|
|
|
|
Robert Maguire
Making Waves in SoCal
[January/February 2006]
By Jennifer D. Duell
Oft described as the maverick developer who revitalized downtown Los Angeles when others left it for dead, Robert F. Maguire III has turned his considerable vision and energy to growing his namesake company, Maguire Properties, Inc. (NYSE: MPG), into one of the largest and most
successful office REITs in the country.
Since Maguire Properties' IPO in 2003, Maguire
has taken the Southern California-focused REIT from a market capitalization of $1.9 billion to $5.1 billion today, boosting its
office portfolio from 6 million square
feet to more than 16 million square feet.
As founder, chairman and CEO, Maguire has helped expand the REIT's development pipeline from 300,000 square feet to more than 11 million square feet today, representing $2 billion worth of new developments ranging from Glendale to San Diego.
| CLOSE UP |
AGE: 70
EDUCATION: B.S. in political science from UCLA
FAMILY: Father of four and grandfather of six
most recently read book: "I tend to read three or
four books simultaneously, so the
titles tend to blur and probably
the contents as well."
MOST RECENTLY READ BOOK: "I tend to read three or
four books simultaneously, so the
titles tend to blur and probably
the contents as well."
FAVORITE SPORTING ACTIVITY: "Rowing my 17-foot seaworn Dory."
VACATION SPOT: "I love Europe, Russia, Cabo San Lucas and South Africa."
COMMUNITY ACTIVITIES: Board of Los Angeles County Museum of Art, where he served
as chairman; board member of
Los Angeles Music Center and
St. John’s Hospital in Santa
Monica, Calif.
PROFESSIONAL ACTIVITIES: Member of NAREIT and Urban Land Institute
|
Recently, Real Estate Portfolio sat down with Maguire to talk about the Southern California real estate market and what's next for his company. At the time of our interview, Maguire expected his company would end 2005 by providing a total return to shareholders of 74 percent over the past two years.
Portfolio: In early 2005, Maguire Properties announced that it planned to
sell off interests in several assets to reduce its debt level. Why did you make this decision, and how will it help the company?
Maguire: From a strategic standpoint, we are selling joint venture interests in stabilized properties. We are bringing in joint venture partners
at 75 percent to 80 percent of the ownership of stabilized
properties, which we will continue to manage, lease and have significant fee income and promotional interests, as well as retaining 20 percent to 25 percent ownership. The purpose
is in part for debt pay down, but the significant reason for the long term is to redeploy the cash that we generate into new funds with institutional investors.
Portfolio: In October, your company entered into a joint venture with Macquarie Office Trust. What can you tell about your strategy to tap into the Australian market?
Maguire: We selected Macquarie Office as a joint venture partner because we were impressed with its proven track record in comparable ventures, plus its entrepreneurial approach and enthusiastic commitment to the strategic growth of this new venture. We spent a great deal of time with CEO Simon Jones and his management team in the process and found them to be a highly talented and capable group of professionals. We were extremely pleased with the venture and its economics, especially the outperformance distribution if certain venture results are achieved.
In general, we like the Australian market a great deal and think it is certainly a leg that we intend to utilize in terms of potential capital raising. The thing we are enthused about with these joint ventures is that they offer terrific capital to grow the company because it is non-dilutive and gives the company very strong leverage to increase earnings in the future. So we are very enthused about our approach in the
Aussie market.
Portfolio: Some of Maguire Properties' recent acquisitions have included development opportunities. What role will development play in the company's future?
Maguire: The growth of the company will come from a combination of developments
and acquisitions. Because we are developers,
we like to build, and we think there are going
to be some very attractive opportunities in Southern California in the future because
yields in development—if it is conservatively done, and we like to have significant pre-
leasing in development—are substantially
more attractive than the yields from acquisitions.
Our development pipeline is a tremendous asset because development entitlement in Southern California cannot be duplicated. Because there are so many restrictions on growth in virtually every city in Southern California, entitlements give us a tremendous competitive edge over our competitors in terms of being able to offer new buildings at very competitive prices.
Portfolio: With all the talk of a housing bubble in Southern California and dire predictions that the region's economy will take a huge hit, what are your thoughts
about its future economic health?
Maguire: First of all, I do not agree that there is a bubble in Southern California because of the sheer supply and demand characteristics. The availability of housing in Southern California is simply not keeping pace at all with the demand for housing. We have some housing in our development pipeline that we will likely do in joint venture with residential builders.
With respect to the office market in Los Angeles, Orange County and San Diego, those are very strong and performing very, very well. We are basically in markets where the current vacancy is under 10 percent and there are not a lot
of new development options to compete with. The region is seeing very strong job growth from L.A. to San Diego, with very limited entitlements in all segments.
Portfolio: As the largest landlord in downtown Los
Angeles, Maguire Properties has been instrumental in
rebuilding the city's urban core. Why is corporate
citizenship important to you and your company?
Maguire: I think that if you look at our history, we have
always been a really strong proponent of giving back to the cities that we invest in. We really try not to take or ask for any kind of subsidy from the city. I think we have been in the forefront in terms of urban planning, establishing a reputation of very high quality properties but also making a significant investment in the communities that we do business with.
We think this is very significant for our shareholders. Because of our approach, we
are able to get projects approved, typically even in very difficult communities.
Portfolio: One of the country's largest unions, the Service Employees International Union (SEIU), has a beef with Maguire
Properties about not allowing the company's security guards to join the organization.
What is your take on the situation?
Maguire: There has been an ongoing
dialogue with the SEIU. It is a little ironic because our buildings are the buildings in which the union's members really strive to work. We have offered health care benefits to our employees for years, and we pay significantly more than the market in terms of wages.
Regarding the SEIU, we have just said, "It is not an issue with unions. We are not anti-union, but we don't want to
combine both janitors and security guards in the same union." If there is a major disaster, we want to make sure there is not
a conflict between janitors, for example, and a security guard from the same union. If one goes on strike, we want to make sure there is not any kind of sympathetic reaction.
We are perfectly happy for security workers in our building to want to organize. This is OK with us if they want to try to do that, but our specific objection is in mixing the
janitors and security guards in the same union. We have
an ongoing dialogue and will see where it ends up. We may be able to accommodate each other; I just don't know at
this point.
Portfolio: Maguire Properties owns some very high-
profile, high-quality buildings. With the Terrorism
Risk Insurance Act (TRIA) being extended for two years, what are your concerns about terrorism and the ability to
obtain terrorism insurance coverage?
Maguire: I think it is really important that TRIA was
extended. It is extraordinarily difficult to obtain insurance without it. It's a place of last resort, which is really an
important government role. This is a significant issue
for owners and operators of major urban buildings.
We run very sophisticated security programs in our buildings, particularly in downtown Los Angeles.
Terrorism remains a risk and something that we
want to make sure that we are covering very effectively
because in the final analysis, we are the ones that are
responsible for the safety of our buildings.
|
|
|
|
|
|
