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Maguire Exec Talks About Downtown Office Market

By Eric Richardson
Published: Tuesday, October 28, 2008, at 09:26PM
Skyline with Palms Eric Richardson [Flickr]

This shot of the Downtown skyline features only Maguire skyscrapers: Gas Company, California Plaza I & II, US Bank Tower, and the Wells Fargo Tower.

When the recent financial meltdown began, one of the questions asked was how the collapse of several large financial institutions would impact the Downtown leasing market. On his company's Q3 earnings call today, Maguire Properties CEO Nelson Rising addressed that concern and the overall state of the Downtown office market, raising no red flags on either front.

This excerpt of Rising's remarks comes from Seeking Alpha's transcript of the earnings call. In particular, Rising notes talks for over 240,000 square feet in future leases and says that the arm of failed lender AIG located at 777 S. Figueroa is one that appears to be quite stable.

With respect to downtown Los Angeles, the third and fourth quarter leasing activity has been light. Direct vacancy for premiere space is up slightly from 12% to 12.5% and total vacancy is 14.8%. The good news is that there is little lease rollover in the market through the end of 2009 and there are currently 300,000 square feet of out-of-market tenants recently looking at downtown.

Transportation[,] the downtown residents and quality buildings continue to draw. We are specifically focused on the vacancy now at US Bank Tower, Latham Watkins having moved over to KPMG Tower, but we are in discussions with prospects for over 240,000 square feet.

We have had many questions asked of us regarding the potential exposure to our tenants in the financial service and insurance industries. I am pleased to report that our three largest banking tenants, Wells Fargo with almost 400,000 square feet, Bank of America with 190,000 square feet and US Bank with 162,000 square feet, have all weathered the financial storm quite well.

We have four other tenants in excess of 100,000 square feet. AIG is a tenant for 126,000 square feet in the 777 tower in downtown Los Angeles and the entity on the lease is American Home Insurance, a subsidiary of AIG commercial insurance which is well capitalized and appears to be financially secure.

Washington Mutual, we have exposure to Washington Mutual of approximately 126,000 square feet. This is in three separate locations. One is the WaMu campus. The total campus is 360,000 square feet of their occupancy but we own 20% of that, so our exposure is the 72,000 square feet at that location, 28,000 square feet at Pac Arts in Orange County in 26,000 square feet at Cal Plaza II.

Rising became the CEO of Maguire Properties in May, replacing ousted founder Robert F. Maguire III. Maguire stock was up 38 percent today, closing at $4.15 per share.

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