A snag in Maguire Properties Inc.’s plan to build a 20-story office tower in Irvine is causing headaches for the Los Angeles-based company.
But Maguire, armed with a new $350 million venture to bankroll acquisitions, still said it plans to be active in Orange County, following a quiet 2005.
Maguire has run into some interference from the Federal Aviation Administration in Irvine. The planned tower at Park Place, which is set to total 600,000 square feet and be home to subprime lender New Century Financial Corp. and law firm Gibson, Dunn & Crutcher LLP, would be among Irvine’s tallest buildings.
Its height appears to be the cause of the holdup, with the FAA yet to issue a permit to allow construction on the high-rise to begin.
The tower was planned to be 20 stories, next to the San Diego (I-405) Freeway at the northern edge of Park Place. That would make it eight stories higher than an office project developed by Houston-based Hines Interests LP at 2211 Michelson Drive, a block away from the airport.
In Santa Ana, developer Michael Harrah has plans for a 37-story office tower, which would set the bar for the county.
Work recently began on the parking structure at Maguire’s site in Irvine. But the developer has been waiting for months for approval from the FAA, which must sign off on all construction that could interfere with flights to and from John Wayne Airport.
Permits are “still being processed,it is very fluid and dynamic,” said William Flaherty, senior vice president of leasing and marketing for Maguire.
It’s uncertain when the agency will give its final decision. Flaherty said the delay won’t halt the project.
“We are building the tower,” he said. “Construction is still happening.”
But one potential result of the FAA’s reluctance to sign off on the deal would be for Maguire to lower the size of the building by a few floors. That possibility is very speculative, Flaherty said.
Maguire still plans to open the tower in mid-2007. Local contractors said that’s an extremely ambitious deadline.
One thing in Maguire’s favor: Most of the materials for the project have been preordered.
Along with likely saving money due to the rapidly rising costs of construction materials, preordering would save time once the project gets final approval.
It’s taking 16 to 20 weeks for builders to get steel after they order it, said Dennis Katovsich, senior vice president in the Newport Beach office of St. Louis-based construction company McCarthy Building Cos.
Nearly half of the tower has been leased. New Century is set to take 190,000 square feet, with Gibson, Dunn signing on for 80,000 square feet.
No other leases have been announced since June. Greg May, who ran Maguire’s OC leasing operations for about a year, recently left the company. Stefan Khudic replaced him.
There’s been much speculation locally that Maguire may have to compensate the two tenants with big rent concessions or other penalties if the project isn’t completed on time.
Typically, though, there are few remedies for tenants in this situation, said Jon Janecek, a partner with Newport Beach-based Newmeyer & Dillion LLP, which has a practice focused on real estate deals.
“In a worst-case scenario, the landlord could say that your remedy is to terminate the lease,” Janacek said.
But with such a tight market for large chunks of space, few tenants would be willing to walk away from a project at such a late date, he said.
Despite the permitting delay, Maguire isn’t souring on OC.
The real estate investment trust, which also focuses heavily on Los Angeles and San Diego, is eyeing two other OC spots for office development.
Maguire’s entitled sites are at its 826,000-square-foot office campus at Costa Mesa’s Pacific Arts Plaza, where it can build another 200,000 square feet of space, and at its Washington Mutual campus in Irvine, where 150,000 square feet of development is possible.
“We are ready to begin aggressively developing (in OC),” Flaherty said.
Maguire sold land at Park Place last year to Canadian developer Bosa Development Corp., which is finishing two other condo towers at the site. Maguire held on to the right to build up to 850 housing units at Park Place.
The company expects to sell or form a venture to begin developing the housing this year.
Meanwhile, Maguire is “back in the acquisition market” for properties in OC, as well as in San Diego and L.A., Flaherty said.
The company was behind the three largest OC office buys in 2004, spending close to $626 million for two parcels at the sprawling 105-acre Park Place complex, along with the Washington Mutual campus.
Maguire made no major buys in OC last year. The company has seen competitors boost their presence in the regional office market.
In particular, Donald Bren’s The Irvine Company has snapped up a number of high-profile office towers in Maguire’s key markets, including OC and San Diego.
Maguire’s $350 million venture with Australian investment firm Macquarie Office Trust could get Maguire back to buying. The venture is called Maguire Macquarie Office.
