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Maguire’s Leadership Unrest Costs It Leases

The unsettled and long-running struggle over who should run Maguire Properties Inc. is starting to give some tenants pause about signing leases with Orange County’s second-largest office landlord.

A handful of large, existing Maguire tenants have opted to sign leases with the county’s No. 1 office owner, Newport Beach’s The Irvine Company, and other competing landlords in the past few months, largely because of questions over Maguire’s future, local brokers said.

The Irvine Co., in particular, “is seen as the stable, safe alternative,” said one broker who represents tenants.

Stability isn’t the first word to describe Maguire these days.

Hedge fund investors are pushing for Los Angeles-based Maguire,which counts a market value of about $1.3 billion,to consider a number of big changes to boost the company’s shares, which are down about 30% in the past year.

Options include a possible sale. It’s the second time Maguire’s explored a potential sale in a little more than a year.

The landlord’s chief executive, 72-year-old Robert Maguire, has his own plans in mind. He’s dismissed calls to turn over control of the company, and is instead said to be lining up overseas investors who would help him take the company private.

Maguire says he’s bringing on Los Angeles-based investment firm Colony Capital and the Qatar Investment Authority as partners for a bid to buy the company and take it private.

Qatar Investment Authority, a state-run investment company, would be the latest big area investor to come from the Persian Gulf.

In 2006, Newport Beach’s John Laing Homes was acquired by Dubai’s Emaar Properties in a $1 billion deal. And in early December, Irvine-based developers Bixby Land Co. announced a venture to buy commercial properties in the Silicon Valley with international investment firm Investcorp, which was founded in Bahrain in the 1980s (see Real Estate column, page 26).


Buildings for Sale

In OC, a handful of offices that Maguire owns are said to be still up for sale, as the company looks to pay down debt from its $3 billion buy earlier this year of former Equity Office Properties Trust buildings.

The most notable properties on the block are believed to be the company’s Main Plaza Towers, a pair of 12-story buildings at 1920 and 2010 Main St., in Irvine. They were put on the market in early October, according to brokers.

If the company puts any additional buildings on the trading block in 2008, it’s a good chance that they’ll also be in OC, where Maguire still owns close to 8 million square feet of space, brokers say.

Real estate executives that know Maguire say that while he remains committed to OC, he’s likely more interested in holding on to his trophy office towers in downtown Los Angeles, where he’s had a big presence for decades.

The ongoing saga of whether Maguire will be sold or taken private isn’t helping the company attract local tenants.

About 21% of the company’s local buildings were empty at the start of the fourth quarter.

That’s a vacancy rate nearly 10% higher than the typical OC office, and is due largely to the large number of subprime mortgage lenders in its recently acquired buildings that have closed.

It’s also losing other tenants.

GE Capital Solutions, a financial services division of General Electric Co., last month opted to consolidate two of its big local offices in Anaheim and Irvine. It’s moving roughly 100 employees from a Maguire-owned office in Anaheim to 28,000 square feet of new space at The Irvine Co.’s Jamboree Center campus, giving it 51,000 square feet there. The move is expected in July.

“The Irvine Co. represented some stability in rent obligations, and we won’t have any (additional) tax obligations” that could result if Maguire’s buildings are sold again, said a broker who represented GE Capital.

A number of prominent local office towers have traded hands as many as three times in the past year, as former Equity Office buildings were sold to Blackstone Group LP, then to Maguire, and then to companies including Bixby Land, Muller Cos. and the Hearn Co.

Each of those transactions brought higher valuations for the buildings, expectations of higher rents and likely higher tax bills for some tenants.

But that hasn’t scared everyone away.


Lease in Works

In the next few weeks, real estate sources say a local law firm with about 50 employees is expected to announce a lease at 3161 Michelson, Maguire’s new office tower near John Wayne Airport.

A deal would mark the third law firm to sign on for the building at Maguire’s Park Place complex, alongside existing tenants Gibson, Dunn & Crutcher LLP and Greenberg Traurig LLP.

Irvine subprime lender New Century Financial Corp. was set to take up the largest part of the building before declaring bankruptcy early in 2007.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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