MPG Office Trust Chief Executive Nelson C. Rising resigned Thursday in a surprise change of leadership at the high-profile Los Angeles real estate company.
The real estate trust formerly known as Maguire Properties Inc. said it had accepted Rising's resignation, which will take effect Monday.
"I believe the board of directors and I do not share a common vision for the strategic direction of the Company and a capital structure necessary to achieve it," Rising said in his resignation letter.
Chairman Paul M. Watson, retired vice chairman of Wells Fargo Bank, will serve as interim chief executive until a new leader is named, the company said.
MPG is the largest landlord of upscale office space in downtown Los Angeles and also owns properties in Orange and San Diego counties. One of its best-known holdings is U.S. Bank Tower in downtown L.A., the tallest building in the West.
Rising's voluntary departure caught many in the real estate industry unaware because when he took power less than three years ago with a mandate to fix severe financial problems, he was widely regarded as a white knight.
"MPG now has a crisis of leadership to go along with being a financial zombie — not dead, but not really alive either," said analyst Michael Knott of Green Street Advisors. "This is very bad news."
Rising, a former executive with MPG, was lured back by the board of directors in May 2008 in the hope that he could turn the company's fortunes around. At the time, MPG was carrying about $5 billion worth of debt. And a financial and real estate crash was on the horizon.
The company has been staggering under heavy debt since 2007, when it paid about $3 billion for 23 office buildings in Orange and Los Angeles counties. The bold move by then-CEO Robert F. Maguire III greatly expanded the company's property portfolio in Orange County.
The financial trouble led to an uprising of dissident shareholders against founder Maguire as the stock price sank. Maguire had taken the company public as a real estate investment trust in 2003 and then tried to buy it back in 2008.
When Maguire's efforts to take back control were rejected by the board, he resigned. Rising took his place at the top of the company.
MPG endured heavy losses during the real estate crash, and Rising moved to reduce debt, extend loans and sell buildings that were a drag on company finances. MPG stopped paying the mortgages on seven properties, mostly in Orange County.
Debt has been reduced by $2 billion, but the company is still in crisis: The recession drove down occupancy and rents in office buildings, including MPG's. Last week, MPG reported a third-quarter loss of nearly $18 million. It was an improvement from a loss of $46.8 million in the same period last year, but the company's stock price, which peaked at $44 in 2007, has lingered under $4 since 2008.
On Thursday, before the announcement of Rising's resignation, MPG closed at $2.84, down 8 cents, or nearly 3%.
Many of the company's shares have been purchased by hedge funds that have supported bold moves such as selling prime assets — or the entire company — while Rising has attempted to gradually bring the company back to life with its downtown Los Angeles trophy buildings still in hand.
On Thursday, MPG said it would continue to guard its core Los Angeles office buildings and negotiate with lenders to keep debt at bay. It also announced that it would attempt to sell its only non-office property, the Westin Pasadena Hotel, to raise cash.
Rising, 68, worked for the company in the 1980s and '90s. He oversaw many of its projects, notably Playa Vista, the sprawling and controversial development that sprang from property south of Marina del Rey that was once owned by Howard Hughes. Rising also supervised construction of U.S. Bank Tower and the nearby Gas Company Tower in downtown Los Angeles.
He left in 1994 to take over Catellus Development Corp., and over the next 11 years he supervised the growing company and its Mission Bay project, the largest mixed-used development in the history of San Francisco. Catellus was sold in 2005.
Rising was well regarded in the real estate community, but his tenure at MPG was not without bumps.
Critics, including Maguire, questioned his ability to take on the punishing challenge of negotiating with lenders as well as his decision to hire his son Christopher as a senior executive. The younger Rising resigned in July, collecting more than $575,000 in severance pay.
Nelson Rising will receive no severance payments and won't be eligible for a 2010 bonus, the company said.
His departure is a blow for the company, said John Cushman, chairman of real estate brokerage Cushman & Wakefield.
"They don't come any better than Nelson," Cushman said. "What the company is going to do to replace him in this extremely volatile market and how they will go about it will be one be one difficult proposition."