Maguire to Buy Offices in 4 States

By Roger Vincent

Jan. 29, 2005 12 AM PT

Times Staff Writer

Maguire Properties Inc. has agreed to buy 10 office complexes in the Western U.S. from CommonWealth Partners for $1.51 billion, the parties said Friday.

Included in the 5-million-square-foot portfolio are such signature buildings as 777 Tower on Figueroa Street in downtown Los Angeles, 801 N. Brand Blvd. in Glendale and Pacific Arts Plaza in Costa Mesa. Three office complexes in San Diego County are also part of the deal.

The purchase expands Maguire’s holdings outside the Los Angeles area. Some analysts have criticized the L.A.-based real estate investment trust for clustering its assets in the region.

“I think Wall Street will have a positive view of the acquisition because it diversifies them a little bit,” said real estate analyst Craig Silvers of Bricks & Mortar Capital. “Their holdings were probably too concentrated for people back East.”

Maguire will keep its focus on Southern California, however, and plans to resell CommonWealth properties in Phoenix, Denver and Austin, Texas.

“We will continue to concentrate on Los Angeles, Orange and San Diego counties,” Chairman Robert F. Maguire said. “They have very strong job growth and unbelievable barriers to entry” for developing land that has not already received necessary approvals. “That’s a very good combination.”

Four of the CommonWealth properties come with land parcels that are ready to be developed into as much as 1.5 million square feet of offices. Maguire estimated that the land in downtown Los Angeles, Glendale, Orange County and San Diego was worth more than $100 million, and he intends to build on it as soon as the market is ready.

Failed bidders, according to people familiar with the process, included real estate investors Equity Office, J.P. Morgan & Co., Trizec Properties Inc. and Hines.

The intense competition certainly drove up the price of the portfolio, said analyst Jim Sullivan of Green Street Advisors, yet it’s too soon to say whether Maguire overpaid. The prices the company fetches for its offices and the undisclosed terms of financing provided by Credit Suisse First Boston will be deciding factors.

“A lot of things need to fall in place favorably to make this thing work financially,” Sullivan said. Still, Sullivan said he was impressed by the quality and location of the properties, noting that they complement Maguire’s existing portfolio. “The strategic fit,” he said, “is excellent.”

For its part, CommonWealth had owned the offices for about six years, said President Michael Croft. “We and our partners at CalPERS felt it was a good time for us to realize the returns for our portfolio.”

CommonWealth, a Los Angeles real estate investment and development firm, still has more than $1 billion to invest for the California Public Employees’ Retirement System and Rockefeller Group, Croft said, noting that it will plunge back into the market.

“We would love to grow our portfolio back to the level it was or bigger,” he said. “We also want to expand geographically.”

The private company has been focused on the Southwest, but it will now also shop for office investments in the Bay Area, the Pacific Northwest and selected East Coast markets, Croft said.

Maguire Properties was founded in 1965. It has developed several office buildings, mostly in downtown Los Angeles and Santa Monica, including U.S. Bank Tower, the tallest building west of the Mississippi. Maguire took the company public in 2003, raising $800 million. Shares closed down 22 cents Friday at $23.72 on the New York Stock Exchange.

(BEGIN TEXT OF INFOBOX)

The portfolio

Here’s what Maguire Properties is buying in Los Angeles and Orange counties from CommonWealth Partners:

777 Tower

Size: 1 million square feet, 52 floors

Year built: 1991

700 N. Central

Size: 134,169 square feet, 8 floors

Year built: 1979

801 N. Brand

Size: 282,403 square feet, 13 floors

Year built: 1987