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IRVINE, CA-The impact of the subprime mortgage industry collapse on the office market has been well documented, but the long-term impact of the subprime and general financial industry crises continues to surface in new ways, as reflected in deals and reports here and elsewhere. Two examples occurred recently in office sales in Orange County, where Los Angeles-based office REIT Maguire Properties sold one building that was nearly 75% empty because of the collapse of its subprime mortgage lender tenant and another office campus could face default because of the exit of Washington Mutual Bank from the property.

The property that Maguire sold, one of a number of Orange County assets that the L.A.-based REIT has sold in recent months, was a 460,000-square-foot complex called City Parkway that the Long Beach, CA-based Abbey Co. bought from Maguire for an undisclosed price. The complex, which had once housed the headquarters for subprime lender Ameriquest, was 26% occupied at the time of the sale to Abbey, which plans capital improvements and a lease-up program.

The Maguire property that faces a possible default is its 566,000-square-foot Quintana office campus in Irvine, which is encumbered by a $106 million CMBS mortgage. Maguire, which owns a 20% interest in a joint venture with Australia’s Macquarie Office Trust that owns the Quintana campus, said in public filings recently that the departure of Washington Mutual Bank as a major tenant, vacating 250,000 square feet, left the building only 40% occupied and struggling to meet debt service. Maguire at the time of the filing was in discussions with the special servicer for a $106-million CMBS financing.

The effects of the financial industry woes on Maguire represent just some of the many ways in which the subprime and financial industry troubles are shaking out. Late last year, for example, Countrywide Home Loans Inc. sold an 86,000-square-foot office building in Calabasas, CA, and industry observers continue to wonder what will happen to all of Countrywide’s office space in light of its acquisition by Bank of America.

In addition to these specific transactions, the financial industry woes continue to generate broader changes in markets, like the transition occurring in the Midtown New York City office market. Office space in Midtown has been largely repriced, according to a recent report by CB Richard Ellis, which says that the repricing actually portends the approach of a market bottom and a recovery beginning in 2010. As the CBRE report pointed out, the financial crisis “has created a situation in which companies are unsure of what the future holds for the economy, their industry and their own business, as well as for the real estate market.” A continuing impact of the financial crisis on the office market, according to the report, is that it “has fueled a reluctance (on the part of tenants) to make long-term commitments, including for office space.

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