Beleaguered Maguire Properties Inc., the largest landlord of Class A office space in downtown Los Angeles, announced the sale of three more of its Orange County office buildings this month as it continues to pare down its massive debt.
The company announced June 2 that it had disposed of City Parkway, a three-building office project in Orange, allowing it to eliminate debt obligations that would have matured next year. The company is taking a $40 million write-off in the sale to an entity of the Abbey Co. of Long Beach.
The sale follows four others in Orange County since May 2008 with more expected to follow prompting one analyst to say Maguire is in “slow liquidation mode” of its 35-property portfolio.
“We expect more asset sales and give-backs vs. loan extensions. A number of portfolio assets are simply underwater, with limited near-term prospects,” wrote John Guinee of Stifel Nicolaus & Co. in a recent research note.
Robert Maguire, the real estate investment trust’s founder, was ousted last year as chief executive after making a poorly timed $3 billion portfolio purchase in 2007 from Blackstone Group LP. The portfolio included multiple Orange County buildings that had tenants in the subprime mortgage industry and which later went out of business.
However, Maguire Chief Executive Nelson Rising took issue with Guinee’s characterization of the company slowly liquidating, saying that since he replaced Maguire as CEO in May 2008 his focus has been liquidity, debt maturities and leasing properties.
“What we are trying to do is address those overall issues,” he said. “What happened with the macro forces certainly made it much more challenging and more difficult than I thought.”
Still, when the sales are completed the company could be left with a lean portfolio of mostly trophy assets in downtown Los Angeles, including the U.S. Bank Tower, Gas Co. Tower and Wells Fargo Center.
That may not be such a bad thing according to Guinee. “L.A. County is a strong market relative to others nationally, perhaps the strongest nationally,” he wrote in his research note.
Rising agreed, saying he was “very optimistic” about the future of downtown Los Angeles. “I look out my window and see the Convention Center hotel coming to reality, what’s happening with L.A. Live, what’s happening with the residential,” he said.
Maguire has closed a few significant leases in recent months, but the tough economy and battered commercial real estate market has hammered the company’s stock.
After reaching a low of 32 cents in March, shares have rebounded somewhat, closing at $1.09 on June 11. But that is just a fraction of the $27 price it topped at as late as February 2008. It reached an all-time high of $44.25 one year earlier.
