Maguire poses big test for new CEO
The turnaround specialist who took control Monday of the largest office landlord in downtown Los Angeles has already earned a merit badge in rescuing troubled California businesses.
But Nelson Rising may face his toughest challenge in reviving Maguire Properties Inc., the company that built some of the tallest buildings in the West and played a major role in redefining the city’s skyline.
He must act quickly to bolster the company’s ailing finances and chart the future of the real estate investment trust without the presence of the man who gave the company its name and much of its vision and drive in years past.
“We have challenges, but I am very upbeat about the company’s prospects,” Rising said at the close of his first full day on the job. “The assets the company has are terrific.”
In spite of the nation’s economic downturn, “I am extremely positive about the Southern California economy and the growth in demand for office space -- because of increases in the service sector.”
Robert F. Maguire III, 73, stepped aside over the weekend after his efforts to buy back the company failed. The board of directors made Rising president and chief executive. Maguire will still be chairman emeritus and a part-time consultant, but he must move out of company offices.
After a brief board meeting Saturday during which Maguire resigned, he headed for what he described as a “hellish” yacht race with his brother around Santa Barbara Island that ended at 2 a.m. in Orange County’s Emerald Bay. Now, he said, he will pursue other business interests including a natural gas operation in Dallas and real estate development at Van Nuys Airport.
“I ain’t done yet, by any means,” Maguire said. He’ll also be pulling for the recovery of Maguire Properties, in part because he is its largest stockholder. The company had a $48.6-million first-quarter loss.
Maguire’s departure marked the end of a tortuous six months for the man who fought unsuccessfully to keep control of the company he started in 1965. He also endured embarrassment when his ex-wife testified during the trial of Anthony Pellicano that the private investigator had tapped Maguire’s personal phone calls.
Rising, 66, knows what he is in for. He worked for Maguire’s company in the 1980s and 1990s and oversaw many of its projects, notably Playa Vista, the sprawling and controversial development that sprung from property south of Marina del Rey that was once owned by Howard Hughes. He also supervised construction of U.S. Bank Tower and the nearby Gas Company Tower in downtown Los Angeles.
“I think Nelson is as prepared and as good a choice as you could think of anywhere in the country,” said Richard Gilchrist, Robert Maguire’s former co-chief executive who left in 2006 to take over the office division of Irvine Co.
Like Maguire, Rising has a reputation as a creative and tenacious executive -- though a more diplomatic one. Whereas Maguire could be volatile and autocratic, Rising is known for his consensus-building skills.
Rising, a lawyer and former UCLA lineman who attended the university on a football scholarship, labored four years to resurrect Playa Vista and reach compromises with environmental activists after public sentiment had turned against the development.
Rising was recruited in 1994 to take over Catellus Development Corp., the languishing real estate spinoff of Southern Pacific Railroad that hoped to reinvent itself as a builder. Over the next 11 years he supervised the growing company and its most ambitious project, Mission Bay, the largest mixed-used development in the history of San Francisco.
Catellus, which also owned Union Station in Los Angeles, was sold for $3.6 billion in cash and stock to warehouse and distribution giant ProLogis in 2005. Recently, Rising started a small private real estate company with his son Christopher and longtime partner Douglas Gardner, both of whom have come with him to Maguire as senior executives.
Rising will receive a base annual salary of $950,000 and through incentive payments for improving the company’s bottom line may earn a bonus of up to 300% of that salary.
One of Rising’s first moves was to break the lease the company was paying for office space in a Santa Monica building owned personally by Robert Maguire. In the past the company website said it was based in Los Angeles, but calls to headquarters in the 213 area code for downtown actually rang on Ocean Avenue in Santa Monica.
As of Monday, the executive offices had moved to KPMG Tower, a Grand Avenue office building owned by the company. His first priority now, Rising said, is to evaluate the company’s position and outline a recovery strategy
The company has “a whole range of challenges,” including heavy debt and a big stake in the Orange County office market, which has suffered from personnel cutbacks in the home mortgage industry and competition from new buildings.
Analysts expect Rising to try to bring the company back to profitability gradually instead of selling off large chunks to more quickly alter the balance sheet. “This is now a long-term turnaround project, like Catellus was,” said analyst Michael Knott of Green Street Advisors.
Perhaps with that timetable in mind, investors saw Maguire shares slip 35 cents Monday to $14.85. The stock has fallen 50% in the last year.
Rising’s reputation for candor and clear communication should improve Wall Street’s perception of the company, said analyst Craig Silvers, president of Bricks & Mortar Capital.
By contrast, “Maguire wanted to run the company the way he saw fit, and he didn’t want to be second-guessed, which Wall Street has a tendency to do,” Silvers said. The street also has a fixation on quarterly performance that clashed with Maguire’s longer-term vision, he said.
“Running a public company is probably not the most favorite thing in my life,” Maguire acknowledged. “I built a lot of the skyline downtown and I am very proud of that. Nelson is an exceptional guy and I am sure he will do a great job taking the company forward.”
The company has an outstanding real estate portfolio and the time is right for its entrepreneurial founder to transfer power, said former Maguire partner Ned Fox, now chief executive of Vantage Property Investors. The transition will give Maguire more room to maneuver and pursue new ventures, he said. “This frees Rob.”
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