Businesses consider moving to save costs

Faced with rising costs, many local business owners are evaluating their options to renew leases or cut expenses by moving.

“Really, any financial services company, or a company that has any necessities or a brand that has a certain polish to it, Newport Beach is a great address, said Phil Voorhees, CB Richard Ellis’ senior vice president. “As is Anton in South Coast Plaza area—those are some profile addresses.” But the rents and the cost of doing business in Newport-Mesa doesn’t always come cheap. Because business vacancy rates are relatively low in the area, supply-and-demand principles come into play.

“Rents are climbing fast right now…. It’s simple dollars-and-cents economics,” Voorhees said.

Companies that could have been looking at a rent of about $2 per square foot in the last decade may now be looking at renewals of over $3 per square foot, Voorhees said.

Costa Mesa-based Valeant Pharmaceuticals International plans to cut costs by heading south to Aliso Viejo and selling its Costa Mesa building and lease space in the former Fluor building.

Valeant executives have been actively trying to sell the company’s building in the 3300 block of Hyland Avenue. They hope the company will be able to announce a new owner soon, senior vice president Jeff Misakian said.

The move will shrink the pharmaceutical giant. In its Costa Mesa building, the lab will be abandoned and the company will no longer engage in clinical operations. Lab employees will not move to the Aliso Viejo building as the company divests that portion of its business to recoup weak profits.

The company has been under some financial stress and officials hope the move will start a positive earnings trend.

“The move is really part of a broad-based restructuring initiated in April, all of which is designed to streamline operations, reduce costs and ultimately increase earnings performance,” Misakian said. “That’s the rationale behind the move.”

Early in November, when Valeant was due to report its third-quarter earnings to the Securities and Exchange Commission, the company was only able to release a preliminary report. In October, the company set up a special committee to evaluate its past stock-option practices. This, coupled with less-than-expected sales, was part of the impetus for the move.

Valeant is expected to finish the move to Aliso Viejo by the end of the year.

The company explored a number of options before deciding on the old Fluor building.

“It essentially provided the same stand-alone feel with our facility now, where all the employees could be housed in the same facility,” Misakian said. “We’re the only occupants, if you will.”

Unlike Valeant, Costa Mesa-based law firm Rutan & Tucker decided to stick it out at the firm’s Anton Boulevard high-rise and is expanding the space to accommodate additional lawyers at the practice. Rutan & Tucker extended the firm’s lease with Maguire Properties and will add 12,000 square feet to its 10,000 square feet in the Pacific Arts Plaza Tower 2. The deal will extend the lease through 2021.

“We would always be staying in Orange County…. I think we’re looking for a place that’s centrally located, and when we were looking at different alternatives, we looked at the location of attorneys, staff and clients,” partner Kim Thompson said. “Costa Mesa was, from a distance standpoint and convenience standpoint, closer to some of the other alternatives.”

The law firm was looking elsewhere, including at Irvine and the area around John Wayne Airport.

Aside from the expansion, a new lobby, and landscaping deal worked into the new lease, Costa Mesa’s cultural accolades were another reason for the law firm to stay.

“There were a couple things … that Costa Mesa had that Irvine didn’t,” managing partner Michael Hornak said. “There’s the cultural and arts aspect of South Coast Plaza here. I think people view that as a positive to have that here. Also, the city worked with us as we were negotiating this deal to deal with some of our traffic issues.”

Costa Mesa officials changed a light on Bristol Street, making getting in and out of the area much safer for clients and employees, “thereby showing how interested they were with Rutan staying here,” Hornak said.

Costa Mesa Chamber of Commerce President Ed Fawcett said the chamber was glad to see Rutan sticking around.

“The city and the chamber are always willing to help address any issues that might be causing a business … to want to relocate out of town,” Fawcett said. “Those situations being if they have some problems that can be handled at the city level, even at the county level or the regional level.”

Landlord-tenant disputes are generally out of the chamber’s scope, Fawcett said.

A Newport Beach or Anton Boulevard address, where Rutan is headquartered, is great for certain kinds of businesses, Voorhees said.

But for Valeant, it made more sense to sell and rent in the rapidly growing business and residential community in South County.

Misakian, who lives in Arcadia, said the company is looking to subsidize some of the costs incurred by employees who did not have to take the toll road to get to the Costa Mesa office.