several recreational and
entertainment hotspots of the region. The office building also
offers easy access to various transportation facilities and is
located in the vicinity of a regional transportation hub.
MPG Office Trust is the largest owner and operator of Class A
office properties in the Los Angeles central business district.
The company specializes as a full-service real estate company
focusing primarily on the Southern California market.
MPG Office Trust is currently in a defensive mode and is focusing
more on shoring up its balance sheet. The company has suspended
its common and preferred dividends in an effort to save cash. In
addition, the company continues to successfully extend its debt
By the end of the third quarter of 2012, MPG Office Trust had
$2.5 billion of consolidated debt, and $117.4 million of cash and
cash equivalents. The debt burden of the company is a derivative
of its acquisition binge. In 2007, the company bought $2.9
billion of assets at the height of the real estate bubble. The
acquisition had pushed the company heavily into debt and it is
now trying to de-leverage its balance sheet.
However, MPG Office Trust has assets in some of the best
long-term, supply-constrained office markets in the country.
Rents continue to increase as leases roll, which is a positive
sign. In addition, new construction in the company's core markets
has virtually come to a halt, which is encouraging for the
long-term prospects. If the company can tide over the present
liquidity crisis, it can expect a reversal of fortunes in future.
Currently, we have a Neutral recommendation and a Zacks #3 Rank
on MPG Office Trust that translates into a short-term Hold
rating. We also have a Neutral recommendation and a Zacks #3 Rank
Duke Realty Corp.
), one of the peers of MPG Office Trust.
DUKE REALTY CP (DRE): Free Stock Analysis
MPG OFFICE TRST (MPG): Free Stock Analysis
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