PMB Commercial Banking President Tom Vertin Talks to the Orange

MAY 25, 2015
Julia Passes Torch on
Philanthropy; Dukes
Back in Business
Count on Julia Argyros to gently move the
needle on a subject that’s prompted a lot of
sideline chatter ever since Henry Segerstrom
passed away in February: Who’s in line to
take the torch from the remarkable group of
entrepreneurs who have driven OC’s philanthropy over the past half century? Julia knows
something about that as the wife and partner
of George Argyros, one of the lions of this
market’s modern development. George was at
her side last
week as she told
a crowd gathered
on the lawn of
their Harbor Island home that
they’ve passed
the torch on the philanthropic portion of their
affairs to daughters Stephanie and Lisa, and
son, George Jr. The crowd was there for the
Southern California introduction of We Day,
a movement that fills stadiums with self-starting kids whose volunteerism earns them tickets to all-day events studded with celebrities
and inspirational stories. Stephanie has signed
on as co-chair of the Toronto-based group’s
bid to bring its program of child-empowerment and edification to 1,000 schools
throughout Southern California. It’s a compelling campaign that’s offered free to public
schools but also needs support from the community. The Argyros family got things started
with a pledge of $1 million to the program,
which needs about $4 million a year to meet
its goal in Southern California. Visit
weday.com for more information—and don’t
be surprised to see Stephanie Argyros selling
more than real estate in the next few years ...
Former Ingram Micro President David
Dukes is the new owner of Cappy’s Café,
the PCH eatery known for its beach murals,
tank-topped waitresses and heaping portions.
Dukes says he “stepped out of the business
world” 18 years ago to focus on board and
charitable work and to raise a daughter, Savannah, who now is headed to college.
Dukes, meanwhile, is collecting historical
info about the restaurant and has been told it
dates to the ‘50s, was once called the Bengal
Tiger and featured belly dancers. Anyone
with information is invited to contact the Insider or go directly to Dukes, who can be
found at Cappy’s most days now … Give the
Register a big win over the L.A. Times on
coverage of Game 2 of the NHL playoff series between the Ducks and Chicago Blackhawks, a 3-overtime thriller on May 19 at the
Honda Center that pushed against the
dailies’ deadlines. The Register held the
presses and greeted morning readers with the
result—a 3-2 win for the Chicago squad.
Times’ subscribers in OC got word that the
game was tied when the paper went to press
… Kudos: to NAIOP and its annual Night at
the Fights, which drew a crowd of more than
1,000 to its annual card at Hotel Irvine and
will put a minimum of $10,000 toward the
group’s Building Block Foundation Fund
… Correction: on an error of omission last
week, when this column noted Concordia
University Irvine’s chance to land a spot in
the Avista NAIA World Series field but
failed to credit Vanguard University in
Costa Mesa, which had earned a similar opportunity. Both made the 10-team field, which
was set to start a double-elimination tourney
in Lewiston, Idaho, as this edition went to
press. The overlooked Lions can thank Donovan McReynolds—president of Systems
Waterproofing in Anaheim and a graduate of
the school back when it was called Southern
California College—for setting the record
straight.
Local breaking news: www.ocbj.com
ORANGE COUNTY BUSINESS JOURNAL 3
Office Sale Gives Offshore Trend Korean Flavor
REAL ESTATE: New owners
add to ethnic enclave here
By MARK MUELLER
One of the larger multitenant office complexes in Buena Park has traded hands in the
latest notable Orange County commercial
real estate deal involving investors from
Asia.
Buena Park Commerce Plaza, a two-building complex on Beach Boulevard that’s just
off the Santa Ana (I-5) Freeway, recently
fetched about $29.1 million, according to
CoStar Group Inc. records. The deal for the
159,000-square-foot property came to
around $183 per square foot.
The offices were bought by a group of
high-net-worth foreign buyers, according to
Buena Park Commerce Plaza: 2 buildings,
159,000 square feet
Anthony DeLorenzo, first vice president for
the Newport Beach office of CBRE Group
Inc. who was part of the brokerage team that
marketed the property for the seller, Dallasbased Lincoln Property Co.
The complex was marketed in large part to
Korean and Chinese buyers; property records
suggest that at least some of the buyers are
from Korea or of Korean descent.
The deal appears to add to an already-sizable presence for the ethnic group in Buena
Park, which combines with neighboring
Fullerton for a concentration of KoreanAmerican residents and businesses that’s second in Southern California only to Koreatown
in Los Angeles.
About 11% of Buena Park’s population—
roughly 9,000 people—is Korean-American,
according to 2013 U.S. census data.
OC overall is home to about 90,000 Korean-Americans and 9,000 businesses owned
by members of the ethnic group, according to
Business Journal research.
The three-story buildings at Buena Park
Commerce Plaza are on about 8.2 acres near
the intersection of Beach Boulevard and Auto
!Buena Park 10
Fairhaven Memorial in Santa Ana to Dallas Buyer
REAL ESTATE: Deal includes
2 other funeral homes in area
By MARK MUELLER
Fairhaven Memorial Park and Mortuary in
Santa Ana—one of Orange County’s largest
and oldest cemeteries—has been sold to one
of the country’s biggest providers of funeral
services.
Service Corporation International, a
Dallas-based company that runs funeral
homes, cemeteries and related services, recently completed the acquisition of Fairhaven
Memorial Park and two other area funeral
homes: Fairhaven Memorial Services in Mis-
Pac Merc Expands
Hollywood Niche
FINANCE: Beverly Hillsbased unit lends to A-list movies
By JANE YU
Costa Mesa-based Pacific Mercantile
Bank has ramped up its entertainment financing business, an area that has become
a key contributor to
growth as the bank
sharpens its focus on
commercial lending.
Recent movie financing deals for the
bank include a loan to
Mike and Marty
Productions for its
legal thriller “Beyond
Deceit,” which stars Vertin: expects “brisk
Academy Award win- pace to continue”
ners Anthony Hopkins and Al Pacino. The
movie is set for release in February 2016.
Pacific Mercantile also has provided financing for “Damascus Cover,” which stars
Golden Globe winner Jonathan Rhys
Meyers and recently completed production
in Morocco. The distribution rights for the
movie are currently being sold by Carnaby
International.
Pacific Mercantile set up its entertainment industries division in 2009.
Senior Vice President Adrian Ward
began heading the Beverly Hills-based unit
this year after the retirement of Art Stribley, who founded the group.
The division provides various services,
including gap financing, lines of credit and
!Pacific Mercantile 5
Fairhaven Memorial Park and Mortuary: 73-acre cemetery centerpiece of sale
sion Viejo and Family Mortuary and Funeral
Home in Santa Ana.
Terms of the sale were not disclosed, al-
though recent statements from Service Corp.
executives suggest that the total price paid for
!Fairhaven 8
MAY 25, 2015
Western Digital
! from page 1
the company told the Business Journal in a statement.
Western Digital is the world’s largest hard disk
drive maker in units sold and revenue. The company had about 1,900 workers in Irvine through
March, when it was the third largest local employer among public companies based here, according to Business Journal research.
The latest development dovetails with Western
Digital’s ongoing effort to align production levels at its primary plants in Thailand and other locations across the world with the changing habits
of consumers and businesses. Customers in both
segments are continuing to shift away from PCs
to mobile devices while relying increasingly on
cloud storage in place of physical products, such
as hard drives.
WD has slashed about 25,000 jobs around the
world in the past three years and now employs
roughly 81,000.
“We have worked that head count level down
over time primarily through attrition,” Chief Executive Steve Milligan said in a recent conference call with analysts.
Milligan, who took the helm in January 2013
after the retirement of John Coyne, garnered
Wall Street kudos for reshaping the HGST unit
of Japan-based Hitachi Ltd. from an unprof-
Pacific Mercantile
! from page 3
cash management. It’s made more than $225
million worth of loans to independent film
and television production companies.
The loan amounts for “Beyond Deceit” and
“Damascus Cover” weren’t disclosed, but the
bank said a typical transaction can range from
$1 million to $15 million.
“In general, when we do film production financing, we are supplementing equity with our
debt in order to complete the production of a
film,” said Tom Vertin, president of commercial banking. “We also finance tax incentives
that are provided by various states or in some
cases provinces … in order to induce film production taking place in their regions. We’ll also
finance the gap between the full distribution
rights to films and the remaining distribution
rights yet to be sold.”
Vertin said the entertainment industries division has seen “a marked increase in film production activity” since Ward took charge.
“In fact, in the first quarter of 2014, I believe
we did one film production loan. In the first
quarter of 2015, we did five,” Vertin said. “And
I anticipate that brisk pace to continue. We are
financing film production of both movies and
television, and we’re working with producers
that we’ve had a relationship with for quite
some time. It’s one of our best-performing loan
portfolios.”
The division’s loans topped $88 million in
2014, up from about $63 million in 2013 and
$44 million in 2012.
“This is an industry where we have made a
larger investment in terms of people and other
resources,” Vertin said. “And this is an industry
where we think our presence will grow quite
substantially over the short and midterm.”
Pacific Mercantile, headed by Chief Executive Steven Buster, is among the largest commercial banks with headquarters in Orange
County. It had about $1.1 billion in assets as of
the end of the first quarter.
The bank has been working to strengthen its
commercial banking emphasis and transition
away from a real estate focus, including by
closing its mortgage divisions and restructuring
its Small Business Administration lending
team.
It is owned by Irvine-based bank adviser and
private equity firm Carpenter Community
Bancfund. ■
Local breaking news: www.ocbj.com
Western Digital Corp.
Headquarters: Irvine
Business: Data storage products
Founded: 1970
Ticker symbol: WDC (Nasdaq)
Market value: About $22 billion
Fiscal 2014 revenue: $15.1 billion
Recent earnings: $384 million for
April quarter
Market value: About $21.95 billion
115
WDC
85
June
Nov.
May
itable operation into a thriving global competitor
and spinoff candidate before it was acquired by
Western Digital in 2012 for $4.8 billion in its
largest deal to date.
Regulators in China have yet to approve the
massive integration that includes 41,000 employees and operations around the globe. Western Digital stands to improve margins and
profits, boost sales with uniformed pricing, and
save some $400 million in annual costs by cutting redundancies.
Western Digital management continues to negotiate with China’s Ministry of Commerce, but
frustrations appear to be mounting.
“I am encouraged by the frequency of those
communications and the substance of those
communications,” Milligan said. “Where I am
not pleased is with regards to the pace of decision-making or the transparency of that decisionmaking. That is where the frustration is.”
Western Digital posted sales of $3.5 billion
and adjusted profits topping $441 million in the
March quarter, both narrowly missing Wall
Street expectations. The company sold 54.5 million hard drive units compared to 61 million
units shipped in the December quarter.
The results were driven by “PC demand chal-
ORANGE COUNTY BUSINESS JOURNAL 5
lenges that were largely driven by weak macroeconomic conditions,” according to Milligan,
who said he expects a rebound in the second half
of the year led by the gaming sector.
Global PC sales in the first quarter hit 71.7
million units, down 5.2% from the same period
a year earlier, according to Stamford, Conn.based Gartner Inc.
The market tracker forecasts that shipments of
desktops, notebooks and “premium ultramobile”
PCs, which includes Apple’s MacBook Air, will
drop 2.4% this year to 306 million units.
Western Digital’s hard disk drives go into
computers, external storage devices, corporate
networks and consumer electronics, such as laptops.
Hard drives use spinning disks to store data,
unlike the company’s growing line of solid-state
drives, which use chips.
The growing SSD segment, geared for business customers, turned a profit in the March
quarter, with revenue topping $224 million, up
67% from a year earlier. ■