Agents’ Orange Chapter 7C: Birth of the IRVINE COMPANY.

[Third section of “Heavy Hitters” from the out-of-print 2000 book “Agents’ Orange”]

The Irvine Ranch was acquired by James Irvine and two partners in the 1860s. From 1866 to 1868, they owned land totaling over 101,000 acres in what was then Los Angeles County. Irvine bought out his partners, Llewellen Bixby and the Flint brothers, in 1876. In 1889 the ranch property was included in the newly formed Orange County, and extended from the Pacific Ocean to Riverside County in the east.

Irvine died in 1886 at the age of 59, and the ranch passed to his son James Irvine II who was 19 at the time. The son, known as J. I., came into full possession of the ranch in 1892. Formerly a resident of San Francisco, J. I. moved to the ranch and was instrumental in seeing the cattle and sheep grazing land turned into a large agricultural enterprise. He is said to have ridden over the 100,000 acres on horseback, a rifle cradled in his arms.

The family suffered a tragic loss when J. I.’s son, James Irvine III, died of tuberculosis at the age of 42. By that time, orchards and row-crop farming were being developed with the installation of irrigation systems.

J. I. loved to enjoy another ranch property the family owned, the Flying D, near Bozeman, Montana, which he had purchased with proceeds from the sale of portions of the Orange County ranch to the US Government. There were 4000 acres for the El Toro Marine Base and 1600 acres for the Tustin “Lighter-Than-Air” Station involved in the sale.

J. I. died in 1947 at the age of 80 while fishing on the Flying D, which was later purchased by Ted Turner. The presidency of the Irvine Company was assumed by a younger son, Myford, age 49. Ten years later he was found in the basement of the Irvine family home, dead, apparently of a self-inflicted gunshot wound to the head.

During Myford’s tenure as president, there had been some land-development projects, mostly in and around Newport Beach. The accessibility of this area was greatly enhanced by the completion of Pacific Coast Highway in 1925 on land that had been dedicated by the state to The Irvine Company.

The Company was to use a fairly unique approach in several of their developments. The land would be leased to a tenant for a relatively short period. The tenant could then obtain financing and build a home on the leased land without the cost of acquiring the property outright.

The Irvine Company thus felt that it was receiving a fair return on the value of the property without having to pay taxes on an outright sale. While this appeared to be a “win-win” situation, it would come back later to haunt the company.

The company used several homebuilders to develop certain properties, but in the beginning it was the canny John McCleod and the Macco Corporation who did the lion’s share.

Irvine Coast Country Club was built at this time, and the first golf course was installed on ranch property.

As Orange County’s population surged during the 50s and 60s, the need for additional housing became acute. Veteran loan programs, low interest rates from the savings and loan companies, plus an ideal coastal climate made living in Orange County most desirable. There were still almost 90,000 acres of open land yet to be developed on the Irvine Ranch.

After Myford Irvine’s untimely suicide, Arthur McFadden took over the reins, seeing himself as a caretaker president, but with the county assessor valuing all properties on the basis of “highest and best use,” he realized that the prime acres would have to be opened to development. Accelerating this eventuality was the ascendancy to the board of directors of Joan Irvine Burt (right, later Smith) who came into her inheritance in 1957.

The first developments were a combination of high-tech industrial facilities located near the Orange County Airport, the sale of 125 acres to Koll Development, and the construction of more upscale housing units near Newport Beach.

In addition, at the prompting of Joan, in 1960 the board of directions deeded 1000 acres to what would become the campus of the University of California, Irvine.

During this period, Joan’s mother, Athalie Clark, and her husband, former Federal Judge Thurmond Clark, were a charming and gracious contact between the company and the community. The Clarks were active in social as well as Republican circles, and on many occasions offered the hospitality of their residence for various causes including fundraising for the GOP.

Arthur McFadden, interim chief executive, knew that the time for him to step down would come, and it was a fortuitous occasion when one of the Irvine Company directors, retired Admiral Loyall McLaren, asked former Secretary of the Navy Charles Thomas to serve as president.

In 1960 Charlie Thomas took over the huge task of facilitating a master plan designed by William Pereira (left) that included shopping malls, housing, commercial and industrial facilities, recreation, balanced agriculture, along with parks and open space. Charlie Thomas was always approachable, courteous, and had a sense of community. He served out his four-year contract and the board asked him to stay on another two years, which he did, retiring in 1966.

Thomas was replaced by William R. Mason who continued to oversee the early construction projects and deliberate growth of The Irvine Company, and later appointed Ray Watson as senior vice president, Mason’s previous position.

The agricultural aspects of the ranch were still considerable, due to an earlier decision to place a large portion of its acreage into agricultural preserves under the Williamson Act. This legislation granted a tax advantage to farmers and ranchers who wished to continue in the production of food and fiber in lieu of converting their land to development.

In 1969 Mason took a coterie of company officials for a three-week study of the Mediterranean to gather ideas for development of the coastal areas of the ranch.

To achieve more recognition for the Irvine Company’s development plans for South County, Gil Ferguson, a retired Marine colonel, was appointed VP of corporate communications. In 1970 the company started the publication of Irvine World News, and later a magazine, the New Worlds of Irvine.

City of Irvine Incorporated

In 1971 the city of Irvine was incorporated, which, at the time, did not appear to be a hindrance to the company’s plans for development since the first City Council was composed of individuals thought friendly to the corporation.

During this period Joan Irvine Smith was not satisfied with the growth or profits of the company. The Irvine Foundation, established by her grandfather, actually held a majority in the company, and Joan discovered that there was Federal legislation pending that would, in effect, force the corporation to divest itself of its holdings within ten years.

Bill Mason passed away suddenly in 1973 and Ray Watson took over the reins. Martin Brower notes in his book “The Irvine Ranch, A Time For People” that during Mason’s tenure some building had been going on, and one of the projects, the City on the Village of Greentree, was being developed by several homebuilders under guidelines established by the company. One builder was judged by Irvine Company to be “uncooperative” (with respect to the strict requirements set down), and that builder would never again be invited to build on ranch property. The builder’s name was Don Bren. [left] Irvine Company officials now label this bit of history “NOT TRUE.” [But this author stands by the story.]

The trustees of the Irvine Foundation had begun to make plans to sell the company, but Watson pressed on with a new development program. There was a ready market for homes built on the ranch; in fact there were waiting lines of potential buyers on those days when the homes first went on sale. In 1976, 350 homes in the Woodbridge community were put up for sale, and over 10,000 potential buyers lined up to participate in lotteries for the chance to purchase them.

Fashion Island was being expanded with a new wing anchored by the upscale Bullocks Wilshire department store. Some people familiar with the construction malls questioned the advisability of building a huge center having only a 180-marketing area to draw from, with the Pacific Ocean on the western edge.

When its substantial investment in Fashion Island seemed at stake, solutions were proposed by the company with the help of county officials that did not always (read, NEVER) take into consideration the best interests of neighboring communities.

Despite the rosy outlook, the foundation trustees were preparing in earnest for the sale of the company. It was not thought feasible to take the company public, as investors were more interested in short-term profits, and land development – no matter how promising – provided only long-term opportunities. The foundation was ultimately forced to sell because of the provisions of the Tax Reform Act of 1969.

It was rumored that another reason for not issuing stock was that the trustees were dead set against making it possible for their nemesis, Joan, to control a publicly held corporation with her inherited 22% share of the company.

The Irvine Company’s director of communications, Martin Brower, conducted a national media campaign to extol the virtues and values of the firm. A complex and spirited “bidding contest” ensued with such potential buyers as Mobil Oil Company and Fairview Cadillac. In the end, a consortium named SMBH & Z – headed by Albert Taubman, Henry Ford II, Max Disher of United Brands from Detroit, plus others including Joan Irvine and Don Bren – were high bidders when, on May 20, 1977, Mobil dropped out and the sale was made. The successful bidders of $340 million incorporated in the state of Michigan as The Irvine Company. It must be noted that this was a highly leveraged offer made possible by a $100 million loan. Ray Watson and two other top executives resigned their positions, even though requested by the new owners to stay on. The newly formed corporation hired Peter Kremer as its president, recruiting him from a neighboring firm to the north, Newhall Land and Cattle Company, which was also planning a large housing project in “Canyon Country” located in Newhall and Valencia in north LA County.

Kremer, faced with a large number of former executives leaving the company after the sale, formed a property management division to manage all of the Irvine properties; formerly each had administered its own respective developments internally. This change in management style caused discontent and criticism amongst the various tenants, and the company began to take on a reputation for being heavy-handed in its dealings.

Martin Brower was later to observe that the animosity that arose was in part resentment against the “Back East” absentee owners with overtones of anti-Semitism directed mainly against Taubman. This adversarial climate was nurtured by new-found interest by local media, and anyone with a complaint against the company found that their cause would usually become newsworthy, providing The Irvine Company with unwelcome and sometimes unwarranted attention. Gone were the halcyon days when the ranch was considered a jewel to the south, with Athalie and Judge Thurmond Clark looked upon as respected and admired neighboring landowners.

To make matters more difficult for the new owners, Joan Irvine Smith had a falling-out with the other board members after the first euphoria of the sale abated. She discontinued attending board meetings, preferring instead to communicate by hand-delivered mail. The issue in contention was the company’s agreement to partially fund ($1 million) a waterline that would deliver Metropolitan Water District water to the South County. Joan’s opinion was that this would benefit competitors in the development business more than the company, and opposed the expenditure.

A thorny issue beset Kremer in the form of residential land leases that were reaching maturation at the end of their 15-year original period. Two factors were in contention: the re-evaluation of the parcel and the waterfront properties on Linda Isle and Bayshores, with a complicating element being that the lessees were wealthy individuals who had the funds and media access to engage in a public relations battle with the lessors. There were approximately 4000 of these dissidents who formed a “Committee of 4000” to engage in combat with Taubman who insisted that “A deal’s a deal.”

Other, less visible, setbacks occurred with the commercial tenants who chaffed under what they considered to be outrageous demands by the property management arm of the company.

In 1982 Robert Shelton, a former Newport Beach city councilman, now the in-house senior vice president of governmental relations, began hearing rumors that Bren and his assistant, Gary Hunt, were holding confidential meetings with elected officials. The purpose of the sessions was rumored to be to determine the attitude of city and county governments vis a vis the corporation as it may have been affected by the adverse publicity, and to what extent, if any, the squabbles might have on future relations.

In early 1982 Kremer received notice from Bren that his contract would not be renewed, and in October of that year Kremer announced his departure with hurt feelings and $22 million in severance pay.

In 1983, Thomas Nielsen, an in-house executive who had also been recruited from the Newhall firm, was named as president. Nielsen was courtly and urbane, and always pleasant in conversation.

One year after Nielsen took the helm, Bren offered to buy out Taubman and the other partners at a price they could not refuse. Taubman was reported to have claimed that it was “a better deal than the Louisiana Purchase!”

Company regulars were shocked when Gary Hunt, Bren’s assistant, informed them that the new owner and chairman of the board would have an office at corporate headquarters, with the clear implication that Bren would also act as a take-charge CEO.

Bren occupied an ostentatious office in the company headquarters building, with Gary Hunt in an adjacent office. A new board was named and it included Don Koll, Bob Fluor, and Ray Watson among others. Tom Nielsen was moved sideways in conformity with this new corporate philosophy that the enterprise was too big for one president.

After all of the shuffles and changes in plans, misdirections, and poor public image, the company was on its way – well financed, well-staffed, with thousands of acres of land crying out for profitable development.

Local City Councils become a problem.

Several years before, a brief shadow had fallen in the path of the company’s unlimited growth, when a “slow growth and irresponsible” majority on the Newport Beach City Council failed to rubber-stamp some of the Irvine Company’s more ambitious plans. That situation was taken care of when the slow growths advocates were replaced by a majority of “enlightened” candidates who were elected to the council in their stead.

Later, when Larry Agran and Ed Dornan [above] were elected to the Irvine City Council as environmental-minded candidates, upsetting a company-favored slate, there were a few furrowed brows, but considering how well the Newport Beach situation had worked out a few years earlier, plus the unlimited political resources available to the well-connected Irvine Company, WHO WAS TO WORRY?

TO BE CONTINUED…….

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The Series so far:

1. Introduction, Readers’ Guide, Bio of Tom.

2. OC Becomes a Conservative Powerhouse, 1920-80

3. Partisan Political Volunteers in the OC, 1960-2000

4. NON-Partisan Volunteers in the OC, 1960-2000

(I skipped doing chapters 5-6 for now – Vern)

7. The Heavy Hitters!

8. Heavy Hitters b) The Mission Viejo Company.

9. Heavy Hitters c) The Irvine Company.

10. Heavy Hitters d) George Argyros & the Minor-League.

MUCH MORE TO COME!

About Tom C. Rogers

Tom C. Rogers served courageously in World War II in the United States Army in combat operations throughout the Pacific Theatre. Thanks to his experience as a teenager sailing small boats up and down the Southern California coast and his keen interest in all things having to do with the sea, Tom volunteered for General MacArthur’s new Army amphibian unit. He was assigned to the Army’s 544th Engineer Boat and Shore Regiment of the 4th Special Brigade where he skippered landing craft (LCM) throughout New Guinea and the Philippine Islands, including participation in the first wave of forces to help liberate the Islands from the Japanese. In February 1995, Tom and his Army buddy Jim Bellamy returned to Manila to represent the United States at the Fiftieth Anniversary Commemoration events of the liberation of the Philippines. After returning to civilian life and earning a Bachelor’s Degree at Loyola University through the GI Bill, Tom joined millions of other servicemen in realizing the American dream by marrying and starting a family. In 1950 in Santa Barbara, he married Cecile von Rotz, his devoted wife, who was born and raised in Sarnen, Switzerland. While pursuing various business ventures, Tom began his life-long involvement in ranching and political volunteerism. His dedication to the conservation of California’s land resources was the bedrock of both his avocations. Since 1960, Tom was active in Orange County politics and served as Chairman of the Orange County Republican Central Committee from 1969 to 1972. In 1972, he was appointed Chairman of Cal Plan, an arm of the Republican State Committee, which had responsibility for all the California State Assembly and Senate races that year, during the Governorship of Ronald Reagan. Tom also held a number of other volunteer political posts, including Chairman of Citizens Against Unfair Taxation (1984) and Citizens for Sensible Growth (1988). In recent years his efforts have been bi-partisan with an emphasis on limiting growth and taxation. He is considered an environmentalist, and was most proud of his successful efforts to help defeat the attempts to build a new commercial airport at the former El Toro Marine Corps Air Station. Tom enjoyed cattle ranching, gardening, and writing scholarly articles. He is a former associate editor of The Wanderer, a leading Catholic weekly newspaper, and he self-published Beach Soldiers, a personal history of amphibian warfare in the South Pacific during WWII. In 2000, he also self-published Agents’ Orange, a political history of Orange County from 1960 through 2000.