MaguirePartners Angles to Go Public
Robert F. Maguire doesn’t know the meaning of small.
The 73-story Library Tower in downtown Los Angeles, part of his company’s $2-billion real estate portfolio, is the tallest building in the West. The Playa Vista project was among the biggest planned communities in Los Angeles County when Maguire spearheaded it in the late 1980s.
And on Tuesday, MaguirePartners filed for the real estate industry’s biggest initial public stock offering in five years. The $890-million IPO, set for January, is designed to help fund future acquisitions and development.
Maguire Properties Inc., a new company to be formed by a series of complex refinancing and acquisition deals, would operate as a real estate investment trust, according to a Securities and Exchange Commission filing Tuesday. Maguire would wind up with 20.5% of the company’s stock.
A REIT allows small investors to participate in large real estate ventures. Unlike other public companies, REITs must distribute 95% of their income to shareholders.
The proposed stock sale comes at a time when the commercial real estate market has been slowing and investors are more skeptical of publicly traded real estate firms.
“Premier office REITs currently trade at prices that are lower than their net assets, which tells you something about how public investors feel about the current state of the office market -- not good,” said James Sullivan, an analyst at Green Street Advisors, an independent real estate securities research firm in Newport Beach.
But Maguire and his partners, the largest office landlords in downtown Los Angeles, have some things working in their favor. They have “a portfolio of very, very high quality assets” and a “strong track record of creating value,” Sullivan said.
Among the 23 office buildings owned by MaguirePartners are the landmark Gas Co. Tower and Wells Fargo Center in downtown Los Angeles. It also owns two hotels and 20 parking garages. Rounding out the portfolio, which spans 12 million square feet of space in all, are a few properties in the Dallas-Fort Worth area.
Maguire is a major player in L.A. civic and philanthropic affairs. While he is often charming, the 67-year-old Maguire also can be abrupt and profane -- traits not always conducive to leadership of a public company.
“It remains to be seen if he has the personality required to be tolerant of analysts and shareholders who might question his decision-making,” Sullivan said.
Perhaps in an effort to assuage such concerns, Maguire has named attorney Richard I. Gilchrist co-chief executive and president of the new company. Gilchrist, 52, was a senior partner with Maguire from 1982 to 1995, when he left to co-found Commonwealth Partners, a Los Angeles-based property management and development firm. Gilchrist went on to serve as CEO and president of Commonwealth Atlantic, a privately held REIT, before returning in February to work with Maguire as a consultant.
Maguire and his representatives declined to comment on the filing, citing SEC rules. The filing didn’t say how many sharesMaguire Properties planned to sell to the investing public. The offering will be handled by Credit Suisse First Boston and Salomon Smith Barney.
A series of refinancings and other transactions tied to the IPO would give the portfolio a $10.2-million profit through the six months ended June 30, contrasted with a $12.9-million loss before the restructuring, according to the SEC filing. At the same time, the filing notes that there are considerable risks for would-be investors. Among them: “We have not obtained recent appraisals of the properties in connection with this offering, and the consideration paid for them may exceed their fair-market value.”
In all, Maguire has developed 30 million square feet over the last 20 years. His firm, formerly known as Maguire Thomas Partners, was one of the largest developers in the Los Angeles region and the U.S. in the late 1980s, before the real estate recession of the early 1990s. He and his longtime partner, James Thomas, split in 1996 after rents and values in downtown Los Angeles collapsed.
Not all of Maguire’s efforts have been winners. He lost control of the massive Playa Vista commercial and residential development near Westchester in 1997 amid financial problems and a feud with DreamWorks SKG, which was going to be the lead tenant before it backed out. A group of investment banks led by Goldman Sachs Group Inc. and Morgan Stanley took control, leaving Maguire with a tiny stake and the right to develop some commercial space.
But it didn’t take Maguire long to bounce back. He waited out the recession and began reclaiming sole ownership of a series of properties in which he had sold a partial interest.
The initial public offering unveiled Tuesday would be the biggest for an office REIT since Boston Properties Inc. raised $903 million in June 1997, according to the National Assn. of Real Estate Investment Trusts.
Maguire has been trying to raise funds for more than a year. Negotiations to sell a majority stake in his properties to TrizecHahn Corp. ended in late 2001 after the market suffered in the wake of the terrorist attacks.
Whether the IPO will succeed, and allow Maguire to realize his ambitions, remains to be seen. Market volatility, said David Menlow, president of New Jersey-based Ipofinancial.com, “will be a permanent part of the landscape for a while.”
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Key properties
MaguirePartners holdings include more than 12 million square feet in Southern California and Texas. A sampling:
* Library Tower: Built in 1990, the 73-story skyscraper is the tallest building in the Western United States.
* Water’s Edge: A 455,000-square-foot office complex in Playa Vista.
* Gas Co. Tower: A 52-story building in downtown Los Angeles was built in 1991.
* Wells Fargo and KPMG towers: Built in 1982 and 1983, respectively, the two buildings have more than 1.5 million square feet of office, retail and storage space.
* Plaza Las Fuentes: A mixed-use project in Pasadena includes a 350-room hotel.
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Source: MaguirePartners
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Bloomberg News was used in compiling this report.
