Aerospace Firm Will Move but Stay in O.C. : Relocation: Loral Aeronutronic’s shift to a Rancho Santa Margarita site is an economic victory for the county.

Loral Aeronutronic, after scouring sites from Orange County to Texas, will move its aerospace division and 1,300 employees from Newport Beach about 20 miles to this master-planned community.

The move is a significant boost for the 450-acre Santa Margarita Business Park in Rancho Santa Margarita, which last year lost Hughes Aircraft, a defense contractor that moved nearly 500 jobs to Carlsbad in a consolidation of two divisions.

The decision by Loral, which builds Sidewinder and Chaparral missile systems at its hillside Newport Beach location overlooking the ocean, comes after a three-year tug of war between California and other Southwestern states. It saves Orange County aerospace jobs that might have gone to Texas or Arkansas, where parent company Loral Corp. has other missile production plants.

It also marks a victory for a consortium of government, utilities and the area chambers of commerce that teamed up to offer incentives to Loral, such as subsidies for maintenance costs, transportation fees, and lower electricity rates.

“This is the largest company that we know which was seriously considering moving out, and it’s the first case where a company of this size has worked with our consortium and we worked through the process to keep them,” said Fred Mickelson, regional manager for Southern California Edison. “We can now prove that it makes sense for businesses to stay in Orange County.”

Loral Aeronutronic joins a growing list of companies gauging whether to move from the region. Just last week, Taco Bell said that it had been contacted by officials in Atlanta, Dallas and North Carolina after it announced that it was considering relocating from its Irvine headquarters, where it leases 280,000 square feet of office space, when its lease expires in November, 1996.

“We did a complete survey of options, including moving out of the state as many companies are doing,” said Shelly Buttrill, president of Loral Aeronutronic.

Barely 20 miles away, Loral’s new home will be a welcome relocation for the hundreds of employees, who were uncertain whether they might be uprooted from Orange County. The final decision was based upon lower relocation costs and the need to keep experienced engineers and other employees happy, the division’s president said.

“You could say that a sigh of relief went out when we announced it to our employees,” said Buttrill. “The cost of moving elsewhere would have been prohibitive if you’re interested in keeping a core group of highly skilled engineers.”

There was no shortage of competition for the Loral lease. In fact, the Rancho Santa Margarita site beat out three others in Orange County, Buttrill said, including sites where Loral would have built its own buildings or leased space from McDonnell Douglas in Santa Ana or another company in Irvine. He declined to identify the other sites.

Loral will become the biggest single tenant in Rancho Santa Margarita, a master-planned community east of Mission Viejo designed to allow residents to work, live and play in the same location.

The town, home to about 20,000 people and 200 companies, is near the eastern end of the Foothill Transportation Corridor, a toll road under construction. Buttrill cited the proximity of housing and other quality of life amenities as factors in the final selection.

“We are very excited that a company of Loral Aeronutronic’s stature has decided to locate in Rancho Santa Margarita,” said Anthony Moiso, president of the Santa Margarita Co., the owner of the business park.

A. Martin Stradtman, vice president at the Santa Margarita company, described the Loral lease as the “deal of the decade for Orange County so far.” He declined to disclose financial details.

New York-based Loral had been looking for a site since it bought the former Ford Aerospace Corp. in 1990 for $715 million in cash plus other expenses from Ford Motor Co. The plant, among the oldest in Orange County, was established in 1960 at the Newport Beach site.

In the deal, Loral did not buy the 100-acre Jamboree Boulevard plant site, which is surrounded by luxury homes. The land, owned by the Irvine Co., is valued at about $100 million minus costs of cleanup, consultants estimate.

Under a sublease from Ford, Loral paid $92,000 a month. But the rent was scheduled to increase to market rates, about $1 million a month, by 1996. It was obvious, at that rent, that Loral had to move in order to make its business viable, said Buttrill.

In August, Ford negotiated an option to buy the Newport Beach site from the Irvine Co. Ford said it plans to build luxury homes on the property.

Tom Riley, the Orange County Supervisor whose 5th district includes Rancho Santa Margarita, said county officials and other Orange County boosters had lobbied Loral for months to stay.

“I did say a few prayers,” he said. “Rancho Santa Margarita is a young community that is doing a lot of things right. Loral has highly skilled people who will add to that community.”

Two prime competitors for the Loral relocation were Grand Prairie, Tex., and Camden, Ark. Loral acquired sites in those cities when it bought the missile division of Dallas-based LTV Corp. in July, 1992, for $240 million.

Hurt by steady cuts in defense programs and a bleak outlook for future work, the Newport Beach division has been shrinking ever since Loral bought the company. It had 2,500 employees at the time of the purchase, but that has shrunk to about 1,500.

Ironically, Orange County was able to stay competitive because business conditions had gotten worse. The shrinking of the division and a fall in local commercial real estate prices brought on by the recession were both factors that made it easier to keep the division in Orange County, Buttrill said.

Not all of the Loral jobs will stay in the state, however.

In June, the company decided to move 200 to 250 air-to-air Sidewinder and ground-to-air Chaparral missile production jobs from Newport Beach to Goodyear, Ariz., where Loral makes aircraft reconnaissance equipment.

Buttrill said the company found it could compete better for annual missile contracts because costs--from assembly-line wages to real estate--are cheaper at the Loral Defense Systems site near Phoenix.

But the company decided the majority of the high-wage Newport Beach jobs did not have to be moved from Orange County. Most employees moving to Rancho Santa Margarita work in administrative, research and development or Nite Hawk production. There isn’t a big imbalance in the costs of employing them in California rather than other states, in contrast with the situation of production workers.

“There is no misconception that it is hard to keep aerospace manufacturing jobs in California,” Buttrill said. “It just so happens for our company that it makes more sense to keep these jobs here. Other companies have been leaving in great numbers.”

Loral will move into a 300,000-square-foot building in Rancho Santa Margarita vacated by Hughes Aircraft Co. when it moved its Microelectronics Systems Division to Carlsbad last year. The relocation of Hughes, which had 475 people, was a severe blow to the town’s progress.

Loral will also occupy a new, 47,000-square-foot building a block away from the former Hughes building. Loral signed an 8.8-year lease for an undisclosed sum, with several options to continue for up to 20 years. Buttrill said the company hopes to complete the move by mid-1994.

Neighboring companies in the business park include Unisys Corp., Toastmasters International, Control Components and International Food and Beverage.