Maguire Properties takes itself off the market
Maguire Properties Inc., one of Southern California’s largest real estate investment trusts, said Friday that it was no longer looking for a buyer. Its stock tumbled 16% on the news.
Saying it received no viable acquisition proposals since it began to consider bids in December, Maguire blamed a credit crunch that has made it difficult for private equity investors to obtain financing for buyouts.
“It’s not surprising this happened, given the credit markets,” said Michael Knott of Green Street Advisors.
Maguire shares closed Friday at $14.33, down $2.74, after hitting an all-time low of $12.42 earlier in the day.
The stock has dropped 68% in the last 14 months.
A spokeswoman for Maguire declined to comment.
The company owns the 72-story US Bank Tower, the tallest building on the West Coast, as well as seven other downtown Los Angeles high-rises, 16 buildings in Orange County, eight other Southern California buildings and Denver’s Wells Fargo Center.
Craig Silvers, an analyst with Los Angeles-based Bricks & Mortar Capital, said the board turned down bids because it believed the company was worth more than was offered for it.
The firm pulled itself off the market once before, analysts said, when its chairman and chief executive, Robert Maguire, contended that a $40-a-share takeover bid was too low.
The company’s most pressing need now is to increase its cash flow, depressed by a loss of tenants, many of them mortgage companies hit by the sub-prime collapse, in the company’s Orange County buildings.
“The first step is to get the cash,” Silvers said. “But the issue is whether Maguire sells the jewel of his portfolio -- the downtown properties -- or the buildings in the O.C., where no one is much interested.”
Analysts said the company might also consider cutting its dividend. But a committee of independent company directors, formed to review strategies to enhance shareholder value, plans to recommend payment of the company’s first-quarter dividend, the firm said in its statement Friday.
After nearly 40 years of private ownership, Maguire Properties went public in June 2003 at $19 a share and saw its stock surge along with Southern California’s hot office market, reaching an all-time high of $44.25 in February 2007. That month the company spent $2.88 billion to buy 8.1 million square feet of office space, including 22 buildings in Orange County.
“They developed too much debt at the wrong time, just before the home mortgage market imploded and with the general slowdown in the economy,” Silvers said.
The occupancy rate in the company’s Orange County properties is about 72%, according to Goldman, Sachs & Co. analyst Jonathan Habermann.
For the fourth quarter of 2007, the company posted a loss of $44.5 million, or 95 cents a share, compared with a loss of $8.77 million, or 19 cents, a year earlier.
Revenue jumped 28% to $155.4 million from $121.2 million, partly because of the February purchase. But interest expenses jumped $41 million, more than the $34-million increase in revenue.
Investors pushed Robert Maguire to sell the company or step down.
The special committee of directors was formed in December and began taking bids, including one from Maguire himself.
Analysts said two other bidders, Brookfield Properties Corp. of New York and Chicago-based Walton Street Capital, joined in, complicating the bidding. Brookfield owns three major downtown L.A. office buildings. A Brookfield representative declined to comment. A representative for Walton could not be reached.
With no takeover imminent, Robert Maguire could again face pressure to step down. But Silvers said he had weathered bad news in the past and survived.
“It’s going to take time to rebuild, but Maguire’s dealt with stuff like this before, and he’ll do it again,” Silvers said. “He always comes back.”
--
