Q2: Maguire Loses, Brookfield Slips

The L .A.-based office REIT has named four new board members in response to complaints from a dissident shareholder. Maguire's $110.6-million loss translated to $2.32 per share in comparison to a net loss of $24.4 million and 52 cents per share for the same quarter last year. The REIT, which has ousted CEO and founder Rob Maguire in recent months and shaken up management, blamed a number of factors for its loss. Among these were a $51.9-million charge in connection with its pending sale of Main Plaza in Orange County to San Francisco-based Shorenstein Partners for $211 million and $17.5 million of costs associated with its review of strategic alternatives and management changes as the REIT looked for a buyer that never materialized.

Along with its loss, Maguire on July 28 reported that it would name four additional directors to its board as part of an agreement reached with JMB Capital Partners Master Fund LP, a major shareholder that has complained about Maguire's performance and management in SEC filings. Under the terms of the agreement, Maguire will temporarily expand its board to 10 directors from six, appointing Jonathan Brooks, Cyrus Hadidi, Paul Watson and a JMB Capital nominee to be named shortly. As part of the deal, existing board members Lawrence S. Kaplan, Andrea L. Van de Kamp and Walter L. Weisman will not stand for re-election in order to reduce the board to its original total of seven members.

In return for Maguire's naming of JMB nominees to the board, JMB has agreed to withdraw any proposal or proposed nominees or slate of nominees for consideration at Maguire's next annual meeting. JMB had threatened to propose its own slate if Maguire didn't cooperate.

The other earnings report that reflects the changing economic and office market environments--from Brookfield--showed that net income for the three months ended June 30 dropped to $45 million and 11 cents per diluted share from $79 million and 20 cents per diluted share compared with the same period in 2007. The figures were a bit skewed in that the same quarter last year included a $17-million net gain on the sale of two properties.

Despite the earnings slide, Brookfield president and CEO Richard Clark said both the US and Canadian operations of the REIT "continue to exhibit strong performance, notwithstanding the current unsettled economic climate." He noted that, during the second quarter, Brookfield leased two million sf at an average net rent of $27.83 per sf. Except for a renewal with Continental Airlines in Houston, the average net rent in leased space was $31.43 per sf, which works out to a 36% improvement over the average in-place net rent at the beginning of the quarter.

Brookfield also recently closed one of the office market's biggest deals of the year: the disposition of its 50% interest in the TD Canada Trust Tower to Omers Realty Corp, the co-owner in the building, for $425 million [Canadian] or $721 per sf. The 51-story, 1.1-million-sf office tower is one of two comprising the 2.6-million-sf Brookfield Place office-and-retail complex in Toronto's financial district.