Maguire Seals $1B-Plus Commonwealth Deal
By Bob Howard
Last updated: January 28, 2005 09:55am

LOS ANGELES-The Downtown-based Maguire Properties office REIT has agreed to pay $1.5 billion for 10 properties totaling five million sf in Southern California, Colorado, Texas and Arizona that it will acquire from a partnership of CommonWealth Partners LLC, Rockefeller Group International Inc and the California Public Employees Retirement System. The assets are known as the Fifth Street Properties Portfolio.

The acquisition, , expected to close in the first quarter, will add three million sf to Maguire Properties' Southern California portfolio, including the one-million-sf 777 S. Figueroa building Downtown, which is near Maguire’s Bunker Hill properties. It will also increase the REIT’s dominance in the Downtown Los Angeles market, where it is already the largest owner of office space. The out-of-state properties are in Denver, Phoenix and Austin, TX. Overall, the portfolio is 86.4% leased.

The deal will also boost Maguire’s presence in Orange County, where it expanded significantly with major acquisitions last year, by adding the Pacific Arts Plaza property adjacent to South Coast Plaza near the REIT’s Park Place and Washington Mutual Campus projects. In addition, the new properties mark Maguire’s entrance into the San Diego market, where the company says it intends to substantially expand its holdings.

Besides the existing buildings, the Commonwealth acquisition gives Maguire four development sites in Los Angeles, Glendale, Orange County and San Diego that are entitled for more than 1.5 million sf of office space.

Robert F. Maguire III, chairman and Co-CEO, points out that the L.A. suburban, Orange County and San Diego buildings are all in submarkets with vacancies of 10% or lower. Besides the properties mentioned above, the assets that Maguire has agreed to acquire include 700 North Central and 801 N. Brand in Glendale, Wateridge Plaza and Mission City Corporate Center in San Diego, Regents Square I & II in La Jolla, Wells Fargo Center in Denver, Austin Research Park in Austin and One Renaissance Square in Phoenix. The development parcels are 755 S. Figueroa in Downtown Los Angeles, 200 N. Burchett in Glendale, at Pacific Arts in Orange County and at Mission City in San Diego County.

The deal will be funded initially with assumed debt and financing provided by Credit Suisse First Boston, which acted as financial advisor to Maguire. The REIT plans to hire CommonWealth in an interim contract for management and leasing services of the new portfolio.

Maguire Properties Agrees to Buy CommonWealth Portfolio for $1.5 Billion

By ANDY FIXMER
Los Angeles Business Journal Staff

Maguire Properties Inc. announced Friday it had agreed to acquire a 10-building portfolio of office buildings from an affiliate of CommonWealth Partners LLC for $1.51 billion.

Maguire expects to close on the deal, funded through assumed debt and financing provided by Credit Suisse First Boston, in the first quarter.

The acquisition includes 5 million square feet of office space, including the 1 million-square-foot trophy 777 tower in downtown Los Angeles, and four parcels of land entitled for another 1.5 million square feet. It also enhances the L.A.-based real estate investment trust’s position as the largest owner of Class-A office property downtown.

“Our emphasis is to expand in high job growth and severely supply constrained areas which should give us higher returns,” Robert F. Maguire, the company’s chairman and co-chief executive, said in a statement. “We believe this acquisition should be very accretive to the company.”

Besides the 777 tower, two other properties in the portfolio in L.A. County are: 700 N. Central Ave. and 801 N. Brand Blvd. in Glendale.

Overall, the purchase adds 3 million square feet of office buildings in Maguire’s core Southern California market, with three buildings in San Diego County and one in Orange County. The company also picked up buildings in Phoenix, Denver and Austin, Texas.

All the buildings were owned through Los Angeles-based CommonWealth’s Fifth Street Properties Portfolio, a partnership with Rockefeller Group International Inc. and the California Public Employees Retirement System

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MAGUIRE GOES HIGHER
Peter Slatin

In a deal that creates one of commercial real estates more interesting blended families, West Coast REIT Maguire Properties is buying the assets of CommonWealth Partners, ending a fierce bidding war for the 3 million-square-foot California portfolio.

Although neither side would comment, The Slatin Report has learned that Maguire has emerged as the $1.5 billion winner in a bidding war that local papers have followed like a horse race. Maguire triumphs over rivals such as Equity Office Properties and Hines. Hines sold its own roughly $2 billion portfolio late last year, but clearly wanted to fill the hole that it was leaving behind. Both Hines and Commonwealth hired vaunted LA broker Secured Capital to sell their portfolios – and they each had the same institutional partner: CalPERS, which is taking advantage of the booming market in asset sales to unload key portfolios. Indeed, earlier this week CalPERS announced that it had again secured Secured, this time to sell a 12 million-square-foot, $2-plus billion portfolio of retail properties.

Maguire, which two weeks ago was barely considered to be in the running against rivals that also included the Irvine Company and J.P. Morgan Chase, is on its own roll. In December, Maguire closed on the $136 million purchase of the Lantana Entertainment Media Campus in Santa Monica. But the current deal extends the REIT's reach to a sweet spot that to date has basically eluded Maguire: San Diego. The Commonwealth portfolio also includes buildings in Glendale and Orange County. The biggest prize, though, is 777 S. Figueroa, a 53-story, 1 million-square-foot tower smack dab in the middle of Maguire country, downtown LA's central business district.

The Commonwealth portfolio also includes properties in markets such as Denver and Honolulu, but it was unclear at press time whether these will actually be part of the final acquisition package for Maguire, which prefers to stick to its Southern California knitting.

Although the deal definitely includes "just the buildings, not the people," according to one person familiar with the transaction, it's worth noting that it reunites two former colleagues, if only at the closing table. CommonWealth CEO Mike Croft and Maguire co-CEO and president Rick Gilchrist. Croft and Gilchrist were important players at Maguire Thomas Partners in the 1980s and 1990s, but left to form CommonWealth around 1996. Gilchrist returned to Maguire when the developer chose to launch his holdings into the public market as a real estate investment trust in 2002.

Another player in the deal is New York-based Rockefeller Group International, which acquired a controlling interest in Commonwealth in late 2003.