Irvine Co. Minority Holding Offered for Sale : Real estate: Howard P. Marguleas seeks $94 million for 5% stake. Brokers say shares will attract pension funds, wealthy investors.

A minority owner in the Irvine Co. has put his shares in the well-known Orange County real estate firm up for sale for $94 million as part of a private offering that is attracting interest among wealthy investors and major pension and trust funds.

Howard P. Marguleas, an Irvine Co. director since 1977, wants to sell his 5.05% stake in the privately held company to meet his other “business obligations,” according to a confidential stock prospectus distributed to select investors and funds.

The Irvine Co., which turned a family ranching empire into a sprawling real estate giant, is run with an iron hand by billionaire Donald L. Bren, who still holds 92% of the company’s outstanding shares. This means he elects all board directors and controls all aspects of the company’s operations and plans.

The company is known for keeping its finances secret. But the prospectus reveals that the Irvine Co.’s assets are worth about $4.1 billion and that it has an estimated $1.8 billion in debt. Irvine Co. officials did not review, prepare, provide information or confirm the accuracy of the prospectus and its numbers.

At $500,000 a share for Marguleas’ stake, ownership of the stock could become the ultimate status symbol for affluent Southern California investors.

“This is as blue chip as you’re going to get in the Southern California real estate market,” said Winston Elton, principal in charge of the real estate group with KPMG Peat Marwick, an accounting firm.

“This is not the sort of stock that’s going to double or triple (in value) in a year,” he said. “This is an investment for the long haul--a piece of the rock.”

And it comes at a discount, according to the prospectus. Marguleas, formerly chairman of Sun World International, is offering to sell the stock at 19% below its estimated value of $617,984 a share.

But investors would have no voting rights, could not sit in on board meetings and, in the short term, would not receive much of a return on their initial investment because company pays only a 0.6% dividend. Still, that dividend comes to $3,000 a share annually.

Many wealthy Southern California families and high-profile individuals are reportedly interested in the shares as a secure, long-term investment that could pay off big-time as development continues, or if the Irvine Co. eventually goes public.

Major county or state pension funds such as the California Public Employees Retirement System would also be likely investors, especially if they join together to buy shares, several sources said. The Irvine Co. has a total of 3,722 shares of common stock outstanding.

The Irvine Co. has been the owner and developer of the Irvine Ranch, a vast swatch that stretches from the ocean to the mountains along the Riverside County line. The company’s holdings include two hotels, two golf courses, several shopping centers and about 11 million square feet of office and industrial space.

Bren acquired a 35% interest in the Irvine Co. as part of a group that purchased it for $337 million from the Irvine family after a wild bidding war in 1977.

Bren acquired his controlling interest in 1983. Marguleas, as a minority shareholder, joined with Bren and other investors in 1977 to purchase the company and remained a minority shareholder when Bren purchased controlling interest.

The company’s net worth is now estimated at $2.3 billion, up sharply from a decade ago. In the late 1980s, after years of litigation by heiress Joan Irvine Smith, a judge ruled that, as of 1983, the company’s stock value was $1.3 billion.

Bren did not step forward to buy Marguleas’ stake or put together an investor group to buy the shares. Bren, though, has been in a selling, not buying, mode, real estate experts said, pointing to his sale of the company’s apartment division to the public for nearly $200 million last year.

Marguleas is selling his securities through Friend/Danzi Capital Partners, an investment banking firm in Irvine. Michael Danzi, the firm’s executive director, refused to comment.

A relatively small brokerage, Friend/Danzi is a division of L.H. Friend, Weinress & Frankson Inc., an Irvine investment banking firm with about 40 employees. The company is expected to allow other local brokers help it sell stock to individual investors.

Some local brokers in town were eagerly anticipating the unique stock deal, which some said would go mostly to individual investors and family trust funds.

“There’s something about being able to say you own a part of the Irvine Co.,” said Larry Butler, a broker with Cruttenden & Co., an Irvine investment banking firm. “There’s definitely a certain prestige involved. Not many people can say that, and there are some big real estate types around who might not mind plunking down $500,000 for a share.”

However, Jeffrey L. Kilpatrick, president of Newport Securities Corp., a Costa Mesa brokerage, predicted that most of the shares would be sold to institutional investors and other big funds that could hold onto the securities long-term. He questioned whether wealthy investors would be eager to buy a stake.

“Most investors want to make money. I can’t think why anyone would buy shares just because it’s the Irvine Co.,” he said.

Max Hampton, a manager of the Merrill Lynch & Co. brokerage office in Newport Beach, said his office had not received any phone calls from interested clients.

Money managers such as Trust Co. of the West in Los Angeles, with $47.5 billion in assets under management, also were nonplussed.

“This is not the type of thing TCW would be interested in,” said Alvin R. Albe, chief administrative officer with TCW. “I don’t think we’d play in something like this. You’re buying a super minority position in something that is very illiquid.”

* MARGULEAS PROFILE: Ex-Sun World chairman’s farm holdings appear in trouble. D8

Irvine Co. Holdings

As Orange County’s largest private landowner, the Irvine Co. has a diversified portfolio of residential and commercial properties as well as 48,000 acres of undeveloped land. An overview of its assets:

OFFICE

Property Location Square footage Los Angeles Westwood Gateway Los Angeles 500,000 Civic Plaza Irvine 238,000 AT&T; Tower Irvine 306,444 Corporate Plaza Irvine 128,837 Newport Center Newport Beach 1,197,666 MacArthur Court Irvine 176,808 Jamboree Center Newport Beach 1,591,090 Other office space 1,572,855 Total office space 5,711,700

RETAIL

Property Location Square footage Regional centers Newport Center Fashion Island Newport Beach 1,300,000 Tustin Market Place Tustin 750,000 Community centers The Crossroads Irvine 318,000 Irvine Market Place Irvine 175,000 Irvine Home & Garden Center Irvine 265,000 Neighborhood centers 15 properties Irvine, Newport Beach 1,159,860 Other properties 65,000 Total retail space 4,032,860

INDUSTRIAL

Property Location Square footage 10 properties Irvine, Newport Beach 495,262 Irvine Spectrum, other industrial properties Total industrial 5,331,200

Source: Irvine Co.