Headquarters Sale by Fluor Is Completed : Dallas Developer Acquires Complex in $340-Million Deal
After eight hours of signing stacks of legal documents, Fluor Corp. officials ended a year of negotiations Wednesday and completed the sale of the company’s distinctive aquamarine headquarters building and surrounding land to Trammell Crow Co. of Dallas.
The $340-million purchase of Fluor’s Irvine headquarters is the biggest transaction to date for Trammell Crow, one of the nation’s largest commercial real estate developers. Trammell Crow is buying the land in partnership with Winthrop Financial Associates, an affiliate of First Winthrop Corp., a Boston-based investment banking firm.
“This sale is a major milestone in the real estate phase of our asset redeployment plan announced over a year ago,” said David S. Tappan Jr., chairman and chief executive of the giant engineering, construction and natural resources company. “Fluor looked long and hard for just the right company to develop this property to its full potential.”
$225 Million After Taxes
Tappan said the sale will generate after-tax cash proceeds of $225 million in 1985, “99%” of which will be used to reduce debt. Fluor received $305 million at the close of escrow. The company is scheduled to receive the remaining $35 million on or before July 31, 1986, contingent on the City of Irvine’s approving Trammell Crow’s plans to develop the 122 acres surrounding Fluor’s headquarters.
“We plan to build the most prestigious mixed-use complex on the West Coast, if not the United States,” said William Lane Jr., managing partner of Trammell Crow’s Orange County office. Lane said that Fluor’s strategically located property is “truly a landmark.” He said building retail space to serve the surrounding business community is a top priority, but offices and a hotel are also being planned.
Tappan said Fluor’s plans to sell and develop its Irvine land faced “a somewhat bumpy road with a few misunderstandings about development rights.” When Fluor’s development plans were unveiled last March, they created a controversy in the City of Irvine. Some City Council members and planners believe that current zoning laws prohibit commercial development on land designated as a corporate headquarters site. The Irvine Co. and the Koll Co., which are building large commercial projects in Irvine, also objected to Fluor’s plans.
However, opposition to Fluor and Trammell Crow’s development has subsided since representatives from Irvine’s largest companies began meeting weekly to discuss development in the Irvine Business Complex, a 2,500-acre area which includes the Fluor site. Irvine city officials say they are trying to work out some sort of compromise because Fluor is not the only corporate property owner planning to build a commercial development on its land.
Fluor’s attorneys contend that Fluor, which retains 6.56% interest in any future development of the land, has the right to build anything it wants on the property. Fluor also has less than 1% interest in the existing buildings.
Tappan expressed confidence that zoning questions raised by the City of Irvine would be resolved “in this calendar year.” The City Council is scheduled to discuss the zoning laws governing Fluor’s development plans in early fall.
Fluor purchased most of the land for $3.4 million about 10 years ago. Following the sale, Fluor leased back 100% of the existing buildings for $30 million a year. Fluor has sublet about 300,000 square feet of space to other companies and another 300,000 square feet is available for rent.
