Orange County, the most troubled market for Los Angeles-based office building owner Maguire Properties Inc., is set to get “hands-on” attention from its new chief executive.
“I’ll be down here a lot,” said Nelson Rising, who took over last week for longtime boss Robert Maguire. “(Orange County’s) an important part of our portfolio.”
Rising is the former chief executive of San Francisco-based Catellus Development Corp., where he made his mark as a turnaround specialist. He came to power at Maguire Properties after the company’s board ousted Robert Maguire following an ownership battle that saw him fail to take the company he founded private.
Prior to Catellus, Rising worked for Maguire,then known as Maguire Thomas Partners,for 10 years, overseeing some of the company’s big Los Angeles office buildings, including the 73-story Library Tower.
Rising “knows Orange County well, but he’s been more focused on downtown Los Angeles,” said Rick Gilchrist, the former co-chief executive of Maguire who now heads up the investment properties group for Newport Beach’s The Irvine Company.
Started at Coto
OC was the location of Rising’s first real estate job 35 years ago, when he was the president of Coto de Caza prior to development of the upscale housing project.
“That was before entitlement, before water,” he said of his work at Coto.
OC is the biggest challenge facing Rising at Maguire. The company’s office buildings in Orange and Irvine are the worst off in its nearly 21 million-square-foot portfolio.
Many of the local buildings were bought in early 2007, at the peak of the commercial real estate market and just before the implosion of the mortgage sector.
At the end of the first quarter, Maguire’s 8 million square feet of space in OC was a third empty. That’s far worse than the county average vacancy rate of about 16%, and Maguire’s companywide vacancy rate of 19%.
Rising calls last year’s mortgage meltdown, in which Maguire lost big tenants New Century Financial Corp. of Irvine and Ameriquest parent ACC Capital Holdings Inc. in Orange, “the perfect storm.”
Still, he said he’s bullish on a turnaround:
“I have a very positive view of Orange County over time. It’s a classic supply and demand imbalance. It will take a few years to sort out.”
Rising’s turnaround work at Catellus took years. He took over the company,the real estate spinoff of railroad owner Santa Fe Pacific Corp.,in 1994.
The company was bought by Denver-based warehouse owner and industrial developer ProLogis for $3.6 billion in 2005.
“He’ll be a reasoned, cautious CEO,” Gilchrist said of Rising. “I’m not looking for any precipitous (moves) or a big disposition.”
But a long-term approach may not be what some investors,including hedge funds with big stakes in Maguire,are looking for. They’ve been pushing for a sale of the company during the past year, although finding a buyer could be difficult in today’s market.
The company had a market value of about $720 million last week, down from nearly $2 billion at the peak of the market.
Founder Maguire’s last bid for the company earlier this month called for selling most of its buildings outside OC.
Another bid for the company could come from Maguire. He told the Wall Street Journal last week that he stepped down because it was the best way for him to continue his efforts to taking the company private.
Other investors and developers expect Rising to sell at least some of Maguire’s buildings to pay down debt.
The executive change at Maguire brings another tie between OC’s two big office landlords.
Rising had been on the board of privately held Irvine Co. He’ll be leaving that position shortly, to avoid any conflict.
“Now we’re competitors, but we wish him well,” Gilchrist said. n
