Maguire sells Irvine tower at a loss
Maguire Properties Inc., L.A.’s largest office building owner, has sold a newly built 19-story office tower on the Park Place campus in Irvine at a loss as part of ongoing efforts to reduce its debt.
The buyer of 3161 Michelson Drive was the Emmes Group of Cos., a New York real estate investment firm whose chief executive, Andrew Davidoff, confirmed the purchase for $160 million.
“We think it’s the finest building in this marketplace,” Davidoff said of the glass-clad, 532,000-square-foot structure. “A best-in-class type of asset.”
The building cost an estimated $250 million to $260 million to build, said Michael Knott, an analyst with Green Street Advisors in Newport Beach, although Maguire had been paying down its construction debt.
“It doesn’t strike me as a bargain-basement price,” said Knott. “It strikes me as a fair price.”
The building was completed in 2007 and is 60% leased.
At Emmes -- which owns industrial, multifamily and retail properties in 20 states -- “the philosophy is to be counter-cyclical,” Davidoff said of the company’s decision to buy at a time when commercial real estate sales are down. “Clearly there are fewer buyers today than there might have been several years ago.”
The purchase was financed with a $120-million loan from lenders led by EuroHypo AG, which held the construction loan.
Faced with a drop in demand for office space and overburdened with debt, cash-strapped Maguire announced plans more than a year ago to sell off some of its properties. It had spent about $3 billion in 2007 for 23 buildings in Los Angeles and Orange counties.
Among the Orange County sites identified for sale was Park Place, a 105-acre office, retail and residential complex built in 1978 along the 405 Freeway. Maguire paid $475 million to acquire it in two purchases starting in 2004 and then built the office building just acquired by Emmes.
Maguire, whose holdings include the 72-story US Bank Tower and the Wells Fargo Center in downtown Los Angeles, wrote down the value of 3161 Michelson by $50 million in the fourth quarter of 2008 and $23.5 million in the first quarter.
Construction debt secured by the property was set to mature in September. In a statement from Maguire, Chief Executive Nelson C. Rising said the transaction “eliminates our entire obligation under the project loan and significant master lease obligations.”
Among other recent sales, the Southern California-focused real estate investment trust completed a $22-million transaction in March with Allergan Inc. for a building in Irvine.
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