Maguire Properties Inc.
(MPG), a leading real estate investment trust (REIT), recently sold its Park Place I office property in Irvine, California for $17 million in its continued efforts to de-lever the balance sheet and improve its liquidity.
Along with the Park Place I property, management also approved certain other assets for disposal and consequently recorded $345 million of asset impairment charges during the second quarter. The disposal plan primarily includes assets in California like the Stadium Towers in Central Orange County, Park Place II in Irvine, 2600 Michelson in Irvine, Pacific Arts Plaza in Costa Mesa, 550 South Hope in Downtown Los Angeles and 500 Orange Tower in Central Orange County.
With the fall of the real estate market in California, these assets were a continuous drag on the company’s earnings. In addition to plummeting demand for office space, Maguire Properties is plagued by a huge debt load. By the end of the second quarter, the company had $4.6 billion of consolidated debt on its balance sheet.
Maguire Properties’ debt burden was primarily due to its acquisition. In 2007, the company bought $2.875 billion of assets at the height of the real estate bubble. The acquisition put the company heavily in debt, and now it is trying to unload properties.
The company has reported huge loss in the second quarter, and has expressed concerns regarding mortgage payments for several office buildings in Orange County and Los Angeles. Maguire Properties intends to sell most of these properties or return them to the lenders. This puts a huge question mark on the future of the company and it could be another casualty of the current commercial real estate downturn.
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