Incentives Help New Tenants Start Where Defense Left Off

Harold Bastrup remembers the long lines of cars snaking their way down Orangethorpe and La Palma avenues through vanishing citrus groves and truck farms.

Driven by production workers and engineers, janitors and executives, the cars brought more than 30,000 people a day into the big defense plants and smaller subcontractors’ shops that by the early 1960s had sprouted along Anaheim’s major east-west routes.

This was where the giant defense contractors from Los Angeles first located as they began following cheap land and a growing labor pool into the suburbs.

“It was a nice time,” recalls Bastrup, who started working as an Anaheim police officer in June 1955, and retired as police chief in 1978. “They brought a lot of people and a lot of business to the city.”

By the late 1980s, however, federal defense spending started winding down and the big plants along the Riverside Freeway began withering. Northrop Corp. and Aerojet General plants, a Hughes Electronics research facility, and big pieces of Rockwell International’s Autonetics plant all have shut down.

“There was a big vacuum created by the decline of the defense business,” said Cal State Fullerton economist Anil Puri, author of a 1992 study of defense spending in the county.

Facing the prospects of broken-down factory buildings and a shrunken tax and employment base, Anaheim officials decided to offer redevelopment incentives to find new tenants for the area--everything from new sewers to a fiber-optic web.

And they were prodded by commercial property brokers, who saw big commissions in refilling several million square feet of empty defense buildings.

The result is a real estate rebirth. Where more than a dozen large defense contractors once ruled, there are now plastics molders, metalworking shops, auto parts and compact disc makers and even a few retailers.

Tenants and property developers have spent more than $100 million in the area, and the reuse of the buildings has kept several thousand jobs in the city.

These deals have generated more than $2.5 million in commissions for brokerages, industry insiders say.

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SPM/Anaheim, for example, was looking at properties in Corona and South County when it decided in 1991 that it needed to consolidate its operations, which had spread out over a seven-building complex.

Then Mike and Larry Noggle, whose father had started the molded plastics business in 1953, received a flier from commercial broker Robert Socci, who was marketing a nearby factory building that had once housed a Rockwell Autonetics operation.

“The chance to move just a mile was too much to pass up,” Larry Noggle said. “We already had discovered that just moving to Corona would cost us a lot of our middle management. People didn’t want to drive the extra 20 or 30 minutes. So we decided to stay where the work force was if we could do a deal for the building.”

The company, which was acquired last year by a British conglomerate, has doubled its Anaheim work force since moving from its old complex into its new 200,000-square-foot facility and now employs about 600 workers.

SPM products include the complex oval plastic cover plate for the 1996 Ford Taurus radio and heater controls, and the bodies for cellular flip phones sold by Motorola and several other companies.

Socci, a broker with the Anaheim office of Voit Commercial Brokerage, not only negotiated the lease with the building owner, but also helped the company win an agreement from the city to speed up the permit process.

The city, which owns its own electric utility, showed SPM how to shave about $60,000 a year off its city bills by installing a transformer station.

“It cost us a couple hundred thousand [dollars] to put it in, but we’ve saved that back in three years,” Larry Noggle said.

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In addition to a number of financial lures such as tax breaks and training funds, the city rebuilt street and sewer and storm-drain systems in the area to make it more attractive to business.

Now the city is taking bids on a passenger terminal at Tustin Avenue and La Palma to serve the commuter trains that run from Los Angeles through northern Orange County and out into Riverside and San Bernardino.

In conjunction with San Diego-based SpectraNet International, Anaheim also is installing a high-tech fiber optic telecommunications web in the industrial area.

A fiber optic system can handle electronic data transmission hundreds of times faster and more accurately than a conventional wired telephone system--a big draw as businesses become increasingly computerized.

The system for hooking individual buildings to the web is still being designed, said Bob Cerasoli, chief strategic officer for SpectraNet. “But we are hoping we can get the first businesses hooked up this fall,” he said.

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Brokers like Socci and Grubb & Ellis Co.’s Jeff Read have armed themselves with an encyclopedic knowledge of city economic development programs to help negotiate deals, and they say that a lot of the defense properties probably would still be empty if it weren’t for the city’s aggressive campaign to transform the area.

But their jobs don’t revolve around passing out city favors. “They don’t give things away,” said Read, who specializes in northern Orange County commercial properties.

So the brokers send out mailers, advertise in industrial listing books, post huge signs in front of buildings they are marketing and make blind telephone calls to dozens, sometimes hundreds, of companies around the nation they think might be in the market for such buildings.

Sometimes they are called in by a seller, who literally auditions a series of brokers to see who has the best marketing ideas for the least fees.

That’s how Socci and Voit landed the deal to sell Northrop Corp.’s 53-acre Fullerton property several years ago. The factory was the first of the defense plants to move into Orange County and was closed in 1990, a year short of its 40th birthday. The closure took 1,400 jobs out of Orange County.

The prospective buyer for the property was brought to Socci by a Newport Beach brokerage, Collins Fuller Corp., which represented La Mirada-based RSI Home Products.

RSI, which makes prefabricated home cabinets and counter tops, is another company that had spread out as it grew and was looking for a building big enough to consolidate all of its operations under one roof.

Few exist in the area, however. RSI needed at least 600,000 square feet and Chief Executive Ronald M. Simon said he’d looked at properties in Huntington Beach and in the Riverside area, but decided to build his own place on the old Northrop property because it was close. “It will help us keep our employees and cut down on the costs and time involved in moving,” he said.

Ultimately, RSI brought in a new buyer. Colorado-based investment company Security Capital Investment Trust paid Northrop $14.7 million for the land and is spending about $25 million to build a 1.2-million-square-foot manufacturing complex there.

“We decided we didn’t want to be in the real estate business,” Simon said. But RSI is leasing a 675,000-square-foot building from security capital.

“It was the ability to find a place we could have a building this big that made the deal,” Simon said. And when RSI moves its La Mirada factories and headquarters and Torrance warehouse to Anaheim this summer, it will bring 350 employees back into the area.

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For Disc Manufacturing Industries, the city provided an aid package that included utility rate discounts, job training funds and the city’s $1.4-million purchase of a three-acre section of the former Rockwell parcel that DMI will use for employee parking.

The deal calls for DMI, which makes discs for audio and software companies, to repurchase the lot after 15 years. But in the interim it freed up that money for the company to use elsewhere.

The company paid $7.1 million for an old Rockwell property on La Palma and put $22 million into it before moving in last April.

General Manager Tom Brown says that the company was looking at sites in Sparks, Nev., when it decided in 1994 that it needed to move out of its old 30,000-square-foot building.

Voit already represented Rockwell and was bidding to represent DMI when the defense contractor put the 220,000-square-foot plant on the market.

Socci ended up handling both sides of the transaction. The city assistance and the ability to remain in the same area were key ingredients, Brown said.

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Next-door to Disc Manufacturing, another former Rockwell facility is being refurbished for Fry’s Electronics, a giant discount computer and home electronics retailer that paid $5.5 million for the building and is spending an estimated $4 million to refurbish it.

Fry’s wanted the freeway access and a big building. But the deal was clinched when the city agreed to reimburse almost all of the refurbishing costs over a 20-year period.

The funds will come from sales tax revenue from the store. The city will keep half, give half to Fry’s each year and figures none of it would be coming in if the store weren’t there, said Richard Bruckner, manager of economic development and redevelopment projects for Anaheim’s Community Development Department.

In a further concession, the city agreed to waive its sign restrictions and allow the retailer to erect a large sign in the parking lot fronting the Riverside Freeway.

Things were simpler when northern Orange County’s economy was driven by the defense industry.

But much of that is gone now, and along the Riverside Freeway they’ve decided not to spend much time worrying about what has passed.

The action is in the conversion deals that players like Socci, Read, Bruckner and a host of others spend their days putting together.

“That is the future,” economist Puri says.