Firm Emerges from Anonymity : Family Quietly Builds Development Empire

When Art Birtcher was a junior at Claremont Men’s College in 1960, his father, Fayette, summoned him and his older brother, Ron, to a special luncheon meeting. His father’s “important” news, Art Birtcher remembers, was that the family’s Orange County real estate development business finally was large enough that they could afford lunch “from time to time” on the company expense account.

At 45, Art Birtcher has no more worries about the cost of a restaurant lunch.

The family-owned company, known simply as Birtcher, has quietly developed into one of the largest firms of its kind in Southern California. In the last eight years, the Laguna Niguel-based firm has developed more than 34 million square feet of buildings and currently has about $1.1 billion in additional development under way.

Ranks Among Top Five

Despite its public anonymity, Birtcher currently ranks “at least in the top five” of commercial builders in Southern California, according to Bob Reicher, director of Orange County operations for the Sanford R. Goodkin Research Corp., a real estate industry consultant.

Now the private company is coming out of the closet as it aggressively expands a fledgling investment division, which company officials hope will eventually raise upwards of $1 million a day.

The Birtcher investment division’s first public investment fund, formed in partnership with Damson Properties, is expected to sell out in September after having attracted about 30,000 investors and acquired $95 million worth of buildings. This year alone the division expects to buy $250 million worth of real estate.

As part of Birtcher’s new business game plan, the firm is aiming for larger development projects, an ambition the firm’s family owners acknowledge can be assisted by making the company more visible.

But in the new drive to expand their business, the Birtchers are determined not to lose the single-mindedness that many believe to be their company’s most important asset.

Assuming Higher Profile

“The strength (of the company) lies in the family,” said Art Birtcher, who shares ownership and control of the company equally with his 53-year-old brother Ron, the firm’s other general partner.

The Birtchers are not interested just in corporate expansion, said one company official. Rather, family members “want to be intimately involved in every project . . . . They like to get out and kick the dirt,” said Birtcher President Donald B. Talcott.

As a first step toward assuming a higher profile, the company last year changed its name from Birtcher Pacific to Birtcher in order to emphasize its national status, although the company has actually been operating on a national scale since 1970, when it entered a joint venture with Southern Pacific Railroad to develop the railroad’s extensive land holdings in 22 states.

Birtcher currently has 32 active projects nationwide, about half of them in California, with a host of financial partners. Among the largest projects are redevelopment of the Los Angeles Wholesale Produce Market in downtown Los Angeles and development of a 15-acre complex of office buildings, shops, theaters and a hotel in North Hollywood to serve as a new headquarters for the Academy of Television Arts and Sciences.

Birtcher developments run the gamut from single-story high-tech industrial parks, such as the $34-million Birtcher High Technology Center on the former site of the Holly Sugar factory in Santa Ana, to soaring office towers and hotels, such as the planned $130-million Lakeshores Towers hotel and office building development in Irvine.

Members of the Birtcher family cut their teeth on the development of specialty wholesale marts. In 1974 they constructed the mammoth, blue-hued Pacific Design Center in West Hollywood, familiarly called “The Blue Whale,” which houses 190 showrooms for fabric, furniture and tile manufacturers.

Generate Future Income

The high volume of construction is especially significant because, unlike “merchant builders” who sell the structures they build, Birtcher builds office towers, industrial parks and other properties as a sort of family legacy, to keep and hand down from father to son. The ultimate goal of the company, family members agreed, is to acquire, develop and manage a portfolio of real estate properties that will generate rental income for Birtcher children and grandchildren.

Birtcher currently manages about $600 million in commercial, industrial and residential property.

“If we were just to stop (taking new) business right now and complete what we are doing, we would be managing $2 billion worth of assets in which we have a substantial ownership interest,” said Art Birtcher. Most of the company’s growth, he added, took place in the last decade under his and brother Ron’s direction. Their father retired from the firm in 1965.

The company is considered remarkable within the building industry as a tight-knit family organization that over the span of four generations has emerged without fanfare as a major regional force in commercial and industrial construction.

Fiscally Conservative

The company has been fiscally conservative, refusing to borrow against any of its real estate holdings to raise money to finance new projects. It has been able to avoid doing so because of its enviable ability to attract partners willing and able to provide necessary building capital.

Jim Bell, vice president and sales manager of Coldwell Banker’s commercial division in Newport Beach, said he finds it remarkable that Birtcher has been able to raise financing for increasingly large and more costly projects without undertaking a public stock offering.

As an alternative to going public or borrowing against its real estate holdings, Birtcher has developed strong ties with major organizations, such as Mutual of New York and U.S. Life and Equitable, which bring financing into the deals as venture partners.

But analysts and brokers in the real estate industry say that Birtcher has profited most by being an entrepreneurial risk-taker when it selects projects to build. And it has swayed others with its success.

Good Track Record

Commercial brokers recall with admiration how the Birtchers, largely on the basis of their track record in predicting emerging markets, persuaded tenants at the Pacific Design Center in Los Angeles to open satellite showrooms at a brand new complex, called the Design Center South, in Laguna Niguel.

“From a commercial point of view (the Design Center South) is in the middle of nowhere,” said Tony French, an Irvine developer. But, he added, the Birtchers succeeded in convincing the interior decor wholesalers that what they saw as an out-of-the-way location would soon become the center of Southern California development. Less than a year since the first phase of Design Center South opened, its 100,000 square feet of showroom space is about 98% leased. Construction is scheduled to begin in July on a 100,000-square-foot expansion, targeted to open in March of next year. That is already 20% pre-leased.

Brea-based real estate analyst Al Gobar called the Birtchers “independent thinkers” who get rich by refusing to follow the herd. “They have the guts to go into an area that’s untested,” he said. On the flip side, he added, the Birtchers have “the self-confidence to say no” to a project proposed in an area already saturated by developers who have pushed land prices too high to let a newcomer make a satisfactory profit.

‘Like Diversification’

“We do like diversification,” said Ron Birtcher, observing that recently the company obtained franchise rights to build and operate 31 Carl’s Jr. fast-food outlets in Houston and Fort Worth.

Another Birtcher trademark, Talcott said, is that they do not embark on construction ventures for tax shelters. “Throughout my association with them they always look at the economic viability of a project before income-tax considerations,” he said.

Over the years the Birtchers have succeeded remarkably well in keeping private their lives and business affairs. Eschewing the social pressures of Newport Beach, Art and Ron Birtcher have chosen to raise their families in luxurious homes they have built within a gated, six-acre family-owned compound in San Juan Capistrano, next door to their parents’ home. Also sharing the enclave is Art Birtcher’s stable of prize-winning hackney ponies.

Family Dynasty

The brothers trace the Birtcher building dynasty to grandfather Justus, a carpenter, who came to Orange County from Philadelphia in 1908. His son, Fayette, became a developer in 1939, joined by his own sons, Ron in 1953 and Art in 1961. (The company has no connection to El Monte-based Birtcher Corp., a maker of medical instruments that was founded by a distant relative.)

There is no chief executive at Birtcher. Last year the company acquired its first president in its former chief financial officer, Donald Talcott, who is not a family member. Talcott said it is his job to keep in contact with the Birtchers’ entrepreneurial partner-developers in Orange County, Houston, Dallas, Washington, Seattle and Palm Desert.

By attending to administrative details and representing the Birtchers in sometimes tedious negotiations, Talcott said, he enables the family members to devote more time to favorite projects and to make the best use of their individual talents.

According to Talcott, Ron and Art never enter a real estate deal separately. “I’ve seen transactions they haven’t done because one of the brothers doesn’t think it’s good,” he said. “They do not have any real estate project except what they are both in and have jointly approved.”

As a privately held firm, Birtcher does not make public its earnings or revenues. Since 1979, the company has been based in a two-story garden office building in Laguna Niguel, within view of cattle grazing on rolling hills and far from the beaten path of the county’s other first-string developers, most of whom live and work in Irvine or Newport Beach.

Reflecting Birtcher’s new image consciousness, the firm intends in three years to move its headquarters into one of the high-rise buildings it is developing in Irvine.

- Redevelopment of the Los Angeles Wholesale Produce Market in downtown Los Angeles.

- “The Academy” complex--a new headquarters for the Academy of Television Arts and Sciences--including offices, shops and a 300-room hotel on 15 acres in North Hollywood.

- $34-million Birtcher Orange County Tech Center in Santa Ana on the former site of the Holly Sugar factory.

- $130-million hotel, high-rise office building complex in Irvine.

$70-million hotel, office and research and development complex on 40 acres in La Palma.

- A 495,000-square-foot office park at Lake Oswego, Ore.

- Six one-story office buildings valued at $11.4 million in Lanham, Md.

- Construction and operation of 31 Carl’s Jr. franchised restaurants in Houston and Fort Worth, Texas.