Towards the end of June, this blog picked up on a story regarding the future of the LA office market. The story, citing a UCLA study, indicated that demand was to outpace supply all the way through 2010. The trend is culminating quicker than anticipated:
"Today the numbers that commercial developers watch are encouraging them. Downtown vacancy rates are dropping and rents are heading upward, new statistics show. Landlords say they are bullish unless a swift downturn in the economy is ahead."
"As the office market tightens across much of Los Angeles County, according to recent statistics, some of the biggest downtown landlords are raising rents -- something almost unheard of three years ago."
"Rents downtown will go up 4% to 5% by the end of the year, predicted Bill Flaherty, a senior vice president at Maguire Properties, which owns the most downtown office space."
Ding Ding Ding...Is Maguire a buy? In June, the feeling was to hold off. Since then, Maguire Properties stock price has fallen 22.5 percent. A company that was trading at $34.82 on June 19th, closed trading today at $26.97.
The fence: it's still being used...Maguire: neither buy, nor sell. Check for updates.
Showing posts with label REITs. Show all posts
Showing posts with label REITs. Show all posts
Monday, October 29, 2007
Tuesday, June 19, 2007
UCLA Survey: LA County Office Rents to Increase
According to the LA Times, a recent UCLA survey of real estate professionals indicates a coming increase in rents for office space in LA County:
"'Our panel believes the demand will grow faster than the supply all the way through 2010,' said UCLA economist Jerry Nickelsburg".
This bodes well for companies who own office space or are in the process of constructing office buildings in the greater LA area. I can think of two companies who stand to benefit: Maguire Properties and Arden Realty. Arden Realty was acquired by GE in 2006. The acquisition has made it harder to predict how much GE will benefit, assuming that the UCLA study is correct. Since Maguire is still structured as a REIT (it distributes at least 90 percent of it's taxable income to shareholders), and because of the recent activity, it's the company I'm more focused on. Months ago, Maguire Properties acquired a sizable portion of Southern California office space:
"The deal consists of two trophy downtown Los Angeles assets -- 550 South Hope and Two California Plaza -- and 22 Orange County buildings."
As time has passed, it's become apparent that the driving force behind the completion of the deal has been the two downtown buildings. On April 16, 2007, the company announced the disposition of five orange county office buildings; the sale was completed on May 29th. On May 21, 2007, Maguire announced the disposition of three more Orange County office buildings. The sale is pending. As the company sells off Orange County properties, it reduces its debt level and increases its attractiveness as an investment. And the two recent downtown acquisitions are only a small part of their impressive LA portfolio.
I do not recommend buying Maguire Properties (MPG) for now, but it's a stock to watch. Real estate hasn't been a popular investment lately and although the stock price is close to a 52 week low, it could go down further. Watch for an update as the real estate bubble unwinds.
"'Our panel believes the demand will grow faster than the supply all the way through 2010,' said UCLA economist Jerry Nickelsburg".
This bodes well for companies who own office space or are in the process of constructing office buildings in the greater LA area. I can think of two companies who stand to benefit: Maguire Properties and Arden Realty. Arden Realty was acquired by GE in 2006. The acquisition has made it harder to predict how much GE will benefit, assuming that the UCLA study is correct. Since Maguire is still structured as a REIT (it distributes at least 90 percent of it's taxable income to shareholders), and because of the recent activity, it's the company I'm more focused on. Months ago, Maguire Properties acquired a sizable portion of Southern California office space:
"The deal consists of two trophy downtown Los Angeles assets -- 550 South Hope and Two California Plaza -- and 22 Orange County buildings."
As time has passed, it's become apparent that the driving force behind the completion of the deal has been the two downtown buildings. On April 16, 2007, the company announced the disposition of five orange county office buildings; the sale was completed on May 29th. On May 21, 2007, Maguire announced the disposition of three more Orange County office buildings. The sale is pending. As the company sells off Orange County properties, it reduces its debt level and increases its attractiveness as an investment. And the two recent downtown acquisitions are only a small part of their impressive LA portfolio.
I do not recommend buying Maguire Properties (MPG) for now, but it's a stock to watch. Real estate hasn't been a popular investment lately and although the stock price is close to a 52 week low, it could go down further. Watch for an update as the real estate bubble unwinds.
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