Prestige Address : Newport--Prospering on a Name

Geril Muller served so many flaming dishes at his elegant Newport Beach restaurant that the Fire Department tried to ban his steak Diane--not to mention his cherries jubilee.

But he obtained the required permits, and for more than 10 years, when the elite of Newport Beach got hungry, they drove their Mercedes and Maseratis to Muller’s posh eatery, Ambrosia. Muller would uncork $2,000 bottles of wine and treat customers to five-hour, seven-course meals.

When his rent was about to double two years ago, however, Muller pulled up stakes and took his restaurant to nearby Costa Mesa. There, where a mini-urban hub is supposedly developing, his business folded in March, less than one year after opening. In Newport Beach, Ambrosia annually did $2 million in business, but just a few miles outside the comfortable confines of Newport Beach, Muller said, “We lost $1,000 a day just for coming to work.”

Snob Appeal

Enter the snob factor. With Newport Beach as a business address, Muller prospered. Without it, he lost his shirt. Muller is convinced that Ambrosia’s ill-fated jump to Costa Mesa--away from many of its corporate clients--would be like moving Ma Maison to Monrovia.

Newport Beach--where success is commonly measured by the length of a person’s limo--has clearly evolved from an upscale resort town into a community that ranks as a full-fledged corporate status symbol. A growing number of companies--many of them branches of major corporations--are calling Newport Beach home. Resident corporate chiefs relish the five-minute drive to work, while their East Coast co-workers and clients jump at any chance to attend Newport Beach sales sessions or seminars.

Rents Increasing

One result of this much-envied address, however, is skyrocketing rents that have chased out a number of businesses--including some major corporations. In the last six months, three of Newport Beach’s biggest corporate tenants have changed--or announced plans to change--addresses. Avco Financial Services Inc. will move to Irvine in January, Pacific Mutual Insurance Co. is in the process of moving nearly one-quarter of its operations to Fountain Valley and in March, Smith International Inc. moved from its posh Newport Beach offices to lower-rent offices in the same city.

But the corporate push is mostly to move into Newport Beach, not out. Thousands of businesses locate in Newport Beach in name only, by purchasing post office boxes that can give them the luster of a Newport Beach address for as little as $20 per month. In fact, there are more private post office boxes per square mile in Newport Beach than anywhere else in the country, according to the Assn. of Commercial Mail Receiving Agencies.

Why? “Why do buzzards circle a dying body?” answers Jim Baer, executive director of the association in Allentown, Pa. “They know with a sixth sense that there will quickly be food on the table.” The pickings must be good in Newport Beach, he said, because the city--and its Orange County environs--have as many private postal services as the states of Pennsylvania, Vermont and New Hampshire combined.

Charles Lisherness, owner of the Post Box in Newport Beach, said many of his 375 post box customers are lawyers who want the “snob appeal” address of Newport Beach. One of his clients is a major Santa Ana law firm that has all of its correspondence addressed to the Newport Beach post box. “It’s all ego,” said the law firm’s executive secretary, who asked not to be identified. “It’s like in L.A., where everyone has to have a Beverly Hills lawyer.”

At Mail Box Rentals of Newport Beach, owner Richard Unwin said he forwards business mail to 30 countries every week. “They can be anywhere in the world, but they want Newport Beach on their letterhead,” he said.

At midyear, a whopping 10,000 businesses had applied for business licenses in Newport Beach. That is one business for every 6.6 residents. Although the city does not keep year-to-year records of license applicants, officials say the number of new businesses wanting to locate in Newport Beach is growing at a dizzying pace.

Draws Comparisons

“Of America’s great small cities, there is nowhere else quite like Newport Beach,” said Allan Cox, a Chicago-based management consultant and author of four business books. “La Jolla doesn’t touch it. Nor does Monterey.” Newport Beach combines the qualities of Century City, Beverly Hills, “and Marina del Rey thrown in for good measure,” said Martin Brower, editor of a Newport Beach-based executive newsletter, Orange County Report.

Executive recruiters interviewed generally rated New York, Boston, Los Angeles, San Francisco and Chicago as the five most desirable corporate locations. “Manhattan was built on the premise that it’s important to be here,” said John Wareham, author of four management books and president of Wareham Associates, New York. “People figure if you have a New York address, you’ve been able to survive in the toughest city, so you must be OK.”

But on a separate scale, Newport Beach on the West Coast and Cambridge, Mass., on the East Coast are generally regarded as the two choice branch cities, where both prestige and pleasure are interwoven into the same package, corporate executives and industrial psychologists say. Why else, for example, would six of the Big Eight accounting firms have Newport Beach offices? And virtually every major Los Angeles law firm has a Newport Beach branch. O’Melveny & Myers, for example, one of Los Angeles’ most prestigious firms, recently signed a 20-year lease at fashionable Newport Center.

Helps New Businesses

So-called prestige addresses, such as Newport Beach or Beverly Hills--or more specifically Wall Street or Madison Avenue--are especially crucial to new or unestablished companies, said Harry Levinson, president of the Levinson Institute, a national management consulting firm based in Belmont, Mass. Levinson’s consulting firm still uses a Cambridge post office box, although it has actually been headquartered in nearby Belmont for years. Right or wrong, said Kent Nakamoto, assistant professor of marketing at UCLA’s Graduate School of Management, “a glamorous address can give a company credibility.”

Next to Los Angeles, executives commonly regard Newport Beach as the hub of real estate development in Southern California. It is home to major developers such as the Irvine Co. and the Koll Co. That, in turn, attracts financial companies such as Marine Midland Realty Credit Corp. “We go where the developers go,” said Philip R. Johnson, assistant vice president.

Although Newport Beach may have a “sexy name,” said Louis T. Moore, vice president and manager of the Newport Beach office of Ralph C. Sutro Co., “the cold facts are that the businesses are here because there’s money to be made.”

With so much money to be made, Newport Beach has also recently become a hub for fraudulent securities operations. As law enforcement agencies increasingly focus on Newport Beach, some area lawyers suspect there may soon be a public image backlash. Legitimate companies, they say, may avoid a Newport Beach address for fear of being tainted.

But the Mail Box Rental’s Unwin is unconvinced that Newport Beach’s reputation as a prime business center is in any great danger. “As nearly as we’ve been able to figure out, there are about the same number of deadbeats here as anywhere else,” he said. “I’d say about one-tenth of one percent are hiding or escaping or whatever.”

Personnel Factor

In other cases, the move to Newport Beach is dictated by the desire of the chief executive to live and work in the city’s leisurely atmosphere. Many long to be a part of the life style where corporate chiefs commonly sport open-necked shirts and catch lunch on the yacht at the marina. “Few will admit it,” Levinson said, “but companies often move to a city like Newport Beach simply because that’s where the chief executive wants to be.”

When Ocean Pacific Sunwear Ltd., the $281-million recreational wear company, moved its headquarters from Tustin to Newport Beach last year, the company’s then-chief executive, Chuck Buttner, a Newport Beach resident, explained that the move “should get our creative juices flowing.” Instead, the lure of Newport Beach’s good life quickly coaxed Buttner, a former surfer who had become a Jet Ski enthusiast, to enjoy the fortune he had amassed. Six months after the move, the 44-year-old resigned as chief executive and assumed lesser duties.

The two top officers from Pacific Mutual, Chairman Walter B. Gerken and President Harry G. Bubb, moved to Newport Beach after the company relocated there in 1972 after nearly 65 years in downtown Los Angeles. An extensive corporate study revealed that the area would develop into a “dynamic business center,” said Edgar Lehman, vice president of human resources. Besides that, he added, “it’s a good place to live.”

Similarly, Wallace Merryman, chairman of Avco Financial, said he took a lot of ribbing when his company relocated to Newport Beach from Los Angeles in 1971. But he insists that the move was primarily based on a “good investment opportunity.” All of that recently changed, however, when the currently cost-conscious company sold its Newport tower to the Irvine Co. for $45 million. “We no longer needed such a nice address,” a company spokesman said.

Drop in Rents

Most businesses pay a premium for the privilege of a Newport Beach address. “If you drew rings around Newport Beach, you’d find the cost of office space drops considerably each mile out,” said Kenton Boettcher, senior associate at Newport Beach Economic Group Inc. While office space at Newport Beach’s John Wayne Airport area averages $2.24 per square foot monthly, in Santa Ana it drops to $1.73, and down to $1.58 in Garden Grove, he said.

So costly is Newport Beach office space that, in many cases, comparable office space in downtown Los Angeles is priced less, said Kirby Greenlee, office properties specialist at Grubb & Ellis Co. Nearly 4 million square feet of newly constructed office space in downtown Los Angeles leases for $2 to $2.10 a square foot, he said.

West Cost office rentals appear to be bargains compared to the East Coast business centers. Prime office space in Cambridge, Mass., goes for $2.50 a square foot monthly, and choice Manhattan office space averages $3.40, according to Grubb & Ellis studies.

Newport Beach has often been likened to a private club that businesses join by moving inside the city limits. They leave only when the dues--rents--become too high. “The whole city is a country club,” said Brower, the newsletter publisher. “Everyone knows each other,” said Brower, a former Irvine Co. official.

Newport Beach’s unofficial executive meeting place is Gelson’s Market, a gourmet supermarket in one of the city’s most exclusive locations. “Virtually every corporate chief in the area shops there,” Brower said. “They wave to each other while waiting in the checkout lines.”

Personal Touch

Don Lee, vice president at Gelson’s, agrees that the store does attract the powerful and wealthy. In fact, the liquor department manager has learned the drinking habits of many of the store’s executive clients, he said. When the Newport Beach store opened in 1976, one customer used to faithfully stroll in between 4 p.m. and 5 p.m. each afternoon and buy a bottle of Dom Perignon champagne. “I’m still not sure if she was getting off work, or going to work,” mused Lee.

This is not to ignore the fact that many businesses have entered Newport Beach with bold dreams of fortune, only to leave dragging their horror tales behind them. Tiffany & Co., the glitzy New York jeweler that has a Rodeo Drive store, recently test-marketed Newport Beach for a potential retail outlet when it opened a small office to serve corporate clients. Just a few months later, however, the office closed because of poor business.

Midge Welch, former publisher of Arts in Orange County, had high hopes of boosting the image of her publication with a Newport Beach address. So, while Welch worked out of her Garden Grove home for nearly a year, subscribers and advertisers corresponded with her at a private post box in Newport Beach. “Let’s face it,” she said, “new publications have a stigma attached to them anyway. Having a Newport Beach address gives you more credibility.” Newport Beach credibility or not, the monthly arts magazine folded in less than a year.

Resort Town

For years, Newport Beach prospered primarily as a seasonal resort town until the completion of the Santa Ana Freeway in 1956 eased the strain of the Los Angeles commuter. By the mid-1960s, the Irvine Co. redefined Newport Beach as a business address with its development of Newport Center. A nine-story tower built in 1967 stuck out like a monolith in a town that was dotted with one- and two-story office buildings. Now, a multimillion-dollar expansion is under way at Newport Center. Many natives have still not accustomed themselves to the growth.

The ocean was another key factor in Newport Beach’s emergence as a city with corporate appeal. Its 10,000-plus yachts rank it as one of the largest pleasure boat harbors in the world. “Many executives came here because they wanted to work close to their yachts,” said Richard Luehrs, executive director of the Newport Harbor Area Chamber of Commerce. “Once that happened, other people came here because they wanted to be close to those people.”

Ronald Tiker doesn’t know much about yachts, but he knows a lot about water. His company, Newport Beach Drain Service, unclogs plugged-up drains--mostly in the Newport Beach area. But despite its name, Newport Beach Drain Service is not located in Newport Beach at all. It is near Tiker’s home in Garden Grove.

“The rent is too high in Newport Beach,” Tiker said. “Besides, who’s going to know the difference?”