Maguire Properties

Maguire Properties annual report 2003 Maguire Properties, Inc. One California Plaza, Los Angeles, CA We are the largest owner and operator of Class A office properties in the Los Angeles central business district, or LACBD, and are primarily focused on owning and operating high quality office properties in the high-barrier-to-entry Southern California market. We are a full service real estate company with substantial in-house expertise and resources in property management, marketing, leasing, acquisitions, development and financing. PASADENA GLENDALE LOS ANGELES COUNTY DOWNTOWN LOS ANGELES ORANGE COUNTY CERRITOS IRVINE SAN DIEGO COUNTY On cover: US Bank Tower, Los Angeles, CA 1 Gas Company Tower, Los Angeles, CA Glendale Center, Glendale, CA 2 3 Plaza Las Fuentes, Pasadena, CA Park Place, Irvine, CA 4 5 > Wells Fargo Center, Los Angeles, CA Cerritos Corporate Center, Cerritos, CA 6 7 Letter to Shareholders extremely pleased thatthat thosethose shareholdersshareholders whowho investedinvested in in our our stock stock at at our our initial initial public public offer offeringing in in June 2003 were rewarded with a 28%33% totaltotal returnreturn inin ourour initialinitial sixsix monthmonth operatingoperating history.history. However,However, we recognize that we will need to work even harder to continue generating superior returns. Strong Portfolio/Strong Financial Performance Our financial performance for the period between our initial public offering on June 30, 2003 and December 31, 2003, was in line with internal and external expectations, and we remain on track in 2004. As we move forward, Maguire is building on a very solid financial foundation. We have strong, stable cash flow from our properties, with high-quality tenants (more than 41% are investment grade and another 34% are nationally recognized firms) and a portfolio that is more than 90% leased. Thanks to the hard work of our leasing team, which has brought in new tenants whilewhile alsoalso executingexecuting numerous numerous extensions very attractive with extensionskey existing with tenants, key existing we are targetingtenants, wea 93% are leasedtargeting rate a for93% 2004 leased and rate minimal for 2004 rollover and minimal of approxi rollovermately of 3.2% approxi of ourmately total 3.2% annual of ourrent. total The annualaverage rent. lease The term average in our lease portfolio term is in now our longerportfolio than is nowsix years,longer withthan scheduledsix years, withexpi- Robert F. Maguire III Richard I. Gilchrist scheduledrations balanced expirations evenly balanced over the evenly coming over decade the coming and beyond. decade and beyond. Chairman and President and Co-Chief Executive Officer Co-Chief Executive Officer Our debt is also well structured,structured, withwith aa weightedweighted averageaverage costcost of of 4.3%, 4.3%, an an average average maturity of 6.5 years including extension options, and 18.6% exposure to floating rates. Our debt-to-market capitalization was 48.2% at the end of the year. After consideration of our $250 million As the saying goes, “the more things change, the more they stay the same,” and at Maguire Properties, this was definitely the case in 2003. While going public was probably the biggest single change for the company in its 35 years of operation, at the same time, the core strengths that have made Maguire successful –“our deep understanding of the Southern California real estate market and our commitment to owning and managing the highest quality office properties”– have stayed exactly the same. Which is not to say we do not welcome the changes that have come with being a public company. We do. Being publicly traded has strengthened our overall financial condition. It has improved our access to new capital. It has enhanced the Maguire brand with tenants, lenders, and potential partners. Perhaps most important, going public has raised the bar for every one of us at the company. We now have more than 10,000 fellow shareholders and are 8 9 Series A Preferred Stock offering completed in January 2004 our pro forma debt-to-market capitalization would have decreased to 43.8%. And we maintain a $100 million credit facility to ensure we have the resources to act quickly on attractive opportunities as they arise. An Expanding Presence in a High-Growth Region Given this strong financial platform, how do we plan to drive Maguire’s continued strong These demographic and general market trends bode well for Maguire, given our yields and future growth? By adhering to the successful operating strategy that has made us a strength in downtown Los Angeles. In addition, we are actively seeking new growth opportunities. long-standing leader in commercial real estate. Consider the acquisition of One California Plaza. We were able to purchase this very attractive property – which wasn’t on the market – because we had worked closely with the previous The heart of that strategy is our focus on Southern California, including the downtown owners, we understood the situation (the property has a complicated ground lease with the Los Angeles market, where we have a commanding presence. Our five office towers – US city), and we were able to structure a deal advantageous to both buyer and seller. To make the Bank Tower, Gas Company Tower, Wells Fargo Tower, KPMG Tower, and the recently-acquired building more profitable we are now adding the kind of amenities that we know top-tier One California Plaza – together comprise more than six million square feet and 60% of the tenants look for and that have made our other properties successful in the market. available Class A office space in the prime Bunker Hill section of downtown. Beyond downtown Los Angeles, Maguire has also established a strong presence in Downtown Los Angeles has been experiencing a renaissance in recent years, with areas of opportunity elsewhere in the Southern California region (which we define as Los Angeles, growth in high-quality housing, greatly improved transportation infrastructure, and world-class Orange and San Diego counties), including the Glendale-Pasadena-Burbank “Tri-City” area, cultural amenities, ranging from the Staples Center to the Museum of Contemporary Art to the Cerritos sub-market, and the sub-market adjacent to John Wayne Airport in Orange County. the new Walt Disney Concert Hall. There has been no new office construction in more than We believe these areas, and other regional sub-markets we are carefully assessing, can be the ten years and no large-scale construction is expected in the near future. Rents are rising as net platform for our expansion and accelerated growth in Southern California. absorption of space has turned positive and this is expected to continue through at least 2005. Higher Quality Properties Produce Higher Returns As we expand in our target markets, we will continue to follow our second strategic imperative: to own and manage properties of the highest quality. This is a deeply ingrained, company-wide attitude at Maguire that comes from our long history as a developer. We don’t see property as static; we see it as malleable, full of potential, and improvable. So even when we acquire build- ings – as we are primarily doing in the current real estate environment – our first question is: how can we make this property better? 10 11 Continued Growth in 2004 and Beyond “Better” in our view, by the way, means better for our tenants. We believe our role as a landlord is to help make our tenants more productive. If we do so – by providing desirable In closing, we want to thank all of our new shareholders for their interest in and support of amenities like sports clubs, day care facilities, high-quality restaurants, even more pleasant Maguire Properties. We believe the company is extremely well positioned in a high-opportunity and accessible parking – we will attract top tier tenants willing to pay above-average rents. market. Our job now is to execute our strategy. Experienced tenants know this is more than reasonable. It is a smart business decision because a better work environment translates into less absenteeism, less employee turnover, If we succeed – and we firmly intend to – we will expand our customer base, our and higher productivity. In a very real sense, our approach to building management becomes market share, and our presence in new, dynamic sub-markets in Southern California. And we a strategic advantage for our tenants. will continue to produce a strong, stable dividend stream (6.6% yield as of the end of 2003) and the kind of sustainable, profitable growth that builds shareholder value. These are our In addition to attracting top-tier tenants and generating strong rents, providing long-term goals for Maguire, and we look forward to reporting on our progress in the exceptional commercial real estate also translates into higher renewal rates. It also establish- months and years ahead. es a reputation for leadership that helps to give us access to high-quality properties that are not formally for sale, such as One California Plaza and our most recent acquisition, Park Place. Located near John Wayne Airport, at the heavily traveled intersection of Interstate 405 and Jamboree Road in Newport Beach, Park Place features 1.7 million square feet of office space on a 15-acre campus. It is an outstanding addition to our portfolio that has let us enter a growing, supply-constrained sub-market with immediate strength. As with One California Robert F. Maguire III Richard I. Gilchrist Plaza, we knew the sellers and saw a way to structure a deal beneficial to both parties. We Chairman and Co-Chief Executive Officer President and Co-Chief Executive Officer made it attractive to sell, and because the deal did not come to bid, we believe we paid an attractive price. April 2004 In keeping with our “quality-first” approach, we also saw ways to make Park Place better and we have already begun planning enhancements and new amenities.

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