Marriage of Land Barons : Santa Margarita Co. to Merge With Western National

By CHRIS WOODYARD and JAMES S. GRANELLI

Jan. 26, 1995 12 AM PT

TIMES STAFF WRITERS

Santa Margarita Co., the family-owned ranching and land development concern that has been a driving force behind the rapid growth in southern Orange County, said Wednesday that it will merge with apartment builder Western National Group, creating one of the state’s largest real estate companies.

The two firms had already tested a consolidation last summer by merging their home-building operations.

“They have had a six-month engagement,” said Irvine real estate consultant Ken Agid. “Now they have decided to get married.”

The two privately held companies did not disclose terms of the merger except to say that they expect it to be completed in March. Observers, however, said that the deal involves holdings easily valued in the billions of dollars.

Western National, based in Orange, owns and operates 71 apartment complexes containing 10,500 units in Orange County. It also manages 93 complexes with 17,000 units in California, the Northwest and Southeast.

Santa Margarita, based in San Juan Capistrano, is Orange County’s second-largest landowner behind Irvine Co. It developed the 5,000-acre Rancho Santa Margarita, a fast-growing planned community, and the adjacent 1,000-acre Las Flores planned community. It also manages the 40,000-acre Rancho Mission Viejo cattle ranch.

Santa Margarita is wise to diversify its operations, said John Shumway at Market Profiles, a residential research consulting company in Costa Mesa.

“There’s a finite amount of land left in Orange County and a finite list of master-planned communities with land still available,” Shumway said. “Also, Orange County isn’t growing as fast as it has in the past.”

For Western National, the merger provides financing to help it grow, he said. Santa Margarita should have no problem financing projects, especially with additional funds now coming from the California Public Employees Retirement System. CalPERS is contributing $20 million to a joint venture with Santa Margarita to develop Las Flores.

“Santa Margarita Co. and Western National Group share many of the same goals,” said Anthony R. Moiso, president and chief executive of Santa Margarita Co. “By combining our respective business and fiduciary expertise, we have positioned Santa Margarita Co. for optimum diversification and increased opportunities for expansion.”

Moiso will become chief executive and a director of the new company, while Richard J. O’Neill will be its chairman. Michael K. Hayde, a Western National managing partner, will become chief operating officer.

The Moiso-O’Neill family and Santa Margarita Co. have deep roots in Orange County. Moiso and O’Neill are descendants of Richard O’Neill, an immigrant cattleman who in the 1880s bought the 230,000-acre Rancho Santa Margarita. The property extended from Aliso Creek in Orange County to Oceanside in San Diego County.

Nearly half of the land was purchased by the federal government during World War II to establish Camp Pendleton. In 1963, Richard J. O’Neill founded the city of Mission Viejo on 10,000 acres of the remaining land and built the first homes on the property. In 1983, Moiso began developing Rancho Santa Margarita, which now has a population of about 21,000.

“Over the past couple years, Santa Margarita has had trouble selling its home sites for housing,” said Louis Masotti, director of the Real Estate Management Program at UC Irvine. But as Southern California recovers from the lingering recession of the early 1990s and the real estate industry picks up, he said, home building will lead the way.

Masotti said Santa Margarita may be following the lead of Orange County’s largest landowner, the Irvine Co., which last year sold public investors a stake in its apartment properties through a real estate investment trust.

Western National, in fact, had filed a statement with the Securities and Exchange Commission to establish a REIT, but the company shelved the proposal as rising interest rates depressed the market.

A spokeswoman for Santa Margarita said Wednesday that federal and state authorities have approved the REIT, however, and the company may consider offering it when market conditions improve.

The new merged company is expected to operate under the Santa Margarita Co. name and have a board made up of equal numbers of directors from both companies. It will be based in Rancho Santa Margarita, though both companies will keep their present quarters for now.

No employees will be laid off as a result of the merger, a spokeswoman said. Santa Margarita has about 140 workers and Western National about 100, with another 840 working for the company nationwide.

Times staff writer Debora Vrana contributed to this report.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Real Estate Mega-Mix

The merger of Santa Margarita Co. and Western National Group would create a huge real estate concern encompassing community and commercial real estate development and apartment property investment, management and development.

Merger at a Glance

The joining of two of Orange County’s largest real estate operations follows by a few months the merger of the companies’ home building operations to form San Juan Group Inc.

Santa Margarita Co.

* Headquarters: San Juan Capistrano

* Chief Executive Officer: Anthony R. Moiso

* Employees: 100

* Businesses: Land management, cattle ranching and real estate development

* Major holdings: 46,000 acres; 5,000-acre community of Rancho Santa Margarita on the company’s 40,000-acre Rancho Mission Viejo property

Western National Group

* Headquarters: Orange

* Managing Partner: Michael K. Hayde

* Employees: 940 nationwide

* Businesses: Management, development and construction of multifamily housing

* Major holdings: Manages 27,000 multifamily units; in past 30 years has built more than 15,000 apartments and 2,500 homes or home sites

Real Estate Holdings

Western National Group owns apartments in five Southern California counties and manages others across the nation. A summary of its Southern California operations:

Apartment Units by City

Los Angeles County

Long Beach: 200

Orange County

Anaheim: 2,137

Brea: 1,474

Buena Park: 184

Costa Mesa: 37

Fullerton: 314

Garden Grove: 116

Huntington Beach: 233

La Habra: 82