There’s something about December that makes us look back at the year that’s winding down and forward to the one that’s ahead.
Next week, the Business Journal looks ahead to 2008 with our annual preview issue. We’re set to take a look at the major industries that make up Orange County’s economy and give a sense of what to expect in the new year.
We also pick people, companies, agencies, malls and even a country to keep an eye on in the coming year.
Which brings us to this week’s issue.
Before we start gazing into our crystal balls with a look at 2008, we take stock of how our picks of a year ago panned out.
Just about all of our picks to watch, including Ameriquest Mortgage parent ACC Capital Holdings Corp., retailer Pacific Sunwear of California Inc. and Advanced Medical Optic Inc.’s Jim Mazzo, were on the mark with a dramatic year in 2007.
Some of our other picks had eventful years, though not necessarily out of the ordinary.
In a couple of cases, we missed the mark.
Costa Mesa-based Pacific Mercantile Bank didn’t get bought. Kimberly-Clark Corp.’s Fullerton plant didn’t close. And UCI Medical Center in Orange didn’t end up finding a new permanent chief executive.
But overall, we did pretty well with our picks for 2007.
Here’s a look back at them and how they did this year.
TECHNOLOGY
Person to Watch:
Jim McCluney
Chief executive,
Emulex Corp.
Emulex Corp.’s Jim McCluney put some polish on what was a lackluster company just a year ago.
In 2006, we pegged him as one to watch because the Costa Mesa-based maker of electronics for data storage networks wasn’t living up to its potential.
After being promoted to the top spot in late 2006,replacing longtime boss and now Executive Chairman Paul Folino,McCluney charged ahead and has proven himself quickly.
“I am pleased to say that it has been an excellent year so far for Emulex, as we’ve seen tremendous results from our execution of our objectives,” he said.
The company, which makes circuit boards that speed the flow of data on networks, has seen progress in diversification, market share and new products.
“We have steadily increased market share, gained new customers for our products and are leading the charge in storage area networking expansion,” McCluney said.
Emulex saw a modest boost in market share gains for fibre channel host bus adapters,circuit boards that link computers on data networks,with design wins in servers by IBM Corp. and Sun Microsystems Inc.
Together with rival QLogic Corp. of Aliso Viejo, the two companies have about 88% of the market for host bus adapters, a profitable bit of electronics.
In the third quarter, QLogic had 47.6% of the market, up from 44.4% in the second quarter. Emulex upped its stake from 40.2% to 40.8%.
The company is on its way to diversifying.
Until recently, most of Emulex’s $470 million in yearly sales came from host bus adapter cards.
They still make up more than 70% of sales, but that’s down from a year ago, when they accounted for 85%.
McCluney’s looking to get host bus adapter sales to 50% of revenue and to more than double yearly sales to $1 billion in the next two years. Emulex had two acquisitions last year that added products and customers.
It spent $39 million for San Jose-based Aarohi Communications Inc. and $180 million for Roseville-based Sierra Logic Inc.
McCluney also broke the company into three units and ventured into new products,a first for Emulex.
The company beefed up its sales force and marketing efforts, which resulted in some 30 design wins.
For the December quarter, analysts are looking for profits of about $26 million, versus $25 million a year earlier. They project sales of $131 million, up from $121.4 million a year earlier.
,Sarah Tolkoff
Company to Watch:
Gateway Inc.
We were right on the money with our pick of struggling Irvine computer maker Gateway Inc.,it didn’t make it another year as a stand-alone company.
Wall Street had been clamoring for change at Gateway for years.
In late 2006, the company got Chief Executive Ed Coleman, who was set to get the company back on track.
His tenure was marked by running speculation about a buyout, tough going in Gateway’s results, a laptop battery recall and job cuts.
“I joined Gateway with the charter of bringing resolution to what had been an up and down period for the company for the past several years,” Coleman said at an event last month hosted by the Paul Merage School of Business at the University of California, Irvine.
Coleman made job cuts and looked for ways to slash expenses.
Despite Coleman’s efforts, the first half of 2007 proved that Gateway was a sinking ship.
The prospect of an acquisition loomed large after the company turned out disappointing results in the first and second quarters.
Some analysts said a buyout was Gateway’s only hope for survival against bigger rivals Dell Inc. and Hewlett-Packard Co.
Enter Taiwan’s Acer Inc., the No. 3 PC maker, which in October bought Gateway for $710 million.
Acer also got Gateway’s eMachines brand of budget PCs.
As a prelude to the deal, Gateway sold off its business selling computers to corporate customers, schools and the government for $90 million to Idaho’s MPC Corp.
With the Gateway buy, Acer gets Gateway’s well-known brand name and shelf space in big U.S. stores, including those of Best Buy.
Acer, which counted more than $11 billion in sales last year, brings to the table something that Gateway could never get,enormous scale.
Acer was able to grab more of the market because it could make and sell PCs cheaper than Gateway.
Coleman is sticking around to help with the integration of the company under Acer’s wing.
How Gateway ultimately absorbs into Acer still is unclear.
The company said last month it’s set to cut another 60 jobs from the part of Gateway’s business that went to MPC.
Acer is set to position its lineup of brands to be marketed to different segments of buyers, “like cars,” Coleman said.
It’s also set to re-examine what the Gateway brand means to consumers to help in its marketing efforts.
“That’s something that’s been missing for a long time,” he said.
REAL ESTATE
Emile Haddad
Chief investment officer,
Lennar Corp.
We tapped Lennar Corp. Chief Investment Officer Emile Haddad as a person to watch last December, noting at the time that Orange County’s most active homebuilder was facing the onset of slowing sales and falling prices.
That turned out to be an understatement.
The housing market’s gotten progressively worse in 2007, both here and nationally.
The fallout from the crash of subprime mortgages added another wrinkle to an already tough market for builders.
Local sales are off nearly 40% from a year earlier, and OC’s median price has fallen about 7% from its peak. Numerous builders are dropping prices for homes in the range
of 20% and still are having trouble enticing buyers.
There are few signs that we’ve seen the bottom yet.
It’s made for a tough year locally for Lennar and Haddad, who along with Lennar Chief Operating Officer Jon Jaffe, was the Business Journal’s 2006 business person of the year.
The slowing market has increased scrutiny for the company’s ambitious developments plans in Irvine, Anaheim and Tustin, including some of the first high-rise condominium towers for the area.
In all, the company has plans for close to 15,000 homes in OC.
Lennar has no intention of backing out of its OC projects, according to Haddad, even if it has had to readjust its strategy to account for the reality of current market conditions.
Most recently, the company decided in October to suspend sales for low and midrise condos at its Central Park West project under construction in Irvine.
Sales are being halted until the housing and mortgage markets show signs of recovery.
Any additional construction at the 1,500-home project is being delayed.
The mothballing strategy is unique among homebuilders and garnered national attention. Most builders prefer to get projects in the works off their books quickly, even at a loss.
Lennar’s big local developments are financed through off balance sheet ventures with outside investors, so the builder isn’t as tempted to slash prices just to sell homes, Haddad said.
In Anaheim, the builder also is cautiously approaching rollouts of its massive A-Town project at the city’s Platinum Triangle. Lennar has put the 3,000-home project on hold, pending market conditions, according to the city.
At Lennar’s second, smaller section of its Platinum Triangle plan, called A-Town Stadium, the company recently cut early development estimates by some 250 homes.
When construction does begin, most expect to see Lennar focus on low and midrise development, rather than high-rise condos, which are seeing slow sales elsewhere in the county.
For the company’s biggest and most expensive project on the books, at the Great Park’s Heritage Fields, plans still are on track, according to Haddad.
Irvine city officials had expressed concern earlier this fall that Lennar might be looking to offload the project, due to the slumping market. That’s never been an option, Haddad said.
“When you embark on a long-term project, you have to filter out the noise in the market,” he said in October.
Home development at Heritage Fields still is a few years away, when the company hopes the market will have rebounded. Early development work should begin ramping up next year.
At Lennar’s Aliso Viejo office, where the company’s day-to-day operations are run, Haddad has spent a good part of the year cheerleading his staff during the tough market.
“I tell everybody, this is the industry we signed up for,” he said.
,Mark Mueller
ACC Capital Holdings Corp.
Bulls-eye on our prediction that a big, local subprime lender would grab a lot of headlines this year. Orange-based ACC Capital Holdings Corp. had one of the more eventful years any Orange County company’s seen in ages.
The company stopped making loans after the spring subprime meltdown and the ensuing summer credit crunch.
ACC, parent of Ameriquest Mortgage Co., sold off most of its businesses, shuttered its best known brand, laid off hundreds of local employees and left a large swath of empty office space in Central Orange County and Irvine.
The bright side? ACC,which in 2005 was the country’s biggest subprime lender,managed to avoid the spotlight more than you’d expect.
Chalk that up to the even more spectacular crash of its longtime competitor, New Century Financial Corp. of Irvine, which became the poster boy for the industry’s downfall in 2007.
Publicly traded New Century saw its stock collapse and went bankrupt in April. It’s still winding down its business amid lawsuits and inquiries from federal regulators.
For privately held ACC, 2007 wasn’t as dramatic as New Century. But it felt the effects of the subprime meltdown nearly as hard.
In September, ACC sold its AMC Mortgage Services and Argent Mortgage Co. units to Citigroup Inc. and closed Ameriquest.
The deal had been expected for months. New York-based Citigroup and ACC struck a financing deal in March that gave Citigroup the option to buy the businesses.
Terms of the deal with Citigroup weren’t announced. But the price was likely well below what the business was worth a few years ago at Ameriquest’s peak.
And the sale’s already looking like a loser for Citigroup, which is seeing larger-than-expected losses in its mortgage servicing portfolio.
Citigroup bought a company with a much smaller footprint than a few years ago. ACC Capital laid off more than 1,000 local workers in the early part of the year, on top of another 3,800 nationwide layoffs announced the prior year.
The slimmed down operations of ACC also were felt in OC’s office market, where it long had been one of the area’s biggest tenants.
In May, close to 500,000 square feet of Central County office space leased by the company was put back on the market. That’s on top of another 600,000 square feet of space put back on the market for sublease in 2006.
A majority of the space given back in 2007 was in offices bought early this year by Los Angeles-based Maguire Properties Inc. The givebacks put a damper on the landlord’s plans to raise rates in the area, as vacancy rates in the county’s offices moved up above 10% for the first time in three years.
HEALTHCARE
Person to Watch:
James Mazzo
Advanced Medical Optics Inc.
We picked James Mazzo as our healthcare person to watch in 2007 based on challenges he was facing at the end of 2006 at Advanced Medical Optics Inc., the Santa Ana maker of eye surgery devices and contact lens solutions he’s run since its inception.
As it turned out, the year was eventful.
Mazzo and Advanced Medical entered 2007 dealing with a recall of its Complete MoisturePlus contact lens solution after bacteria were found in three batches in China.
In early January, Mazzo unveiled plans to buy Irvine’s IntraLase Corp. in an $808 million deal to boost its business for devices used in laser eye surgery. The IntraLase buy closed in April.
A month later, Advanced Medical moved to what could have been its biggest deal,an ambitious $4.23 billion bid for rival Bausch & Lomb Inc. of Rochester, N.Y.
Bausch would have brought Advanced Medical contact lenses, a product that Mazzo has said he’s interested in.
But the bid faced significant opposition from Advanced Medical shareholders, including ValueAct Capital Partners LP of San Francisco.
Advanced Medical’s Bausch play came right before it had to tackle a second major voluntary recall within six months. The company pulled Complete MoisturePlus after regulators linked it to a rare eye infection and made plans to bring it back with a new formulation.
In August, Mazzo pulled the plug on Advanced Medical’s bid for Bausch, saying in a letter to Bausch directors that the company was disappointed that Bausch’s board would not grant it more time. Warburg Pincus LLC, a private equity firm, ended up buying Bausch for $3.7 billion.
In September, Advanced Medical began shipping a new formulation of Complete that emphasized rubbing, rather than just soaking, as a lens cleaning method to customers.
,Vita Reed
Hospital to Watch:
UCI Medical Center, Orange
We predicted the University of California, Irvine’s Orange teaching hospital would make news in 2007 for naming a permanent chief executive.
We’re still waiting on that one.
The hospital still is looking for a perma-
nent leader, according to David Bailey, vice
chancellor for health affairs for UC Irvine.
UCI hired executive recruiter Korn Ferry International to identify potential candidates and hopes to have a permanent chief executive some time before UCI Medical Center opens its New University Hospital, an expansion designed to meet state earthquake laws, in 2009, according to Bailey.
UCI hasn’t had a permanent leader since Ralph Cygan resigned in early 2006. Cygan stepped down after a liver transplant scandal and remains on the School of Medicine’s staff.
Maureen Zehntner, UCI Medical Center’s chief operating officer, is serving as interim chief executive.
While the top hospital job isn’t filled, UCI Chancellor Michael Drake did succeed in hiring Bailey, who oversees the hospital and the School of Medicine.
Bailey, who was previously with the University of California, San Diego, began his job at UCI in March.
Besides overseeing the medical school and health programs, Bailey’s also oversees ongoing construction on UCI Medical Center’s $427 million patient tower, which is about 85% complete and ahead of schedule.
TOURISM
City to Watch:
Huntington Beach
Huntington Beach spent a lot of time and money during 2007 on its efforts to rebrand itself as Surf City USA.
Despite objections from Santa Cruz, Huntington Beach resolved most of the trademark and legal issues and has extended the Surf City name to some 25 licensees, including fishing boats bicycles, soft drinks and even an official credit union.
It also extended the name to events, with the pacific Shoreline Marathon renamed the Surf City Marathon.
The city also bolstered its spring and fall season event calendar with the addition of surf fishing tournaments in each of those seasons.
“It’s one of the top five things people say they do in non-summer months,” said Doug Traub, president and chief executive of the Huntington Beach Conference and Visitors Bureau.
Summer beachgoers, of course, still drive the bulk of the city’s visitor business. Beach visitors were 16.3 million in 2006, up from 13.4 million in 2001. Traub said he expects the number will be even higher when 2007 figures are released.
City government has been pushing more visitors while being mindful of residents. In the past year, the Bella Terra shopping complex,a remake of the old Huntington Beach Mall,came to life with its entertainment amphitheater and good mix of stores and restaurants.
The city’s experiment in downtown,dubbed “Surf City Nights”,turned Main Street into a pedestrian mall on Tuesday evenings. Merchants have reported more business on those nights, according to Traub. The positive response might mean it becomes a permanent fixture if the City Council agrees.
On another front, the city’s Dog Beach faced a small skirmish over its vendors this year that was recently resolved. About half of all dog owners now say they travel with their pets, which might make the Dog Beach an added attraction for the city.
The Hilton Waterfront Beach Resort and Hyatt Regency Huntington Beach Resort & Spa have become the anchors of the city’s coast, and a meetings hub for groups.
Next year, they’ll be joined in fall by one of three new hotels long in the making: the Shorebreak Hotel at the Strand.
Operated by San Francisco-based Joie de Vivre Hospitality, it will add a boutique hotel to the city’s coastline as part of Los Angeles-based CIM Group’s $90 million development linking the beach and downtown.
Makar Properties LLC’s Pacific City project and Robert Mayer Corp.’s high-end hotel between the Hilton and Hyatt still are in the works with no opening dates set.
Robert Mayer’s project is entitled by the city and the California Coastal Commission for a hotel of timeshare condominiums.
The company is projecting 150 to 200 rooms and still is deciding whether it wants to pursue the condo-hotel option, Chief Executive Steve Bone said.
In another effort to keep the city at the forefront of the public eye, the visitor’s bureau last summer launched a film Web site (filmhuntingtonbeach.com) that touts popular film locations and that walks would-be movie-makers through the permit requirements.
In January, Huntington Beach lifeguards are set to be featured in a reality series. The city already has been used for filming TV shows such as “CSI: Miami,” “Nanny 911” and “Dr. Phil.”
,Sandi Cain
Curt Pringle
Anaheim Mayor Curt Pringle proved worth watching in tourism for 2007, as he spent much of the year locked in a battle over whether or not to change zoning in the 13-year-old Anaheim Resort District to allow homes.
The request, from Irvine-based developer SunCal Cos., sought homes on land now occupied by two mobile home parks.
Walt Disney Co. has opposed adding homes near its Anaheim theme parks and hotels.
After a flurry of activity that generated signatures for a ballot referendum on the issue, the request was rendered moot by SunCal’s failure to complete the deal and a subsequent vote by the City Council in late November to rescind approval of a zoning change.
As soon as the SunCal option expired on the property, the owner signed an option with a hotel developer, according to Pringle.
The debate over homes in the resort district actually bolstered interest in the area, according to Pringle.
It highlighted the fact that there isn’t much property left in Anaheim for resort development and ratcheted up interest from hotel developers, he said.
The referendum may be off the ballot but a separate initiative that would require resident approval of any changes to the Resort District zoning still could go before voters next year.
A less controversial,though longer-term,plan launched last year envisions linking Anaheim with Los Angeles and other points north and south via an Anaheim Transit Center, which would be the largest in Southern California.
The project was presented to potential investors at an October conference that drew more than 200 people to explore elements of a plan for the city to work with developers.
“We’re soliciting private investment interest to develop retail, parking, office and (other aspects),” Pringle said. “We’re not interested in waiting for government money.”
Other items from 2007 included the new Muzeo museum that opened in downtown as part of that area’s renovation and the city’s 150th anniversary celebration.
Anaheim also was one of three California cities chosen to take part in a statewide homeland security and disaster preparedness exercise held in November.
Pringle was presented a Mobility 21 Transportation Award for his efforts with the transit center and his work with the Orange County Transportation Authority and the California High Speed Rail commission.
In April, the mayor hosted a top tourism conference, Powwow, which showcased the city to 5,000 or so tour operators from around the globe. One Powwow event was held at the new outdoor area surrounding the revamped Anaheim Arena.
The city also is looking at options for another Convention Center expansion, while the Anaheim/Orange County Visitor & Convention Bureau has begun targeting larger groups to come to Anaheim.
The completion of the Anaheim Marriott’s meeting space and ballroom wing, along with the major makeover under way at the Hilton Anaheim, have received high marks from meeting and convention planners.
“We’re encouraging even more changes with Hilton and Marriott to create a campus atmosphere (at the Convention Center),” Pringle said.
The visitors bureau already is marketing the area as “Center Walk” to stress a campus feel. And speaking of walks, the first restaurants opened at GardenWalk, a big shopping, dinning and entertainment center going up alongside Disneyland. The rest is set for completion early next year.
Elsewhere in the city, the housing downturn has brought some slowing in development around the Platinum Triangle, a key project of Pringle’s. But he said he isn’t worried about it in the long term.
MANUFACTURING
Company to Watch:
Kimberly-Clark Corp.
A year ago, we tapped Kimberly-Clark Corp.’s Fullerton plant to watch because of long-running concern in the city about its future.
Even though Dallas-based Kimberly-Clark shuttered some facilities elsewhere, the local paper mill that makes Kleenex tissue has kept churning.
Still, high costs of doing business in California combined with rising energy and materials prices have led many to believe it’s just a matter of when, not if, the sprawling plant will go away.
“Any of the larger-scale industrial operations are kind of perennial candidates for conjecture,” said Robert Zur Schmiede, head of economic development for Fullerton.
A closure of Fullerton plant would leave a big hole. An icon to the city for more than 50 years, the plant takes up 66 acres and even has a street named after it.
It is one of Fullerton’s largest employers with about 330 workers.
It is also one of its largest water utility customers, sewage users and recyclers, according to Zur Schmiede.
So far Kimberly-Clark’s closings have been on the retail side of its business rather than the industrial side, according to spokesman Dave Dickson.
The Fullerton plant primarily makes tissues that are sold to hotels, schools and office buildings. The company also uses the plant to distribute Huggies diapers and Kotex products.
Serving the company’s market west of the Rocky Mountains, the Fullerton plant’s closeness to Los Angeles and San Diego has strategic value, according to Dickson.
Most of Kimberly-Clark’s facility closings have gone toward consolidating diaper operations into three locations in Beach Island, S.C., Paris, Texas and Ogden, Utah.
Still, it isn’t entirely clear if Kimberly-Clark will stay in Fullerton.
“We’re always evaluating costs,” Dickson said.
The company has listed for sale 24 of its North American and European facilities as part of a cost-cutting plan that began in 2005.
In August it closed a Wisconsin diaper plant.
,Dan Beighley
INTERNATIONAL TRADE
Country to Watch:
Vietnam
It’s been a big year for Vietnam.
Orange County exporters got a boost this year when Vietnam joined the World Trade Organization in January.
Local numbers are hard to come by. But trade between the U.S. and Vietnam has been growing steadily since the signing of the U.S.-Vietnam Bilateral Trade Agreement in 2001,from about $2 billion to $10 billion in just five years, according to statistics from the Department of Commerce.
Vietnam’s accession into the WTO is set to open the doors even wider for trade with a country that’s growing at a rapid clip.
Vietnam’s economy grew 8.3% in the first nine months of this year, fueled by exports, foreign investment and increased consumer spending, according to World Bank statistics.
Industrial production grew by 10%. Manufacturing grew by 13%.
2008 is expected to see Vietnam grow 8% as well.
California is the biggest exporter to Vietnam by far, with exports totaling $198 billion for the 12 months ended June 30, according to data from the Department of Commerce.
That’s up 72% from a year earlier, when exports totaled $115 billion.
“Since January we have seen a jump in exports of about 80% nationwide,” said Hong-Fong Pho, who works at the Vietnam desk at the Commerce Department in Washington, D.C. “That’s part of the lift that came with WTO accession.”
The Commerce Department doesn’t break out figures for OC. Based on the state’s total, OC exports to Vietnam are estimated at about $20 million a year. The number is small compared to the county’s largest trading partners, but up from an estimated $12 million a year earlier.
Vietnam continues to buy big-ticket items from U.S. companies, such as airplanes, heavy machinery and manufacturing equipment, according to Pho.
The biggest exports are for electricity, telecommunications, oil and gas, pollution controls, airports and ports.
“You see that whenever we have large ticket items like that, the trade numbers spike significantly,” Pho said. “Infrastructure is where the need really is.”
Vietnam’s technology sector is ripe for investment.
Late last year, Intel Corp. said it’s set to invest $1 billion in Vietnam by building its largest chip assembly and testing plant in Ho Chi Minh City.
OC is in a position to benefit.
“It’s centrally located and it has the largest Vietnamese-American population in the U.S.,” Pho said, referring to Little Saigon. “Some of the industries that you have meet the demands and needs of a growing Vietnam. There’s a whole range of advantages.”
,Sarah Tolkoff
RETAIL
Pacific Sunwear of California Inc.
Wayward mall retailer Pacific Sunwear of California Inc. didn’t disappoint.
The Anaheim-based seller of clothes inspired by surfing and urban styles started the year without a permanent chief executive after the 2006 departure of Seth Johnson.
Director and retail veteran Sally Frame Kasaks filled in and got the permanent post this year.
She wasted no time moving on changes.
The biggest: In October, the company said it plans to sell off its struggling demo clothing store chain and close its fledgling One Thousand Steps stores selling shoes.
The move will leave Pacific Sunwear with its dominant PacSun chain, a seller of surf and skateboarding clothing.
Kasaks started to reverse troubles that plagued the teen retailer for the past two years.
PacSun was a bright spot for the three months ended Nov. 3, with sales at stores open at least a year rising 7.7%.
Kasaks set out three main goals for PacSun in 2007: to reconnect with customers, improve their shopping experience and increase sales of girls’ clothes.
“We are well on our way to accomplishing each of these goals,” she said during a recent conference call.
PacSun sponsored the U.S. Amateur Surf Team and is set to back the U.S. Amateur Snowboard Team. The snowboard move is part of PacSun’s expansion into clothes inspired by the sport, a new area for the chain. With the move, PacSun picked up some snow brands, including Vermont’s Burton Snowboards.
PacSun also refreshed stores to bring in shoppers. Changes included cutting the amount of clothes sold and bringing in new merchandising displays.
Some 50 stores will be revamped by year’s end, with plans to refresh another 75 next year.
Selling clothes for girls and young women also saw a boost from jeans under PacSun’s own Bullhead girls label.
The company runs 838 PacSun stores and 117 PacSun outlet stores. It has about 150 demo stores and nine One Thousand Steps stores, both of which have been a drain. Demo and One Thousand Steps lost $21 million during the three quarters through Nov. 3. The company estimates a charge of $48 million related to the sale or closure of the two chains.
,Jennifer Bellantonio
Mall to Watch:
South Coast Plaza
South Coast Plaza had a big year, as expected.
Orange County’s largest mall, by both space and yearly sales, is expected to end the year with $1.5 billion in revenue.
The center also marked its 40th anniversary this past year with a $30 million makeover.
The recently finished makeover added a glass elevator, new lighting and landscaping and automatic doors. South Coast Plaza also opened popular stores, including two H & Ms.;
In October, the shopping center held a monthlong Italy promotion with the Italian Trade Commission. The promotion,two years in the making,helped boost business for South Coast Plaza’s 30 or so stores and restaurants that sell Italian goods and food.
One of the few enclosed malls in Southern California, South Coast Plaza continues to attract international tourists and locals.
Another coup for South Coast Plaza this year: It played host to a group of international journalists and travel bookers, who were attending the travel industry’s International Powwow convention, held in Anaheim for the first time this past year.
,Sherri Cruz
FINANCE
Person To Watch:
Raymond Dellerba
Chief executive,
Pacific Mercantile Bank
After Ray Dellerba’s Costa Mesa-based Pacific Mercantile Bank hit the $1 billion asset mark in 2006, we figured it was ripe for a buyout.
That hasn’t happened.
But 8-year-old Pacific Mercantile continues to be at the top of people’s lists of buyout candidates.
When it comes to local bank acquisitions, regional strength can go a long way.
The last local bank to grow to more than $1 billion in assets was Irvine-based Eldorado Bank, which was bought in 2001 by California Bank & Trust, a unit of Zions Bancorp in Salt Lake City.
“Major banks tend to acquire smaller institutions to fill void market areas or expand earning asset bases that tend to shift with demographic trends,” Dellerba, chief executive of Pacific Mercantile, said last year.
As the county’s largest local bank, Pacific Mercantile still makes an attractive prize for anyone looking to gain a foothold in the county.
Pacific Mercantile is feeling the effects of an industrywide increase in bad loans, though the impact on it has been small.
For the third quarter, the bank said its loans in default or close to defaulting were less than 1%, or $6.2 million, of its portfolio. That’s up from $781,000 a year ago.
Banking’s slowdown, fueled largely by fallout from the mortgage crisis, could fuel more deals, according to some observers.
Pacific Mercantile’s market value has declined about 30% in the past three months to about $140 million.
It is one of a handful of publicly traded local banks in the county.
The bank operates eight branches in Southern California. Four are in Orange County, two in Los Angeles County, one in San Diego County and one in the Inland Empire.
It targets businesses with $500,000 to $150 million in sales for loans.
Like all other banks, Pacific Mercantile is fighting to add deposits.
It got its start as an Internet bank in the late 1990s during the technology boom. It weathered the recession that was the aftermath of the 2001 technology bust.
Dellerba is a 30-year veteran of the banking world and earlier was chief operating officer of Eldorado Bank.
Company to Watch:
Orange County Teachers
Federal Credit Union
Orange County Teachers Federal Credit Union, the county’s largest credit union,and second largest financial institution of any type based here after Newport Beach-based Downey Financial Corp.,did what we thought in 2007.
It played a key part in starting the first credit union aimed at Hispanics here.
Santa Ana-based Orange County Teachers Federal Credit Union helped start Comunidad Latina a year ago with hopes to fill unmet demand in Hispanic banking.
“We’re growing as we expected,” Comunidad Latina board member Jose Lara said. “We want to take things slow at first.”
After one year, Comunidad Latina still is tiny at $1.7 million in assets, Lara said.
Growth has averaged about 30 members a month and personal and auto loans have
totaled about $400,000 for the year, he said.
The slow growth is deliberate to ensure the union is handling its operations properly, according to Lara.
Comunidad Latina was two years in
the planning before it opened, hoping to
tap into the more than 250,000 Hispanics
in Santa Ana.
Hispanics represent a third of all of Orange County residents.
Comunidad Latina initially brought on Luis Valerio to be its chief executive. But after he left to pursue another job, it hired Terry Agius.
Agius, formerly with Western Corporate Credit Union, is slated to take over by the end of the year.
So far, Comunidad Latina’s biggest challenge has been in boosting deposits, according to Lara.
To promote itself, the not-for-profit puts ads in Santa Ana’s local free papers Miniondas and Rumores.
To be eligible for membership in the credit union, you must live in Santa Ana.
Comunidad Latina draws on the support of OCTFCU for accounting and lending help.
Other financial backers of the credit union are Lake Forest-based Eagle Credit Union; Brea-based Evangelical Christian Credit Union; Orange-based Health Associates Federal Credit Union; Santa Ana-based Orange County’s Credit Union; and La Habra-based South Western Federal Credit Union.
Growth at OCTFCU, with assets of about $6 billion, was healthy for 2007 but might pull back some in 2008, according to Chief Financial Officer Erin Mendez.
The credit union plans three branches to open by the end of the year to bring its total to 22.
Next year the credit union plans to open two more.
2007 deposits grew 10%, or by $568 million, as its membership grew 6.5% to 370,000 people, she said.
In OCTFCU’s lending department, about $542 million was made for mortgages, personal lines of credit and auto loans this year.
Next year, the credit union projects it will make about $487 million in loans.
“We’ve had little write-offs this year, but next year we could see more,” Mendez said.
,Dan Beighley
GOVERNMENT
Issue to Watch:
Transportation
Really, how could you go wrong any year picking transportation as the issue to watch in Orange County?
We picked the issue a year ago on the heels of the renewal of the Measure M sales tax through 2041. As expected, the Orange County Transportation Authority spent much of 2007 plotting out $12 billion worth of projects for the next three decades.
In November, OCTA detailed a plan to offer bonds backed by renewed Measure M money, which isn’t set to start flowing until 2011.
The authority said it needs $377 million for initial projects through 2011, including $300 million for freeways, $71 million for transit projects and $14.4 million for roads.
So far, the renewal of Measure M hasn’t brought a revival of OCTA’s controversial and ill-fated Centerline light-rail project, which faded two years ago.
Some critics of extending Measure M worried that it would embolden transportation planners to resurrect the $1 billion, 9.3-mile light-rail system.
The talk from OCTA in 2007 has been focused on freeways, roads and improving bus service.
At the start of the year, the authority got a new chairwoman, Orange Mayor Carolyn Cavecche, who’s a rail critic focused on fixing roads and buses.
Major work on the Garden Grove (22), Riverside (91) and other freeways played out in 2007.
In other transportation news, an October hearing on extending the Foothill (241) Toll Road from Oso Parkway to the San Diego (I-5) Freeway at San Onofre was put off by the California Coastal Commission.
The commission could take up the controversial issue in February.
The project is backed by most local political leaders and has won some key regulatory approvals. But it is opposed by surfers, environmental groups and the state attorney general, who have sued to stop it.
,Michael Lyster
Politician to Watch:
Loretta Sanchez
Loretta Sanchez got her first taste of majority power in 2007.
After 2006’s vote that ousted the Republicans from Capitol Hill, Sanchez and her fellow Democrats took power for the first time since she entered Congress in 1996.
She’s now chairwoman of the House Subcommittee on Border, Maritime and Global Counterterrorism.
In February, Sanchez made news for quitting the Hispanic Caucus, accusing its chairman of being demeaning to women after he allegedly gossiped about her being a “whore.”
The episode made for fodder for Comedy Central’s Stephen Colbert, who did a segment on it in his “Colbert Report” TV show.
Early in the year, Sanchez got to fill in for Speaker Nancy Pelosi for a few hours, presiding over the House for a couple of votes on non-controversial items.
In April, Sanchez was in Vietnam, where she tried to meet with relatives of dissidents.
A month later, she backed a measure to no longer exempt the Foothill (241) Toll Road extension from state environmental laws, adding a regulatory burden to the controversial project.
In August, six protesters were arrested at Sanchez’s Garden Grove office after demanding that she vote to cut off funding for the war in Iraq. Sanchez, who opposed the Iraq war, said she instead was working on a redeployment of troops.
As far as actual legislation, 2007 hasn’t been a banner year for Sanchez. In June, the House passed legislation of hers giving Orange County more money to reclaim wastewater and study groundwater issues.
