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Article by DailyStocks_admin    (05-29-08 06:30 AM)

Filed with the SEC from May 15 to May 21:

Maguire Properties (MPG)
Hedge fund Third Point originally acquired the shares for investment, without any purpose of changing or influencing control of MPG, but Maguire's recent announcement of dropping plans of a sale prompted the fund to proclaim itself an activist. Third Point said it raised its stake to 4.05 million shares (8.4%), from 3.35 million (7.1%).

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, we have paid quarterly distributions on our Series A Preferred Stock at a rate of $0.4766 per share, equivalent to an annual rate of $1.9064 per share.

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.

We came to terms with our lender to amend the financial covenants of our 3161 Michelson construction loan, which resulted in an increase in the spread from 2.25% to 2.50% effective September 30, 2007.

As of December 31, 2007, we have a total of $164.1 million available for draw under our construction loans to fund future construction activity at our projects currently under development and to fund tenant improvements and lease commissions as we lease space at our 3161 Michelson property that was placed in service during 2007.

2006 Activity –

We entered into a $240.0 million construction loan for our project at 3161 Michelson located in Irvine, California in September 2006. This loan bore interest at LIBOR plus 2.25% and matures in September 2008, excluding three one-year extensions available to us at our option.

We entered into a $39.7 million construction loan for our development project at the Washington Mutual Irvine campus located in Irvine, California. This loan bears interest at LIBOR plus 1.80% and matures in December 2008, excluding a one-year extension available to us at our option, subject to certain conditions.

Investment in Joint Ventures

Maguire Macquarie Office, LLC

Maguire Properties, L.P. and Macquarie Office Trust entered into a joint venture agreement in October 2005 and completed the transactions contemplated in the agreement in January 2006. We contributed Wells Fargo Center (Denver), One California Plaza, San Diego Tech Center, Washington Mutual Campus and Cerritos Corporate Center to the joint venture, while Macquarie Office Trust contributed Stadium Gateway and cash. As of December 31, 2007 and 2006, our interest in the joint venture is 20% and Macquarie Office Trust’s interest is 80%.

During 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.

We earn management, investment advisory fees and leasing commissions from the joint venture.

Maguire Properties, L.P. is the guarantor on the $95.0 million mortgage loan secured by Cerritos Corporate Center through January 4, 2009.

In accordance with the joint venture agreement, both Maguire Properties, L.P. and Macquarie Office Trust have rights of first offer to co-invest in any Southern California acquisition opportunities meeting certain defined criteria that the other party intends to acquire. In addition, Macquarie Office Trust has a right to acquire up to a 50% interest in our development projects at Washington Mutual Irvine Campus and San Diego Tech Center at 92.5% of stabilized value, which will be determined when the project is 90% leased.

DH Von Karman Maguire, LLC

In October 2007, we contributed our office property located at 18301 Von Karman located in Irvine, California to a joint venture. We retain a 1% common equity interest and a 2% preferred interest in the joint venture. We did not record a gain or loss from the contribution of this property to the joint venture since the purchase price allocated to this property at the date of acquisition equaled the value recorded upon disposal.

Foreign Operations

We do not engage in any foreign operations or derive any revenue from foreign sources.

Competition

We compete in the leasing of office space with a considerable number of other real estate companies, some of which may have greater marketing and financial resources. In addition, our hotel property competes for guests with other hotels, some of which may have greater marketing and financial resources than are available to us and our hotel operator, Westin ® Hotels and Resorts.

Principal factors of competition in our primary business of owning, acquiring and developing office properties are: the quality of properties, leasing terms (including rent and other charges and allowances for tenant improvements), attractiveness and convenience of location, the quality and breadth of tenant services provided, and reputation as an owner and operator of quality office properties in the relevant market. Additionally, our ability to compete depends upon, among other factors, trends in the national and local economies, investment alternatives, financial condition and operating results of current and prospective tenants, availability and cost of capital, construction and renovation costs, taxes, governmental regulations, legislation and population trends.

Government and Environmental Regulations

Office properties in our submarkets are subject to various laws, ordinances and regulations, including regulations relating to common areas. We believe that each of our existing properties has the necessary permits and approvals to operate its business.

Our properties must comply with Title III of the Americans with Disabilities Act of 1990 (the “ADA”) to the extent that such properties are “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. We believe that our properties are in substantial compliance with the ADA, and we continue to make capital expenditures to address the requirements of the ADA. Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we continue to assess our properties and to make alterations as appropriate in this respect.

Some of the properties in our portfolio contain, or may have contained, or are adjacent to or near other properties that have contained or currently contain, underground storage tanks for the storage of petroleum products or other hazardous or toxic substances. These operations create a potential for the release of petroleum products or other hazardous or toxic substances. Also, some of our properties contain asbestos-containing building materials (“ACBM”). Environmental laws require that ACBM be properly managed and maintained, and may impose fines and penalties on building owners or operators for failure to comply with these requirements. These laws may also allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers. We can make no assurance that costs of future environmental compliance will not affect our ability to make distributions to our stockholders or that such costs or other remedial measures will not have a material adverse effect on our business, financial condition or results of operations. None of our recent site assessments revealed any past or present environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations.

From time to time, the United States Environmental Protection Agency (“EPA”) designates certain sites affected by hazardous substances as “Superfund” sites pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act. Superfund sites can cover large areas, affecting many different parcels of land. The EPA identifies parties who are considered to be potentially responsible for the hazardous substances at Superfund sites and makes them liable for the costs of responding to the hazardous substances. The parcel of land on which Glendale Center is located lies within a large Superfund site. The site was designated as a Superfund site because the groundwater beneath the site is contaminated. We have not been named, and do not expect to be named, as a potentially responsible party for the site. If we were named, we would likely be required to enter into a de minimus settlement with the EPA and pay nominal damages.

CEO BACKGROUND

Robert F. Maguire III has served as Chairman of the Board since June 26, 2002, Chief Executive Officer since January 1, 2006 and from June 26, 2002 to November 11, 2002, and Co-Chief Executive Officer from November 12, 2002 to December 31, 2005. Mr. Maguire received his bachelor’s degree in political science from UCLA in 1961. Thereafter, he joined Security Pacific National Bank and progressed to the role of vice president, working with many of the country’s largest corporations and real estate developers. In 1965, he established the Maguire Organization, comprised of Maguire Partners Development, Ltd. and its more than 125 predecessor and related entities. All were predominantly owned by or otherwise affiliated with Mr. Maguire, and collectively did business as Maguire Partners. Maguire Partners initially specialized in industrial and housing projects and commenced commercial office building development in 1968. Mr. Maguire has directed the development of more than 25 million square feet of institutional-quality projects nationally, generally with major tenants such as Sempra Energy, IBM, Wells Fargo Bank, Bank of America, The Walt Disney Company, MGM and Time Warner. Recognized for the architectural quality of its properties, Maguire Partners received numerous awards for design excellence. Under Mr. Maguire’s direction, the firm developed some of the most significant landmark projects in the country. These include premier projects such as US Bank Tower, Gas Company Tower, Wells Fargo Tower and KPMG Tower in downtown Los Angeles, California; Plaza Las Fuentes in Pasadena, California; Glendale Center in Glendale, California; Commerce Square in downtown Philadelphia, Pennsylvania; and Solana in Dallas, Texas. Mr. Maguire is a trustee of St. John’s Hospital and a board member of the Los Angeles County Museum of Art and the Los Angeles Music Center.

Lawrence S. Kaplan has served on the Board since May 14, 2003. Mr. Kaplan is a Certified Public Accountant and retired as a partner from Ernst & Young LLP in September of 2000, where he was the national director of that firm’s REIT Advisory Services group. Mr. Kaplan joined Ernst & Young LLP as a partner in 1995 and was actively involved in the formation of numerous publicly traded REITs. After his retirement in 2000, Mr. Kaplan was retained by Ernst & Young LLP as a consultant through 2001. Mr. Kaplan has served on the board of governors of the National Association of Real Estate Investment Trusts and has been actively involved in REIT legislative and regulatory matters for more than 20 years. He is a member of the board of directors of Highwoods Properties, Inc. and Feldman Mall Properties, Inc., publicly held REITs, where he serves as Chairman of their audit committees, and until December 2005, was a director of Endeavour Real Estate Securities Limited, a privately held REIT. At Feldman Mall Properties, Mr. Kaplan is also a member of their compensation and nomination/governance committees. Mr. Kaplan holds a bachelor of science degree from the University of Chicago and an MBA from Columbia University. He serves as one of our Independent Directors (as defined below under the heading “– Independent Directors”), as Chair of our Audit Committee and as a member of our Compensation Committee and Nominating and Corporate Governance Committee.

Caroline S. McBride has served on the Board since May 14, 2003. Ms. McBride is co-Founder, Chief Investment Officer and a Managing Director of Forum Partners Investment Management LLC, a real estate investment management firm that specializes in value-added indirect investments. Prior to founding Forum Partners, Ms. McBride was a Managing Director at Security Capital Group, where she provided investment and operating oversight for public and private real estate companies in which Security Capital Group had a significant ownership position. Ms. McBride holds a bachelor of arts degree from Middlebury College and an MBA from New York University. She serves as one of our Independent Directors, as Chair of our Compensation Committee and as a member of our Audit Committee and Nominating and Corporate Governance Committee.

Andrea L. Van de Kamp has served on the Board since April 23, 2003. Ms. Van de Kamp has served as President of the West Coast Division of Fernwood Art Investments, LLC since January 2006. Prior to joining Fernwood, she served as Chairman of Sotheby’s west coast business activities, and until 2005, was a Senior Vice President for Sotheby’s North America. Ms. Van de Kamp is the Chairman Emeritus of the Performing Arts Center of Los Angeles County, which is the second largest performance arts center in the United States. Prior to joining Sotheby’s in 1989, Ms. Van de Kamp was President and CEO of the Independent Colleges of Southern California, where she administered annual fundraising campaigns for fifteen independent colleges. Earlier in her career, she served as Director for Public Affairs for Carter Hawley Hale Stores, Director of Development of the Museum of Contemporary Art, Executive Director of the Southern California Coro Foundation and Associate Director of Admissions for Dartmouth College. Ms. Van de Kamp served on the board of directors of Jenny Craig, Inc. from August 1994 until May 2002, The Walt Disney Company from December 1998 until March 2003, and City National Bank from 1993 until 2006. Ms. Van de Kamp is a graduate of Michigan State University and received a Master’s degree from Teacher’s College of Columbia University. She serves as one of our Independent Directors and as a member of our Compensation Committee and Nominating and Corporate Governance Committee.

Walter L. Weisman has served on the Board since April 23, 2003. Mr. Weisman is a past Chairman and Chief Executive Officer of American Medical International, Inc. (“AMI”). Mr. Weisman was admitted to the California bar in 1960, practiced law for several years, entered the healthcare field in 1969 and joined AMI in 1972. He became Chief Operating Officer of AMI in 1976, President in 1978 and Chief Executive Officer in 1985. When Mr. Weisman left AMI in 1988, AMI was primarily a hospital management company that owned and operated acute care hospitals across the United States and in Europe, the Middle East, Latin America, Asia and Australia. At the time, AMI had more than 50,000 employees and annual revenues of approximately $4 billion. Since 1988, Mr. Weisman has been involved in private investments and volunteer activities. He is presently Vice Chairman of the Board of Trustees of the California Institute of Technology and a Member of the Institute’s oversight committee for the Jet Propulsion Laboratory. Mr. Weisman is the former Chairman and is now a Life Trustee of the Board of Trustees of the Los Angeles County Museum of Art and Chairman of the Board of Trustees of the Sundance Institute. He is also a trustee of the Kress Foundation. Mr. Weisman is a director of Occidental Petroleum Corporation (Los Angeles) and Fresenius Medical Care (Frankfurt, Germany), and until March 2005 was a director of Community Care Health Network, Inc. (New York City). Mr. Weisman holds a bachelor’s degree from Stanford University and a juris doctor degree from Stanford Law School. On February 2, 2006, the board of directors approved the appointment of Walter L. Weisman as non-executive Vice Chairman and lead director of the board of directors of the Company. Mr. Weisman also serves as one of our Independent Directors, as Chair of our Nominating and Corporate Governance Committee and as a member of our Audit Committee and Compensation Committee.

Lewis N. Wolff has served on the Board since December 8, 2005. Mr. Wolff is Chairman of Wolff Urban Management, Inc., a real estate acquisition, investment, development and management firm. He co-founded and, since 1994, served as Chairman of Maritz, Wolff & Co., a privately held hotel investment group that manages top-tier luxury hotels. Maritz, Wolff & Co.’s investments exceed $1.0 billion. Mr. Wolff serves as Chairman of Sunstone Hotel Investors, Inc., serves as Vice Chairman of Rosewood Hotels & Resorts and, from 1999 through the summer of 2004, served as Co-Chairman of Fairmont Hotels & Resorts, a hotel management company formed by Fairmont Hotel Management Company and Canadian Pacific Hotels & Resorts, Inc. In April of 2005, Mr. Wolff acquired ownership of Major League Baseball’s Oakland Athletics. He serves on the Board of Directors for Grill Concepts, Inc., First Century Bank and the Museum of Contemporary Art. Mr. Wolff entered the hotel business in the 1980s by becoming developer/owner/operator of the San Jose Holiday Inn in Northern California and the Burbank Airport Hilton and the La Mirada Gateway Plaza Holiday Inn in Southern California. He expanded his portfolio by acquiring office buildings, theaters and additional hotels. Mr. Wolff’s career began in St. Louis, Louisiana at Roy Wenzlick & Company, a real estate economics, appraisal and publishing firm, and he eventually opened and managed its West Coast office in Los Angeles. Mr. Wolff’s accomplishments in the real estate field earned him an appointment in 1977 as a permanent staff member of the University of California Extension Program. Mr. Wolff also served as President of Twentieth Century Fox Realty & Development Company, where he managed Twentieth Century Fox’s worldwide corporate real estate activities. Mr. Wolff is a former primary owner of the St. Louis Blues National Hockey League Team and a former primary owner of the Golden State Warriors National Basketball Team. Mr. Wolff holds a bachelor’s degree in business administration from the University of Wisconsin, Madison and received his MBA from Washington University in St. Louis. He is a member of the American Institute of Real Estate Appraisers. He serves as one of our Independent Directors and as a member of our Compensation Committee and Nominating and Corporate Governance Committee.

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:


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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;


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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;


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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


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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.

Acquisitions –

We purchased 24 properties and 11 development sites from Blackstone Real Estate Advisors in April 2007 for $2.875 billion. 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, which was comprised of a $400.0 million term loan, which was fully drawn at closing, and a $130.0 million revolving credit facility, which was not drawn at closing. We funded our $175.0 million cash requirement to close this 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.

Dispositions –

We acquired 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 while $238.9 million was repaid. 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 of $121.2 million and $103.6 million, respectively, were assumed by the buyers of these properties. The mortgage loan of $47.9 and mezzanine loan of $15.0 million related to Wateridge Plaza were repaid upon disposition.

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.

MANAGEMENT DISCUSSION FOR LATEST QUARTER
Results of Operations

Comparison of the Three Months Ended March 31, 2008 to March 31, 2007

Our results of operations for the three months ended March 31, 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.

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