Sale of Smith Empire Points to Rebound, Analysts Say

The sale of Martin V. “Bud” Smith’s real estate empire to a high-profile Wall Street investor not only shows the long-term strength of Ventura County’s economy but underscores a business rebound that has built for 18 months, analysts said Thursday.

New York-based Tiger Real Estate fund’s pending purchase of 60 Smith properties for a price brokers say exceeds $150 million also emphasizes the county’s new role as a regional leader in economic growth and as a budding center for investment, they said.

“The investment of a fund like Tiger shows the maturation of Ventura County’s commercial real estate market from being basically nowhere . . . to being an evolving, viable marketplace for large investors,” said Fred Ferro, vice president at Capital Commercial Real Estate in Oxnard.

A number of large and medium-size firms--all from Los Angeles County--are also considering a move here, Ferro said.

Indeed, a series of year-end reports have highlighted Ventura County’s emergence from recession. And several new developments make business prospects even better for 1996.

“The stars are lining up,” said Jerry Pelton, managing officer of CB Commercial Real Estate’s operations in Ventura County.

In its annual market analysis, CB reported Thursday a countywide boom in retail sales and the projected construction of 1 million square feet of stores in 1996--most in the Conejo Valley, where virtually every storefront is filled.

The new year also brings the healthiest market for industrial space this decade, with rents rising 20% in recent months and developers even promising to build a few new structures without guaranteed tenants. Such speculative investment has been unheard of for five years.

Taxable sales and jobs also grew faster in Ventura County last year than in any other part of Southern California, according to Marc Schniepp, director of economic forecasting at UC Santa Barbara.

“It’s leading the pack in consumption and employment. It’s no wonder Tiger was interested,” Schniepp said. “The overall economic ambience of Ventura County is right. . . . I’ve seen a lot of people show a lot of interest in Ventura County in the last 12 months.”

In fact, Salomon Bros., one of Wall Street’s biggest investment houses, called Schniepp last month and ordered volumes of information on the county’s demographics and economic health, he said.

Schniepp thinks that the data was ordered for delivery overnight to help Tiger analyze its deal with Smith.

What Salomon Bros. found was that a Ventura County recovery that began in 1994 broadened and became more visible in 1995.

The county’s population grew at its fastest rate in four years. Unemployment fell for the third straight year. Jobs in the county reached historic highs. And home prices stabilized after a five-year free fall.

Local real estate analysts think that Smith’s ability to sell off most of his properties for a good price can only enhance the county’s reputation as a good place for companies to invest and grow.

“Whenever you have movement by a large group,” Pelton said, “that certainly will cause other people to look at our area more seriously.”

Pelton said the entire Smith portfolio was placed quietly on the market at more than $200 million, and he said its key properties sold for at least three-fourths of that amount. Smith kept several, including the Wagon Wheel and Carriage Square properties in Oxnard.

“What we’ve heard is that the price exceeds $150 million,” Pelton said.

Other brokers estimated the price tag at $175 million.

Both Smith and representatives of the Tiger fund have refused to disclose the purchase price of Smith’s holdings, which stretch from Calabasas to Santa Maria.

Tiger Real Estate’s $785-million investment pool is partly owned by Julian Robertson, one of Wall Street’s most successful investors. Robertson’s parent company, Tiger Management Corp., manages investments of about $7 billion.

The Smith holdings in the deal include the landmark Financial Plaza in Oxnard, Fisherman’s Wharf at Channel Islands Harbor, nine hotels with about 1,200 rooms and more than 1,000 apartments, most near the Oxnard harbor. About 2 million square feet of space in office, commercial and industrial buildings is part of the transaction.

Tiger’s purchase will have benefits beyond spreading word of Ventura County, brokers said.

They expect Tiger to fix up the properties for maximum return and boost local real estate values by selling some lesser properties at premium prices.

“We’re telling our property owners [that] now’s the time to consider selling your portfolio,” Pelton said. “Some of these people bought at the top of the market in 1990, and now they can get out of it.”

Even without Tiger’s presence, however, the county’s market has slowly been making a comeback.

“What I see happening from my chair is just a constant drumbeat of companies from the greater Los Angeles area making inquiry out here,” said Steve Kinney, executive director of the Greater Oxnard Economic Development Corp.

“They’re talking about the possibility of branch operations or wholesale relocation to the area,” he said. “There are a number of other small companies coming in and bringing 25 or 30 employees. We counted up 1,500 industrial and service-type jobs being added to the Oxnard area in the past year.”

For example, Haas Automation Inc. of Chatsworth announced in the fall that it will move its 400 employees to a new headquarters to be built in Oxnard. And a Santa Clarita firm, Special Devices Inc., expects to build a 500-employee plant in Moorpark this year.

After declining for three years, vacancies at large industrial buildings are almost gone, brokers said. Only two or three structures that can accommodate a large tenant remain on the market and they are nearly obsolete, they said.

For that reason, owners of the two Sammis business parks in Oxnard plan this year to build on speculation three industrial buildings totaling 148,000 square feet.

“If we do well, we’ll go right into the next phase [of 120,000 square feet],” said Russ Goodman, regional president of Sares / Regis Group, owner of the parks. “It’s starting to be economical to build again.”

Statistics released by CB Commercial generally show the reason why, although the east county market remains much stronger than the west.

The weakest segment of the market was in office leases. The countywide vacancy rate for large office buildings was 15.7% for the fourth quarter of 1995. The rate in the east was 13% after a drop, while it was 18.2% in the west after an increase.

“The trend reflects the continued interest in the Conejo and Simi valleys as locations of choice for businesses relocating from the San Fernando Valley,” the CB study said.

The east county market is so strong that two small office buildings are under construction in Thousand Oaks, the first in five years, analysts said.

The same east-west dichotomy can be seen in industrial buildings. The east county’s vacancy rate fell sharply and the west county’s remained about the same. Overall, vacancies fell for the third straight year, from nearly 15% in 1992 to about 9% today.

Meanwhile, several new shopping centers boomed and several more are planned for construction this year, including major developments in Camarillo, Westlake Village and Thousand Oaks.

“We’ve got vacancy rates down to a level we had 10 years ago,” said Brian T. McAndrews, CB retail broker. “We have a much greater base and it’s all full.”

The countywide vacancy rate for stores and shops was 6.2%, including 8.3% in the west and 3.9% in the east.