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Thomas Properties Group Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: March 12, 2012 06:24AM
Thomas Properties Group Inc. (TPGI) filed Annual Report for the period ended 2011-12-31.
Highlight of Business Operations:Total revenues decreased by approximately $2.7 million to $95.0 million for the year ended December 31, 2011 from $97.7 million for the year ended December 31, 2010. The decrease was primarily due to the sale of 14 condominium units for the year ended December 31, 2011 compared to the sale of 29 condominium units for the same period in the prior year, which resulted in a decrease of $7.3 million of revenue from condominium sales. This revenue decrease was partially offset by a $2.2 million increase in tenant reimbursements related to a significant tenant at Commerce Square which transitioned from a gross lease to a net lease as well as a new significant tenant also at Commerce Square. Additionally, there was an increase of $2.2 million in revenues from our investment advisory business, primarily as a result of a deferred incentive fee payment related to the sale of Valencia Town Center, a managed property. Finally, our reduced ownership interests in City National Plaza and
Total revenues decreased by approximately $16.4 million to $97.7 million for the year ended December 31, 2010 from $114.1 million for the year ended December 31, 2009. The decrease was primarily due to the sale of 29 condominium units for the year ended December 31, 2010 compared to the sale of 75 condominium units at Murano for the same period in the prior year, which resulted in a decrease of $15.2 million of revenue from condominium sales. The decrease was due to an accelerated marketing program we entered into in 2009 for the sale of lower priced units, we sold 40 units through this marketing program. We did not have a similar marketing program for the year ended December 31, 2010. Additionally, there was a $1.0 million decrease in tenant reimbursements related to a scheduled expiration in June 2009 of a significant lease (Conrail) at Two Commerce Square representing approximately 378,000 rentable square feet, offset by a decrease in refunds to tenants in 2010 as compared to 2009 related to their share of operating expenses.
Total expenses decreased by approximately $33.1 million primarily as a result of the decrease in condominium unit sales expense, interest expense, general and administrative expenses, and asset impairment charges. Condominium unit sale expenses decreased by $15.5 million for the year ended December 31, 2010 compared to the year ended December 31, 2009, (see previous paragraph). The decrease in interest expense of $7.7 million for the year ended December 31, 2010 compared to the year ended December 31, 2009 is primarily attributable to the payoff of mezzanine debt at Two Commerce Square in December 2009, which resulted in a decrease of $8.8 million in interest expense compared to the prior period. Interest expense also decreased at our Murano and Four Points Centre properties as a result of payments made which lowered the principal balances of the related mortgage loans. General and administrative expense decreased by $2.9 million for the year ended December 31, 2010 compared to the same period in the prior year due to a reduction in compensation expense as a result of cost saving measures. We recognized an impairment charge related to our Murano condominium project for the year ended December 31, 2010 that was $8.5 million lower than the impairment recognized in the prior year. The book carrying value of Murano, net of the impairment charges, is reflective of the Company's estimation of future absorption rates and sales prices, which are supported by a third party appraisal. If the actual absorption and sales prices are materially less than the projection, we could potentially need to record additional impairment in future periods.
The Murano loan has a balance of $15.5 million as of December 31, 2011. The loan bears interest at the one-month LIBOR plus 3.75% and the interest rate as of December 31, 2011 was 4.1% per annum. The loan is scheduled to mature on December 15, 2013. On June 21, 2011, the prior construction loan was refinanced with a new mortgage loan in the amount of $21.5 million. At closing, $19.9 million of the loan was funded, with an additional $1.4 million available for funding interest expense and $0.2 million available for leasing costs related to the retail space. On each June 30th and December 31st through and including June 30, 2013, the loan is required to be reduced to a stated maximum balance. On June 30, 2012, the next amortization date, we will be required to make a rebalancing payment if the outstanding principal amount plus any undisbursed commitment exceeds $12.9 million. Repayment of this loan is being made with proceeds from the sales of condominium units. TPG is subject to a limited guaranty which (i) guarantees repayment of the loan in the event of certain bankruptcy events affecting the borrower, (ii) guarantees payment of the lender's damages from customary “bad boy” actions of the borrower or TPG (such as fraud, physical waste of the property, misappropriation of funds and similar bad acts); and (iii) guarantees payment of the amount, if any, by which the loan balance exceeds 80% of the bulk sale value of the collateral upon an acceleration of the loan triggered by a borrower default.
Net cash provided by investing activities increased by $33.9 million to $40.5 million provided by investing activities for the year ended December 31, 2011 compared to $6.6 million provided by investing activities for the year ended December 31, 2010. The increase was primarily due to higher distributions from our unconsolidated real estate entities of $21.3 million resulting from asset sales during the current year in addition to lower contributions to our unconsolidated real estate entities of $11.8 million during the current year. Further, we received a cash breakup fee of $8.5 million in 2011 related to the termination of the MetroStudios@Lankershim development project, and we received proceeds from the sale of a 2.2 acre land parcel at Campus El Segundo. Finally, these cash increases were offset by diminished proceeds of $6.7 million due to 15 fewer condominium unit sales in 2011.
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