Maguire REIT cruising on Wall Street.

As the largest Class A commercial landlord in downtown Los Angeles, Maguire Properties Inc. is well-placed to benefit from the city's investment in revitalizing its urban core.

But the investment community has been just as interested in the Bunker Hill-based real estate investment trust's progress in lowering debt and diversifying its holdings throughout Southern California.

Given that the REIT's stock price is up 50 percent from a year ago, boosted by an overall rally in the sector, Maguire appears to be keeping Wall Street happy.

"We believe (Maguire) is a value play in the attractive Southern California office markets, where we see meaningful rent growth though 2011," Bank of America analysts told clients following the company's first-quarter report this month.

Analysts John Kim and Ross Nussbaum, who have a "buy" rating on shares, have been critical of some of Maguire's buying binges but fans of its recent debt reduction efforts. The company's debt-to-market capitalization ratio was at 55 percent at the end of March.

Maguire reported first-quarter net income of $84.8 million compared with $2.6 million net loss a year ago. Revenues increased 13 percent to $109 million. Kim and Nussbaum stilt decided to lower their price target for shares by $3, to $38 a share, citing the higher cost of capital. The stock closed at $33.75 on May 11.

Analyst John Guinee at Stifel Nicolaus & Co. likewise tells clients that Maguire is a longer-term holding. "We think (Maguire) is a development and eventual privatization story where the shareholders should look at value creation with the current pipeline ... rather than focus on what we believe will be choppy and uninspiring quarterly numbers," said Guinee, who has a "hold" recommendation on shares.

With a portfolio valued at $3.86 billion, Maguire, named for its maverick founder and Chief Executive Robert Maguire, owns or has a stake in 23 office and retail projects, most notably downtown's 777 Tower and One California Plaza. Its U.S. Bank Tower is the tallest building on the West Coast. As of the end of March, the company's office properties were 91.5 percent leased.

Maguire also owns a 350-room hotel, several off-site parking garages and undeveloped land adjacent to their buildings that could support around 11.8 million square feet of office, retail, structured parking, and residential uses.

Maguire moved quickly to sell off most of the non-Southern California properties it acquired from an affiliate of CommonWealth Partners LLC for $1.51 billion in early 2005. Last fall, the REIT raised $350 million by selling a controlling interest in five of its buildings to Macquarie Office Trust, an Australian REIT. Maguire retains a 20 percent ownership and manages the six buildings in the joint venture, whose holdings range from One California Plaza to the Wells Fargo Center in Denver, which was part of the CommonWealth deal.

Over the past few years, Maguire also has acquired a collection of office complexes and land with 3.5 million square feet of entitlements in Orange County. Construction is underway this spring on what will be one of the county's tallest buildings. The 20-story tower in Park Place in Irvine is 50 percent pre-leased and scheduled to be completed in the third quarter of 2007. In San Diego, Maguire acquired three office complexes in the CommonWealth deal, plus a 215-acre parcel in Mission Valley. Back in L.A. County, Maguire is scheduled to pull permits this month before breaking ground on the first phase of a 195,000-square-foot project at the Lantana Entertainment Media Campus in Santa Monica. Downtown, Maguire Properties owns 840,000 square feet of entitled land at 755 South Figueroa. While the entitlements are for offices, Maguire has plans before the city that would include a hotel/condo component that takes advantage of downtown's residential boom.

"As a general rule, the West Coast, and the Mid-Atlantic, are having the best occupancy and rent gains and that's what Wall Street likes," said Craig Silvers, fund manager at Los Angeles-based Bricks & Mortar Capital LLC, which does not hold Maguire shares. "I'm not a big fan of downtown, but on the other hand it's got nowhere to go but up. There's a lot of public investment taking place down there and Maguire is going to benefit from that."

Robert Maguire has been a longtime presence in downtown, helping kick off the modern skyscraper boom with the development of the two-tower Wells Fargo Center, then known as Crocker Plaza, in 1982.

The 72-story Library Tower followed in 1989 as part of the Los Angeles Central Library Redevelopment Plan which included creation of the landmark Maguire Gardens. Achieving sci-fi cult status as the first L.A. building to be destroyed by alien invaders in the 1996 movie "Independence Day," the I.M. Pei-designed tower was renamed U.S. Bank Tower when the bank became a major tenant in 2003.

Following the lead of downtown's second largest landlord, Thomas Properties Group Inc., Maguire, who generally has good relations with organized labor, last month broke ranks with other large commercial landlords by agreeing to let security guards in his buildings form a union that would be affiliated with the Service Employees International Union.

Maguire did raise eyebrows in the personnel arena when co-Chief Executive Richard Gilchrist suddenly resigned in December, leaving Robert Maguire as the sole top executive. Gilchrist, a former Maguire senior partner who returned to the company in 2002, was credited with deftly wooing investors during the company's 2003 initial public offering.

"It was a negative for the company because he was the face for Maguire on Wall Street," Silvers said. "The qualms have only dissipated because Maguire and REIT stocks in general have had such a big run this year. Without that, there would have been a lot more conversation about his departure."

The company is moving to strengthen its upper management bench, something that analysts such as Kim and Nussbaum had been suggesting. Former consultant Peter Johnston was hired in January as senior vice president for leasing and executive Bill Flaherty was promoted to senior vice president for marketing.

YEAR (Dec. 31)                    2005      2004

Revenue (millions)              $487.3    $326.7
Total Expenses (millions)        520.2     289.3
Operating Income (millions)       (33)      37.5
Net Income (millions)           (23.8)      33.5
Earnings Per Share             ($0.99)     $0.36

SUMMARY

Business: Commercial Real Estate
Headquarters: Los Angeles
CEO: Robert F. Maguire III
Market Cap: $1.5 billion   Dividend Yield: 4.6%
Total Liabilities: $2.8 billion   P/E Ratio: N/A
Long-Term Debt: $2.6 billion