SPACELAND RANCHERS:
Boeing Planning Expansion of Surf City Business Park
By DANIEL D. WILLIAMS
Aerial shot of Boeing’s Huntington Beach business park, inset of expansion land: 33 acres of industrial space planned, on top of 80 already developed
Boeing Co. is known for satellites, 747s and fighter jets. But one part of the aerospace company is decidedly down to earth.
Boeing Realty Corp. manages upward of 6 million square feet of real estate in northwest Orange County and Long Beach. And a big chunk of the company’s land is on the block for redevelopment.
“From the Irvine Ranch up through the San Fernando Valley, we pretty much have all of the quality infill spots,” boasted Phil Cyburt, president of Long Beach-based Boeing Realty. “We bought much of this land 40 to 60 years ago, and communities have grown up around these sites.”
By virtue of Boeing’s shopping spree in the past decade,buying McDonnell Douglas Corp., Rockwell International Inc.’s defense arm and the satellite business of Hughes Electronics Corp.,the Chicago-based company has amassed a sprawling land portfolio.
Boeing Realty manages the company’s real estate empire, which includes corporate facilities as well as surplus land for redevelopment.
In all, Boeing Realty counts 121 million square feet of office, industrial and vacant space nationwide. That’s a couple million more square feet than Sam Zell oversees as chairman of Chicago-based Equity Office Properties Trust, the nation’s largest real estate investment trust.
While Boeing has flown under the radar, so to speak, it has several big projects in the works:
n PacifiCenter at Long Beach, a 260-acre business campus that is expected to create 15,000 jobs and add about $1.6 billion to the regional economy. The project calls for 5 million square feet of development.
n Harbor Gateway Center in Los Angeles, a 170-acre business center with more than 3 million square feet in planned development.
n Pacific Gateway in Seal Beach, a 44-acre business park.
n The second phase of McDonnell Business Centre in Huntington Beach, where 33 acres of industrial development are planned.
Unlike, say, The Irvine Company, Boeing Realty doesn’t put up, own and manage buildings. The unit’s mission is to sell off excess company land,at a profit. Boeing Realty’s strategy is to lay plans for its land and get development approvals before selling it off.
Boeing Realty’s time frame for a redevelopment project, including a sale: three years.
“As soon as we can get out, that’s our strategy,” Cyburt said. “Most companies view real estate as an investment. But we are in it by the wake of our operations and our size.”
But Boeing Realty sees itself like the Irvine Co. in one way,by trying to boost the value of land through planning.
“We studied their model,” Cyburt said. “We even think of ourselves as ranchers.”
Boeing even has tapped a couple of former ranch hands as consultants: Gary Hunt and Bill McFarland, two former longtime Irvine Co. executives.
Hunt, who runs his own consultancy, helps Boeing Realty navigate the murky area of entitlements. McFarland, a director at Newport Beach real estate investor Cornerstone Ventures Inc., weighs in on housing developments.
Boeing Realty’s biggest push in OC is the expansion of the McDonnell Business Centre. The first phase of the park included roughly 80 acres and 1.8 million square feet of office and industrial space.
Completed in 1998, the site near Bolsa Chica Street and Bolsa Avenue includes a 494,000-square-foot facility that serves as a regional headquarters for Japan’s Sharp Electronics Corp. It’s also home to a 282,000-square-foot regional base for Japan’s Konica Corp.
For the second phase, Boeing Realty has planned out 33 acres zoned for 600,000 square feet of development. The land is divided into parcels of up to 4.5 acres and is geared toward light manufacturing.
“We believe it’s the last of the major land opportunities for West Orange County,” said Bob Goodmanson, a broker in the Anaheim office of CB Richard Ellis Services Inc.
Goodmanson, along with Brian DeRevere, also of CB’s Anaheim office, are marketing Boeing Realty’s Surf City project.
“In all, we’ll see eight to 10 buildings for phase II,” DeRevere said.
There are no deals in place yet for the land. Interest is strong, according to De-Revere, who said he saw a pickup in the second quarter.
Work on sewer lines and other basics is under way at the site. Before that, a 350,000-square-foot building,a reminder of the area’s aerospace past,was razed.
“It was not a concrete tilt-up building,” DeRevere said. “It was on older metal building. It’s important to note that it was a ‘surplus’ building.”
Boeing Realty counts 31 workers, including 19 at its Long Beach base. The company relies on CB and other hired hands for much of its work. At the Pacific Center in Long Beach, it has a team of 40 consultants.
Boeing Realty has teamed with CB as well as Trammell Crow Co. on other projects across the U.S.
Most of Boeing Realty’s land is in Southern California, the Seattle area, St. Louis and Wichita, Kan. The portfolio is valued at $9 billion.
The push to get the most out of Boeing’s land intensified after Sept. 11, according to Cyburt. The terrorist attacks spurred a big drop in jetliner orders and massive job cuts at Boeing.
“We are committed to optimizing our assets, reducing our asset base and helping make this company more efficient,” Cyburt said.
Boeing is more involved in the redevelopment of its land than other big corporate landowners, according to Steve Case, senior managing director of CB’s OC operation.
“Most corporate real estate groups want to rid themselves of property in bulk, just to get it off the books,” he said. “Boeing takes it a step further by assuming some risks.”
Most corporate landowners don’t grasp the value of their holdings, Cyburt contends.
“Some buyers take advantage of that,” he said. “We’re just trying to level the playing field. We want to make sure we’re not under pricing our assets.”
Cyburt, a former professional baseball pitcher, lives in Corona del Mar. The left-hander spent six years bouncing around minor league affiliates of the Pittsburgh Pirates and Oakland A’s before giving up on his boyhood dream.
After baseball, Cyburt returned home to OC and studied at Chapman University, earning a bachelor’s in finance and accounting.
From there, Cyburt went to work as a broker with Lee & Associates Commercial Real Estate Services Inc., and later as a director of development with Tishman Realty & Construction. From there he went to work as a property manager for McDonnell Douglas.
When Boeing bought McDonnell Douglas in 1997, Cyburt joined Boeing Realty. He became president of the real estate arm the following year.
Under Cyburt, Boeing has redeveloped more than 7 million square feet of space and made another 1,000 acres of land available to developers.
As head of the company’s real estate operations, Cyburt oversaw Boeing’s move from Seattle to Chicago last year.
Boeing Realty’s redevelopment strategy varies by region. It has properties in Georgia and Florida where it plans to sell off land in bulk, without the meticulous planning and spade work it does locally, Cyburt said.
The difference here is the growing scarcity of land. “They’re not making anymore of it,” he said.
Irvine Co. Chairman Donald Bren “has done a great job of leveraging that resource,” Cyburt said. “If you have land in a region where land is dwindling, there’s a lot of value to reap.”
In many cases, Boeing Realty has to clear its land first. In Long Beach, it plans to bring down 6 million square feet of former aerospace facilities to clear the way for $1 billion worth of new development.
In Anaheim, Boeing Realty manages 1.5 million square feet of space used by an arm of Boeing’s Seal Beach-based Space and Communications unit.
The Anaheim land could offer redevelopment potential down the road, Cyburt said. But for now the Anaheim operation is busy with defense work.
Last week, Boeing won an Army contract for battlefield radios that could be worth up to $2 billion with work set to be done in Anaheim.
