Maguire remains leveraged even after slashing portfolio.

LIKE many other real estate investment trusts, shares of Maguire Properties Inc. have made a comeback this fall after a steep decline driven by fears the residential credit crunch was heading into the commercial sector.

But with shares of Maguire still off nearly 40 percent from a 52-week high back in February, rumors are swirling around Wall Street that downtown's biggest landlord is seizing on the company's paltry $1.25 billion market cap to take the REIT private.

Maguire only went public four years ago, but company founder and chairman Robert Maguire has long felt that Wall Street has undervalued his company, whose marquee property is the U.S. Bank Tower, the tallest skyscraper west of the Mississippi.

He also may be spurred by what is widely seen as his bad timing earlier this year to buy a $3 billion portfolio of 24 Southern California properties from Blackstone Group LP, which the private equity group was unloading after its own $23 billion acquisition of Sam Zell's Equity Office Properties Trust.

The deal, first announced in February, included several Orange County properties and occurred just as that market was beginning to feel the impact of the subprime lending meltdown.

Though Maguire has been selling off properties from the purchase, the company still finds itself highly leveraged.

"Rob got burned by the subprime problem," said Barry Vinocur, editor of REIT Zone, a widely read REIT industry publication that first reported rumors of Maguire looking into a sale. "The guy has driven his company to the brink of the precipice numerous times before. In our view Rob is not cut out for the public markets."

Wall Street analysts agree on this much: the company isn't much of an investment these days. One out of 14 analysts tracked by Bloomberg News rates the company a buy. Five rate it a sell, and eight a hold. Shares closed at $26.87 on Oct. 24.

Off again, on again

Of course, a big question is whether Maguire could find financing to take his company private.

This isn't the first time since the company went public in 2003 that Maguire has been said to be exploring taking it private. The company was put up for sale last fall but taken off by the end of the year when offers weren't up to muster.

The latest sale rumors--which this time focus on Maguire retaining control--are at least partially being fueled by an announcement earlier this month that two of the company's directors had resigned. The company said Caroline McBride and Lewis Wolff, owner of Major League Baseball's Oakland Athletics, were resigning due to "pressing other professional obligations."

At least one analyst says that those resignations could hint at a possible sale by the company.

"It may just reflect they knew Rob was thinking about going down this path again and they are busy people and may have said, 'We did this last year, we don't have time again,'" said Michael Knott, an analyst for Green Street Advisors Inc. who covers the company. Knott also noted that new director George A. Vandeman has mergers and acquisitions experience.

Company spokeswoman Peggy Moretti said the company would not comment on industry rumors. But she reiterated that the two former directors left because of other business obligations. She noted that Wolff resigned from the board of another company and is in the beginning stages of a plan to move his baseball team from Oakland to Fremont.

If Maguire Properties were to be sold, parties rumored to be interested include Brookfield Properties Corp. and Thomas Properties Group Inc., which is headed by Maguire's former partner, Jim Thomas.

Vinocur said that these two companies were involved in discussions to buy the company during the last go-around. "The issues will hinge on price and then the Rob factor--how do you deal with Rob?" Vinocur.

Both Thomas Properties and Brookfield declined to comment on the matter.

Maguire is largely considered to be an enigmatic character in the real estate community. In a recent report, Knott, the Green Street Advisors analyst, wrote that "Mr. Maguire has a reputation for being incredibly difficult to deal with on any transaction, let alone a sale of the company, as evidenced by last year's disappointing end to the strategic alternatives process."

Oct. 4 news that Maguire had purchased 194,000 shares in his company also had analysts speculating on the direction of the company. Moretti said the purchase was "a gesture of his commitment to the company."

Maguire has also begun selling part of his 24 property Blackstone portfolio as part of a strategy to dispose of "non-core assets" and the company is "using the proceeds from those asset sales to pay down debt," Moretti said.

So far, Maguire has sold 10 of the Orange County properties, has three more on the market but has no plans to sell the eight others. Any reduction of debt, of course, would make it easier to finance a buy out to take the company private.

Maguire Properties Inc. (NYSE: MPG)

Stock Prices

Oct. 24, 2006                        $42.29

Oct. 27, 2006                        $26.87

Note: Table made from line graph.

YEAR (Dec. 31)                           2006        2005

Revenue (millions)                       $462        $487
Total Expenses (millions)                 487         520
Operating Income (Loss)(millions)      (25.3)        (33)
Net Income (Loss)(millions)              51.3      (23.8)
Earnings (Loss) Per Share               $1.09     ($0.99)

SUMMARY

Business: Real estate investment trust
Headquarters: Los Angeles
CEO: Robert F. Maguire
Market Cap: $1.25 billion Dividend Yield: 6.04%
Total Liabilities: $5.77 billion P/E Ratio: N/A
Long-Term Debt: $5.43 billion

BY DANIEL MILLER

Staff Reporter