Restructuring Yields a Clear No. 2 at The Irvine Company
Michael D. McKee, Vice chairman, chief operating officer
The Irvine Company
By DANIEL D. WILLIAMS
After a two-year shakeout, Newport Beach-based The Irvine Company has settled on its executive hierarchy.
Mike McKee has emerged as the official and undisputed second-in-command to Chairman Donald Bren,a position the Irvine Co. had not filled since Tom Nielsen stepped down as president in January 1991.
In the two-year span, several prominent players left the company, including Richard “Dick” Sim, who retired in July after 20 years as head overseer of Bren’s investment properties. Other executives were promoted and several new recruits were given top posts, including former Santa Ana mayor Dan Young, who now heads the company’s entitlement unit.
But as vice chairman and chief operating officer, McKee’s star now shines the most brightly next to Bren.
McKee’s ascendancy is all the more interesting because he is not a real estate developer, strictly speaking. He’s a lawyer.
But McKee, a former Latham & Watkins attorney who turned 56 on Jan. 2, earned his real estate stripes in the late ’70s and early ’80s, when he worked on some of the earliest real estate investment trusts in the country.
As a hired gun from Latham, he worked closely with Bren on a number of Irvine Co. initiatives, including the Irvine Apartment Communities initial public offering in 1993. In 1994, McKee was brought in-house as the Irvine Co.’s chief legal officer and Bren’s personal attorney for business deals.
McKee also was instrumental in the deals that enabled Bren to buy out minority shareholders to become 100% owner of the company, as well as in Bren’s 1999 buyback of the outstanding shares of IAC.
McKee increasingly has taken a larger role in the company, especially on the financial side. He became chief financial officer in 1996. He now is the overseer of all non-operational functions of the company,legal, finance and investor, government and community relations. As vice chairman, he certainly has clout over operations, as well,he and Bren form a two-person operations management committee.
Close company observers contend that McKee’s lack of experience in the “development trenches” hardly is a drawback in his current job,Bren (himself a builder) and McKee have plenty of seasoned developers at their command.
Moreover, they note that McKee’s background in real estate law and finance are important to a company that is increasingly an asset manager, with a diverse and growing portfolio.
The Irvine Co. in recent years has been looking “beyond the ranch”,to Los Angeles, San Diego and Silicon Valley,to acquire new assets. It’s placing more emphasis on asset management as opposed to new development.
But the faith Bren has placed in McKee comes from more than mere competency, sources say: There’s also a chemistry between the two men. McKee’s even-tempered approach mirrors Bren’s own, and reflects a new breed of Irvine Co. executive that is more organization-oriented and also more publicity shy than some gung-ho managers of the past.
“(Bren’s) not a bomb-thrower. He doesn’t swear. He’s very much a gentleman, and Mike’s like that, too,” said one observer.
Like Bren, McKee shuns the spotlight. When told he had been named a finalist for businessperson of the year, he declined to discuss himself, in-stead focusing on the company and its prospects.
“Well, we have a terrific team in place,” he said.
“I’m thankful for our board of directors, who predicted the slowdown in the economy as early as November 2000,” McKee said. “As it turned out, Orange County faired better than most of the country, and especially better than Northern California.”
Last year, the company geared down its new developments and acquisitions, but projects already in the pipeline resulted in 2 million square feet of vacant space in the Irvine Spectrum, consisting primarily of two-story, tilt-up R & D; product. Also, the Irvine Co. lowered lease rates in many of its facilities.
But not all the news was negative, according to McKee.
“We did have some good news. We received an improved rating from Wall Street,” McKee said.
The company’s rating went from BBB+ rating to an A- rating during 2001.
For 2002, the outlook is a simple one,maintain a conservative approach. In 2001, the company retrenched, pulling back from an acquisition mode that saw growing portfolios in Silicon Valley and Los Angeles, and focused more on the core business within Irvine Ranch.
“In 2002 we will stay very prudent and conservative. Some say the recovery will be early in the year, some say it will happen later. We’re not that smart, so we’ll be prepared either way,” McKee said. “We’re in a ‘study-as-you-go-mode.’ This is not a time to take great risks. Here, our philosophy remains cautious until we see clear signs for consumers’ and corporations’ demands for real estate.”
The obvious question: Will McKee ever succeed Bren as chairman of the company, or at least as chief executive?
That remains a guessing game. Many close observers speculate that Bren, a vigorous 69, intends to never retire, which means that he is likely to outlast his current crop of senior managers,McKee and the others could retire before Bren steps aside.
