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Irvine Co., Fluor Halt Feud Over Rival Plans

Times Staff Writer

A battle among Irvine developers, triggered by Fluor Corp.'s plans to develop its prime acreage, has reached a truce, at least for the moment.

The battle pitting Fluor Corp. and its partner, Trammell Crow Co., against forces led by the Irvine Co. and Koll Co. was proving too costly: Both sides feared that their public and back-room sparring could lead to new limits on corporate development in the city.

Although disagreements remain, the new cooperation between competing companies is reflected by a task force formed under the auspices of the Industrial League of Orange County, a 700-company county business group.

Development Rights Discussed

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Senior managers from about 10 large Irvine-based companies have met about 14 times so far to discuss what rights companies have to develop their land and how to do it within Irvine’s strict controlled-growth policy.

So far the group has reached no consensus, but it recently collected $250,000 to commission a Seattle consulting firm to study how much development Irvine ultimately can absorb and what traffic improvements are needed.

Members of the group say they frequently split on the issues, but at least they continue to talk. The Irvine Business Complex task force, a committee appointed by the city, also is studying the corporate development issue.

Irvine City Council members, who were heavily lobbied by opposing interests last spring, say they were relieved when the angry businessmen agreed to form a task force to find a solution.

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Feuding ‘Doesn’t Help’

“It doesn’t help to have a feuding business community,” said newly elected Irvine Mayor David Baker. Baker said he was happy when the furor died, but “I question whether there will ever be a consensus.”

At issue is how Orange County’s fastest-growing city goes about controlling commercial development when it seems every property owner wants to build and build now. And the stakes are high for Fluor, which has been selling its real estate across the country to raise cash. Whatever Irvine decides to do about Fluor’s proposal will affect billions of dollars worth of future construction in Irvine.

The controversy arose last March when Fluor, a giant engineering and construction company, announced it not only was selling its headquarters to Trammell Crow Co., the nation’s largest commercial developer, but participating in a plan to build office buildings, hotels, restaurants and theaters. The 162-acre Fluor site next to the San Diego Freeway is considered among the most valuable in Southern California.

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Because competition to develop commercial property under Irvine’s tight growth controls is fierce, other Irvine company executives objected to Fluor’s plan. And the business community, usually united on major local issues, began choosing up sides for a battle.

Among the city’s growth controls is a limit of 15 million square feet of office space in the first phase of commercial development surrounding John Wayne Airport. This ceiling has created fierce competition among developers for permission to build--and to build before a competitor can.

Insists on Rights

A 1982 city ordinance gave each company that built its headquarters in Irvine the right to expand for corporate purposes. But Fluor, the first to file commercial development plans for its headquarters land, insists it has the legal right to build whatever it wants on its land under the zoning laws.

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Irvine City Atty. Roger Grable disagrees. He and other city officials say that if Fluor wants to change the way it uses its corporate development rights, it must ask for an exemption, or wait in line behind 16 other companies that have commercial development plans under review.

Fluor executives privately accused the Irvine Co. of pressuring not only the council but other businessmen and consultants to oppose Fluor’s development plans. The Irvine Co., the county’s largest private landowner and the owner of the bulk of the city of Irvine’s undeveloped land, denies pressuring anyone. Officials insist they were only concerned about the “horrendous traffic implications,” of Fluor’s future development and are not opposed to the project.

Council member Miller said that after the Irvine Co. raised the traffic issue, a Trammell Crow representative went to the city transportation commissioner and began “raising hell, trying to stop the Irvine Co.'s Westpark project.” Westpark is a 5,200-unit planned community scheduled to be built across the 405 Freeway from Fluor’s site.

In recent weeks, however, opposition to Westpark from the Fluor/Trammell camp evaporated, and rumors of deals circulated. Fluor Chairman David S. Tappan Jr. sent a letter dated May 16 to Councilman David Sills, supporting Westpark. Tappan wrote that the provisions for traffic were compatible with the plans for the Irvine Business Complex, and that Westpark would “provide much-needed housing” for current and future employees in Irvine.

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While both Fluor and Irvine Co. officials deny that any deals were made to end the opposition to each other’s projects, a Fluor spokesman said his company decided a “conciliatory attitude” would work better.

‘Equitable Solution’ Seen

Tappan said the task force is “working in a cooperative spirit, and we believe an equitable solution will be reached in the future.”

Gary Hunt, assistant to the chairman of the Irvine Co., agreed that the task force discussions have been productive. He said initial studies of Fluor’s proposal show that “traffic is no longer an issue as far as we’re concerned.” Hunt said the Irvine Co. is not the only company concerned with the development issues raised by Fluor’s plan. “Our principal concern is that the process be followed.”

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The Irvine City Council, with its traditionally pro-business bias, was surprised to find itself in the middle of a nasty, business-related controversy. After debating the rules governing corporate development for nearly five hours last March, council members Sally Anne Miller, David Baker and David Sills voted for a six-month study. Members Barbara Wiener and Larry Agran voted against the delay. Agran said the council action “deep-sixed” Fluor’s plan because any delay might jeopardize such a large project.

“Everybody wants what they want and they want it now,” said Miller. She said she has “a completely open mind” on the issue, but added that she has a “gut feeling we’re probably going to get sued either way.” She said she expects Fluor and Trammell Crow to sue if the development is held up--and other corporate landowners to sue if the project is approved.

“If we put (Fluor) to the head of the list, what’s going to happen to the 16 other companies (on the list)?” Miller said. “They are going to come in and kill us.”

Keeps Low Profile

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Keeping a low profile in the dispute is Trammell Crow’s Orange County managing partner, William Lane Jr., who said that no matter what the council decides in the near future, the purchase of Fluor’s distinctive headquarters is an excellent one.

Trammell Crow and First Winthrop Corp., a Boston investment banking firm, recently formed a partnership to buy, manage and develop Fluor’s property.

The sale, expected to close before July 31, is a key element of Tappan’s business strategy of guiding the company through rough times. Fluor is due to receive $305 million when escrow closes and another $35 million next July after the development issues are resolved.

In recent years, the worldwide engineering and construction industry has been in a slump. Fluor, which earned $1 billion on revenues of $4.4 billion in 1982, lost $72 million on revenues of $2.1 billion in the first half of fiscal 1985. Since 1983, Fluor has sold $935 million worth of assets to raise cash. It is also leasing out a portion of its headquarters building to others.

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