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Thursday, Mar 28, 2024

2006: Year in Review

A look at the people, places and things that shaped the Valley area in 2006.It was a year of high gas prices, a high Dow, stock option probes and an ailing auto market nationally. In the Valley, the business scene in 2006 was dominated by a slowing housing market, a changing retail scene, a rash of restaurant robberies and a recovering movie industry, which saw a stronger-than-expected summer. The year also brought a slate of new faces, brands, projects and issues that will set the agenda for the region in coming years. The Business Journal takes a special look at those issues and the people, businesses and events that helped shape 2006 in the San Fernando Valley area. Accounting Climate: Another gangbuster year for CPA firms thanks to the continued effects of Sarbanes-Oxley legislation. Along with the many headaches the legislation caused for public companies, it continued to boost staffing levels and salaries for accounting professionals and proved a reliable and constant driver of revenues for accounting firms. Biggest News: FAS 123. The new ruling, which regulated the way in which companies account for executive stock option compensation and led to a host of scandals related to the way stock option grants were dated at some firms. Companies in the News: Local Valley companies, The Cheesecake Factory, Semtech and THQ were among those whose stock option practices became the subject of SEC investigations. People in the News: Bruce Karatz, CEO of KB Home, was forced out of the company after an internal investigation found he had inappropriately backdated stock option grants. Karatz, who earned $155.9 million in the prior year, agreed to repay KB some $13 million. Shelly Garcia Autos Climate: The environment for Valley auto dealers largely mirrored the conditions affecting the Big 3 automakers in general, which were dealt with massive layoffs, a slowed production cycle and skyrocketing gas prices. As a result, fewer people purchased sports utility vehicles and downsized to smaller cars. Despite those conditions, though, some luxury dealers reported minimal impact from the slowdown Bob Smith BMW in Calabasas, for example, reported revenues of $93 million as of June 30 while Vista Lexus in Woodland Hills brought in $33.5 million. The year brought a handful of new car-related projects including a 20,000-square-foot CarMax location that opened in November at Alameda and Flower streets in Burbank. In Glendale, several dealerships on the Brand Boulevard of Cars received makeovers. However, it also saw the loss of a longtime family-owned dealer, Auto Stiegler Mercedes-Benz in Encino, which was purchased in August by a competing car dealer. Biggest News: Detroit’s woes and the cost of fuel made motorists think twice about buying that new SUV, hurting local dealers. Companies in the News: The Big 3 automakers and Galpin Motors, which opened a new aftermarket auto sports division in March. People in the News: Stephen Smythe, the 11-year president of Mercedes-Benz of Beverly Hills, and investor David L. Peterson of Calabasas Motorcars, who purchased Auto Stiegler Mercedes-Benz in Encino. Chris Coates Aviation Climate: The aviation industry remained stable although charter companies faced high prices in fuel and difficulty in finding maintenance workers and mechanics. Biggest News The Los Angeles Board of Airport Commissioners moved ahead with a study on whether to ban certain types of jet aircraft at Van Nuys Airport. Business aviation and commercial aviation interests were at odds over funding of the Federal Aviation Administration and its air traffic control system. Companies in the News: Petersen Aviation is sold and bought by Los Angeles real estate developer Robert Maguire who changes the name to Maguire Aviation. Plans by Avjet to construct a new hangar and office space at Bob Hope Airport in Burbank stalled over whether the project violates zoning codes. People in the News: Alan Purwin and Helinet Aviation Services received a 2006 American Spirit Award from the U.S. Small Business Administration for work in Louisiana following Hurricane Katrina. Richard Hodkinson stepped away from the daily operation of his charter company Elite Aviation after 14 years. Mark R. .Madler Banking and Finance Climate: 2006 was a transitional year for banks. With long term interest rates remaining relatively low and short term rates rising, banks found they were paying more for deposits than they were earning in interest income on loans. Happily, the strong economy kept loan volume relatively high, mitigating some of the margin pressure. But that was not the case in the home mortgage lending sector, where a dramatic slowdown in home sales led to big declines in loan volume. Biggest News: Americas United Bank, the first Hispanic-managed bank in the Valley, opened in Glendale, becoming one of the strongest signals yet of the growing potential of the Hispanic commercial banking market. Companies in the News: Mid-State Bank & Trust, a Central California banking organization, moved into the Conejo Valley with its first Westlake Village Branch. Community West Bank opened in Westlake Village, marking the Goleta-based bank’s first entry into the greater Valley area. People in the News: C.G. Kum, president and CEO of First California Bank, engineers a planned merger of FCB Bancorp with National Mercantile Bancorp, which will create an entity with assets of nearly $1 billion when the transaction closes next year; Ron Nechemia, CEO of Eurorient, became the first U.S. businessman to engineer a deal for a $1 billion contract to build a Liquified Natural Gas terminal in China. Shelly Garcia Chambers Climate: The 26 chambers of commerce in the San Fernando Valley area continued to gain prominence and influence this year. The Chatsworth/Porter Ranch Chamber of Commerce took a stance on the divisive effort by Mayor Antonio Villaraigosa to gain control over the LAUSD. In October, Patricia Soteras, the longtime executive director of the Agoura/Oak Park/Conejo Valley Chamber of Commerce, died of a heart attack at 75. A former child star, she was widely credited with building the organization’s membership and its influence in the community. Biggest News: Late this year, the membership of the Woodland Hills and Tarzana chambers of commerce voted to merge, becoming one group representing the two communities starting Jan. 1. The new group will have about 650 members. The Tarzana Chamber will receive four seats on the combined board of directors. Chris Coates Commercial Real Estate Climate: With a strong economy, the office and industrial leasing markets tightened to range between 3 percent and 9 percent, pushing up rents and encouraging a continued interest in property acquisitions in the area. But as the year came to an end, acquisition activity slowed considerably, putting into question whether property values would hold in 2007. Biggest News: Merger mania. In the largest deal, Equity Office Properties Trust was acquired by Blackstone Group for about $19 billion. Elsewhere, Arden Realty was acquired by a joint venture of General Electric Co. and Trizec Properties Inc. Trizec, in turn, was acquired in short order by a venture of Brookfield Properties Corp. and Blackstone Group. CB Richard Ellis acquired Trammell Crow Co. in a transaction valued at about $2.2 billion. Companies in the News: John Laing Homes, a company with roots dating back to 1848, was acquired by Emaar Properties in Dubai. Hines International made a stunning entry into the San Fernando Valley marketplace when it acquired LNR Warner Center for $385 a foot. People in the News: Isaac Larian, the CEO of MGA Entertainment, makers of Bratz dolls, beat out a number of the area’s most prominent developers to acquire the Los Angeles Times property in Canoga Park. Shelly Garcia Education Climate: Education in the Los Angeles area was dominated by the efforts of Los Angeles Mayor Antonio Villaraigosa to reform the Los Angeles Unified School District. In October, the school board selected a new superintendent, retired Navy admiral David L. Brewer, who took over last month and Brewer has since called on the business community to help him reform the troubled district. The school district also continued its building spree, opening new high schools in Arleta, Panorama City and the East Valley and launching plans to construct an $89 million school on the site of the former Granada Hills Hospital. Outside of the LAUSD, Dr. William Jennings in June was named interim dean of the College of Business and Economics at California State University, Northridge. This summer, Woodbury University launched a fundraising effort for a new facility at its business school while the National Tooling and Machining Association’s training facility closed its doors. Biggest News: Villaraigosa’s efforts to reform the LAUSD and the subsequent selection of Brewer as superintendent. Chris Coates Entertainment Climate: Hollywood studios bounced back in the summer of 2006 following a weak performance the previous summer. Leading the way was the Walt Disney Co.’s “Pirates of the Caribbean: Dead Man’s Chest,” which earned more than $1 billion in worldwide receipts. Biggest News: The Valley got a double dose of big news in January when the Disney Co. announced its $7 billion acquisition of Pixar Animation. Warner Bros. Entertainment and CBS Corp. announced at the same time they were pulling the plug on their respective television networks and replacing them with The CW, based in Burbank. Companies in the News: Disney; NBC Universal saying it would take a second look at using scripted programming during weeknight prime time; shareholders of Chatsworth-based Image Entertainment turned back an attempt by Lions Gate Entertainment to elect a slate of hand-picked officers to the company board. People in the News: Disney Chief Executive Officer and President Robert Iger made good on his pledge to create Disney-branded content, putting that content on as many technological platforms as possible, and expanding into overseas markets. Mark R. Madler Government and Politics Climate: Despite a contentious election year, only a handful of races included Valley seats and as a result, the real action seemed to come from city hall and Sacramento. As Mayor Antonio Villaraigosa tried to wrestle control of the LAUSD, the City Council made some strides to make L.A. more business-friendly with mostly mixed results. The most significant step came just this month when the council voted to extend an exemption freeing new businesses from paying business taxes for 10 years after start-up. Gov. Arnold Schwarzenegger signed into law a phased increase of the state’s minimum wage from the current $6.75 to $7.25 on Jan. 1 and $8 Jan. 1, 2008. Biggest News: Shock flared across the Valley when the state Department of Housing and Community Development denied on Nov. 3 a request to renew the Northeast Valley Enterprise Zone, which had been in place since 1986. The designation, the only such zone in the Valley, allowed businesses to receive financial incentives and tax credits. (The state did approve, however, an enterprise zone for Santa Clarita.) People in the News: Villaraigosa; Second District Councilwoman Wendy Greuel and City Council President Eric Garcetti, who introduced the business tax extensions; and Valley City Councilman Dennis Zine, who remains the most business-friendly member of the current council. Chris Coates Health care Climate: The business of health care in the Valley continued to face a laundry list of familiar but no less daunting issues: changes in premiums; more underinsured patients, fewer nurses and calls for seismic retrofits. 2006 saw a spate of new projects open: a new emergency room at Henry Mayo Newhall Hospital; a patient tower at Valley Presbyterian Hospital; a $200 million spa and health facility in Westlake Village by the CEO of Dole Foods Co.; and, at Jewish Home for the Aging in Reseda, a new residential center and acute care facility. Construction and expansion projects also continued at virtually every facility. A new cancer center broke ground at Providence St. Joseph in Burbank and an expansion at West Hills Hospital Medical Center also broke ground. The year also saw controversy ignited after officials for Henry Mayo Newhall Memorial Hospital in August announced they were closing an acute care ward. Biggest News: In June, the owners of Los Robles Hospital and Medical Center and West Hills Medical Center and SEIU United Healthcare Workers West agreed to a new union contract after 15 days of negotiations and a threat of the strike. Companies in the News: Amgen Inc., which launched a series of expansions at facilities in San Francisco and Colorado; Mannkind Inc., which raised money for its inhalable insulin delivery system; Meridian Health Care Management Inc., which filed for bankruptcy in May; the staffing firm On Assignment Inc. People in the News: Morre Dean, named president and CEO of Glendale Adventist Medical Center and Scott Reiner stepped down; Kaiser Permanente veteran Matt Gerlach, named chief administrative officer for the Southern California region of Providence Health System in October. Chris Coates Hospitality Climate: The Valley hospitality industry largely rebounded from a series of lackluster years following the terrorist attacks of Sept. 11 and the SARs outbreak, which dealt a blow to the local tourism market. Hotel occupancy rates were up across the Valley area while areas such as Lancaster and Santa Clarita staked an even larger claim in the Los Angeles market by adding a number of new projects. The year also brought continued tensions over whether taxes generated from Valley hotel stays should fund a Valley-specific tourism bureau and worries over the possible closure of Six Flags Magic Mountain in Valencia. The biggest concern came in November, when Los Angeles Mayor Antonio Villaraigosa approved a plan to extend the living wage ordinance to hotels near Los Angeles International Airport, raising fears that a similar ordinance could pass in other areas of the city, such as the Valley. Biggest News: The continued growth of hotels in the Santa Clarita Valley, which experienced some of the highest occupancy rates among hotels in the entire region for 2006. Companies in the News: Six Flags Inc.; Four Seasons Hotels and Resorts, which last month opened a 270-room luxury hotel as part of the $250 million California WellBeing Institute in Westlake Village; the Hilton Burbank Airport & Convention Center, which sold in August for $125 million. People in the News: Wendy Greuel, the Valley Councilwoman pushing for the Valley hotel bed tax to fund a new Valley-specific tourism bureau; Six Flags President and CEO Mark Shapiro, who in June announced the company was considering selling Magic Mountain and Hurricane Harbor in Valencia to cut costs. Chris Coates Insurance Climate: The year saw continued efforts to re-evaluate how auto insurance companies determine premiums and there was a move to expand by two local insurers. Woodland Hills-based 21st Century Insurance aggressively expanded into New Jersey, Florida, Georgia & Pennsylvania while Calabasas-based Countrywide Insurance Group moved into Arizona, Nevada, Illinois, Indiana and Colorado. Biggest News: The “good driver reforms” by California Insurance Commissioner John Garamendi to base insurance premiums more on a driver’s record versus his or her home address altered the long-held but largely arbitrary technique used to determine how much a person pays for car insurance. Companies in the News: 21st Century; Countrywide; Farmers Insurance; WKF & C; Agency Inc., a New York-based insurance company that opened a Warner Center office in August. Farmers Insurance opened an employee training center in Agoura Hills. Chris Coates Manufacturing Climate: Manufacturing in the Valley leveled off for the year with the biggest challenge for the industry finding qualified employees. Biggest News: Already beset by trouble hiring qualified workers, the Valley’s manufacturing sector was hit by the closure of a training center of the National Tooling and Machining Association in North Hollywood. Companies in the News: Mattel Inc. amended a 2004 lawsuit against Van Nuys-based MGA Entertainment alleging MGA hired away key Mattel personnel and used intellectual property theft to fuel the growth of the company through its popular Bratz doll line. People in the News: Precision Dynamics co-founder and chief technology officer Walt Mosher files a lawsuit challenging the election of two members of the privately-held company’s board. Following an 8-day trial, a judge ruled in December that Mosher had not proven the two board members had been elected improperly. Mark. R. Madler Media Climate: When it came to the newspaper side of the industry, 2006 was not a bright one. San Fernando Valley publications were not immune to the general anemic conditions leading to lower circulation numbers and staffing cuts. Biggest News: In October, the publisher, directors of circulation, human resources and finance plus four reporters were cut at the Daily News. The move by parent company, MediaNews Group, consolidates a number of business functions, a strategy employed at other newspapers owned by MediaNews. Meanwhile, the Los Angeles Times saw its publisher Jeff Johnson and editor Dean Baquet pushed out following a public dispute with Tribune Co. over making additional staff cuts at the newspaper. Replacements were brought in from the Chicago Tribune. Companies in the News: The Daily News and Tribune Co.; NBC Universal announced consolidations in its area news operations into the Burbank location. People in the News: Johnson; Baquet; former Daily News Publisher Tracy Rafter was axed to be replaced by John McKeon, president and Chief Executive Officer of the Los Angeles News Group. Mark R. Madler Residential Real Estate Climate: 2006 was the year of the stalemate. Homes sales came to an abrupt stop and then began declining. By July, condominium and single-family home sales declined nearly 20 percent to 1,126 from year ago figures. Condominium developers came under fire from local community groups and worries began to surface that the market was oversaturated. Home prices continued to climb, albeit modestly. Biggest News: Noho Commons, a mixed use development that includes about 300 loft apartment rentals units, opened for business. Companies in the News: The Ryland Group Inc., Calabasas, after three years of sharp income increases, saw revenues flatten and earnings decline. Shelly Garcia Restaurants Climate: Soaring gas prices gave many restaurant operators, particularly fast food and casual dining establishments, indigestion. Would-be diners stayed away from even favorite eating places as the price of filling a tank rose well beyond $3 a gallon. Even as the price of gas stabilized later in the year, sales continued to be off at many restaurants. Biggest News: Valley restaurants along Ventura Boulevard and elsewhere were victims of a rash of takeover robberies that remain unsolved. Companies in the News: Wendy’s International Inc. sold Westlake Village-based Baja Fresh Mexican Grill to a private investor for $31 million, a fraction of what the company paid for the chain several years earlier. Shelly Garcia Retail Climate: Despite expectations that retail sales would sink with the downturn in the housing market, shoppers continued to pack stores and purchase merchandise. Biggest News: The passing of Robinsons-May. The chain was converted to Macy’s following the merger of May Department Stores Co. and Federated Department Stores Co. Besides the disappearance of the Rob-May moniker throughout L.A., the Valley lost the chain’s regional headquarters, which had operated in North Hollywood. Companies in the News: Westfield completed one of the largest makeovers ever in the Valley with the renovation of its Topanga mall. Nordstrom opened the largest store in its arsenal, a redone 200,000-square foot freestanding store, also in Topanga. Stevens Nursery & Hardware closed after 65 years in the Valley to make room for a condominium development in Valley Village. Shelly Garcia Technology Climate: The technology industry remained strong in the Valley and the state as a whole as it was helped along by private investment and job growth in certain sectors. Biggest News: In May, Vitesse fired three top executives and a month later was delisted from the Nasdaq National Market. Companies in the News: Magnetek pulled up stakes from Chatsworth and moved its corporate headquarters to suburban Milwaukee. The move came a month after Magnetek sold its power electronics group to Camarillo-based Power-One Inc. Server hosting company ISWest broke ground on a new 16,000-square-foot data center in Agoura Hills and online banking software company Digital Insight Corp. was acquired for $1.35 billion in cash by Intuit Inc. Mark R. Madler

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