There’s no shortage of speculation surrounding the fate of Maguire Properties Inc. these days.
Questions range from what tenants will be taking up space at the Los Angeles-based landlord’s highest-profile office towers here to who will be running the real estate investment trust in a few months.
Maguire is Orange County’s largest publicly traded landlord and the county’s second-biggest office owner behind Newport Beach’s The Irvine Company.
The company’s offices here, which total about 8 million square feet, are 28% vacant. Maguire bet big when it bought a $2.9 billion office portfolio heavy with mortgage industry tenants that had belonged to Equity Office Properties Trust.
That bet didn’t immediately pay off as last year’s collapse of the area’s home financing sector drove the company’s vacancy rate to more than double the county’s 14% average.
But Maguire could be near a deal that would put a dent in its vacancy rate.
The buzz in real estate circles is a possible leasing coup for Maguire, a multifloor deal for its largely empty 3161 Michelson tower in Irvine.
Several brokers say the landlord is in talks with South Korea’s Hyundai Motor Co. for close to 65,000 square feet of space at the 20-story, $244 million tower.
A credit and finance unit of Hyundai Motor America Inc., which is based in Fountain Valley, is said to be considering a deal, which could lead to Hyundai’s name going up at the top of the tower along the San Diego (I-405) Freeway near Jamboree Road.
Brokers for the Irvine office of Cushman & Wakefield Inc., which represents Hyundai, confirm that the company is in the market for space. But they stress no deal has been reached and that 3161 Michelson is only one of several options the finance unit is considering.
Hyundai is the largest automaker with operations in OC and counts more than 900 workers here, largely in Fountain Valley and in Irvine. The company is facing a tough auto market as of late, which could play a role in its decision on where to lease.
A deal would be welcome news for a sluggish local office market, which still is feeling the effects of last year’s mortgage meltdown. The office market’s vacancy rate is up about 40% from a year earlier.
If the Hyundai deal is done at the size being discussed, it would be the biggest lease signed at 3161 Michelson since the building broke ground two years ago (excluding preleases). It also would be the largest lease signed in more than a year for any of the six new office towers in Irvine.
Monthly asking rents for space at 3161 Michelson had been running close to $3.85 per square foot at the end of 2007, brokers said. Maguire was looking to get more than $4 per square foot for the top floors of the building, which Hyundai is said to be considering.
3161 Michelson originally was slated to hold the headquarters of Irvine’s New Century Financial Corp., before the subprime lender went bankrupt last year.
New Century was slated to take up space on seven floors of the building, including the top four floors. The 190,000-square-foot lease, signed in mid-2005, was for $3 per square foot.
The building now is about a third full.
Brokers who represent tenants in leases say that it’s been business as usual for Maguire as of late, despite the uncertainty surrounding the company’s ownership.
Ongoing Review
Earlier this month, Maguire said it was continuing its review of a possible sale of the company. Beyond that, it’s being tight-lipped.
Officials have said they only will make an announcement if and when a deal is struck. The company has canceled investor presentations and officials have pulled out of public appearances as the strategic review is in progress.
Insiders say the first round of bids for the company is on the board. Most notably, chief executive and company namesake Robert Maguire is said to be looking to take the company private in a bid with an investor group that includes Colony Capital LLC and the Qatar Investment Authority.
Other bidders are believed to be Toronto-based Brookfield Asset Management Inc. and its New York-based affiliate Brookfield Properties Corp., as well as Chicago-based Walton Street Capital LLC.
The Irvine Co. also was tagged as a potential bidder by trade newsletter REIT Newshound. Officials for the Irvine Co. deny that the company is interested in buying Maguire or any of its buildings.
The strategic review is being conducted under the direction of a committee of independent directors of Maguire’s board, which doesn’t include Robert Maguire,keeping the chief executive out of the loop with regard to the sale, sources said.
