Businessperson of the Year: Donald Bren
Office Buys, Tower Building, Other Moves Earn Bren Honor for 2006
Just about any year, a case could be made for Donald Bren as the Business Journal’s businessperson of the year.
In 2006, it was no contest.
The chairman of The Irvine Company undertook a major office expansion, starting construction on three Irvine towers and spending $1 billion to buy trophy high-rises here and in San Diego.
Bren also started work on low-rise Irvine office buildings and continued with masterplanned developments of homes, apartments and shops.
He expanded shopping centers and attracted companies and developers to the Irvine Spectrum, where they paid top dollar for land. And he made headway toward completing his crown jewel, Pelican Hill Resort at Newport Coast.
The federal government honored Bren for his conservation efforts. The Los Angeles Times named him the most powerful man in Southern California. BusinessWeek named him one of the nation’s most generous philanthropists.
It was one of the Irvine Co.’s busiest years since Bren took control of the company in 1977.
“Dramatic may not be the best description,” Bren said of 2006. “Demanding may be better. And certainly satisfying. It was an extremely busy year for us because of continuing demand across our business lines— especially office, retail and apartments.”
Towers, apartments going up in Irvine Spectrum: “Our biggest challenge is to create the framework for a strong economic base at job centers like the Irvine Spectrum … and also to provide for a full range of housing nearby,” Bren says
Arguably Bren’s biggest impact in 2006 was in the office market. The Irvine Co., already the county’s largest landlord, started building office towers here for the first time in more than a decade.
The company also paid $540 million for office complexes in Irvine and Newport Beach, and spent another $450 million on two downtown San Diego towers.
In January, the company acquired the twin Newport Gateway buildings on MacArthur Boulevard and Jamboree Road in Newport Beach for about $215 million.
Around the same time, it acquired Irvine Center Towers on Von Karman Avenue near John Wayne Airport for about $325 million.
Then in February, the Irvine Co. bought two high-rise office buildings in downtown San Diego, One America Plaza—the city’s marquee office tower—and Koll Center, a 21-story building nearby.
“That’s the one thing (Bren) did differently last year—he was much more active as an investor,” said William “Bill” Halford, chief executive of Newport Beach-based developer Bixby Land Co. and former head of the Irvine Co.’s office division.
The building buys pushed per-square-foot sales prices to new highs. In San Diego, Bren is reported to have paid $520 a square foot. In Orange County, he paid about $385.
“Those deals came at a time when some were questioning whether we were at the top of the market,” Halford said. “But when you look at what he’s done—and how the market is now—he looks prophetic.”
Bren said he turned bullish on the office market about two years ago. That’s when the company decided to start building and looking at acquisitions.
In 2004, the company spent close to $45 million upgrading 30 of its office buildings.
“Office had remained flat for several years in part because it had been overbuilt,” Bren said. “Fortunately, the economy in Orange County and San Diego kept generating new jobs. It was a matter of time before office would regain its footing, and I think we caught it on the upswing.”
Office “is the new engine of the real estate economy,” he said.
In 2005, Bren was a bidder on the 5.5 million-square-foot office portfolio of CommonWealth Partners LLC, which ended up being bought by Los Angeles-based Maguire Properties Inc.
“If we see continued long-term demand from an expanding economy, I will consider new acquisitions,” Bren said. “But I think 2006 probably will be remembered as the big year for office.”
One worry, according to Bren: The loose lending policies of the home mortgage industry, heavily rooted in OC, have continued despite the housing slowdown.
Last year, mortgage lenders put nearly 1 million square feet of sublease space back on the local market amid a downturn for the sector.
Among Bren’s largest construction projects:
A 700,000-square-foot campus for chipmaker Broadcom Corp. at Irvine’s University Research Park.
20 and 40 Pacifica, twin 15-story towers going up next to Irvine Spectrum Center, totaling about 620,000 square feet of office space.
A 231,000-square-foot office tower at Irvine Towers near John Wayne Airport in Irvine.
Jamboree Business Center, a three-building, low-rise complex totaling 233,000 square feet.
The company’s office push comes at a time when homebuilders have stopped buying land to build on amid slowing home sales and falling prices.
For the first time this decade, the value of the county’s commercial construction, led by office building, is expected to exceed that of homebuilding in 2007.
About 5 million square feet of office space is under construction in the county. The Irvine Co. is behind more than a third of it.
The overall market “has remained strong in spite of the short-term pause in the housing industry,” Bren said.
“I believe for some time we have been in the best real estate investment economy that I’ve experienced in my career,” he said. “We have had consistent and strong job creation, relatively low interest rates, abundant capital, and we are in one of the best places in the world to live and work. It really has been extraordinary.”
Bren had a big hand in the designs for the company’s three towers going up in Irvine and in the office acquisitions.
“I was personally involved in all aspects, which is how I work, and why I still enjoy every minute in this business,” he said. “These are very significant investments that will be a major part of our portfolio, as well as the visual and economic landscape of our communities for years into the future. It was very important to me to be confident that they will be the highest quality, and also successful.”
The housing market should show signs of a rebound in late spring or early summer, Bren predicted.
The Irvine Co. continues to prepare land—much of it among the most desirable in the county—for housing development. Bren said he expects demand to continue amid economic growth.
In July, homebuilders started work on Portola Springs, a 4,500-home, Irvine Co. development along Portola Parkway near the toll roads.
Portola Springs is part of Irvine’s Northern Sphere, an area spanning 7,700 acres of Irvine Co. land in the northeast part of the city. It’s the company’s second Northern Sphere development, after Woodbury. The third and final development, Orchard Hills, should get started in a few years, depending on demand.
In Anaheim Hills, the company filed plans last year for the first phases of Mountain Park, which calls for 2,500 homes.
Next door in East Orange, the company is doing initial planning for homes in Santiago Hills.
“Last year, we experienced a short-term slowdown in the housing market, yet we opened the community of Portola Springs in Irvine, refined our planning for long-contemplated new communities in Orange and Anaheim and received national awards for Woodbury in Irvine,” Bren said.
The planning challenge, he said, “is to create the framework for a strong economic base at job centers like the Irvine Spectrum, University Research Park and Newport Center, and also to provide for a full range of housing nearby.”
As for condominium towers, Bren said:
“I’ve not been convinced that the market for high-rise living in Orange County has much depth. Having said that, there no doubt is some demand, and it may be increasing with the aging of baby boomers. If the demand exists, I believe there are places where high-rise living makes sense if it is close—walking distance—to a range of services and experiences that people want, like shopping, restaurants, theaters, parks, healthcare and if it doesn’t negatively impact existing business centers.”
Irvine Co. apartments in Newport Center near Fashion Island and next to the Irvine Spectrum have worked, he said.
“They just aren’t high-rise,” Bren said.
Still, Bren isn’t saying never to condo towers.
“I wouldn’t rule it out on the ranch, though,” he said, referring to the company’s land that traces back to Mexican and Spanish land grants in the 1860s.
In November, Bren struck a big apartment deal in Silicon Valley.
The company plans to turn a former Sony Corp. office campus in North San Jose into 1,800 apartments.
In San Diego, the Irvine Co. paid $355 million last year for apartment complexes in Sorrento Valley and Mission Valley.
Not everything went to plan in 2006.
In San Francisco, a deal to buy a 31-story tower known as the JP Morgan Chase building fell through.
The building was set to sell for more than $400 million, which likely would have set a per-square-foot record in San Francisco.
In San Diego, a jury awarded a $37.5 million judgment against the Irvine Co. in a dispute with developer Cisterra Partners LLC of La Jolla.
The six-year-old dispute was over land that eventually became the local campus of Cambridge, Mass.-based Biogen Idec Inc. in University City.
Cisterra charged the Irvine Co. with sabotaging its deal to buy the 42-acre site. The Irvine Co. was critical of the judgment and vowed to appeal “to protect its reputation.”
For all of Bren’s business moves in 2006, he said he’s most proud of getting a large chunk of the Irvine Ranch designated as a national landmark
In October, Gov. Arnold Schwarzenegger joined Bren at a ceremony at Crystal Cove State Park bestowing “National Natural Landmark” status on 37,000 acres of protected parks, wildlands and open space owned by the Irvine Co., the county of Orange, Irvine and the Nature Conservancy.
The land is part of the 50,000-acre Irvine Ranch Land Reserve, which makes up half of the historic ranch.
“It really was a very special moment for all of us who have worked hard to set a new standard for large scale protection, conservation and public access to open space in Orange County,” Bren said.
Philanthropy has played a bigger role for Bren in recent years, including in 2006.
In spring, Bren pledged $20 million for arts and sciences in Irvine schools. In summer, he gave $1 million to an after-school program for elementary students in Santa Ana public schools and $2 million for science classes for elementary students in the Newport-Mesa School District.