Battle-Hardened Maguire Stays Active in Slow Market
By DANNY KING
Staff Reporter
Rob Maguire has a high threshold for pain.
The 67-year-old grandfather of four was riding a mountain bike near his Bel-Air home last August when he crashed on a wet road, breaking his shoulder in the process.
“I didn’t feel very good but I rode my bike home until it got too steep to pedal,” said Maguire, somewhat sheepishly. “It wasn’t shattered. If it was shattered, that would’ve been bad.”
Resilience has served Maguire well in his nearly 40 years in the real estate development business. It proved especially useful last year when tenants were taking a conservative approach to occupancy needs, and competition on downtown L.A. deals increased as outside investors took advantage of low interest rates.
No developer symbolized these up-and-down dynamics better than Maguire, a constant on the local development scene for decades who founded and heads Maguire Partners.
Last year, Maguire completed a $55 million lease deal for 161,000 square feet at Plaza Las Fuentes in Pasadena, securing the anchor tenant investment firm Western Asset Management he needed to break ground on the project’s 257,000 second phase, now called Western Asset Plaza, in August.
In downtown Los Angeles that same month, Maguire worked a $22 million deal to keep the L.A. Unified School District in 225,000 square feet at KPMG Tower, which Maguire owns. He also bought out Dai-ichi Mutual Life’s 75 percent stake in Library Tower, and was arranging to buy the 42 percent of Wells Fargo Tower he didn’t already own.
These deals helped Maguire Partners ready itself for an initial public offering, filed in November under the name Maguire Properties Inc.
“We got a lot accomplished,” said Maguire. “It was a terrific year in terms of setting the stage for what we’re doing.”
Setbacks
With the stock market unreceptive to new offerings, though, Maguire Properties is still waiting in the wings. And there are other problems.
Two Westside buildings finished last year Water’s Edge and 1733 Ocean Ave., totaling about 345,000 square feet remain empty.
With the bankruptcy filing of Arthur Andersen, Maguire faced losing Library Tower’s fourth-largest tenant. He settled the long-term lease for $5 million, The New York Times reported. And Maguire has yet to make good on his intention to purchase the 114-acre eastern flank of the Playa Vista project that he had proposed to develop in 1999.
Maguire also failed in an attempt to add to his 5.1 million square foot downtown L.A. portfolio by purchasing Arco Plaza. The 2.6 million-square-foot complex eventually sold to Thomas Properties Group LLC, whose chief executive, Jim Thomas, had been a partner of Maguire before the formation of Maguire Partners in 1998.
Maguire has reached icon status by being both creative and somewhat stubborn in his dealmaking a throwback to the days of highly leveraged developers who seem worlds apart from the institutional entities dominating the trophy property market today.
As part of the former Maguire Thomas Partners, Maguire developed Bunker Hill in the 1980s and early 1990s. But his gambler’s mentality also caused his lender to foreclose on Playa Vista in the mid-1990s, after years of butting heads with environmentalists. He got back in as developer and minority partner on the Water’s Edge portion of the project with Equity Office Properties Trust.
“If you look at the large developers, most don’t have one person that’s the face of the company like Rob,” said commercial broker Matthew Miller, a principal at CRESA Partners. “He’s certainly the most interesting developer around.”
With Western Asset Plaza, Maguire is developing the first large Tri-Cities office project in more than 10 years that had an anchor tenant in tow before breaking ground, according to Bill Boyd, senior vice president at Grubb & Ellis Co. “This market has grown up on spec buildings,” Boyd said.
The only previous pre-leased example in the area was Nestle’s 300,000 square feet at 101 N. Brand Ave. in Glendale.
To bring Western Asset into the fold, Maguire offered an equity stake in the project, a method he had used with anchor tenants Wells Fargo & Co. and law firm Gibson Dunn & Crutcher LLP in Wells Fargo Tower two decades ago.
“There are very effective deals for major tenants because we’re letting them participate in the economics of the project,” said Maguire. “It was basically a venture approach with Western Asset.”
With a shorter-term tenant like LAUSD, Maguire sweetened the deal by providing free rent concessions and shuttle services to the district, which had also been negotiating with Transamerica Center.
“It was relatively the same, but Maguire added a few concessions at the last moment,” said school board member Jose Huizar, shortly after the deal was made. “Maguire put some nice flavor into the deal.”
Maguire’s most prominent downtown transaction was buying out Dai-Ichi Mutual Life’s stake in Library Tower for $300 million. The purchase, along with his buyout of Dai-Ichi’s 50 percent stake in Gas Co. Tower in early 2001, was part of a two-year effort to prepare his company to go public.
The road show for the $890 million deal, originally scheduled for January, has been delayed at least until next month.
“It’s going along well,” said Maguire, who wouldn’t comment on specifics.
Westside woes
Maguire has had difficulty moving his triumphs in the Tri-Cities and downtown L.A. to the west.
By completing the 91,000 square foot 1733 Ocean Ave. in Santa Monica in June, and the 253,000-square-foot Water’s Edge at Playa Vista in September, Maguire plunged into a Westside office market already in a two-year free fall.
The West L.A. vacancy rate was 15.8 percent during the fourth quarter, up from 7.8 percent in the fourth quarter 2000. “Both buildings were victims of bad timing,” Miller said. “Had those properties been ready to market two years earlier, they would have been leased.”
Maguire, whose asking rents remain in the upper end of the $2.50 to $3 a foot range for Class-A space on the Westside, showed a typically defiant attitude toward the market.
“Westside’s pretty (bad) but it’s not terminal,” said Maguire. “We’re not going to give the space away, I’ll tell you that.”
Meanwhile, an opportunity to develop a portion of Playa Vista’s eastern campus may have lapsed. Maguire would not comment on his role in the project, whose lead developer is Playa Capital LLC. Maguire noted that the site, once home to Hughes Aircraft Co., still had environmental issues to be resolved.
Another question is whether Maguire, who has rankled business partners with his mercurial moves in the past, will be able to maintain his creativity as chairman and co-chief executive of a publicly held real estate investment trust.
“I don’t think it’s restrictive at all,” said Maguire. “Our peer group in the REIT industry would be a Boston Properties Inc. or Cousins (Properties Inc.), which enjoy a long tradition of developing properties and creating value.”
Regardless, Maguire appears to be continuing his resiliency amid a first quarter that has yet to show an improvement from 2002. Minnesota-based U.S. Bancorp is nearing a deal to take Arthur Andersen’s 165,000-square-feet, according to a New York Times report. The 15-year deal would involve the Minneapolis-based company getting building-top signage rights and an equity stake in the 1.4-million-square-foot building, according to downtown sources.
“I cannot comment on that, other than, ‘Yippee!'” said Maguire.
L.A.’s Most Influential Developer
Player: Robert F. Maguire III, founder and managing partner of Maguire Partners.
Projects: Western Asset Plaza, 1733 Ocean Ave., Water’s Edge, Library Tower
The Deals: Maguire was able to break ground on Pasadena’s Plaza Las Fuentes II project by signing Western Asset Management to a long-term deal worth about $55 million, and prepared for his pending public offering by purchasing his partner’s 75 percent interest in Library Tower for $300 million. Still, the developer’s newly constructed Water’s Edge and 1733 Ocean Ave. remain empty in a stagnant Westside market.
