The commercial real estate market in California is currently taking a beating from the foreclosure crisis that has been pummeling the residential real estate market for several years now. Adding to the growing number of bank owned foreclosed properties in the state are Maguire Properties’ seven office buildings located in Los Angeles and Orange County.

Maguire Properties, one of the biggest real estate investment trusts (REIT) in the country, is compared to a heavily indebted homeowner who is trying to renegotiate troubled loans and deal with foreclosure.

Because of its inability to pay its mortgage, the Los Angeles-based REIT decided to turn over seven office buildings to lenders. This is the latest development in the company’s efforts to strengthen its balance sheet, which include renegotiating terms of another major loan.

Since the start of the housing market collapse in 2007, investors have been pondering when the foreclosure crisis would cross over from the residential real estate market to the commercial real estate market.

Market data showed that office buildings with combined worth of $127 billion are in danger of foreclosure because their owners are deep in debt in the current market that makes recovery an impossible task to achieve.

Industry analysts said that Maguire Properties has $4.4 billion assets and liabilities of $4.6 billion. They said that the REIT’s problems stem from its acquisition of office buildings worth $3 billion from Blackstone Group in 2007. During that time, these office buildings were occupied by mortgage brokers mostly from Orange County.

They explained that the acquisition deal was done during the peak of the housing market. And when the market collapsed and lending went kaput, vacancies in Maguire Properties buildings rose.

In the second quarter of this year, the company’s revenues were pegged at $135 million. It took charge-offs on its office properties thereby producing shareholder losses amounting to $384 million. For the same period last year, Maguire Properties reported only $110 million losses.

The company’s operational funds amounted to $339.7 million, a loss for $7.10 a share. A year earlier, the company took a $56.4 million loss or $1.18 a share.

Maguire Properties was established by Robert Maguire III, a major developer of downtown skyscrapers in Los Angeles. He tried but failed to raise funds for the company by taking it private. He resigned as the company’s chief executive office last May.