Irvine Co. Plans 2 Major Projects Outside O.C.

In its biggest push yet to develop beyond the Orange County “ranch,” the Irvine Co. Monday said it has bought large tracts of land in Silicon Valley and San Diego County where it plans to build office and industrial projects costing $70 million.

The developments--eight two-story buildings in La Jolla catering to biomedical research firms and two office buildings in Milpitas--are the latest in a recent series of moves by the privately held Irvine Co. and its publicly traded sister company, Irvine Apartment Communities, to diversify outside of Orange County.

Since early last year, both companies have been trying to expand into other California cities with strong economies. They have been buying buildings in established high-tech centers near research universities that company officials believe will become the new “entrepreneurial hot spots.”

These latest acquisitions, however, mark the first time the company has purchased tracts of open land--21 acres in La Jolla and seven in Silicon Valley--with the idea of developing the property itself.

“We have captured our fair share of the market here,” said Richard Sim, Irvine Co. executive vice president. “Now it’s time to grow the business at an accelerated pace.”

Irvine Co. is Orange County’s premier developer, owning 19.5 million square feet of office, industrial and retail buildings here. The original Irvine ranch, as the company calls its holdings, encompasses one-sixth of the county, with about half of it still to be developed. The company is also developing Southern California’s largest and fastest-growing technology park, the Irvine Spectrum, located at the El Toro Y.

Since Donald L. Bren and a group of investors purchased the company 20 years ago, it has generally confined itself to building within the boundaries of the original Spanish land grant. But in the last few years, Bren has talked about extending his companies’ reach.

Analysts Monday speculated that the Irvine Co. is continuing to diversify throughout the state in order to be appealing to Wall Street should it decide to form a real estate investment trust (REIT), in which it would sell shares to the public.

“They’d be more lot more attractive if they had geographic dispersion of the properties,” said Alfred Gobar, a Placentia-based real estate consultant. He added that investing in three different areas would help the Irvine Co. weather any regional downturns.

Company officials Monday insisted there are no current plans to form a REIT.

The Irvine Co. first announced it was considering selling shares of its office, retail and industrial properties in 1994. Those plans were shelved, if temporarily, because the company was able to secure traditional bank loans to pay off debt and expand, officials said.

Since it started growing outside Orange County, the Irvine Co. has been targeting the Silicon Valley and San Diego area. It has purchased almost 30 buildings in Sunnyvale, totaling 1 million square feet. It also has purchased 10 research and development facilities in the Sorrento Mesa area of north San Diego County and plans to build two more at one of the sites.

Eastgate, its recent San Diego land acquisition, is less than a mile from UC San Diego. It was developed by the city during the 1970s to attract research firms.

The Irvine Co. paid $15.5 million in a public bid for two parcels there totaling 21 acres. It plans to spend almost $40 million to build a business park later this year that will require its tenants to work with university research efforts.

“We’ll take [prospective] tenants over to the university and ask them to collaborate,” Sim said. “It will be part of our criteria for marketing the space.”

If a company doesn’t need or want to work with the university, it can lease space in one of the buildings in Sorrento Mesa.

It’s a strategy the company already employs in Irvine. There, companies can lease space in its 3,600-acre Irvine Spectrum. If they want to collaborate with the university, they can also locate in its University Research Park near UC Irvine.

In booming Milpitas, where office vacancy is running around 3%, the Irvine Co. plans to build one of its first office buildings in recent years, a $15.8-million, two-building complex near Stanford University.

By the time these new projects are built, the company will have expanded its portfolio by about 15%.

“Years ago everything used to be plants and facilities. Today it’s people. We are following where jobs are going to be created in the next decade,” Sim said.