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Irvine Co. Shake-Up Signals Direction Shift

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TIMES STAFF WRITER

The resignation of a key aide to Irvine Co. owner Donald L. Bren, the latest in a series of executive departures, comes at a time the 107-year-old real estate company is facing setbacks on local projects and is changing its business strategy.

Gary H. Hunt, 52,a 25-year company veteran who quit unexpectedly as the company’s top political strategist, is one of eight high-ranking executives who have left the Newport Beach developer in the last year.

Hunt was best known for his state and national political clout. But Orange County’s biggest land owner and developer has been beset lately by distinctly local problems.

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A 635-home luxury project at Crystal Cove north of Laguna Beach, for instance, has been stalled for the last 18 months amid environmental concerns. And Newport Beach residents passed a growth-control measure last fall, prompting the company to halt a planned expansion of its Newport Center business park.

Similar battles are being waged throughout coastal California and in urban areas across the nation as demand for new homes and jobs collide with worries over housing affordability, open space and other concerns.

Irvine Co., which created the nation’s largest group of master-planned communities, until recently has been adept at heading off controversy and getting its numerous projects completed.

Meantime, in a bid to stem the vagaries of the cyclical real estate market, the company has been diversifying. It has expanded beyond its Irvine Ranch property, a vast area stretching from the Newport Beach coast to the Cleveland National Forest, to build and buy investment properties in San Diego, Los Angeles and the Silicon Valley.

So much emphasis was put in recent years on apartments and commercial, industrial and office space outside Orange County that investment properties produce more revenue than its community developments in the county, company officials said. The private company keeps its finances confidential.

Amid local battles and expansion beyond the ranch, Michael McKee emerged as vice chairman--second-in-command to Bren--and the corporate lawyer who joined the company in 1994 helped engineer a restructuring in the last year.

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The seeming disarray with the exits of Hunt and the others worried some local leaders dependent on the company’s leadership and largess.

“Who are we going to ask for money? Who do we turn to for a favor?” said Doy Henley, a Republican activist and friend of Hunt.

Stuart Gabriel, executive director of the Lusk Center for Real Estate at USC, said handling growth and entitlement issues has been an increasingly difficult process.

“How do we balance all the constituencies, the environment and growth? And with unemployment at just 2%, Orange County is clearly among the hotter counties in the country.”

Gabriel said, however, that Irvine Co. always has been a leader in addressing such complex issues and negotiating successfully with various interest groups.

At least until some tough recent encounters, observers say.

Though the company is developing parts of its Newport Coast-Crystal Cove projects, the 635-home project near Laguna Beach has been stalled for the last 18 months as critics raised concerns over run-off polluting the ocean. The Coastal Commission reviewed the situation and a regional water board is looking into the issue.

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Perhaps a bigger thorn in the developer’s side was the election last year of longtime company critic and slow-growth advocate Larry Agran as mayor of Irvine, where the company still has most of its residential land to develop.

The company had aggressively opposed the Newport Beach slow-growth measure, but voters approved it anyway. The company halted plans last month for expanding the Newport Center business complex that surrounds the Fashion Island shopping mall.

“They’re being harassed locally from one end of the Ranch to the other by the anti-growth and environmental people who always have nagged them,” said Gil Ferguson, a former GOP assemblyman who once headed Irvine Co.’s public relations department.

Ferguson thinks the tide of friendly public opinion has turned against the company because of such factors as the sale of its Irvine and Tustin newspapers--giving outsiders control of news coverage and editorials--and the retreat of Bren from public appearances.

“By not having the kind of local presence that they had for years, . . . they have lost their abilities to influence the communities,” he said.

Whatever the cause, the setbacks have slowed Bren’s plans, and the 68-year-old billionaire--known as a headstrong and exacting boss--has been moving to shake up management and rebuild the local muscle.

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In an interview, Hunt said he wanted to devote more time to his two sons, who will soon be college age, and take a “fresh look” at other business opportunities. He declined to discuss why so many of his colleagues had left, but said: “The company still has very good people on the government side.”

Hunt, a well-recognized business leader who helped lead Orange County out of its 1994 bankruptcy, had been loaned out by the company to work on a number of political campaigns dating back to Ronald Reagan’s 1980 presidential election.

Hunt, who commanded the ear of politicians in Sacramento and Washington, had wrangled six months off to act as finance chairman for former state Atty. Gen. Dan Lungren’s $30-million bid for governor. Insiders and local political leaders say Bren was initially reluctant to allow Hunt the time off. Lungren was trounced.

“Don stood behind [Hunt] and it was a magnificent sacrifice by the company to have Gary take that time off,” Henley said. “The candidate just did a terrible job.”

High-level company sources said Hunt and former local lobbyist Carol Hoffman, who quit last fall, felt compelled to leave after falling from Bren’s favor.

Three other executives, who previously were aides to Bren friend and former Gov. Pete Wilson also left during the last year as the focus shifted from state politics toward local lobbying and corporate marketing.

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Larry Thomas, who spent 12 years as Bren’s spokesman, resigned last February, followed soon after by Franz Wisner in government relations and, just last week, Paul Kranhold in marketing.

Company officials say that the changes are years in the making, no matter how sudden Hunt’s departure seemed. The company, for example, hired former Santa Ana Mayor Dan Young two years ago to handle lobbying on such issues as a 1,746-home project in East Orange, which is awaiting environmental clearance.

McKee, meantime, consolidated his power. In December, he became part of the three-member executive committee, with Bren and Richard Sim, who built the company’s investment properties on and off the ranch. Sim, who was talked out of retiring early to help restructure the company, is expected to leave soon.

The investment properties are expected not only to buffer the effects of the cyclical housing markets on Irvine Co., but also to gradually dominate the company. That would complete its transformation from a developer of Orange County’s largest ranch into a real-estate investment and management company as the “build out” of Irvine Ranch takes place over the next two decades.

In January, the company’s operations were streamlined into an investment properties group, with Clarence Barker as president and Sim as chairman, and a community development group headed by Joseph Davis.

That reorganization eliminated the job of Bob Williams, former president of the company’s industrial group, and prompted Rick Evans, president of Irvine Co.’s retail operations, to resign.

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Ray Watson, a longtime board member and former Irvine Co. chairman, said Bren had intended mainly to rearrange management, not trigger so many departures. Watson, who also serves on the board of Walt Disney Co., characterized Irvine Co.’s upheaval as no more extreme than that at many companies.

“It’s not an unusual thing for a company to go through times of change,” Watson said. “Some people are asked to leave and some people leave because they don’t get a job they wanted.”

He acknowledged that Hunt was “a special case,” noting that Hunt will consult on “big picture” issues for the company under a five-month severance deal.

One thing that is certain, Watson and other sources said, is that more change will come.

“I would bet [Bren] has plans in place that we haven’t begun to see yet,” said one insider, who, like most, spoke only on condition of anonymity. “We’ve just seen Act 1. Act 2 should be very interesting.”

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Times staff writers Bill Lobdell, Seema Mehta and Phil Willon contributed to this report.

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