Enough of all that talk about a “new normal” in the wake of the recent recession.
2013 has shown that the old normal—in which Orange County real estate is once again deemed a good bet, banks are back to lending, big and small deals get done despite the gummed works of our federal government, and outside money is drawn to everything from homebuilders to the area’s tech sector—is alive and well.
The old normal even got a boost from an unlikely source over the past year. Consider the political maelstrom that has continued to surround the Affordable Care Act and the rest of President Barack Obama’s healthcare reform efforts. The recent rollout of the website for the federal government’s healthcare exchange seemed to be a caricature of everything the public sector doesn’t understand about business.
Yet it’s been healthcare reform that spurred OC’s healthcare sector to a busy year, including a number of major deals for the biggest hospitals here.
Hoag Memorial Hospital Presbyterian in Newport Beach and Irvine-based St. Joseph Health walked into 2013 ready to affiliate under the banner of Covenant Health Network. They received the go-ahead from the state this year, named former Hoag Chief Executive Richard Afable to the same post for Covenant, and started laying the groundwork to compete as a healthcare provider with a countywide presence.
Hoag reminded everyone that it remains an independent entity alongside its participation in Covenant when it struck a deal to partner with the Norris Comprehensive Cancer Center in Los Angeles, part of the University of Southern California’s Keck School of Medicine. The hospital and school will together operate the Hoag Family Cancer Institute, which will be based at its Newport Beach campus.
Hoag finished off the year with a commitment to lease the bulk of a 157,000-square-foot medical office complex across the street from its Hoag Hospital Irvine in the Spectrum area of the city.
Fountain Valley-based MemorialCare stayed busy, too. It struck its own affiliation with UC Irvine Healthcare on primary care and clinics. That followed a move to establish its own Seaside Health Plan.
MemorialCare
Between all of that: MemorialCare paid $34 million for a new headquarters in Costa Mesa, then sold it for $40 million after the building it leases in Fountain Valley became available. MemorialCare will buy the Fountain Valley headquarters for an estimated $60 million and remain there.
Orange County’s real estate sector was just as busy. It sent one new name—TRI Pointe Homes in Irvine—along with longtime Newport Beach-based industry presence William Lyon Homes, into the ranks of publicly traded companies. TRI Pointe raised $233 million in its debut as a public company, and now has a market value of about $575 million.
William Lyon Homes’ second foray as a publicly traded entity included a $217.5 million initial public offering, and the company’s market value is now around $621 million.
TRI Pointe followed up with a blockbuster $2.7 billion offer for the homebuilding assets of Weyerhaeuser Corp. that remains pending. The acquisition would include five homebuilding brands and put 4-year-old TRI Pointe among the 10 largest homebuilders in the U.S.
Residential real estate heated up over the first half of the year, when FivePoint Communities saw a number of builders get started on the first homes at the first phase of its Great Park Neighorhoods in Irvine, while Tony Moiso’s Ranch Mission Viejo LLC proceeded with its final residential project in South OC.
Housing demand strengthened and prices rose at a clip fast enough to have some observers warning of another bubble, but the pace of sales and price increases has moderated since then, thanks in part to a slight hike in interest rates.
Commercial real estate showed signs of getting back to the old normal, as institutional money targeted OC’s office market in 2013. A number of high-profile, class A offices went into institutional portfolios on expectations that rent increases will bolster returns in the near future and longer-term.
The various developments showed OC’s largest home-grown real estate investor, Newport Beach-based Irvine Company, to be ahead of the pack in the residential and commercial sectors here. Irvine Co. had already been aggressive on apartment development and acquisitions here and in other California markets, and remained so this year. The company also laid the groundwork for more office construction in the Spectrum.
WD
Orange County’s technology companies continued to mix it up, with Irvine-based storage products maker Western Digital Corp. posting a stellar year as it integrated the Hitachi Global Storage Technologies operations it acquired for $4.8 billion. Hitachi’s higher-margin product line helped Western Digital to healthy gains that saw its shares more than double, taking its market value to about $18.7 billion.
Western Digital’s gains pushed it past Irvine-based chipmaker Broadcom Corp. as the most valuable technology company based in OC. Broadcom remained a money and a headline maker, though, hanging on to contracts to provide both Apple and Samsung with chips for smartphones.
Broadcom finished the year with plans for growth that could include a new campus in Irvine (see related story, page 1).
It was a big year for a local tech executive who is focusing on finance for now. Vinny Smith got an estimated $800 million for his stake in Aliso Viejo-based Quest Software when it sold to Dell for $2.4 billion in 2012. This year saw him get started in earnest as a full-time venture capitalist through his Irvine-based Toba Capital.
Toba has quickly become the largest venture capital firm in OC, with more than $200 million in its investment portfolio and more than 20 investments.
A number of banks also got back to the old normal of lending in 2013, helping a trend that has seen OC grow as a regional hub of the industry, with Irvine at its center (see related story, page 1).
Ingram Micro
And a company that makes its living as the world’s largest distributor of technology—Santa Ana-based Ingram Micro Inc.—continued to claim the top spot for revenue by a locally based company, closing in on the $40 billion mark.
The sales gains have come with higher margins for Ingram Micro, which has long labored for profits of less than a penny on the dollar.
Chief Executive Alain Monie set out to bring change and bigger margins to Ingram Micro when he took over in 2012.
That’s meant several significant acquisitions for the global operator.
Ingram Micro also has shown an entrepreneurial edge that harkens back to OC’s roots as a place where entrepreneurs grow.
Consider one of the innovations the company came up with this year: an in-house marketing agency that aims to make use of the thousands of client relationships and tomes of product knowledge it has at its disposal.
A new twist, perhaps—but it might just be a case of the old normal coming back into vogue. n
