Maguire Properties pads cash reserves, reduces debt
Distressed office landlord Maguire Properties Inc. substantially reduced its debt and stockpiled cash last year, the company said Monday, but it still has a big financial hole to dig out of before it can return to profitability.
The Los Angeles real estate investment trust, which owns some of the region’s best-known skyscrapers, finished the fourth quarter $299.1 million in the red. Most of that -- $290 million -- resulted from one-time charges from writing down the value of its properties in the declining real estate market and costs related to selling some of its buildings.
Maguire lost $6.17 a share, compared with a loss of $96.3 million, or $2.02 a share, in the fourth quarter of 2008. Revenue was down 4% to $119.4 million.
Maguire is the largest office landlord in downtown Los Angeles. Among its holdings are the Wells Fargo Center and the 72-story US Bank Tower, the tallest building in the West. It also owns office buildings in Orange County, San Diego and Denver.
President Nelson Rising said he was pleased that the company was able to simultaneously cut its debt and build cash reserves, now at $219 million, up 10% from the previous quarter.
Maguire had $3.4 billion in debt at the end of the fourth quarter, compared with a peak of $5 billion at the end of 2007, the year the company paid about $3 billion for 23 office buildings in Orange and Los Angeles counties as part of an aggressive expansion program by founder Robert F. Maguire III.
Rising, who replaced Maguire as president in May 2008, embarked on a program to sell assets. The company defaulted on more than $1 billion in loans on six properties last August, saying that it needed to give back the keys to stay solvent.
“Our focus here is to clean up our balance sheet from all the acquisitions made at the top of the market” in 2007, Rising said. Part of the strategy is to retrench in downtown Los Angeles, where the company controls some of the best buildings in the financial district.
“Their debt is going down, which is very nice,” said analyst Craig Silvers, president of Bricks & Mortar Capital. “They have a long way to go before they truly turn around operations, though.”
The recession has punished office landlords, who were riding high in the mid-2000s. Since then, occupancy and rents have fallen in many office buildings as white-collar companies laid off employees or closed their doors.
Maguire has been aggressively wooing tenants and occupancy in its buildings was down less than 1 percentage point from a year ago at 82.7%. It had to reduce rents, though; Maguire rates are down more than 27% in Orange County, for example.
Renters’ moods are improving as recession fears ease, Rising said.
“We are seeing a very subtle change in attitude by people who need space,” he said. “Rather than waiting, they are making deals now.”
Maguire’s funds from operations, a key measure for real estate investment trusts, were a negative-$265.4 million, or $5.48 a share, compared with a negative $42.2 million, or 88 cents, in the year-earlier quarter. Without the one-time charges, funds from operations would have been $1.6 million, or 3 cents a share.
Shares closed up 1 cent at $2.67 Monday; in after-hours trading the stock dipped as low as $2.41.
