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Article by DailyStocks_admin    (10-27-08 03:55 AM)

Filed with the SEC from Oct 9 to Oct 15:

Maguire Properties (MPG)
California Capital said that it holds 4,650,000 shares (9.7%) of the real-estate investment trust, bought from Sept. 29 to Oct. 7 at prices ranging from $5.81 to $6.23.

BUSINESS OVERVIEW

General

The terms “Maguire Properties,” “us,” “we” and “our” as used in this Annual Report on Form 10-K refer to Maguire Properties, Inc. Through our controlling interest in Maguire Properties, L.P. (the “Operating Partnership”), of which we are the sole general partner and hold an approximate 86.4% interest, and the subsidiaries of our Operating Partnership, including Maguire Properties TRS Holdings, Inc. (“TRS Holdings”), Maguire Properties TRS Holdings II, Inc., Maguire Properties Services, Inc. (the “Services Company”) and its subsidiaries (collectively known as the “Services Companies”), we own, manage, lease, acquire and develop real estate located in: the greater Los Angeles area of California; Orange County, California; San Diego, California; and Denver, Colorado. These locales primarily consist of office properties, parking garages, a retail property and a hotel. We are a full service real estate company, and we operate as a real estate investment trust, or REIT, for federal and state income tax purposes.

As of December 31, 2007, our Operating Partnership indirectly owns whole or partial interests in 37 office and retail properties, a 350-room hotel and offsite parking garages and on-site structured and surface parking (our “Total Portfolio”). We hold an approximate 86.4% interest in our Operating Partnership, and therefore do not completely own the Total Portfolio. Excluding the 80% interest that our Operating Partnership does not own in Maguire Macquarie Office, LLC, an unconsolidated joint venture formed in conjunction with Macquarie Office Trust, our Operating Partnership’s share of the Total Portfolio is 17.8 million square feet and is referred to as our “Effective Portfolio.” Our Effective Portfolio represents our Operating Partnership’s economic interest in the office, hotel and retail properties from which we derive our net income or loss, which we recognize in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The aggregate square footage of our Effective Portfolio has not been reduced to reflect our minority interest partners’ share of the Operating Partnership.

As of December 31, 2007, the majority of our Total Portfolio is located in ten submarkets in Southern California: the Los Angeles Central Business District (“LACBD”); the Tri-Cities area of Pasadena, Glendale and Burbank; the Cerritos submarket; the Santa Monica Professional and Entertainment submarket; the John Wayne Airport, Costa Mesa, Central Orange County and Brea submarkets of Orange County; and the Sorrento Mesa and Mission Valley submarkets of San Diego County. We also have an interest in one property in Denver, Colorado (a joint venture property).

Our office properties are typically leased to high credit tenants for terms ranging from five to ten years. As of December 31, 2007, investment-grade-rated tenants generated 36.2% of the annualized rent of our Effective Portfolio, and nationally recognized professional service firms generated an additional 24.9% of the annualized rent of our Effective Portfolio. The weighted average remaining lease term of our Effective Portfolio was approximately five years as of December 31, 2007. As of December 31, 2007, our Effective Portfolio was 81.1% leased to 955 tenants. Approximately 8.4% of our leased square footage as of December 31, 2007 in our Effective Portfolio expires during 2008.

We receive income primarily from rental revenue (including tenant reimbursements) from our office properties, and to a lesser extent, from our hotel property and on- and off-site parking garages. We also receive income from providing management, leasing and real estate development services to our joint venture with Macquarie Office Trust and certain properties owned by Robert F. Maguire III, our chairman and chief executive officer.

We were formed to succeed to certain businesses of the Maguire Properties predecessor (the “Predecessor”), which was not a legal entity but rather a combination of numerous real estate entities collectively doing business as Maguire Partners, an owner, developer and acquirer of institutional-quality properties in the Los Angeles real estate market since 1965. We were incorporated, and our Operating Partnership was formed, in Maryland on June 26, 2002, and our Services Company was incorporated in Maryland on August 15, 2002, each in anticipation of our initial public offering of common stock (the “IPO”), which was consummated on June 27, 2003 concurrently with the consummation of various formation transactions. Those transactions consolidated the ownership of the portfolio of properties and property interests, and a substantial majority of the real estate management, leasing and development business of the Predecessor, into our Operating Partnership and Services Companies. From inception through June 26, 2003, neither we, our Operating Partnership nor our Services Companies had any operations.

On June 27, 2003, we commenced operations after completing the IPO, which consisted of the sale of 36,510,000 shares of common stock. On July 28, 2003, we issued an additional 5,476,500 shares of common stock as a result of the exercise of the underwriters’ over-allotment option. On January 23, 2004, we completed the offering of 10.0 million shares of our 7.625% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”).

Our operations are carried out primarily through our Operating Partnership and its wholly owned subsidiaries, including our Services Companies. Pursuant to contribution agreements among the owners of the Predecessor and our Operating Partnership, our Operating Partnership received a contribution of direct and indirect interests in connection with the IPO in certain of the properties, as well as certain assets of the management, leasing and real estate development operations of the Predecessor in exchange for limited partnership units in our Operating Partnership. Our Operating Partnership also acquired additional interests in certain properties from unaffiliated parties, which were paid for in cash. As of December 31, 2007, we held 86.4% of the limited partnership units in our Operating Partnership.

Our management team possesses substantial expertise in all aspects of real estate management, marketing, leasing, acquisition, development and finance. We directly manage the properties in our portfolio through our Operating Partnership and/or our Services Companies, except for Cerritos Corporate Center and certain buildings at the Washington Mutual Irvine Campus, as well as the Westin ® Pasadena Hotel.

In addition, we manage an office, hotel and retail property located in the Dallas/Ft. Worth, Texas area, a housing complex and a parking garage in the LACBD, and buildings in West Los Angeles, California, Pasadena, California and Santa Monica, California owned by Mr. Maguire, our chairman and chief executive officer, for which we earn customary fees. The management agreements between us and the entities that own these properties will terminate if and when Mr. Maguire no longer owns an interest in these properties or is no longer bound by his non-competition agreement with us.

Since our IPO, we have paid quarterly distributions on our common stock and limited partnership units at a rate of $0.40 per share and unit, equivalent to an annual rate of $1.60 per share and unit. Since January 23, 2004, Acquisitions

2007 Activity –

We purchased 24 properties and 11 development sites from Blackstone Real Estate Advisors in April 2007 for $2.875 billion (the “Blackstone Transaction”). The purchase price (before reserves and closing costs) was funded through new mortgage financings of $2.28 billion, a bridge mortgage financing of $223.0 million, and a $530.0 million corporate facility comprised of a $400.0 million term loan which was fully drawn at closing, and a $130.0 million revolving credit facility (the “Revolver”), which was not drawn at closing. We funded our $175.0 million cash requirement to close the Blackstone Transaction with excess proceeds from the Wells Fargo Tower refinancing.

We acquired 130 State College, an office property located in Brea, California, in July 2007 for approximately $11 million.

2006 Activity –

We acquired Pacific Center, an office property located in Mission Valley, California, in February 2006 for approximately $149.0 million using net proceeds received from our transfer of properties to our joint venture with Macquarie Office Trust.

We purchased the building located at 701 North Brand located in Glendale, California and the remaining 50% interest in an adjacent garage, which we did not previously own, in September 2006 for $45.0 million using the net proceeds received from the mortgage loan on the property.

Dispositions

2007 Activity –

In 2007, we disposed of eight office properties and three development sites that we had acquired as part of the Blackstone Transaction: Inwood Park, 1201 Dove Street, Fairchild Corporate Center, Redstone Plaza, Bixby Ranch, Lincoln Town Center, Tower 17, 1100 Executive Tower and the Inwood Park, Bixby Ranch and 1100 Executive Tower development sites. We disposed of these properties shortly after their acquisition. A total of $274.0 million of the debt encumbering these properties was assumed by the buyers upon disposition. Excess proceeds from these dispositions were used to pay down our $400.0 million term loan. We recorded no gain or loss on the disposal of these properties since the purchase price allocated to them at the date of acquisition equaled the value recorded upon disposal.

We disposed of three office properties: Wateridge Plaza, Pacific Center and Regents Square—and recorded a total gain on disposition of $195.4 million. The mortgage loans related to Pacific Center and Regents Square totaling $224.8 million were assumed by the buyers of these properties upon disposition. Excess proceeds from these dispositions were used to pay down our $400.0 million term loan.

We contributed our office property located at 18301 Von Karman in Irvine, California to DH Von Karman Maguire, LLC in October 2007 for an agreed upon value of approximately $112 million, less approximately $2 million of credits and the transfer of loan reserves of approximately $7 million in connection with the joint venture’s assumption of the existing $95.0 million mortgage loan on the property. We retain a 1% common equity interest and a 2% preferred interest in this joint venture. We recorded no gain or loss on the contribution of this property since the purchase price allocated to it at the date of acquisition equaled the value recorded upon disposal.

2006 Activity –

We contributed Wells Fargo Center (Denver), One California Plaza, San Diego Tech Center, Washington Mutual Campus and Cerritos Corporate Center to our joint venture with Macquarie Office Trust in January 2006. We received net cash proceeds of $376.4 million and recognized a gain on sale of $108.5 million related to the establishment of the joint venture with Macquarie Office Trust. The joint venture assumed the existing mortgage loans on these properties totaling $661.3 million.

We sold the 808 South Olive garage, a parking garage located in downtown Los Angeles, California for $26.5 million in March 2006. Certain tenants of the Gas Company and US Bank Towers are required under their existing leases to purchase monthly off-site parking passes through the end of their lease terms. These off-site parking requirements were historically met through an existing parking easement agreement between Gas Company Tower and the garage. In connection with the sale of the garage, we entered into an amended and restated parking easement with the buyer of the garage, which expires in 2011, in order to continue to meet the terms of our leases with tenants in the Gas Company and US Bank Towers. The gain on sale of this property has been deferred until such time as the amended and restated parking easement expires.

Financing Activities

Acquisitions

2007 Activity –

In connection with the Blackstone Transaction in April 2007, we obtained a new $530.0 million corporate credit facility, which was comprised of a $400.0 million term loan and a $130.0 million revolving credit facility, and a separate $223.0 million, five-year, interest only bridge loan. The $400.0 million term loan and the $223.0 million bridge loan were fully drawn at the time of closing to help fund the Blackstone Transaction. The term loan and bridge loan were completely repaid in 2007 using the net proceeds received from the disposition of properties and the refinancing of KPMG Tower.

The revolving credit facility matures on April 24, 2011 and bears interest at (1) LIBOR plus 200 basis points or (2) the base rate, as defined in the agreement, plus 100 basis points. This facility is guaranteed by certain subsidiaries, and is secured by deeds of trust on the Plaza Las Fuentes, Westin ® Pasadena Hotel, 755 South Figueroa and Pacific Arts Plaza West properties and pledges of the equity interests in substantially all property-owning subsidiaries of our Operating Partnership. As of December 31, 2007 and through the date of this report, we have approximately $119.7 million available to be drawn under our Revolver. Approximately $10.3 million of the facility has been used to secure standby letters of credit, none of which have been drawn through the date of this report.

The terms of the revolving credit facility include certain restrictions and covenants which limit, among other things, the payment of dividends, the incurrence of additional indebtedness and liens, and the disposition of assets. The terms also require compliance with financial ratios relating to minimum amounts of interest coverage, fixed charge coverage and maximum leverage, the maximum amount of unsecured indebtedness, and certain investment limitations. The dividend restriction provides that, except to enable us to continue to qualify as a REIT for federal income tax purposes, we may not make distributions with respect to our common stock or other equity interests in an aggregate amount in excess of the greater of (1) 95% of funds from operations, as defined, or (2) $1.60 per common share, during any four consecutive fiscal quarters, subject to certain other adjustments.

The separate assets and liabilities of our property-specific subsidiaries are neither available to pay the debts of the consolidated entity nor constitute obligations of the consolidated entity, respectively.

Of the mortgage loans used to finance the Blackstone Transaction, a total of $274.0 million were assumed by the buyers while $238.9 million were repaid when eight of the office properties and three of the development sites were disposed of in 2007. Additionally, our joint venture partner assumed the $95.0 million loan upon our transfer of 18301 Von Karman to the joint venture.

Of the principal amounts outstanding as of December 31, 2007 for mortgages related to properties acquired in the Blackstone Transaction, $406.8 million are variable rate, LIBOR-based loans with spreads from 1.35% to 1.95% and maturities ranging from 2008 to 2009. Extension periods of from one to three years are available, at our option, to extend the maturity dates of these loans. The other $1,466.1 million are fixed rate loans with rates ranging from 5.50% to 5.93% that mature during 2017.

2006 Activity –

We completed a $121.2 million, interest-only, ten-year mortgage loan for Pacific Center in April 2006. The loan had a fixed rate of 5.76% with a maturity date of May 2016. This loan was assumed by the buyer when the property was disposed of during 2007.

We completed a $33.8 million, interest-only, ten-year mortgage loan for 701 North Brand in September 2006. The loan bears interest at a fixed rate of 5.87% with a maturity date of October 2016. The net proceeds of the loan were used to fund the purchase of this property.

Refinancing

2007 Activity –

We completed a new $550.0 million, ten-year fixed rate interest-only financing on the Wells Fargo Tower in April 2007. This mortgage loan bears interest at a fixed rate at 5.68% and matures in April 2017. The net proceeds from the financing, after repayment of the existing $247.1 million mortgage loan and payment of defeasance costs, closing costs and loan reserves, were approximately $290 million. The net proceeds were used to fund $175.0 million of the purchase price of the Blackstone Transaction and for general corporate purposes.

We also completed a new $400.0 million, five-year variable rate interest-only refinancing for our KPMG Tower property in September 2007. This mortgage loan bears interest at a variable rate of LIBOR plus 1.60%. We entered into an interest rate swap agreement to hedge this loan, which effectively fixes the LIBOR rate at 5.564%, resulting in an all inclusive rate of 7.16%. As of December 31, 2007, the amount borrowed under this loan is $368.4 million. The remaining $31.6 million is available to be drawn in future periods to pay for tenant improvements, leasing commissions and debt service related to the KPMG Tower. The net proceeds from the KPMG Tower refinancing, after repayment of the existing $210.0 million mortgage loan and payment of closing costs and loan reserves, were approximately $130 million. The net proceeds were used to repay the outstanding balance on our term loan and for general corporate purposes.

2006 Activity –

We completed an interest-only, ten-year $125.0 million mortgage refinancing for Glendale Center in June 2006. This loan has a fixed rate of 5.82% and matures in August 2016. The net proceeds from this loan were used to repay the existing $80.0 million mortgage and to pay down our previous $450.0 million term loan.

We completed a ten-year, interest-only, fixed rate $458.0 million mortgage refinancing for Gas Company Tower and the World Trade Center garage in August 2006. This loan bears interest at 5.10% and matures in August 2016. The proceeds were used to repay the existing $280.0 million mortgage loans and pay down our previous $450.0 million term loan.

We completed a refinancing for 777 Tower totaling $273.0 million in October 2006. This mortgage loan is an interest-only, seven-year mortgage that bears interest at a fixed rate of 5.84% and matures in November 2013.

We used the net proceeds to repay the existing $154.5 million mortgage and pay down our previous $450.0 million term loan.

Repayments and Dispositions

2007 Activity –

We paid down $10.0 million on our City Plaza mortgage loan in October 2007.

We disposed of three office properties: Wateridge Plaza, Pacific Center and Regents Square. The mortgage loans related to Pacific Center and Regents Square totaling $224.8 million were assumed by the buyers of these properties upon disposal, and the Wateridge Plaza loans totaling $62.9 million were repaid upon disposition of this property.

We acquired eight office properties and three development sites as part of the Blackstone Transaction in April 2007: Inwood Park, 1201 Dove Street, Fairchild Corporate Center, Redstone Plaza, Bixby Ranch, Lincoln Town Center, Tower 17, 1100 Executive Tower and the Inwood Park, Bixby Ranch and 1100 Executive Tower development sites. We disposed of these properties shortly after their acquisition. A total of $274.0 million of the debt encumbered by these properties was assumed by the buyers of these properties upon disposition while $238.9 million was repaid.

We contributed our office property located at 18301 Von Karman in Irvine, California to a joint venture with DH Von Karman Maguire, LLC in October 2007. The $95.0 million mortgage loan related to this property was assumed by the joint venture.

2006 Activity –

The remaining balances on our previous $450.0 million term loan and revolver totaling $498.0 million were fully repaid in 2006 using the net proceeds received from the refinancing of Glendale Center, Gas Company Tower and 777 Tower and a portion of the proceeds received from the transfer of properties to our joint venture with Macquarie Office Trust.

We contributed our Wells Fargo Center (Denver), One California Plaza, San Diego Tech Center, Cerritos Corporate Center and Washington Mutual Campus properties to a joint venture with Macquarie Office Trust. The joint venture assumed the existing mortgage loans on these properties totaling $661.3 million.

Construction Loans

2007 Activity –

We entered into a $26.8 million variable rate construction loan for our development project at Mission City Corporate Center located in San Diego, California in February 2007. This loan bears interest at LIBOR plus 1.90% and matures in February 2009. As of December 31, 2007, $17.6 million is outstanding under this loan. We can extend this loan for one year at our option, subject to certain conditions.

We entered into an $88.0 million variable rate construction loan for our development project at the Lantana Media Campus located in Santa Monica, California in June 2007. This loan bears interest at LIBOR plus 1.50% and matures in June 2009. As of December 31, 2007, $40.6 million was outstanding under this loan. We can extend this loan for one year at our option, subject to certain conditions.

We entered into a $64.5 million variable rate construction loan for our development project at 207 Goode located in Glendale, California in November 2007. This loan bears interest at LIBOR plus 1.80% and matures in May 2010. The first $25.0 million of this loan has been hedged using an interest rate swap agreement that effectively fixes the LIBOR rate at 5.564%. As of December 31, 2007, $0.5 million was outstanding under this loan. We have a one-year extension available at our option on this loan, subject to certain conditions.

CEO BACKGROUND

Jonathan M. Brooks has served on the Board since July 28, 2008. Mr. Brooks is the founder and primary portfolio manager of JMB Capital Partners Master Fund, L.P. (“JMB Capital”), formed in April 2002, and principal of affiliate fund and advisor entities. From December 1994 through December 2000, Mr. Brooks was employed as Head Trader at Cerberus Capital Management, where he oversaw all trading responsibilities. Before joining Cerberus Capital Management, he was a Senior Vice President at Dabney/Resnick, where he worked in the sales and trading department and focused on sales of and research concerning distressed securities. Mr. Brooks received a Bachelor of Science degree in Business Finance from The University of Southern California in 1985 and a Master of Business Administration from The University of Chicago in 1988. Mr. Brooks serves on the Board of Directors of the Michael J. Fox Foundation for Parkinson’s Research.

Christine N. Garvey has served on the Board since July 2, 2008. Ms. Garvey retired from Deutsche Bank AG in May 2004, where she served as Global Head of Corporate Real Estate Services from May 2001. From December 1999 to April 2001, Ms. Garvey served as Vice President, Worldwide Real Estate and Workplace Resources for Cisco Systems, Inc. During her career, Ms. Garvey also held several positions with Bank of America, including Group Executive Vice President and Head of National Commercial Real Estate Services. She is currently a member of the board of directors of ProLogis, UnionBanCal Corporation and HCP, Inc. She also served on the board of directors of Hilton Hotels Corporation until the company was taken private. Ms. Garvey holds a Bachelor of Arts degree, magna cum laude , from Immaculate Heart College in Los Angeles and a Juris Doctor from Suffolk University Law School.

Cyrus S. Hadidi has served on the Board since July 28, 2008. Mr. Hadidi is a partner of JMB Capital, which he joined in August 2002. Mr. Hadidi is the co-portfolio manager of JMB Capital, as well as the Chief Operating Officer for affiliated entities, managing operations such as investor relations, compliance, trading, and risk management. Prior to joining JMB Capital, Mr. Hadidi was an investment banker for Salomon Brothers (now Citigroup) from 1996 through 1999, where he executed capital markets transactions and acted as an advisor on mergers and acquisitions. Mr. Hadidi received a Bachelor of Arts degree in History and Rhetoric (dual majors) from The University of California at Berkeley in 1996 and a Master of Business Administration from Harvard Business School in 2002, where he graduated as a George F. Baker Scholar and a John Loeb Fellow in Finance. Mr. Hadidi serves on the Board of Directors of A Place Called Home, a non-profit youth center in South Central Los Angeles.

Nelson C. Rising has served on the Board and as our President and Chief Executive Officer since May 17, 2008. Mr. Rising served as Chairman and Chief Executive Officer of Rising Realty Partners, LLC from January 2006 to May 2008. Mr. Rising served as Chairman and Chief Executive Officer of Catellus Development Corporation from 2000 to September 2005 when it was merged with and into a subsidiary of ProLogis, and as President and Chief Executive Officer from 1994 to 2000. Prior to joining Catellus, Mr. Rising served for ten years as a Senior Partner with Maguire Thomas Partners, a predecessor to the Company. Prior to entering the real estate industry, Mr. Rising practiced law at O’Melveny & Myers, LLP. He received a Bachelor of Arts degree in Economics, with honors, from the University of California at Los Angeles and a Juris Doctor from UCLA Law School, where he served as the Managing Editor of the UCLA Law Review. Mr. Rising is a former Chairman of the Board of the Federal Reserve Bank of San Francisco and is Chairman Emeritus of the Real Estate Roundtable and Chairman of the Grand Avenue Committee. Mr. Rising was a Trustee of ProLogis from September 2005 until May 2008. He is a member of the Board of Trustees of the California Institute of Technology and the Board of Directors of The TCW Group, Inc., Foley Timber & Land Company and the W.M. Keck Foundation.

George A. Vandeman has served on the Board since October 2, 2007. Mr. Vandeman has been the principal of Vandeman & Co., a private investment firm, since he retired in July 2000 from Amgen Inc., the world’s largest biotechnology company. From 1995 to 2000, Mr. Vandeman was Senior Vice President and General Counsel of Amgen and a member of its Operating Committee. Immediately prior to joining Amgen in July 1995, Mr. Vandeman was a senior partner and head of the Mergers and Acquisitions Practice Group at the international law firm of Latham & Watkins LLP, where he worked for nearly three decades. Mr. Vandeman is a member and past Chair of the Board of Councilors at The University of Southern California Law School. Mr. Vandeman also serves on the Board of Directors of ValueVision Media, Inc., the operator of the ShopNBC television home shopping network.

Paul M. Watson has served on the Board since July 28, 2008. Mr. Watson is the retired Vice Chairman of Wells Fargo Bank N.A., where he was responsible for wholesale and commercial banking, and headed Wells Fargo’s nationwide commercial, corporate and treasury management businesses. Prior to his 45-year tenure at Wells Fargo, Mr. Watson served as 1 st Lieutenant in the United States Army. Mr. Watson received a Bachelor of Arts degree from The University of San Francisco and a certificate from the Graduate School of Credit and Financial Management at Stanford University.

David L. Weinstein has served on the Board since August 6, 2008. Mr. Weinstein is currently a Managing Director of Westbridge Investment Group/Westmont Hospitality Group, a real estate investment fund focused on hospitality. From 1996 until January 2003 Mr. Weinstein worked at Goldman, Sachs & Co. in New York, first in the real estate investment banking group (focusing on mergers, asset sales and corporate finance) and then in the Special Situations Group (focusing on investing in real estate securities). Mr. Weinstein holds a Bachelor of Science degree in Economics, magna cum laude , from The Wharton School and a Juris Doctor, cum laude , from The University of Pennsylvania Law School. He is a member of the New York State Bar Association.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a self-administered and self-managed real estate investment trust, and we operate as a REIT for federal income tax purposes. We are the largest owner and operator of Class A office properties in the Los Angeles Central Business District, have a significant presence in the John Wayne submarket of Orange County and are primarily focused on owning and operating high-quality office properties in the high-barrier-to-entry Southern California market.

As of December 31, 2007, our Operating Partnership indirectly owns whole or partial interests in 37 office and retail properties, a 350-room hotel and offsite parking garages and on-site structured and surface parking (our “Total Portfolio”). We hold an approximate 86.4% interest in our Operating Partnership, and therefore do not completely own the Total Portfolio. Excluding the 80% interest that our Operating Partnership does not own in Maguire Macquarie Office, LLC, an unconsolidated joint venture formed in conjunction with Macquarie Office Trust, our Operating Partnership’s share of the Total Portfolio is 17.8 million square feet and is referred to as our “Effective Portfolio.” Our Effective Portfolio represents our Operating Partnership’s economic interest in the office, hotel and retail properties from which we derive our net income or loss, which we recognize in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The aggregate square footage of our Effective Portfolio has not been reduced to reflect our minority interest partners’ share of the Operating Partnership.

As of December 31, 2007, the majority of our Total Portfolio is located in ten submarkets in Southern California: the LACBD; the Tri-Cities area of Pasadena, Glendale and Burbank; the Cerritos submarket; the Santa Monica Professional and Entertainment submarket; the John Wayne Airport, Costa Mesa, Central Orange County and Brea submarkets of Orange County; and the Sorrento Mesa and Mission Valley submarkets of San Diego County. We also have an interest in one property in Denver, Colorado (a joint venture property).

Our office properties are typically leased to high credit tenants for terms ranging from five to ten years. As of December 31, 2007, investment grade rated tenants generated 36.2% of the annualized rent of our Effective Portfolio, and nationally recognized professional service firms generated an additional 24.9% of the annualized rent of our Effective Portfolio. The weighted average remaining lease term of our Effective Portfolio was approximately 5 years as of December 31, 2007.

We receive income primarily from rental revenue (including tenant reimbursements) from our office properties, and to a lesser extent, from our hotel property and on- and off-site parking garages. We also receive income from providing management, leasing and real estate development services to our joint venture with Macquarie Office Trust and certain properties owned by Robert F. Maguire III, our chairman and chief executive officer.

Factors Which May Influence Future Results of Operations

As of December 31, 2007, our Effective Portfolio was 81.1% leased to 955 tenants. Approximately 8.4% of our Effective Portfolio leased square footage expires during 2008 and 6.4% of our Effective Portfolio leased square footage expires during 2009. Our leasing strategy for 2008 focuses on negotiating renewals for leases scheduled to expire during the year, and identifying new tenants or existing tenants seeking additional space to occupy the spaces for which we are unable to negotiate such renewals. Additionally, we will seek to lease currently vacant space in our office and retail properties with lower occupancy rates.

Our corporate strategy is to continue to own and develop high-quality office buildings concentrated in strong, supply-constrained markets. Our leasing strategy focuses on executing long-term leases with creditworthy tenants. The success of our leasing and development strategy is dependent upon the general economic conditions in the United States and Southern California, and more specifically in the Los Angeles metropolitan, Orange County and San Diego County areas.

We believe that our in-place rental rates scheduled to expire in 2008 and 2009 have contractual rental rates that are at or below market rental rates which will be prevailing during that time. However, we cannot give any assurance that leases will be renewed or that available space will be re-leased at rental rates equal to or above the current contractual rental rates.

We believe that new real estate investments will have a significant impact on our future results of operations, including the acquisitions of the properties through the Blackstone Transaction. During 2008, we will continue to endeavor to lease up our newly acquired properties with creditworthy tenants at rental rates at or above current market rates. In addition, we will continue to take advantage of greater economies of scale achieved and implement more efficient operations throughout all of the properties in our portfolio.

Current Submarket Information

LACBD, California

As of December 31, 2007, our LACBD portfolio was 87.9% leased, with approximately 1,021,266 square feet available for lease. Throughout 2008, we will be focused on increasing occupancy, primarily at US Bank Tower, which is currently 85.4% leased, but expected to decrease significantly upon the relocation of Latham & Watkins to our KPMG Tower property in mid 2008. The closing of the Blackstone Transaction, which added approximately 1.9 million square feet of office space to our LACBD portfolio, increased our concentration in this market.

Los Angeles County, California (excluding LACBD)

As of December 31, 2007, our Los Angeles County (excluding LACBD) portfolio was 93.6% leased, with approximately 97,826 square feet available for lease.

Orange County, California

As of December 31, 2007, our Orange County portfolio was 70.2% leased, with approximately 2,075,004 square feet available for lease. The Blackstone Transaction, which added approximately 3.6 million square feet of office space in Orange County to our portfolio, increased our concentration in this market.

San Diego County, California

As of December 31, 2007, our San Diego County portfolio was 90.2% leased, with approximately 31,181 square feet available for lease.

Development Properties

We believe that a portion of our future growth over the next several years will come from projects currently under development. As of December 31, 2007, we had four projects under construction:


•

Our building at 17885 Von Karman Avenue at the Washington Mutual Irvine Campus, a 150,000 square foot office building. We received a temporary certificate of occupancy for this property in January 2008;


•

Our Mission City Corporate Center, comprised of a 92,000 square foot office building with 128,000 square feet of structured parking, located in San Diego, California. We received a final inspection report for this property in early January 2008;


•

Our project at the Lantana Media Campus, comprised of two office buildings totaling 198,000 square feet with 223,000 square feet of structured parking, located in Santa Monica, California. This project was 31% leased as of December 31, 2007. We expect Lantana–East to be completed in the first quarter of 2008 and Lantana–South to be completed in the second quarter of 2008; and


•

Our building at 207 Goode, a 189,000 square foot office building located in Glendale, California, which began construction during the fourth quarter of 2007.

Land cost related to the four projects was $48.3 million as of December 31, 2007. The total estimated construction budget (excluding land) for these projects is approximately $218.4 million, of which $99.1 million has been incurred as of December 31, 2007.

We expect the funding for these developments to be provided principally from construction loans and, to a lesser extent, from other liquidity sources, including cash on hand, our line of credit and sales of strategically identified assets.

We have a proactive planning process by which we continually evaluate the size, timing and scope of our development programs and, as necessary, scale activity to reflect the economic conditions and the real estate fundamentals that exist in our strategic submarkets. However, we may be unable to lease committed development projects at expected rentals rates or within projected time frames or complete projects on schedule or within budgeted amounts, which could adversely affect our financial condition, results of operations and cash flows.

During the third quarter of 2007, we placed our project at 3161 Michelson in service. This property is a 530,000 square foot office building located in Irvine, California with two parking garages totaling approximately 1,338,000 square feet with the capacity to accommodate approximately 5,100 vehicles. As of December 31, 2007, this property was 32.4% leased. As we lease this property to stabilization, we will continue incurring tenant improvement and leasing commission costs, which will be funded through our existing construction loan.

We also own undeveloped land adjacent to certain of our other properties, primarily located in Downtown Los Angeles, the Tri-Cities area of Los Angeles County, Orange County and San Diego County that we believe can support approximately 17 million net rentable square feet of office, retail, hotel, structured parking and residential uses.

Results of Operations

2007 Compared to 2006

Our results of operations for the year ended December 31, 2007 compared to the same period in 2006 were significantly affected by our acquisitions and dispositions in both years. Therefore, our results are not comparable from period to period. To eliminate the effect of the changes in our Total Portfolio due to acquisitions and dispositions, we have separately presented the results of our “Same Properties Portfolio.”

Properties included in our Same Properties Portfolio analysis are all of the properties in our office portfolio, with the exception of our joint venture properties, properties acquired in the Blackstone Transaction in April 2007, Wateridge Plaza, Pacific Center and Regents Square that were sold during 2007, 701 North Brand that was acquired in third quarter 2006 and 130 State College that was acquired in third quarter 2007.

Tenant Reimbursements

Tenant reimbursements for our Same Properties Portfolio decreased $2.2 million, or 2.6%, as a result of decreases in tenant reimbursements due to 2006 lease terminations/expirations, which were partially offset by an overall increase in operating expenses.

Total Portfolio tenant reimbursement revenue increased $20.3 million, or 23.9%, primarily due to the properties acquired in the Blackstone Transaction.

Parking Revenue

Parking revenue for the Same Properties Portfolio increased $1.0 million, or 2.5%, primarily due to an annual increase in rates, partially offset by lease terminations and expirations

Total Portfolio parking revenue increased $9.6 million, or 24.3%, primarily due to properties acquired in the Blackstone Transaction.

Management, Leasing and Development Services To Affiliates

Total Portfolio management, leasing and development services revenue to affiliates increased $1.2 million, or 14.5%, primarily due to lease commissions earned from the joint venture properties.

Interest and Other Revenue

Total Portfolio interest and other revenue decreased $14.7 million, or 46.5%, primarily due to the recognition of $20.3 million in income associated with a significant lease termination at Park Place in December 2006 offset by interest income earned during 2007 on restricted lender reserves associated with the assets acquired in the Blackstone Transaction.

Rental Property Operating and Maintenance Expense

Rental property operating and maintenance expense for the Same Properties Portfolio increased $6.8 million, or 8.2%, primarily due to a general increase in various property operating expenses across our portfolio.

Total Portfolio rental property operating and maintenance expense increased $39.4 million, or 46.5%, primarily due to properties acquired in the Blackstone Transaction and, to a lesser extent, the Same Properties Portfolio.

Real Estate Taxes

Total Portfolio real estate taxes increased $17.8 million, or 56.1%, primarily due to the properties acquired in the Blackstone Transaction.

Parking Expense

Total Portfolio parking expenses increased $4.3 million, or 35.5%, primarily due to the properties acquired in the Blackstone Transaction and due to the operation of two new garages located at our Park Place property.

General and Administrative Expense

Total Portfolio general and administrative expense increased $0.8 million, or 2.1%. Current year results include costs incurred pursuant to the consulting and separation agreements with Dallas E. Lucas, our previous chief financial officer, and increased expenses due to additional corporate employees hired and office expense incurred as a result of our growth.

Other Expense

Other expense for our Total Portfolio increased $4.6 million, primarily due to the increase in ground lease expense associated with properties purchased in the Blackstone Transaction and an increase in our income tax provision with no comparable activity in the prior period.

Depreciation and Amortization Expense

Depreciation and amortization expense for our Same Properties Portfolio decreased $9.7 million, or 7.5%, primarily due to lower in-place amortization as a result of lease expirations and lease terminations that occurred in 2006 in spaces that have not been re-leased.

Total Portfolio depreciation and amortization expense increased $71.4 million, or 55.0%, primarily due to the properties acquired in the Blackstone Transaction.

Interest Expense

Interest expense for our Same Properties Portfolio increased $19.6 million, or 16.2%, primarily due to an increase in interest expense related to the refinancing of the 777 Tower, Gas Company Tower and Glendale Center mortgage loans in the latter half of 2006, the Wells Fargo Tower mortgage in April 2007 and the KPMG Tower mortgage in September 2007, partially offset by $17.0 million of savings due to the payoff of a previous term loan in 2006.

Total Portfolio interest expense increased $112.0 million, or 91.8%, primarily due to the interest incurred on the mortgage loans for the properties acquired in the Blackstone Transaction and, to a lesser extent, the Same Properties Portfolio.

Loss from Early Extinguishment of Debt

Total Portfolio loss from early extinguishment of debt was $21.6 million for 2007, which includes $8.4 million related to the KPMG Tower refinancing; $4.3 million in defeasance costs related to the financing on the Wells Fargo Tower; $6.7 million in connection with the repayment of the $400.0 million term loan used to fund the Blackstone Transaction; $0.8 million related to the contribution of our office property located at 18301 Von Karman to a joint venture and $1.5 million related the repayment of the $223.0 million bridge loan. Loss from early extinguishment of debt was $11.5 million for 2006, which includes the payment of $3.0 million in prepayment penalties and the recognition of a $0.6 million write off of unamortized loan fees related to the Glendale Center refinancing; the write off of $4.8 million of unamortized loan fees related to the repayment of our previous term loan; the write off of $1.8 million of unamortized loan fees related to the Gas Company Tower refinancing; and the payment of $0.6 million in prepayment penalties and the recognition of a $0.4 million write off of unamortized loan fees related to the 777 Tower refinancing.

Minority Interests

Minority interests attributable to loss from continuing operations were $24.4 million for 2007 compared to minority interest attributable to income from continuing operations of $10.5 million for 2006, primarily due to a $251.0 million reduction in income from continuing operations as a result of the impact of the Blackstone Transaction in 2007 and the non-recurring gain on sale of $108.5 million in 2006 from the sale of an 80% interest in five properties to our joint venture with Macquarie Office Trust.

Discontinued Operations

Our 2007 results include a $195.4 million gain on sale (and related allocation of $24.5 million in minority interests) due to the sale of Pacific Center and Regents Square with no comparable activity in the same period

last year. Discontinued operations generated income of $155.9 million for 2007 compared to an $8.6 million loss for 2006

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations

Comparison of the Three Months Ended June 30, 2008 to June 30, 2007

Our results of operations for the three months ended June 30, 2008 compared to the same period in 2007 were significantly affected by our acquisitions and dispositions in 2007. Therefore, our results are not comparable from period to period. To eliminate the effect of the changes in our Total Portfolio due to acquisitions and dispositions, we have separately presented the results of our “Same Properties Portfolio.”

Properties included in our Same Properties Portfolio analysis are all of the properties in our office portfolio, with the exception of our joint venture properties, properties acquired in the Blackstone Transaction in April 2007, Wateridge Plaza, Pacific Center and Regents Square properties that were disposed of during 2007, 130 State College that was acquired in third quarter 2007 and 3161 Michelson which was placed in service in third quarter 2007.

CONF CALL

Peggy M. Moretti

Thank you for joining our second quarter 2008 earnings conference call. With us today are Nelson Rising, President and CEO, Doug Gardner, Executive Vice President of Operations, Mark Lammas, Executive Vice President of Investments, and Shant Koumriqian, Senior Vice President and Chief Accounting Officer.

During the course of today’s call, management will make forward-looking statements regarding, among other things, projected 2008 results of operations, leasing, competitive conditions, financing, and acquisition. The company’s projections are affected by many factors outside of its control. For a discussion of such factors, please refer to the company’s most recent annual report on Form 10-K under the caption “Risk Factors.” Our supplemental package along with information required under SEC regulation G may be accessed in the Investor Relations section of the Maguire Properties website at www.maguireproperties.com.

Now I’d like to turn the call over to Nelson Rising, President and Chief Executive Officer.

Nelson C. Rising

I guess it’s still morning everywhere we’re talking today. It’s been less than 2.5 months since I assumed the role of President and CEO of Maguire Properties. I accepted the position without illusions of the challenges we face, but I must say I’m extremely pleased with the progress we have made on a number of fronts.

Clearly, I’m not pleased with the financial results for the quarter; however, we’ve already taken steps that should begin to improve these results for the rest of the year and beyond. We took a charge of $17.5 million for costs associated with our review of strategic alternatives, management changes, primarily contractual separation obligations for our former senior executives, and the exit costs and tenant improvement write offs associated with our lease at 1733 Ocean Avenue. I am confident that the reorganization of our management team and the relocation of our office from Santa Monica to downtown Los Angeles and our new management structure will create a more efficient and effective organization that will result in reduced overhead and increased productivity in the future.

As many of you know, I’ve been focused on the cash needs of the company and the company’s liquidity. At the end of the second quarter we had cash on hand of $308 million of which $210 million is restricted by various loan agreements for specific purposes. $121 million of which may be used to re-tenant the portfolio and we also have available to us approximately $41 million in leasing reserves in the form of undrawn loan commitments. This is very encouraging from a standpoint of our ability to lease space. In the aggregate, these funds will support up to 2.3 million square feet if we assume $50 per square foot in costs or up to 1.9 million square feet of leasing at $60 per square foot.

In addition, reserves that we have can accommodate approximately $40 million in existing leasing commitments. So from a lease up standpoint, the combination of these reserves and undrawn loan commitments do give us the cash resources to have a very aggressive lease program.

At the end of the second quarter we also had $90 million in cash available for other corporate purposes. We’ve been focused on two basic strategies to increase this liquidity, secured borrowing on our Plaza Las Fuentes property in Pasadena and the sale of selected Orange County assets. We previously announced that we were in advanced discussions with a lender to obtain $110 million in short term variable rate loans on Plaza Las Fuentes and the Westin Pasadena Hotel. As of this morning, all third party deliverables including appraisals and estoppels have been completed and loan documentation is nearing finalization.

We expect that a closing of the loan could occur as early as at the end of this week. Once that new borrowing is closed, it will replace the existing $130 million revolving credit facility. We’re doing that since the loan covenants in that facility are incompatible with our planned sales of certain Orange County assets.

As we previously announced, during the quarter we entered into the sale of Main Plaza for approximately $211 million to Shorenstein Properties LLC. This includes nearly $10 million of cash reserves and the assumption by Shorenstein of $161 million of project level financing. The sale is subject to the assumption of existing project financing and customer and closing conditions. We expect the sale will close in the third quarter and will yield approximately $48 million in cash. This again is a very important step for us as we try to build our cash reserves. You will notice on our second quarter earnings we took a charge for the sale of this asset. I’ll give you a little background on that. The carry in amount of the asset was based upon an allocation of the $2.9 billion purchase price paid for the acquisition of 24 office properties and 11 development sites from Blackstone Real Estate Advisors in April 2007. The price allocated to this property was determined using management’s best estimate of its fair value during 2007 and as I mentioned, we recorded a non-cash impairment charge totaling $51.9 million during the second quarter.

One very encouraging note about the sale: the purchase price of $211 million was only 6% lower than the pricing in November 2007. That’s very encouraging in what it says about the other assets we have in Orange County because obviously the overall economic situations are not as strong today as they were in November of ’07. We’ve also previously announced that we have been aggressively marketing the Park Place campus situated on 105 acres in Irvine adjacent to 500 acres of permanent open space and natural preserve in the back bay. The mixed use campus has 9 office buildings totaling 2.3 million square feet, retail shops, and entitlements for additional office, retail, residential, hotel, and other uses. We are encouraged by the interest we have seen and it is our current plan to request proposals by August 8th. It’s too early for us to have any feel on pricing but we are encouraged by the amount of interest that has been shown for this asset.

We have also been working on selected assets in Orange County. We believe we are close to finalizing terms for the sale of one of our central Orange County assets. We have a non-refundable deposit posted by the prospective buyer which has been released to the project lender to secure the right to pre-pay the project loan in connection with its purchase of the asset from us. As a result of such a sale, we would be relieved of the existing $101 million project loan and more than $1 million of funding obligations relating to the future infrastructure improvements. We will also receive a profit participation right in the future capital events proceeds generated by the asset. Based upon the annualized second quarter associated with the asset, we expect that GAAP FFO for the company because of this transaction to improve to $0.07 on account of the potential sale. That’s extremely significant to have that kind of result from an asset where we are relieved of the loan obligation, relieved of an obligation to put infrastructure, and improve our GAAP FFO by $0.07. We are not in the position to discuss further details of this transaction since we are now in the process of negotiating a similar transaction with the same group on a similarly situated asset.

One more thing before we go to questions. On July 7 through a 13-D filing, J&B informed the company of its intention to nominate individuals comprising at least the majority of the company’s board of directors at the annual meeting of stockholders. Since then we have had a series of very productive discussions with J&B and early this morning we announced that we had entered into a stockholders agreement with them, the details of which are set forth in that release. This agreement is very important to the company because we will be able now to focus our full attention on the strategic alternatives we have underway and to deliver value for our shareholders.

With that, we would be pleased to answer any questions you may have.

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