MPG Office Trust Inc.
), a real estate investment trust (REIT), has recently sold its 500
Orange Tower high-rise 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 divesture has enabled the company to eliminate $110 million of
mortgage debt and accrued contractual and default interest
associated with the property. At the same time, MPG Office Trust
was granted a general release of claims under the loan documents
pursuant to an in-place agreement with the special servicer of the
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 second quarter of 2012, MPG Office Trust had $2.7
billion of consolidated debt, and $166.5 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 for
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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