Investor assails Maguire founder
Maguire Properties Inc., one of Southern California’s largest office landlords, got a letter from a major shareholder Tuesday requesting two seats on the board of directors and calling for founder Robert Maguire to relinquish some of his control.
Maguire, one of the region’s best-known developers, helped create the downtown Los Angeles skyline and his company owns the most office space in the central business district. Among its holdings is US Bank Tower, the tallest building in the West.
The 72-year-old is known for his autocratic management style and civic leadership. He helped lead the drive to save the Central Library from demolition in the 1980s and has been a major contributor to the Los Angeles County Museum of Art.
The letter from JMB Capital Partners, a Century City-based investment firm that owns 5.2% of the company’s stock, criticized Maguire’s leadership of the real estate investment trust and put pressure on him to sell some properties or perhaps the company itself.
Maguire Properties should create a committee independent of Robert Maguire and the board of directors to “evaluate strategic alternatives,” said the letter from Jon Brooks and Cyrus Hadidi, partners at JMB.
It did not spell out the alternatives, but Santa Monica-based Maguire Properties took on heavy debt when it paid almost $3 billion for 23 office buildings in Los Angeles and Orange counties this year.
Efforts to sell some of the properties have had mixed results, and last week the company reported a third-quarter loss in funds from operations -- a common measure of performance for real estate investment trusts.
“JMB wants them to sell some assets or sell the company,” said analyst Craig Silvers of Bricks & Mortar Capital. “Judging from the tone of the letter, they most likely want the company to be sold.”
A Maguire representative declined to comment on the document filed with the Securities and Exchange Commission.
The letter from Brooks and Hadidi, who were traveling overseas and couldn’t be reached Tuesday, took direct swipes at Maguire himself. The chairman and chief executive should give up one of his titles, they said. They accused Maguire of tolerating “weak corporate governance” and “excessive general and administrative expenses.”
Expenses are about $20 million a year too high, the letter said, citing the example of Maguire Properties renting its headquarters office space in a building on Ocean Avenue owned personally by Robert Maguire.
“We do not understand why one of the largest office REITs in Los Angeles leases space from the CEO of the company as opposed to utilizing space it already owns,” the letter said.
The company also once had an option to buy the headquarters from Maguire but let the option expire, and the building has since appreciated in value significantly.
“The company should have exercised this option . . . but the conflict with your personal interests interfered,” the letter said.
JMB’s partners offered Maguire some praise, saying that he built one of the best collections of office buildings in the area and that his company’s “high-quality portfolio in the Bunker Hill district of downtown Los Angeles is irreplaceable.”
Unfortunately, though, they said, “the skill set that served you so well assembling this great portfolio is not the same skill set that translates into effective management of a public company.”
The company’s stock, which has fallen more than 25% this year, is underpriced compared with the value of its real estate because Wall Street doesn’t respect management, the letter said.
Shares closed up $1.14 at $29.96 on Tuesday. It was a positive day on Wall Street, but the 4% jump might be partly related to JMB’s proposals and the possibility of a sale, Silvers said. “I suspect some people think this letter puts Maguire in play.”
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