Maguire Forms $1B-Plus Joint Venture With Macquarie

LOS ANGELES-Maguire Properties and Australia’s Macquarie Office Trust have formed a joint venture called Maguire Macquarie Office, with the Australian firm taking an 80% interest in the four-million-sf portfolio, which will initially include five Maguire properties and one of Macquarie’s. The JV will own, operate and acquire office properties primarily in Southern California.

The deal, which is expected to be completed and closed in the fourth quarter, will generate net proceeds to Maguire Properties of approximately $350 million. The six assets initially held by the joint venture will include Maguire’s One California Plaza in Los Angeles, Cerritos Corporate Center in Cerritos, the Washington Mutual Campus in Irvine, San Diego Tech Center in San Diego and Wells Fargo Center in Denver. The sixth property will be Macquarie’s Stadium Gateway in Anaheim.

The new venture will benefit Maguire in a number of respects, according to Craig Silvers, a long-time REIT industry analyst and principal of locally based Bricks & Mortar Capital, a fund that invests in REIT stocks. “For Maguire, it improves the company’s balance sheet by getting the debt off the books and bringing in cash. Second, they can take some of the cash and buy other properties to diversify their holdings,” Silvers says.

Third, and possibly most important, Silvers says, is that the venture will increase Maguire’s return on equity because the deal calls for the locally based REIT to receive fees for asset management, property management, leasing, construction management, acquisitions, dispositions and financing for the portfolio held by the JV. Maguire also will be entitled to performance distributions based on the results of the venture.

“Maguire’s return on equity will be higher when you add in the management fees,” Silvers says. He says that although the specific terms of the Maguire-Macquarie arrangement were not disclosed, other REITs have entered similar arrangements that have proven to boost return on equity. “I’ve heard numbers suggesting that this adds anywhere from 100 to 400 basis points to the return on equity, depending on the property and the structuring of the deal,” Silvers tells GlobeSt.com.

Deutsche Bank is financial adviser to Maguire Properties in the transaction, which chairman Rob Maguire describes as part of a strategy to reduce debt and to tap capital for future acquisitions. The deal is one of a number of similar joint ventures that Macquarie has arranged with US REITs.