High-Rising From Real Estate’s Ashes

Forty-five floors above downtown Los Angeles, the offices of developer Rob Maguire are quiet and serene, with no hint of the havoc that has rocked one of Southern California’s most prominent real estate companies.

Maguire and several of his most talented partners have parted ways in recent years, and his firm, Maguire Partners, had lost a valuable and prominent Santa Monica development, MGM Plaza. Most painful, however, has been a nasty, nearly two-year battle over the firm’s largest project, Playa Vista, in which Maguire feuded with his anchor tenant Hollywood studio DreamWorks SKG--and threatened to throw the 1,000-acre project into bankruptcy.

In the end, Maguire’s firm lost controlling ownership of the property near Marina del Rey but held on to valuable rights to develop office and retail components of Playa Vista.

“It certainly . . . was frustrating for everybody,” Maguire said in the understated manner he normally uses in interviews.

Now, with the battle over Playa Vista apparently resolved, Maguire, at 61, says he is again poised to take his firm into a new era of growth. He stunned many real estate observers recently by buying back the million-square-foot MGM Plaza and has refinanced more than $1 billion of debt on his many properties, reaping substantial financial savings and the flexibility to take on new projects.

Maguire is one of the fortunate developers who survived the property estate bust of the early 1990s, arguably the bleakest period in Southern California commercial real estate since the Depression.

Construction came to a virtual standstill, and everything from corner mini-malls to downtown skyscrapers sought refuge in Bankruptcy Court as property values and rents plunged. In downtown Los Angeles, where Maguire dominates the office market, property values fell by as much as 70% from the heady peaks of the late 1980s.

But the recent and dramatic turnaround in Southern California commercial real estate has been a godsend for firms like Maguire’s that managed to hang on. In less than two years, once-lackluster commercial areas--such as the Westside, where Maguire is also a major player--have seen rents, occupancy rates and land values skyrocket. Banks and investors are once again pouring money into real estate throughout Southern California.

However, many real estate observers say Maguire faces a bumpy ride as he tries to navigate the comeback trail.

Some investors, lenders and major tenants remain wary about dealing with Maguire, given the highly publicized feud over Playa Vista and the project’s costly delays. In addition, Maguire Partners must compete with rapidly growing and well-financed real estate investment trusts that are gobbling up buildings in the region.

“He is going to have a difficult time in maintaining and creating credibility with the capital markets in order to continue his so-called reemergence,” said one Southern California real estate lender who did not want to be identified. “Many people are still holding Rob Maguire [debt] and are not too happy about it.”

Still, Maguire wins high marks from many real estate executives for his tenacity and ability to survive a series of ordeals that would have snuffed out lesser competitors. His firm ranks among the most powerful players in Southern California real estate, where it owns and manages more than 8 million square feet of office space.

“Rob is a survivor,” said Clifford P. Goldstein, a partner in the Los Angeles development firm J.H. Snyder Co. “He would have been a pretty tough customer to take down.”

Maguire’s survival skills are evident. After filing for bankruptcy during a real estate slump in the 1970s, he rebuilt his company into one of the largest developers of commercial office space during the booming 1980s.

In downtown Los Angeles alone, Maguire’s firm built four skyscrapers--including the 73-story Library Tower, the tallest building on the West Coast--and provided much of the financial muscle and political clout to rebuild and expand the Central Library and renovate Pershing Square.

A UCLA alumnus and friend of Mayor Richard Riordan, Maguire has been a prominent player in the city’s civic and cultural affairs. An avid art collector, he has served as board president of the Los Angeles County Museum of Art and serves on the oversight board for the Walt Disney Concert Hall project for downtown L.A.

Maguire says he wants to expand his portfolio of downtown properties and expects to break ground soon on an office project in Glendale, where available space is selling at premium prices to fast-growing entertainment companies.

As it has in Santa Monica and downtown L.A., Maguire Partners has taken advantage of the turnaround in the real estate market and low interest rates to buy out a Japanese partner and take control of a 400,000-square-foot office project in Pasadena.

“The market is very strong, very dynamic,” said Maguire, sitting in a conference room with a striking view of the other downtown skyscrapers he controls. The refinancing of debt “positions us extremely well for growth.”

Maguire has also been trying to fill the gap in talent left by the departure of notable partners such as Nelson Rising, now head of real estate giant Catellus Corp., and Ned Fox and Rick Gilchrist, who started their own investment firm. These partners and others battled Maguire over their desires to play bigger roles in the company and shift its focus toward developing projects for other owners.

“There are things I wanted to do with the firm, and I’m doing it,” Maguire said of the departures.

Industry observers have lauded Maguire for hiring John Miller, a well-respected leasing and financial expert from Lincoln Properties, to shore up his staff. “He’s become Maguire’s right-hand man,” one broker said.

Many people say Maguire is simply lucky. The sudden rise in property values made it possible for his firm to finance the purchase of MGM Plaza less than a year after it fell behind on debt payments and lost control of the project. “I read that [purchase] as greater testament to the Santa Monica office market than to Mr. Maguire,” said a Los Angeles real estate investment manager.

The tug of war over Playa Vista proved costly for Maguire financially and politically. He blamed the lawsuits filed by environmentalists for holding up construction and forcing his firm to fall behind on debt payments.

But DreamWorks executives and public officials vilified Maguire for blocking potential investors from taking ownership of Playa Vista, which would have allowed development to begin. Construction is nearly 1 1/2 years behind schedule.

After sinking $200 million into the project, affiliates of investment bankers Morgan Stanley & Co. and Goldman Sachs & Co., as well as the financial firm Oak Tree Capital Management, have taken majority ownership of Playa Vista.

Maguire was left with an option to buy back a portion of the project and remains developer of the office and retail side of it, according to people familiar with the deal.

Maguire will be excluded from developing any of the site where DreamWorks is expected to build its main studio and headquarters.

Despite Maguire’s diminished role at Playa Vista, his firm stands to make more than $100 million in development fees over the decade it is expected to complete the project.

“Everybody has been counting him out, but he held on like a pit bull to those development rights,” said commercial real estate broker Whitley Collins.