O.C. Hatching Internet Incubator

A former Koll Co. executive and the founder of Buy.com have told associates that they are planning to take control of the 40-acre Parker Hannifin aerospace headquarters in Irvine and turn it into a massive incubator for Internet companies.

The site, on prime commercial land off the San Diego Freeway and Jamboree Road, would breed Orange County technology companies that would in turn foster economic growth locally and create a hub of new Internet activity in Southern California, according to more than a dozen brokers and developers.

“There are numerous venture capitalists in the Silicon Valley, but none are purchasing a business park and housing their funded companies like this,” said Matthew Kot, an associate vice president at Grubb & Ellis.

James Watson, who resigned this month as head of Koll Co.’s western division, and Buy.com’s Scott Blum are heading a new company called e-Developments.com of Aliso Viejo to manage the property. Keith Ross, who oversaw Koll’s Orange County projects and reported to Watson, also resigned to join the new firm.

“I’m under a confidentiality agreement with my partners,” Ross said, “and I’m not able to comment until the first week of February, when we’ll announce our partnership and our new business plan.”

Ross declined to confirm the deal, adding only that the Koll Co. would “participate in the new venture.”

But associates and industry leaders said the new company will work closely with Koll to buy the property for $55 million to $59 million and build on the 300,000 square feet of office space that Parker Aerospace is vacating. Under current land-use approvals, the amount of office space could be more than doubled.

Parker and its 500 employees will be moving to two other offices the company operates in Irvine.

While Watson, Blum and Ross have declined to divulge much publicly, they have been discussing their plans with commercial real estate brokers and other industry insiders. Several bidders for the Parker property also revealed information about the successful bid.

The planned incubator reflects the current trend to cash in on the tech boom through Internet start-ups. Already, about a half dozen incubators--such as eCompanies in Santa Monica and Idealab in Pasadena--exist in Southern California. While some question how many incubators the region can support, others in the industry insist that new ones stimulate the business climate, expanding the entrepreneurial pie.

Idealab, the best-known of the bunch, has launched Internet toy seller EToys Inc. and GoTo.com, a Web search engine. Among other things, incubators help young companies recruit executives, raise capital and handle administrative functions. Some of Idealab’s companies are pitched by entrepreneurs themselves, but the bulk of the start-ups were conceived by founder Bill Gross.

Associates of Watson, Blum and Ross say the trio hopes to create an incubator and bring in major companies to provide business services.

“I think it’s a fantastic concept that will surely gain momentum,” said Douglas Killian, senior vice president, at the Voit Co. real estate brokerage in Irvine. “When word gets out on this project, they’ll get a look at every dot-com company interested in this area.”

The deal is in escrow, which means that a down payment is being held by a third party until the conditions of a sale contract are met, sources said. The process could take weeks or months, and the deal still could unravel.

But if the venture is approved, Koll would renovate several low-rise, campus-style buildings for Internet entrepreneurs. The deal could allow Koll to be first-in-line to relocate firms that have “graduated” from the park to relocate into Koll properties elsewhere, industry insiders said.

The fledgling firms would rent space in the park, in part, by agreeing to sell an ownership stake in their company to the site’s developers, industry sources said. If the new companies strike gold on Wall Street, the payoff could be lucrative for the landlords, as well as the entrepreneurs.

“It’s not a real estate deal in the conventional sense,” said George Economos, a senior vice president at Capital Commercial Real Estate of Newport Beach. “It would be very unique. The landlords will have a stock connection, and that’s what will be really unique about this deal.”

The start-ups also would be receiving accounting assistance, software help and other services from some of the industry’s heavy hitters.

Under the plan, a consortium of well-known companies would provide more than $250 million in operating services and venture capital, said Michael Dorsey, a senior vice president at commercial brokerage Grubb & Ellis. The companies include Arthur Andersen, Microsoft Corp., IBM Corp. and Softbank, a Japanese investment firm,

Softbank, which has a 45,000-square-foot incubator facility in Mountain View, said it has been approached by several groups to build a larger site in Southern California. But a company source said talks are in the preliminary stages.

Softbank already has a major stake in Buy.com and has joined Blum last fall in forming ThinkTank.com, an Internet venture capital firm. Blum, who owns 56% of Buy.com, resigned from the Aliso Viejo company just before putting the venture capital firm together. Buy.com, one of the largest Internet retailers, is expected to go public next week in one of Wall Street’s most anticipated initial offerings.

For new companies in the Irvine complex, the project could prove appealing because commercial rent often requires a large chunk of their budget, especially in Orange County, where lease rates rose by double-digit rates last year.

By riding the Internet wave, a company’s needs for office space can mushroom overnight. But that could be less of a concern in this venture, at least initially, since additional land on the site can be developed.

Koll has agreed, sources said, to renovate structures to fit high-tech needs, which include rewiring for high-speed Internet access, building large common areas for recreation and other benefits. It will likely lead to similar projects throughout the country.

Parker Hannifin put the property on the market to determine its value, said Cheryl Flohr, a company spokeswoman. But she said she was unaware of any sale agreement being reached.

The Cleveland conglomerate, involved in aerospace, industrial and other manufacturing operations, said that this is an opportune time to sell the prime parcel to raise cash.

Flohr said the company’s move may lead to the layoff of “a handful” of employees to avoid duplication at its other facilities.

The company hired a consulting firm early last year to appraise the site, and learned then that the land was worth $40 million. But real estate values have steadily risen, and several interested buyers approached the company with offers approaching $50 million.

Parker quietly put the land up for sale in December.

Watson, a 10-year veteran at Koll, oversaw the company’s commercial real estate projects in the Western United States and Mexico. Watson left on good terms, said Gerald Yahr, the company’s executive vice president. He added that Koll would be working closely with Watson on the new project.

“We’re losing a good quality guy, but we’re going to be doing quite a bit of business together,” Yahr said.

Times staff writers P.J. Huffstutter and E. Scott Reckard contributed to this report.