Questions raised about feasibility of Maguire high rise.

WHEN developer Robert Maguire announced plans for a 50-story office building in downtown Los Angeles, civic leaders and the real estate industry lauded the plan for the fast new skyscraper in the area in over 14 years.

But some in the industry are questioning whether the $300 million building will ever be built, suggesting Maguire may have announced plans for the building at Figueroa and Seventh streets as a way to beef up the value of his Maguire Properties Inc. real estate industry trust.

The REIT is on the market, with bids reportedly due by early November from private equity firms.

Michael Knott, an analyst covering the office property sector for Green Street Advisors Inc., a Newport Beach boutique research firm, doesn't go so far as to say Maguire has no intention of building the tower--he just doubts it will happen.

The downtown office market had a vacancy rate of 14.3 percent and monthly Class A asking rents of $2.82 per square foot in the third quarter, according to Grubb & Ellis Co.

"There is a little bit of glossing up the for-sale package. Rob Maguire is trying to demonstrate the health and vitality of the downtown L.A. office market," said Knott. "The current rents don't seem to justify new construction. It doesn't make sense."

However, other observers go so far as to say that they believe Maguire really does have little intent to go forward. (Maguire Properties did not return repeated calls seeking comment.)

REIT Zone--a widely read REIT industry publication--reported on Oct. 19 that Maguire's building announcement was simply a "head fake," and that the company "continues to press ahead with its privatization plan." REIT Zone's Editor Barry Vinocur said Maguire may be trying to divert attention from this week's initial public offering by REIT Douglas Emmett Inc., a Los Angeles office owner.

"I'm sure on some level he's looking at getting attention focused off of Douglas Emmett," Vinocur said. "I'm sure he wants to clarify issues related to the possible sale of the company."

Closer to home, Zaya Younan, chief executive of Younan Properties Inc., a national office properties investment group based in Woodland Hills, said REITs have been known to "pump up" theft portfolios in advance of sales.

"He (Maguire) is not valued very well (by Wall Street)," said Younan, who also believes that current downtown rents and vacancy rates make the proposed skyscraper, called 7+Fig, impossible to justify. "The best way to get higher valuation for himself and his investors is to dress up his portfolio so he could be a target for takeover."

The building site for the nearly one million-square-foot building is a vacant lot owned by Maguire. The building needs city approval if plans are to move forward.

If the skyscraper were not built, it would be a blow to downtown boosters who looked to Maguire's Oct. 16 announcement as a milestone in downtown's emergence.

Carol Schatz, president of the Central City Association, said the building "means downtown is back completely."

However, if 7+Fig isn't built, Schatz says she hopes another developer would move forward with a similar project. "We hope that the economics which would have ostensibly caused the announcement would still prove true for some other office developer," she said.