Developer Robert F. Maguire said Monday that he planned to build a high-rise office building in downtown Los Angeles, the first significant addition to the city's skyline in 14 years.
The proposed 50-story tower at Figueroa and 7th streets might also signal the beginning of a round of office development that would expand the city's financial district.
The building, to be called 7+Fig, also would extend recent downtown development that includes billions of dollars of residential and entertainment projects.
"We think it will be a stunning building in a terrific location. We think it can do very well," said Maguire, who developed some of the best-known buildings of the last downtown development boom, including U.S. Bank Tower, the tallest skyscraper in the West at 72 stories.
Maguire "has always been one of the great visionaries of downtown," said real estate broker Chris Cooper of Cushman & Wakefield. "He built so much of the skyline that he appreciates the new model emerging there."
Los Angeles architect Richard Keating of Keating/Khang Architecture has prepared a preliminary design for the building that Maguire said would cost more than $300 million. Keating also designed Gas Co. Tower, a Bunker Hill high-rise Maguire completed in 1990.
Keating said he was striving to create "a dignified, elegant building" that would "stand in contrast to the cacophony of our everyday lives. We'd like to establish a new image for downtown L.A."
The proposed building would be one of the largest in the area, with almost 1 million square feet of space. Maguire said he intended to get tenants to sign leases for at least 40% of the space before starting construction and hoped to have it ready to be occupied within three years.
Maguire said he would not recruit tenants from his existing buildings.
The site, currently an empty lot, is owned by Maguire Properties Inc., a real estate investment trust Maguire heads as chief executive. It is four blocks north of Staples Center, and has long been zoned for a high-rise office building.
Complicating development plans are widespread reports that Maguire Properties may be sold because the hot market for investment-grade office buildings has made its properties worth more than the company as a whole.
The planned tower would need city approvals. Word of it was first reported in the Los Angeles Downtown News.
Large investors have been drawn to office properties in recent years as the improving economy has filled buildings with tenants paying rising rents and growing land prices and construction costs have limited competing developments. Southern California is among the U.S.' top commercial real estate investment markets.
By creating a viable development plan for the site, Maguire would increase the value of his portfolio, said a real estate executive who asked not to be identified because he didn't want to jeopardize future business dealings with Maguire.
"If there is no development concept, there is no way to monetize" the potential of the site, the executive said. "They're not anywhere near building."
High construction costs present a substantial hurdle to profitable office development. Downtown rents would have to reach unprecedented highs by the time the building hit the market in order to justify the expense of new construction, the executive said.
That office market is tightening, however, said Cooper of Cushman & Wakefield. He predicted that the vacancy rate, now about 15%, would fall into single digits in the next two or three years -- about as long as it would take to build a new skyscraper. Developers generally consider a market with a vacancy rate below 10% as ripe for new construction.
Maguire's timing is daring but should be rewarded, said real estate broker John Cushman, chairman of Cushman & Wakefield.
"Many developers get started too late in the cycle. The first office buildings out of the ground in markets with vacancy below 10% will score home runs," Cushman said, quoting a report he will help deliver at a national real estate event this week.
"The location is pretty damn ideal," Cushman added.
Mayor Antonio Villaraigosa called the development "a big-time project which will beautify and modernize the Los Angeles skyline. The new high-rise will stand as a shining symbol that the L.A. economy is back and stronger than ever."
Changing the downtown environment are thousands of new apartments and condominiums that have been completed or are on the way. The $2.5-billion L.A. Live project under construction north of Staples Center is slated to have 2,000 residential units, a 54-story hotel and condo tower, a 7,100-seat live performance theater, broadcast facilities, a 15-screen movie theater and nearly a dozen restaurants and clubs.
Plans are being reviewed for a $1.8-billion residential-retailhotel-office complex on Grand Avenue atop Bunker Hill by New York developer Related Cos.
"Downtown has always been a part of the city that has been a 'wannabe' San Francisco or Chicago," Cooper said. "Now it's redefining itself as a vibrant place" with more appeal for office workers as the number of things to do after sundown grows.
The blocks around Staples Center near Maguire's property are seeing some of the fastest change. His lot is next to the 52-story 777 Tower, which his company owns, and the 41-story Ernst & Young Plaza owned by Brookfield Properties Corp.
New York-based Brookfield also owns a shopping center there called 7th & Fig. Brookfield plans a "significant retail repositioning" of the 20-year-old mall next year, said Anthony Manos, senior vice president. He declined to elaborate.