Developing tendencies

Christine Carrillo

In the world of development, there typically are two vastly

different kinds of companies: giants, notably the Irvine Co., and

smaller, locally focused businesses that deal in properties worth

millions of dollars, rather than billions.

How they succeed depends largely on the financial and business

scope the company can bring to the table when buying land and

building projects, both big and small.

For them, size does matter.

The Irvine Co., which is headquartered in Newport Beach, best

reflects that reality.

The company has 30 retail centers, 350 offices, 76 apartment

buildings, two hotels, four marinas, three golf courses and a

presence in Orange, Los Angeles and San Diego counties as well as the

Silicon Valley, said John Christensen, senior director of media

relations.

The engine that helped Orange County develop has managed to

maintain its large development capacity and expand at a notably high

level.

But things do not always work that way.

Michael Kendall, vice president and regional partner for the Koll

Development Co., understands the role size plays in the industry.

Having at one time been a part of a billion dollar company with a

large presence in the land development business, he knows both the

positives and negatives to being the big guy on the block.

After experiencing significant downsizing over the last few years,

losing about 50 employees and dropping its billion dollar asset value

to merely a half billion dollars has enabled the company to see both

ends of the spectrum.

“We’re a little more focused than we used to be,” said Kendall,

who works out of the company’s Newport Beach office. “We’re a little

more selective in the projects we pursue and we respond a little more

quickly than we used to. We do have some of the attributes,

typically, of a smaller company in that regard.”

Those attributes develop from the primary strengths of smaller

companies -- local connections.

A common perception of a larger development company is that they

lack the understanding of the local area in which their projects

reside thus creating inevitable drawbacks.

“Real estate is sort of a local game,” said David Allison,

executive vice president and chief operating officer for Voit

Development in Newport Beach. “Being a smaller player focused on

understanding a few regions really, well, gives us an advantage.”

But what about the Irvine Co.’s continuous development within a

defined local area, like the city of Irvine?

Well, with only 25 employees, Voit Development, which has a

$300-million asset value, can only take advantage of its financial

capabilities to a certain limit. While its financial scope allows the

company a little more leeway in regard to bidding competitions for

various projects, its size inevitably becomes a factor.

“It can be challenging because they want to know who’s at the

other end of the table,” Allison said.

And there lies the strength of a larger company.

“I think we have the best of both worlds,” said Kendall, who added

that many of Koll’s clients are corporations that are looking for

development companies with national capabilities. “We have local

partners, like myself, with the same local contacts and local

knowledge as the smaller companies but with a bigger company behind

us.”

And the backing and established reputation of a larger company can

come in quite handy. That is until the bureaucracy larger companies

are known for having rears its ugly head.

“We have a very flat organization so there’s really no bureaucracy

to speak of,” Kendall said. “A lot of that has been thinned out due

to downsizing. I think it’s good to be lean.”

Having to go through a less bureaucratic process in order to

complete or accept a project, smaller development companies often

have an advantage.

“Smaller companies tend to be more fluid,” Allison said. “You can

wear different hats ... I think that fosters a little bit of an

entrepreneurial spirit.”

Although it may foster an entrepreneurial spirit, the bottom-line

is that smaller companies cannot outbid larger ones vying for the

same projects and, fortunately, very rarely find themselves in a

position where they have to.

“There’s niches that develop,” Allison said. “And the kind of

stuff that we do smaller local players do.”