Maguire Properties Inc., one of the region's largest commercial landlords, posted widening losses Monday and said it was about to default on seven prime office buildings in Los Angeles and Orange counties.
The real estate investment trust lost $375.7 million, or $7.95 a share, during the second quarter, more than twice the $105.9 million lost during the same period in 2008.
It is defaulting on loans worth more than $1 billion.
Maguire Properties hopes that by giving back the keys to properties for which it overpaid at the peak of the last boom, it can reduce debt enough to keep the company solvent, Chief Executive Nelson Rising said in an interview Monday.
The huge second-quarter loss reported Monday was largely due to the decision to dispose of those properties, as the company posted a one-time write-down of $345 million.
Analysts interpreted the move as an anxious attempt to save the company, saying that if Maguire no longer has to make payments on the seven buildings, it might be able to hang on until the real estate market turns around.
Despite the bad news, the company's shares rose 15 cents to $1.04 as investors took hope that Maguire would be stronger going forward.
Craig Silvers, president of Bricks and Mortar Capital, said that by dumping some of its financially upside-down properties the company will burn less cash and may get through the real estate downturn.
"It looks like they will survive," said Silvers, who bought Maguire stock on Monday.
But Michael Knott of Green Street Advisors called the company "a zombie . . . with no intrinsic value."
"They are not immediately headed for bankruptcy," Knott said. "But they are on life support and it's going to be hard for them to ever leave the ICU."
Rising said the dramatic move to cut loose prime office buildings did not mean that Chapter 11 was imminent.
"We are not considering bankruptcy," he said. "We think this move will materially strengthen the company."
Maguire's decision to default on its loans is also a sign of worsening trouble in the commercial real estate market.
Properties continue to decline in value and more steep losses for landlords and lenders are coming, industry observers said.
As some brace for a wave of foreclosures like those that have engulfed the housing market, the pain could spread far enough to be a drag on the nation's economy.
