Many publicly traded Los Angeles real estate companies have been hit hard lately, but Meruelo Maddux Properties Inc. has suffered more than most.

Downtown's largest landowner, with a portfolio of several dozen industrial projects, has seen its stock price dip below $1 in recent weeks. That's down from highs of around $10 when the company went public in early 2007. Shares are off nearly one-third in the last month alone. The stock closed at 92 cents Oct. 7.

So what's up with Meruelo Maddux, besides the overall market sell-off?

Liquidity issues and slow leasing have hurt the company, which posted a $4 million net loss in the first quarter and a $6.4 million net loss in the second quarter. In May, a plan by Meruelo Maddux to increase liquidity by selling up to $300 million in stock, debt and a chunk of its portfolio wasn't universally popular. Some industry observers said that the properties were being offered at heavily discounted prices.

Still, the stock is not totally on the outs. In a poll of four analysts by Bloomberg News, one rated it a "buy," two a "hold" and only one a "sell."

Wilkes Graham of Friedman Billings Ramsey & Co. Inc., who has the "buy" rating, said in an August research note that the company was experiencing "muted leasing" at its properties, including its sole residential building that is open, the Union Lofts. But Graham added that Meruelo Maddux had addressed its liquidity issues and rated the stock "outperform."

Andrew Murray, the company's chief financial officer, said he has no doubt that the company is being severely undervalued amid the crash of the stock and real estate markets.

Murray, a former investment banker who joined the company in April, noted that as of the second quarter, the company's total shareholder equity was about $410 million. With a share price of about $1, he said Wall Street is highly undervaluing the company.

"The market is saying our real estate is worth 42 percent less than what we have it on our books for and that's a massive disconnect," Murray said.

The company has its first ground-up residential project under construction, a 35-story tower at 717 W. Ninth St. That also may be a turnoff for Wall Street, but unlike other downtown developers its projects are rental developments, which are faring better than for-sale properties in the current market. The company has several residential development sites in downtown.


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