Thomas Properties Group, Inc. Announces Third Quarter 2009 Results

Thomas Properties Group, Inc. (Nasdaq:TPGI) reported today the results of operations for the quarter ended September 30, 2009.

The results of operations presented in this release include TPGI's results of operations for the three months ended September 30, 2009 and 2008. The consolidated net loss for the three months ended September 30, 2009 was $(10.9) million or $(0.43) per share compared to consolidated net loss of $(2.9) million or $(0.13) per share for the three months ended September 30, 2008. The consolidated net loss for the nine months ended September 30, 2009 was $(13.8) million or $(0.56) per share compared to consolidated net income of $2.2 million or $0.09 per share for the nine months ended September 30, 2008. Included in the consolidated net loss for both the three and nine months ended September 30, 2009 are pre-tax, non-cash impairment charges of $8.6 million related to our Murano condominium project and $2.0 million related to our joint venture investments. Both the condominium units and the joint venture investments are recorded at their estimated fair value on September 30, 2009.

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After tax cash flow (a non-GAAP financial measure) for the three months ended September 30, 2009 was $0.5 million or $0.02 per share compared to after tax cash flow of $3.6 million or $0.15 per share for the three months ended September 30, 2008. After tax cash flow for the nine months ended September 30, 2009 was $8.8 million or $0.35 per share compared to after tax cash flow of $22.0 million or $0.93 per share for the nine months ended September 30, 2008. The reduction in after tax cash flow for the quarter ended September 30, 2009 compared with the quarter ended September 30, 2008 was primarily the result of an income tax benefit recognized during the third quarter of 2008 which resulted from a change in our estimated tax rate. We also experienced an occupancy decline from 87% at September 30, 2008 to 84% at September 30, 2009, which resulted in a decline in property operating revenues. The reduction in after tax cash flow for the nine months ended September 30, 2009 compared with the nine months ended September 30, 2008 resulted from a decline in gains from sales of condominium units at our Murano property and a reduction in our property operating revenues, partially offset by an increase in net revenues from our investment advisory, management, leasing and development services business and by expense reductions. We define after tax cash flow (ATCF) as net income (loss) excluding the following items: noncontrolling interests, deferred income taxes, non-cash charges for depreciation and amortization and asset impairment, amortization of loan costs, non-cash compensation expense, straight-line rent adjustments and adjustments to reflect the fair market value of rent. ATCF is further described in note (c) to the financial statements below.

Commenting on the company's results and recent activities, Jim Thomas, Chairman and CEO, said, "In spite of a tough operating environment, we have accomplished a number of important objectives. We have reduced our exposure to near-term debt maturities by modifying and extending our Four Points Centre and Campus El Segundo loans. We successfully negotiated a payoff of the mezzanine loans at Commerce Square at a discount of approximately 30%, which will result in a $6.6 million reduction in our annual interest expense. We continue to be focused on reducing overall leverage levels. Our accelerated marketing event at Murano ignited a resumption of sales of condominium units at the beginning of the third quarter, and the momentum in condo sales continues. At 84% portfolio occupancy, our properties are performing at or above market occupancies, and we have been successful at reducing operating expenses."

TPGI's recent activities include:

On October 10, 2009, the Campus El Segundo construction loan in the amount of $17.0 million was modified. The loan has been extended to July 31, 2011, and has three one-year extension options at our election subject to us complying with certain loan covenants.

On October 13, 2009, the Four Points Centre construction loan was modified and extended to July 31, 2012 with two one-year extension options subject to certain conditions. We have also provided additional collateral of approximately 62.4 acres of fully entitled unimproved land, which is immediately adjacent to our Four Points Centre office buildings located in Austin, Texas. We have committed to pay down the principal amount of the loan in the total amount of $7.8 million and $10.8 million remains unfunded and available to be drawn.

On October 14, 2009, we entered into a discounted payoff agreement with the holders of the existing mezzanine debt on Two Commerce Square. We have agreed to pay off the two mezzanine loans, with a principal amount of approximately $36.1 million, for a discounted amount of $25.0 million on or before November 30, 2009 (subject to an extension right of up to 29 days).

Continuing the condominium sales momentum at the Murano, we entered into contracts for an additional 24 units and settled 56 units during the quarter; resulting in approximately $25.0 million reduction in our construction loan balance. Subsequent to September 30, 2009, we have entered into contracts to sell an additional six units.

On October 6, 2009 we sold a 1.9 acre land parcel adjacent to our Four Points Centre development property in Austin, Texas, which is subject to a ground lease to a retail tenant. The land was sold for $2.1 million; we expect to recognize a gain of approximately $1.2 million in the fourth quarter, 2009.

Supplemental Materials

The company will publish a Supplemental Financial Information package which will be available at www.tpgre.com in the Investor Relations tab, Supplemental Financial Information section.

Teleconference and Webcast

TPGI will hold a quarterly earnings conference call on Monday, November 2, 2009 at 2:00 p.m. Pacific Time. To participate in the call, dial (866) 804-6923 and (857) 350-1669 internationally, and provide confirmation code 71208810.

A live webcast (listen only mode) of the conference call will also be available at this time. A hyperlink to the live webcast will be available from the Investor Relations section of our website at www.tpgre.com. A replay of the call will be available through November 23, 2009, by calling (888) 286-8010 and (617) 801-6888 internationally, and providing confirmation code 27707903. The replay will also be available on Thomas Properties Group, Inc.'s web site at www.tpgre.com.

The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.fulldisclosure.com, Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).

About Thomas Properties Group, Inc.

Thomas Properties Group, Inc., with headquarters in Los Angeles, is a full-service real estate company that owns, acquires, develops and manages primarily office, as well as mixed-use and residential, properties on a nationwide basis. The company's primary areas of focus are the acquisition and ownership of premier properties, property development and redevelopment, and property and investment management activities. The company seeks to capitalize on opportunities for above-average risk-adjusted investment returns from real estate, while managing the volatility associated with the real estate industry, through joint-venture ownership structures. For more information on Thomas Properties Group, Inc., visit www.tpgre.com.

Forward Looking Statements

Statements made in this press release or during the quarterly earnings conference call that are not historical may contain forward-looking statements. Although TPGI believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, these statements are subject to numerous risks and uncertainties. Factors that could cause actual results to differ materially from TPGI's expectations include actual and perceived trends in various national and economic conditions that affect global and regional markets for commercial real estate services (including interest rates), the availability of credit and equity investors to finance commercial real estate transactions, our ability to enter into or renew leases at favorable rates, which can be impacted by the financial condition of our tenants, risks associated with the success of our development and property redevelopment projects, general volatility in the securities and credit markets, and the impact of tax laws affecting real estate. For a discussion of some of the factors that may cause our results to differ from management's expectations, see the information under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Influence Future Results of Operations" in our Form 10-K for the year ended December 31, 2008, which is filed with the SEC. TPGI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (unaudited) Three months ended September 30, Nine months ended September 30, 2009 2008 2009 2008 (revised) Revenues: Rental $ 7,385 $ 7,482 $ 22,499 $ 23,317 Tenant reimbursements 4,566 5,991 16,151 20,116 Parking and other 571 925 2,156 2,747 Investment advisory, management, leasing and development services 2,622 1,799 7,158 5,570 Investment advisory, management, leasing and development services - unconsolidated real estate entities 3,388 4,244 11,229 13,670 Reimbursement of property personnel costs 1,425 1,657 4,213 5,075 Condominium sales 22,927 3,622 22,927 79,758 Total revenues 42,884 25,720 86,333 150,253 Expenses: Property operating and maintenance 5,936 6,018 18,439 18,877 Real estate taxes 1,943 1,586 5,427 4,762 Investment advisory, management, leasing and development services 2,799 4,142 8,638 12,520 Reimbursable property personnel costs 1,425 1,657 4,213 5,075 Cost of condominium sales 20,892 3,113 20,892 62,228 Rent -- unconsolidated real estate entities 42 65 208 191 Interest 6,787 5,803 20,415 13,740 Depreciation and amortization 3,008 2,948 9,373 8,498 General and administrative 3,865 4,173 12,072 13,556 Impairment loss 8,600 - 8,600 - Total expenses 55,297 29,505 108,277 139,447 Gain on sale of real estate - - - 3,618 Gain from early extinguishment of debt - - 509 255 Interest income 34 587 287 2,341 Equity in net loss of unconsolidated real estate entities (3,103 ) (3,968 ) (595 ) (9,108 ) (Loss) income before income taxes and noncontrolling interests (15,482 ) (7,166 ) (21,743 ) 7,912 (Provision) benefit for income taxes (242 ) 1,359 (480 ) (2,695 ) Net (loss) income (15,724 ) (5,807 ) (22,223 ) 5,217 Noncontrolling interests' share of net loss (income): Unitholders in the Operating Partnership 6,007 2,733 7,456 (3,126 ) Partners in consolidated real estate entities (1,195 ) 133 934 133 4,812 2,866 8,390 (2,993 ) TPGI share of net (loss) income $ (10,912 ) $ (2,941 ) $ (13,833 ) $ 2,224 (Loss) earnings per share-basic $ (0.43 ) $ (0.13 ) $ (0.56 ) $ 0.09 (Loss) earnings per share-diluted $ (0.43 ) $ (0.13 ) $ (0.56 ) $ 0.09 Weighted average common shares-basic 25,212,319 23,701,294 24,978,388 23,681,997 Weighted average common shares-diluted 25,212,319 23,701,294 24,978,388 23,681,997 Reconciliation of net (loss) income to EBDT (a): Net (loss) income $ (10,912 ) $ (2,941 ) $ (13,833 ) $ 2,224 Adjustments: Income tax provision (benefit) 242 (1,359 ) 480 2,695 Noncontrolling interests -- unitholders in the Operating Partnership (6,007 ) (2,733 ) (7,456 ) 3,126 Depreciation and amortization 3,008 2,948 9,373 8,498 Amortization of loan costs 202 78 372 237 Unconsolidated real estate entities: Depreciation and amortization 4,773 5,517 14,601 15,604 Amortization of loan costs 191 247 683 1,090 (Loss) earnings before depreciation, amortization and taxes (b) $ (8,503 ) $ 1,757 $ 4,220 $ 33,474 TPGI share of EBDT (b) $ (5,550 ) $ 1,072 $ 2,708 $ 20,469 EBDT per share - basic $ (0.22 ) $ 0.05 $ 0.11 $ 0.86 EBDT per share - diluted $ (0.22 ) $ 0.05 $ 0.11 $ 0.86 ------------------------------------------------------------------------------- Reconciliation of net (loss) income to ATCF (c): Net (loss) income $ (10,912 ) $ (2,941 ) $ (13,833 ) $ 2,224 Adjustments: Income tax provision (benefit) 242 (1,359 ) 480 2,695 Noncontrolling interests -- unitholders in the Operating Partnership (6,007 ) (2,733 ) (7,456 ) 3,126 Depreciation and amortization 3,008 2,948 9,373 8,498 Amortization of loan costs 202 78 372 237 Non-cash compensation expense 654 848 2,257 2,457 Straight-line rent adjustments (843 ) 165 (762 ) 3,113 Adjustments to reflect the fair market value of rent (5 ) (42 ) 23 (100 ) Impairment loss 8,600 - 8,600 - Unconsolidated real estate entities: Depreciation and amortization 4,773 5,517 14,601 15,604 Amortization of loan costs 191 247 683 1,090 Straight-line rent adjustments (489 ) (546 ) (1,474 ) (1,878 ) Adjustments to reflect the fair market value of rent (316 ) (330 ) (1,026 ) (1,019 ) Impairment loss 2,012 - 2,012 - ATCF before income taxes $ 1,110 $ 1,852 $ 13,850 $ 36,047 TPGI share of ATCF before income taxes (b) $ 618 $ 1,130 $ 8,887 $ 22,043 TPGI income tax (expense) benefit - current (72 ) 2,512 (132 ) - TPGI share of ATCF $ 546 $ 3,642 $ 8,755 $ 22,043 ATCF per share - basic $ 0.02 $ 0.15 $ 0.35 $ 0.93 ATCF per share - diluted $ 0.02 $ 0.15 $ 0.35 $ 0.93 Weighted average common shares-basic 25,212,319 23,701,294 24,978,388 23,681,997 Weighted average common shares-diluted 25,212,319 23,701,294 24,978,388 23,681,997 ------------------------------------------------------------------------------- (a) EBDT is a non-GAAP financial measure and may not be directly comparable to similarly-titled measures reported by other companies. We define EBDT as net income (loss) excluding the following items: i) income tax expense (benefit); ii) noncontrolling interests; iii) non-cash charges for depreciation and amortization; and iv) amortization of loan costs. EBDT provides a performance measure that, when compared year over year, reflects the impact to operations from changes to occupancy rates, rental rates, operating costs, development and redevelopment activities, general and administrative expenses, and interest costs, and provides perspective on operating performance not immediately apparent from net income. EBDT should be considered only as a supplement to net income as a measure of our performance. EBDT also assists management in identifying trends for purposes of financial planning and forecasting results. However, the usefulness of EBDT as a performance measure is limited and EBDT should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs. EBDT also should not be used as a supplement to or substitute for cash flow from operating activities (computed in accordance with GAAP). (b) Based on an interest in our operating partnership of 64.65% and 64.17% for the three and nine months ended September 30, 2009 and 61.01% and 61.15% for the three and nine months ended September 30, 2008, respectively. (c) ATCF is a non-GAAP financial measure and may not be directly comparable to similarly-titled measures reported by other companies. We define ATCF as net income (loss) excluding the following items: i) income tax expense (benefit); ii) noncontrolling interests; iii) non-cash charges for depreciation and amortization and asset impairment; iv) amortization of loan costs; v) non-cash compensation expense; vi) the adjustment to recognize rental revenues using the straight-line method; and vii) the adjustment to rental revenue to reflect the fair market value of rents. Management utilizes ATCF data in assessing performance of our business operations in period-to-period comparisons and for financial planning purposes. ATCF should be considered only as a supplement to net income as a measure of our performance. ATCF should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs. ATCF also should not be used as a supplement to or substitute for cash flow from operating activities (computed in accordance with GAAP). ------------------------------------------------------------------------------- THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) September 30, 2009 December 31, 2008 (unaudited) ASSETS Investments in real estate: Operating properties, net $ 276,878 $ 274,784 Land improvements -- development properties 97,715 100,886 Construction in progress - 1,274 374,593 376,944 Condominium units held for sale 73,567 101,112 Real estate held for sale 619 609 Investments in unconsolidated real estate entities 34,096 29,098 Cash and cash equivalents, unrestricted 50,582 69,023 Restricted cash 15,194 16,665 Rents and other receivables, net 4,537 4,452 Receivables from condominium sales contracts, net 1,786 10,485 Receivables from unconsolidated real estate entities 2,503 4,701 Deferred rents 11,670 10,604 Deferred leasing and loan costs, net 14,646 15,018 Other assets, net 22,979 21,724 Total assets $ 606,772 $ 660,435 LIABILITIES AND EQUITY Liabilities: Mortgage loans $ 255,223 $ 255,579 Other secured loans 110,837 128,466 Unsecured loan - 3,900 Accounts payable and other liabilities, net 33,056 46,567 Dividends and distributions payable 500 2,377 Prepaid rent 1,569 2,819 Total liabilities 401,185 439,708 Equity: Stockholders' equity: Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued or outstanding as of September 30, 2009 and December 31, 2008, respectively - - Common stock, $.01 par value, 225,000,000 and 75,000,000 shares authorized, 25,693,354 and 23,853,904 shares issued and outstanding as of September 30, 2009 and December 31, 2008, respectively 257 238 Limited voting stock, $.01 par value, 20,000,000 shares authorized, 13,813,331 and 14,496,666 shares issued and outstanding as of September 30, 2009 and December 31, 2008, respectively 138 145 Additional paid-in capital 170,598 158,341 Retained deficit and dividends (41,733 ) (26,980 ) Total stockholders' equity 129,260 131,744 Noncontrolling interests: Unitholders in the Operating Partnership 71,908 85,210 Partners in consolidated real estate entities 4,419 3,773 Total noncontrolling interests 76,327 88,983 Total equity 205,587 220,727 Total liabilities and equity $ 606,772 $ 660,435 -------------------------------------------------------------------------------