NICE PROFITS FROM BETTER CITY LIFE The new No. 1 U.S. commercial developer, Maguire Thomas Partners, helps solve urban problems. It adds beauty and space -- and makes money on them.
By John F. Lawrence REPORTER ASSOCIATE Carol Davenport

(FORTUNE Magazine) – ONCE UPON a time in urban America, when greedy developers were ravaging the land, paving paradise for parking lots, and tearing down historic landmarks for pricey office buildings, a couple of fellows more versed in balance sheets than building codes came along and grew big doing things another way. They put up new structures that matched old ones, they saved historic sites and even refurbished them, they limited building heights to less than the law allowed. And in true fairy tale fashion, their business got bigger than all the rest. The frog princes in this story: Maguire Thomas Partners, a name barely known outside its home base in Los Angeles and not even much of a player there ten years ago. Now the firm, with annual billings for construction put in place of more than $1.5 billion, is No. 1 among U.S. commercial developers. By that common industry yardstick, Maguire Thomas outranks perennial leader Trammell Crow of Dallas with construction billings of just under $1.5 billion; Lincoln Property Co., also of Dallas, with $1.3 billion; and Prudential Property Co., of Newark, New Jersey, with $1.1 billion. ; Maguire Thomas, with a professional staff of 130, has 20 million square feet of prime office space completed or under construction in Philadelphia, Dallas- Fort Worth, and Southern California. It has the land and plans for an additional 30 million square feet over the next half dozen years. The total -- 50 million square feet -- is the equivalent of the office space in 70 typical 40-story buildings. More than size, what distinguishes Maguire Thomas from many other developers is its aggressive pursuit of the quality of urban life. This at a time when some critics think cities are decaying relics of an obsolete industrial age, with foul air and fouler people, and others, those in the no-growth group, believe that all urban development should cease. Says Robert F. Maguire III, 54, the founder: ''We think that if you have cheap, dull, ugly cities, you will end up with a cheap, dull, ugly society.'' The firm's challenge in Philadelphia was to develop a downtown office complex that would attract tenants and the workers they employ, as well as fit the city's relatively low skyline (tradition holds that buildings shouldn't be taller than the brim of William Penn's hat on the statue atop City Hall). The partners used only two-thirds of the allowable building density and turned some of the open space into an inviting public plaza, complete with a fountain and places to eat lunch. The development, Commerce Square, impressed the city's planning commission, which is in the process of writing a new building code governing open-space requirements that would embody some of the Commerce Square concepts. In Pasadena, California, when the planning commission rebuffed a developer that wanted to stick glass and steel towers in a central area dominated by Spanish renaissance architecture, Maguire Thomas moved in. It won enthusiastic approvals for low-rise buildings in a Spanish style that complemented the 62- year-old city hall. IBM asked the firm to build a campus-like office complex on the Texas plains between Dallas and Fort Worth. Campus settings for individual companies can leave workers isolated from shops and other services. Therefore, Maguire Thomas pulled together a team of architects and planners from firms in Mexico City, Los Angeles, San Francisco, and New York and produced a plan for a village of shops, restaurants, recreational space, a hotel, and of course office space for 2,500 IBM employees. The firm's most unusual achievement is First Interstate World Center, commonly known as Library Tower, in Los Angeles. Topped off recently at 73 stories, this tallest U.S. building west of Chicago exists only because Maguire, the main force behind the firm's design and architectural standards, came up with the way to wade through a quagmire of bickering city agencies, environmentalists, and historic site preservationists. The project has as its centerpiece the old central library, a 1920s architectural gem that even the city's head librarian thought would have to be torn down. The tower, which is adjacent to the library, and a second Maguire Thomas office building going up nearby promise enough extra tax revenues to pay for nearly all the restoration of the library. In addition the project includes restoring the library's lawn, which had been paved over for parking, and an outdoor stairway reminiscent of Rome's Spanish Steps (complete with fountain). Plenty of developers install amenities like fountains, usually in return for the right to build higher buildings. But many city officials consider Maguire among the standard-setters. Says Edward Helfeld, head of San Francisco's redevelopment agency and until four years ago director of the one in Los Angeles: ''The people who really affect the city environment aren't the city planners -- they are the developers. Most of them want to do a good job, but they don't know how. Rob does.'' But Maguire Thomas is not a firm of do-gooders. It has turned ''quality of life'' into a profitable business by being aggressive in lining up tenants and charging them steep rents. Like many successful big-city developers, it puts up buildings in partnership with an employer prepared to occupy a lot of space. (Developers generally are the ones who envision a project, hire the architects and the general contractor, and manage the project to completion. Often they also manage the completed buildings.) Owned by seven partners, Maguire Thomas retains at least a 50% ownership interest in a project. The firm has two managing partners, Rob Maguire and James Thomas, 52, a tax expert and former Internal Revenue Service trial lawyer, who structures the deals. He is a tough negotiator, insisting that the firm end up with about a 12% annual rate of return on its investment. Often developers are willing to take as little as 8%, figuring that their big profit will come with the building's sale. One of Thomas's talents is in persuading clients to relocate into one of the firm's new buildings, even when they seem happy where they are. The argument that usually clinches the deal: Converting old real estate holdings into cash and then occupying and sharing in the ownership of a better property means higher returns for shareholders.

Consider Pacific Enterprises, the parent of Southern California Gas. It had only a vague idea how valuable was its 63-year-old headquarters in downtown Los Angeles, nor was it sure what to do with some undeveloped property nearby. Then Maguire Thomas produced an analysis showing the properties were worth at least $100 million, $40 million more than Pacific Enterprises thought. The developer pointed out that Pacific Enterprises could put that windfall toward a 50% interest in the new $350 million Library Tower. Not only would the company have a prestigious new headquarters, it could also realize over $500 million more in pretax income during the next 15 years than it would hanging on to the old offices and real estate. Pacific Enterprises bought the idea, which was made even more attractive when a Japanese buyer came forward with an estimated $130 million for the two properties. Willis Wood, head of real estate for the company, calls the deal ''one of the better things we've gotten involved in.'' Before becoming an expert in urban planning, design, and architecture, Rob Maguire was a commercial lending officer at Security Pacific National Bank. In 1965 he borrowed $25,000 from a friend and founded the firm. He started out putting together real estate sale-and-leaseback arrangements for corporate clients, including Northrop. Soon he persuaded the aerospace company to let him develop a new Los Angeles headquarters, and promptly demonstrated his obsession with detail: He traveled to Princeton, New Jersey, to tag some European sycamores for transplanting at the site. Even today he often selects the trees for the exterior landscaping and oversees the interior design, right down to the bathrooms. He considered two dozen Library Tower renderings by Pei Cobb Freed & Partners of New York, the firm that designed the National Gallery in Washington and the controversial pyramid at the Louvre in Paris. He finally settled on one by Henry Cobb and Harold Fredenburgh of that firm. The son of a World War II pilot who flew the Berlin airlift and ferried refugees to Israel (said to be the model for the Irish pilot in Leon Uris's Exodus), Maguire had attended 39 schools around the world by the time he graduated from high school. His understanding of design and architecture is entirely self-taught. He credits his ability to visualize complex projects in part to what he calls a bit of dyslexia -- ''I have to think in simple, graphic terms.'' Maybe so, but to John Cushman III, who heads his own major real estate firm in Los Angeles, Maguire does not do anything that's simple: ''He sort of looks for trouble. He goes for the difficult. At times he reminds me a little of Don Quixote.'' Here's a project worthy of Cervantes: a parcel of land slightly bigger than New York's Central Park in an otherwise heavily developed section of Los Angeles, directly on the coast. Once owned by Howard Hughes, the site, called Playa Vista, has remained largely undeveloped while Summa Corp., the main operating company of the Hughes estate, sought approvals to build on it. Environmentalists, concerned about the last of the natural wetlands in the area, battled Summa's development proposals for years. The company finally gave up, selling controlling interest to Maguire Thomas in March 1987. BEFORE STARTING the project, the firm is conducting a series of meetings in which its design experts and local interest groups are working out plans together. Maguire believes that developers must solve community problems, not just make them: ''Everybody's sick of too much density, too much traffic, too much pollution. So the move is to shut development down. Anything we do has to be a joint process with the community.'' His vision is one that the locals should like: A self-contained community where workers can walk to jobs or use a private bus system to commute elsewhere -- adding little to the congestion tying up most Los Angeles freeways. It's the kind of development where people could live happily ever after.