RESIDENTIAL
Executives for Santa Ana-based First American Corp. appear to be gaining optimism about the state of the real estate market,and their own operations.
The title insurer and financial services company say it’s stepping up efforts to separate its two core lines of business, after a second quarter that Chairman and Chief Executive Parker Kennedy described as “strong.”
The plan now is to consummate the long-awaited spin-off of its financial services operations, including its core title insurance business, from its technology-focused information solutions division during the first half of 2010, Kennedy said.
The spin-off had been put on hold indefinitely as the real estate and mortgage credit markets deteriorated.
Officials said earlier this year that signs of stability in the market were needed before they’d move ahead,which appears to be happening now.
“We are targeting a completion date in the first quarter, but we don’t have full control over the ultimate timing of the transaction due to regulatory matters,” Kennedy said.
First American,Orange County’s largest real estate-related business, both in terms of revenue and employees,is coming off a quarter that exceeded analyst expectations.
It posted earnings of $70.3 million for the second quarter, up from $19.6 million a year earlier. Revenue totaled $1.54 billion for the quarter.
Excluding investment losses, First American’s second-quarter profit was closer to $84 million. Most analysts expected profits to be less than $70 million for the quarter.
The improved quarterly results partly were due to more refinancing work for the company’s title business, as well as a slimmed-down and more efficient employee base, officials said.
Salary and other personnel costs dropped 18% from a year earlier. Even though title work picked up last quarter, First American did not need to add more workers because of efficiencies the company’s made in the past year, Chief Financial Officer Buddy Piszel said during the company’s call with analysts.
The improved results and less turmoil in the mortgage industry are pushing the company ahead with its spin-off plan, which was first announced in January 2008.
Under the plan, the title business will be turned into a separate publicly traded company tentatively called First American Financial Corp. The information solutions division will remain under the current company’s operation.
The company has stepped up efforts to prepare for the spin-off and is working “diligently” toward completing the deal, Kennedy told analysts.
Work under way includes obtaining OKs from the Internal Revenue Service, filing with various insurance and banking regulatory authorities and preparing documentation for the Securities and Exchange Commission.
First American was trying to make the spin-off a little easier when it bid for the 26% of Poway-based First Advantage Corp. that the company doesn’t already own for about $218 million, Kennedy said.
First American announced that offer in late June and is awaiting First Advantage’s response.
COMMERCIAL
More details are being disclosed about one of OC’s largest industrial deals of the year.
My colleague Dan Beighley last month broke the news on New Jersey-based clothing distributor Empire Logistics and Warehousing Inc. signing a 234,763-square-foot deal in Cypress at 6550 Katella Ave.
It’s one of the few industrial leases done in the county larger than 150,000 square feet in the past few years.
The tenant, which also operates under the Empire Clothing name, plans to combine operations from two Compton buildings at the Cypress warehouse, which is owned by Los Angeles-based Colony Realty Partners.
The value of the lease was undisclosed at the time. Now, brokers are confirming industry chatter that Empire got itself a sweetheart deal.
The five-year lease was for about $6 million and included one year of free rent, according to Lee & Associates’ David Bales, who along with Don Smith represented Empire.
Factoring in concessions, that works out to a monthly rent of about 35 cents per square foot.
“For this particular deal, in order for the tenant to justify the move, the landlord needed to make a larger concession than what the market has previously experienced,” Bales said in a statement.
Lab Purchase
Urban developer Lab Holding LLC, which is planning a big project in San Clemente’s North Beach area, has picked up another nearby property.
Lab Holdings, which built “anti-malls” The Lab and The Camp in Costa Mesa, bought San Clemente’s historic Casino ballroom in a public sale. Terms of the deal weren’t disclosed.
The property had been owned by Laguna Hills-based DBN Development LLC, which defaulted on the long-dormant building. The domed property, which opened in the 1930s, had been eyed as a site for possible condominiums by the prior owner.
The new owners said the Casino would complement its Playa del Norte commercial development planned at North Beach, alongside the ocean near the city’s train station.
