TRW Credit Unit Renews Subsidized Orange Lease : Rental: Pact city is underwriting still allows company to cut space, and presumably its operation, by up to 25%.
After persuading the city of Orange to pay part of its rent as an incentive for it to stay in town, TRW Inc.’s credit-reporting unit has renewed its lease on space in three buildings at The City office park.
But the lease still permits TRW to cut the amount of space it leases--and presumably the size of its operations--by as much as 25% over the next 10 years. As part of that reduction, TRW has vacated two floors at one of the buildings in the big office park, said Donald L. Mitchell, a vice president for Tishman West Cos., the landlord.
So far, Mitchell said, TRW hasn’t told the landlord how much more space it may relinquish. Since May, about 200 employees have been laid off or have left the TRW unit. About 1,000 people remain.
Tishman said in May that the lease was worth about $30 million to the landlord. But Mitchell on Monday wouldn’t disclose details--including the precise rent TRW is paying--because of what he called the “sensitivity” of the unusual arrangement, under which the city of Orange will pay as much as $2 million of TRW’s rent.
The subsidy came in for some slams in October after the company laid off 23 people; a City Council member and several of the laid-off employees asked publicly why the company was getting a break on its rent for saving jobs if it was still laying off workers.
TRW had been leasing 270,000 square feet in parts of three office buildings. A provision in the new lease permits the company to cut that to as little as 200,000 square feet. TRW has already vacated 37,000 square feet, or two of the three floors it leased at the 10-story 600 City Parkway building.
The TRW unit sells reports on the credit histories of millions of consumers to businesses such as banks and credit-card companies that are considering extending those consumers credit. In May, the unit--TRW Information Systems and Services--called a meeting of local employees and said it had decided to stay home rather than relocate to Dallas, Cleveland or Denver, where it said it could do business more cheaply.
News of the impending move had leaked earlier, at a time when the city had already taken one hit: A big tennis-shoe manufacturer said it had decided to expand in San Diego instead of Orange.
Meanwhile, a swelling chorus of companies across the state, including TRW, were bemoaning what they say are the prohibitively high costs of doing business in California; some cities and counties, prodded by the complaints, scrambled to hang on to their decamping employers. Orange, too, took a look around and decided it was worth spending public funds to get TRW to stay.
The deal gives TRW--a subsidiary of an $8-billion Fortune 500 defense contractor--a $100,000-a-year break on its rent at The City if it continues to employ more than 750 people in Orange. If TRW continues to employ 1,000, as it does now, the company will get $200,000 a year, or $2 million over the 10-year life of the lease.
Tishman, too, was eager to keep TRW. Right now, office buildings in the central part of Orange County are running a vacancy rate of about 20% and have done so for several years. Rents are at rock-bottom, too.
TRW has leased space at the combination urban mall and office park for nearly 15 years. But this would have been a particularly bad time for Tishman to lose its biggest tenant at The City. So large a tenant is TRW that the lease renewal is being touted by Tishman as the largest deal signed in Orange County this year.
Orange’s redevelopment director, Bert K. Yamasaki, said Monday that the subsidy was important to “sustain the shops, banks and restaurants nearby” that depend on TRW’s hundreds of workers for business.
TRW said late Monday afternoon that executives were not available to respond to questions about whether the company intends to shrink itself still further.
