Irvine Co. Land Baron to Sell Interest in Properties

The kingdom of Donald Leroy Bren gleams in the winter sunlight shimmering off the Pacific Ocean. The last of California’s land barons, he glances down from his corporate tower at the shopping mecca, the Newport Beach office building, the thousands of beige homes.

“Problem with a day like this--the sun comes in every direction,” says Bren, referring to one of the few things in his empire that he doesn’t control.

With a stiff smile, he walks by his desk, a slab of glossy black granite completely clean and empty--no piles of paper, no books, no pens, not even a paper clip--and settles into a chair near a huge coffee table covered with so many stacks of art books that it’s hard to get a coffee mug in between.

Even to be sitting for an interview is a rarity for Bren, whose life has been an uncommon blend of affluence and tragedy, along with a touch of Hollywood. Locals in Orange County call him “DB-squared” because of his larger-than-life presence.

Through his taste in Mediterranean architecture and his penchant for the neat and orderly, he has done as much to shape the look of Southern California as any other developer. He has transformed the Irvine Co., Orange County’s largest private landowner, into the world’s largest and most-copied developer of master-planned communities.

Unconventional and enigmatic, Bren is a former Marine who collects modern art and knows the scientific name of nearly every plant on the sprawling 55,000-acre Irvine Ranch. With a net worth estimated at about $2 billion, he is among America’s 50 wealthiest people.

An innovator in shopping mall and office park design, Bren recently built a “downtown Irvine” entertainment center that features a 21-screen movie theater and, opening to the public Friday, the West Coast’s only 3-D Imax theater.

Now, at 63, Bren is entering a new phase of his long and storied business career.

He is planning to sell major parts of his 102-year-old private company to the public through a so-called real estate investment trust, or REIT. Access to investor cash would give the company the ability to expand outside the limits of its “ranch” and continue to grow locally.

Among the properties that may be offered are the Fashion Island shopping mall and surrounding office towers in Newport Beach and the entertainment center in Irvine. The sale could take place as early as this summer.

“At the end of the day, the Irvine Co. is slowly being transformed,” Bren said. “Our long-term goal is to transform what was once an agricultural company to a development company, and to that, the next, final step is to create a large real estate investment company.”

It is unclear how much of a stake Bren would keep in any new public company. In his first and only foray in the public markets two years ago, he retained a majority stake in the nearly 12,000 apartments sold to outside investors.

While the Irvine Co. won’t divulge details, analysts estimate that a public offering made up of just the company’s commercial and office properties would be $2 billion.

Still, those who know Bren well say that sharing ownership with outside investors goes against his nature, but it’s something he has to do.

“He’s not interested in selling--Bren wants to own everything,” said Raymond L. Watson, an Irvine Co. board member and former company president.

“He didn’t want to sell his beloved apartments. But the world changed,” Watson said. “This will easily give the company the freedom to continue to do what they are doing. And that’s what’s important.”

Tan, well-dressed and fit, Bren keeps focused on business during the interview. A fierce guardian of his privacy, he declines to talk about his personal life.

He stresses that he doesn’t intend to loosen control of the Irvine Co. In fact, he still works long days and is closely involved in all aspects of the company.

His son Cary works for California Pacific Homes, a home-building arm of the Irvine Co. Son Steven, known for his love of race-car driving, works for the Akins Cos., an Irvine home builder. A daughter lives in Los Angeles.

Asked if Cary might take over the company, Bren said: “No, I don’t foresee Cary. Cary doesn’t work here at the Irvine Co. . . . He works independently for a separate company, and I think that’s appropriate--where he creates his own place, so to speak.”

Bren is now single, his two marriages having ended in divorce. Besides his three grown children, he has at least one child from a companion.

Though he owns homes in Los Angeles’ Holmby Hills, New York and a luxury log cabin in Sun Valley, Idaho, Bren spends most of his time at his $5-million home on Linda Isle, a community overlooking Newport Harbor.

Although Bren moves frequently in Los Angeles and New York social circles, he rarely makes public appearances or participates in the Orange County builder social scene.

His older brother, Peter, operates in the real estate arenas of New York and Europe. His half-brother, Charles, was one of 144 killed in a plane collision over San Diego in 1978 while on Irvine Co. business.

In fact, Bren himself was in a helicopter crash in 1971 off the California coast and was hospitalized for four months with a broken back.

Raised in Beverly Hills, Bren was the oldest son of Milton Bren, a Hollywood movie producer and real estate mogul who developed part of Sunset Boulevard.

After his parents divorced, his mother, Marion, a close friend of Nancy Reagan, married Reagan kitchen cabinet member Earle Jorgensen. His father married actress Claire Trevor, who won an Oscar for her role in the movie “Key Largo.”

Trevor recently recalled Bren, known for his love of model kits and tinkering with cars, as an “extremely shy, almost bashful young boy--and he’s taught himself to get over that.” She lives within view of Bren’s office.

After graduating from college, he joined the U.S. Marines where he met now-Gov. Pete Wilson, and the two struck up a lifelong friendship.

Bren is one of Wilson’s biggest contributors; he was co-chairman of Wilson’s campaign in 1992 and was finance chairman for Wilson’s failed presidential campaign bid. And as Bren’s stature grew, so did Wilson’s.

To many, Bren’s appearance in the history of the Irvine Co. was straight out of central casting. Just when the company needed a sophisticated deal maker who could help steer the company, Bren showed up to fill the role.

A successful home builder during the 1960s and 1970s, Bren’s ideas were always “fresh, new, never a copy. He was the person to emulate during the 1960s,” said Kenneth Agid, a real estate consultant in Irvine.

By the late 1970s, Bren was looking for his next big deal. And prompted by a change in tax laws, the Irvine Foundation, which owned and ran the Irvine Co. as a nonprofit organization, was looking for a buyer for its holdings.

Bren hooked up with shopping center magnate Alfred Taubman and several other investors and won the bid. Joan Irvine Smith, granddaughter of James Irvine II, was given a 10% stake.

After a series of disputes with the other investors, Bren bought them and Smith out and ended up with majority control of the company. Since his purchase in 1983, Bren has watched the value of his holdings more than triple.

“He came through this real estate recession and there aren’t even any whip marks on him,” said local real estate analyst Jon Fosheim. “You can’t say that about many of the other developers around here.”

The company has flourished since a restructuring in the mid-1980s slimmed its staff from 1,500 to a current 200, and the focus shifted from residential to expanding its office, industrial and retail centers.

One of the most well-balanced real estate portfolios in the world, the company is divided into several divisions: land and residential development, industrial, corporate affairs, legal and finance. The apartment division was spun off into a public company, still owned 62% by Bren.

Access to new money will enable the company to start new projects and possibly acquire other companies or buildings here. And it will make the company more competitive with the many national public developers setting up shop in Southern California.

The next part of the company most likely to go public is the 3,600-acre Irvine Spectrum industrial park, sometimes dubbed Southern California’s Silicon Valley.

The center was born on the back of an envelope years ago, when Bren quickly scribbled a rough outline, said Irvine Co. executive vice president Gary Hunt.

“He scratched out the freeways and said, ‘This is where we’ll put medical, industrial and high-tech companies,’ ” said Hunt. “A lot of people can have vision, but not a lot can do implementation. He made it happen.”

The Spectrum is now home to about 36,000 workers and 2,200 companies, including many start-ups known as “gazelles” because they grow so fast.

“The gazelles seem very attracted to Spectrum,” Bren said. “It’s very well-executed and a good business environment.”

Vacancy rates are down to 2% from a high of 23% in 1991. And, for the first time since 1989, the company is constructing new buildings at the Spectrum.

Unlike Silicon Valley, with its emphasis on computer chip manufacturing, the Spectrum tries to attract a more diverse mix of high-tech, biotech and other companies.

Western Digital Corp., a computer component maker, is the biggest employer there. Mossimo, the fashion designer, is considering putting its new headquarters there.

When finished, the Spectrum will comprise 5,000 acres and house 150,000 workers, larger than many California cities.

Besides its office project, the Irvine Co. controls some of the choicest shopping centers in the state, including the modern Tustin Ranch marketplace and the upscale Fashion Island, both of which will be expanding this year. Bren masterminded a successful revamp of Fashion Island; the shopping center was recently picked to be home for Orange County’s only Bloomingdale’s.

In a major move, the company in November unveiled its new Entertainment Center at the intersection of Interstates 5 and 405 in the Irvine Spectrum. Almost immediately, other developers began touting plans for similar centers.

Only 200,000 square feet now, including a 21-screen theater whose 6,000 seats make it the nation’s largest, Bren has big plans for more stores and shops that will mushroom into a 2-million-square-foot center.

“I see that as the downtown of Irvine. It will be the major center for Irvine--entertainment, shopping, business, commerce. And so far people seem to be very excited about the first phase,” said Bren.

If things go Bren’s way, and they usually do, the Irvine Co. eventually will consist of a private holding company that would own stakes in the public ventures and be charged with long-term development of the company’s remaining properties.

Bren won’t set a date, but insiders note that it appears the company is readying a sale in the next several months.

Despite some lingering effects from Orange County’s bankruptcy, this could be Bren’s year.

“I’m very bullish,” he said. “I believe the worst is behind us.”

While Bren didn’t want to detail how the Orange County bankruptcy--which prompted housing sales to drop nearly 30% this time last year--had affected Irvine Co. developments, he says he was pleased with the county’s recovery plan.

“It came together quite rapidly,” Bren said, “and the county did it. There were problems, there was pain, but we got to it in a reasonably short time.”

The “we” is a bit of an understatement.

When the bankruptcy crisis hit, it was an Irvine Co. anxious to protect the value of its land holdings that stepped up to broker the recovery plan.

In the days immediately after the bankruptcy filing in late 1994, frantic Orange County supervisors called Irvine Co. executive vice president Hunt every day to ask what they should do.

And when then-Assembly leader Willie Brown came to Orange County to offer aid, he flew in an Irvine Co. jet and went straight to Hunt’s Corona del Mar home.

Still, the company can’t control everything. A “bankruptcy recovery” sales tax increase backed by Bren and other major business interests failed miserably at the polls in June, forcing the company to rethink its strategy.

“The Irvine Co. has always been here,” said Hunt, “and if ever there was a time to be a good corporate citizen, this was it. . . . Donald said OK.”

These days Bren is loath to talk about his legacy or the dramatic influence he has had on this region except to say that he has helped create what he calls the jewel of Edge Cities, a term for communities that have sprung up outside of urban sprawl.

“Well, I get great satisfaction principally out of seeing people who are already living here and working here and enjoying the recreation, the place and the quality of life. And I believe [that] . . . as those communities mature, the quality of life will improve,” he said.

Irvine Co. board member Watson, who has known Bren since the 1960s and still skis with him, says Bren is concerned about his legacy.

“Most developers don’t give a damn as long as it sells,” said Watson. “But Bren has two sides. There is the successful deal maker and there is the architect. He’s proud of what he’s done.”

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Chronology: The Irvine Co.

1864-66: San Francisco merchant James Irvine pays $25,000 for 108,000 acres of land--parts of what had been three enormous Spanish land grants.

1870: Irvine buys out his partners for $150,000; when Orange County forms 18 years later, Irvine will own a quarter of it.

1886: James Irvine Jr., known as J.I., takes over the ranch upon his father’s death.

1894: The Irvine Co. is incorporated.

1918: The ranch now is one of the largest lima bean producers in the world, with 60,000 acres planted.

1937: The philanthropic Irvine Foundation is formed, and half the Irvine Co.’s stock is put under its control. This protects family members from inheritance taxes that could have led to the sale of the ranch.

1947: Eighty-year-old James Irvine Jr. dies during a fishing trip to Montana. Myford Irvine, his son, takes over.

1957: Joan Irvine Smith, 24, niece of Myford Irvine, takes her mother’s seat on the board and begins a long fight with management. She contends that the company is not getting anywhere near the potential profits from the land.

1959: Myford Irvine dies under mysterious circumstances that are ruled suicide. With the last adult male Irvine dead, Joan Irvine Smith becomes the family’s chief voice on the board.

1960: The company donates 1,000 acres of land to build UC Irvine.

1963: Renowned architect-planner William L. Pereira unveils a master plan for the enormous ranch that envisions an entirely new city called Irvine.

1967: The Irvine Co. opens its big Fashion Island mall at Newport Center. It is upstaged by the bigger and more successful South Coast Plaza in Costa Mesa, which opens the same year.

1969: Smith lobbies Congress for a change in federal tax law to require the nonprofit Irvine Foundation to relinquish ownership of the company. Congress later makes the change and the foundation eventually begins looking for a buyer.

1971: Irvine residents vote for cityhood and begin a stormy relationship with the company.

1977: With the company finally up for sale, home builder Donald L. Bren, Smith and some of the nation’s wealthiest men outbid Mobil Oil after a lengthy bidding war. They pay $337 million; the foundation had initially offered it to Mobil for $200 million. Bren, the biggest stockholder, buys more than a third of the shares. The ranch has shrunk to 77,000 acres.

1983: After feuding with Smith and the company’s chairman, Bren buys out his partners for about $500 million. Bren values the company at $1 billion, and he offers Smith and her mother, Athalie R. Clarke, as little as $88 million for their portion. Smith and her mother force a lawsuit. The company still owns 68,000 acres.

1984: Bren speeds up the construction of houses and offices to repay the $500 million he borrowed to buy the company.

1990: The court says Smith should receive $149 million plus interest for her stock. Both sides claim victory.

1991: Smith and her mother get $256 million--approximately $100 million of which is interest. It is far less than the $600 million they had wanted.

1993: Irvine Co. sells the public shares in its nearly 12,000 apartment units, creating the publicly traded Irvine Apartment Communities Inc.

Sources: Los Angeles Times files and the Irvine Co.