Remember the old adage, don't put all your eggs in one basket? Well, that's one that executives at real estate investment trust Maguire Holdings Inc. didn't listen to. The Los Angeles-based REIT borrowed heavily over the last five years to the tune of $5 billion to become downtown Los Angeles' biggest office landlord, with its only property outside Southern California being the 52-story Wells Fargo Center in Denver (pictured at right). Now, drowning in debt with the real estate sector in a slowdown, Maguire is trying to dig itself out of its hole with the planned sale of its 105-acre Park Place development in Orange County, Calif.
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The sale is a start, but what Maguire may get for Park Place will only be a drop in the bucket relative to its total debt. Maguire acquired Park Place for $475 million in 2004, and bidders will likely give a low-ball offer to Maguire to see how desperate the struggling REIT is in making a deal.
What buyers will be really eying is what Maguire will do with its high-end portfolio of commercial buildings in downtown Los Angeles, which includes its 72-story U.S. Bank Tower, the tallest office building on the West Coast. Outwardly, the company has said it won't sell those properties, but the company may have to rethink its stance because selling some of them may be the real solution to its debt problem.
And shareholders may be calling for that strategy soon as Maguire lost $48.6 million last quarter, compared with a loss of $12.6 million in the same period a year ago. Add to that pain, Maguire's stock is trading around $13.00, near its 52-week low of $12.01. - Gerald Magpily
See Bloomberg article
See Los Angeles Times article
