Is it really, really time? For years now, folks promoting Antelope Valley have promised that a resurgence in the area was about to begin. And while there’s been some real estate activity over the past few years, it pales in comparison to the San Fernando, Conejo and Santa Clarita valleys. Now CB Richard Ellis Inc. has opened an office in Lancaster, hoping to catch the long-awaited wave of migration into the community. Officials at CB acknowledge that the neighboring communities of Lancaster and Palmdale have been slow to replace the business base lost when the aerospace industry collapsed in the early 1990s, but they believe that slowly, but surely, the tables are turning back in Antelope Valley’s favor. “We’ve now been through the cycle and all the economic indicators indicate the area is going to experience a substantial amount of residential, industrial and commercial growth,” said Vince Roche, first vice president with CB, who will head the new office from his base in Bakersfield. Two new brokers brought into the firm, Chuck Hoey and Lenny Dance, will be based at the new Lancaster facility at 43619 N. 17th St. Both will focus on industrial properties. In addition, one of the firm’s retail brokers will relocate to the area and there are plans to hire another broker specializing in multifamily properties. Antelope Valley had been home to a number of aerospace companies during the boom in that industry in the 1980s. But the area’s economy began to spiral downward when those companies either folded or relocated. Antelope Valley officials promoted the region as a less expensive alternative to the housing in the San Fernando Valley, but when the recession hit, and prices fell throughout Southern California, few saw any advantage to moving all the way to Antelope Valley. Now, said Roche, with the economy in the San Fernando Valley and Santa Clarita Valley strong, and prices for land and housing rising, Antelope Valley is once again poised to fill a void for more affordable commercial facilities and housing. “You can point to a couple of key transactions that indicate the area has turned the corner,” said Roche. In recent years, Rite-Aid Corp. and Michaels Stores Inc. have built warehousing facilities in the area. And last year Swissair Group announced that it plans to locate its service division for private airlines to Palmdale. Plans call for hiring some 5,000 to 6,000 employees. Still, Roche admits, the office has its work cut out for it. Unlike the areas with which it is competing, there are few existing facilities for commercial ventures. Industrial companies who are considering relocation to the area will either have to buy raw land and build facilities or contract for build to suit developments. “Part of our job will be canvassing users offering them another alternative,” he said. “Part of our job is promoting the area.” Calabasas Sublease Western General Insurance Co. has subleased 40,174 square feet of office space in Calabasas from Amwest Insurance Group in a nine-year deal valued at $10.2 million. Western General, an auto insurance company, will relocate from Encino to its new corporate headquarters at 5230 Las Virgenes Road at the end of the year. The ratings of two Amwest divisions late last year were downgraded after suffering underwriting losses and going into technical default on a loan. The company has suffered a string of losses. Sheryl Mazirow, senior vice president at Grubb & Ellis, represented Western General. Marc Spellman and John Sabourin of Colliers Seeley represented Amwest. Chatsworth Lease An electronics manufacturing company has leased a 37,940-square-foot industrial facility in Chatsworth. Tedea-Huntleigh Inc. and its sister company Transducer Controls Corp., both divisions of a global conglomerate based in Israel, will be expanding their facilities by about 30 percent with the move. The companies will occupy their new area headquarters at 20630 Plummer St. in July. They are moving from a facility in Canoga Park. Dennis Marciniak of Grubb & Ellis along with Mark Rauch at The Staubach Co. represented the tenants in the 10-year lease valued at $2.5 million. David Hoffberg at Delphi Business Properties represented the landlord, Striks Properties. Van Nuys Land Deal City Storage Group acquired a 70,000-square-foot parcel in Van Nuys for $1.2 million. The Tujunga-based self-storage company will build a 104,000-square-foot facility on the site, located at 7346 Sepulveda Blvd. Joseph Gabbaian and Bert Abel of Grubb & Ellis represented the buyer and the seller, Shaffer Family Trust. Family Affair Steadfast Lakeview Terrace LP, an affiliate of Steadfast Properties, has acquired a 128-unit multifamily building at 12326 Foothill Blvd. in Pacoima for $7.3 million. Dean Zander with Hendricks & Partners in Encino represented the seller, Spieker Cos. Mark McDonald, also with Hendricks, represented the buyer. Woodland Hills Law A law firm has purchased a 5,400-square-foot office building in Woodland Hills for $745,000. The Law Offices of Daniel J. Donahue will be relocating to the facility, at 22553 Ventura Blvd. from Tarzana. Craig Weisman of TOLD Partners represented the buyer. The seller, G. Halpin, was represented by Gribin Properties. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14 or by e-mail at [email protected].

According to the results of a recent study commissioned by the Economic Alliance of the San Fernando Valley, a significant percentage of Valley residents are undecided about whether they’d support the creation of a separate city or opt to remain part of Los Angeles. In addition, the number of “yes” responses for secession appears to have diminished since a previous survey by the Alliance. One political analyst says a strong campaign in favor of a breakup ought to begin soon if those numbers are going to change by November 2002. Secessionists however say they are not concerned about the increase in “don’t know” responses. Instead, they are relying on the conclusions of the feasibility study released by the Local Agency Formation Commission (LAFCO) in March, which show the Valley could sustain itself, to pull a majority of those undecided voters (and a good chunk of the “no’s”) over to their side. That report is expected in September. The survey, conducted for the Economic Alliance by The Rose Institute of State and Local Government at Claremont McKenna College, polled 800 Valley residents last year. Results were released on May 31. It was the second annual survey done by the institute. The first one, also commissioned by the Alliance, was completed in 1999. According to the survey, only 41 percent of the respondents would vote in favor of secession, compared to 51 percent in 1999. And, while only 18 percent were opposed to secession compared to roughly 21 percent in 1999, 42 percent of the respondents said they didn’t know how they would vote nearly double the percentage of ‘undecideds’ in 1999, when 20 percent of respondents said they were unsure. Jeff Brain, president of Valley VOTE, the group spearheading the drive for secession, said he believes the high number of undecided responses means that residents are simply taking a “wait-and-see” approach. “I was a little surprised by the number of unknowns,” Brain said. “But Valley VOTE has always told people not to decide today. We have said all along to wait until the LAFCO report is out and then start thinking about their decision.” Ralph Rossum, director of the Rose Institute, said respondents in the most recent survey may have more information from the LAFCO study to go on and are weighing the issue more carefully. “I think what you are seeing here is they are opting to take their time before making up their minds,” said Rossum. Rossum also pointed out that the survey showed that of those that would vote for secession, 48 percent said they would stick to their votes even if their taxes increased by 10 percent. The figure represents an improvement over 1999 survey results, which put that same figure at 37 percent. “What it shows is a marked change in how residents perceive secession would affect their lifestyles,” said Rossum. Over the next few weeks, said Brain, Valley VOTE will begin meeting with representatives from local organizations and asking them to take a position for or against secession. Harver Englander, a political analyst with the Los Angeles-based firm MWW Group, which has run campaigns in the past for city council members including Laura Chick and Hal Bernson, said a campaign for secession is going to be costly and, if it is to be successful, must begin at the grassroots level. “Secessionsts have databases full of supporters, so I would definitely continue to develop a dialogue with them, that’s number one,” said Englander. A lot has been said about the disparity in services between Los Angeles and the Valley the impetus for a breakup in the first place. But Englander said voters will now need to hear more about the advantages of a breakup, including how businesses may benefit from tax breaks and what changes will come concerning municipal services and local representation. “Everyone knows now what the features are going to be, but what are the benefits?” asked Englander. “How will things change for residents of a new Valley city under a breakup? They need to start hearing those things.” It’s too soon to put a price tag on it, but Englander also said organizers for a “Yes on Secession” drive are going to need to raise a lot of cash if they want to win the support they need to pass a ballot measure, which is both a majority of the voters in the Valley and a majority of the voters across Los Angeles. But, said Englander, the focus shouldn’t be on big donors. “There is going to have to be a massive fundraising campaign for this,” said Englander. “But not just a campaign for money from those who can afford to give $50,000 checks. If the average homeowner or voter gives $15 to the campaign, that person is going to be more likely to put a sign on their lawn.” Richard Close, chairman of Valley VOTE, said Englander’s suspicions that an expensive campaign is necessary are right on target. But he pointed out that, along with a secession initiative on the ballot, residents will also be voting for 14 new Valley city council seats and a new mayor in November 2002. And those races, said Close, will come with their own built-in “yes” campaigns, with as many as 10 candidates in each district knocking on doors for support. “There’s no question about the fact that the council and mayor races will also have to promote the ‘yes’ vote,” said Close. “So with about 150 campaigns going on for those seats, that’s about 150 ‘yes’ campaigns for secession. That’s the beauty of this thing.” But even the most rudimentary campaigns can’t begin until LAFCO draws up prospective council districts for the Valley, which could take place sometime this fall. “Everyone is looking for LAFCO to draw up the boundaries. We are getting calls from people who want to run but can’t do so until those are set,” said Close. So far, the most significant “no” campaign has come from outgoing Mayor Richard Riordan. Mayor-elect James Hahn, whom Close said he supported, has also publicly opposed the idea of a breakup of Los Angeles. “Why wouldn’t he? And, why would any of the Los Angeles City Council members want to vote for smaller districts for themselves?” asked Close. “But there really isn’t a “no” campaign, and our message to the new city council over the next year will only be that we want to make sure they don’t try to get in our way.” Close said council races for a new Valley city would be open to all sitting Los Angeles City Council members. And what about the rest of Los Angeles? The residents in the non-Valley portions of the city will be a tough sell, according to Englander. He suggested that a “yes” campaign be launched on two fronts: one at the grassroots level, similar to the monumental Prop. 13 campaign of the 1970s, and a second campaign targeting the residents that would live in the new city. Close agreed that two campaigns are likely. He said, however, that the number of votes needed from non-Valley residents is much lower than the number of votes it expects to get from those who are already living here. “Not only do we think we have a positive message to get out as to why the entire city should vote for secession, we also figure that about 61 percent of the voters next year would be voters who would live in a new Valley city,” said Close.

No Place Like Home Forget the beaches, the mountains and the temperate climate. And never mind that the region continues to bounce back with vigor, even after a decade of floods, fires and riots; energy debacles; or what the headlines may say about us on the cover of Business Week magazine. Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., gave his top three reasons for living in Southern California during the 2001 Info Summit, sponsored by the Economic Alliance of the San Fernando Valley, on May 31. “Yes, homes in Omaha, Neb. are more affordable,” said Kyser, a California native who once lived there briefly. So, would he return to the Midwest? “No. There’s no In-and-Out, no Nordstrom and there’s no good Mexican food.” A Different Ballgame Remember the good old days? When your first car cost as much as a pair of Nike’s do today? Father knew best? And a package of peanuts and Cracker Jacks were all you needed at the ballpark? Those days are so over that even winning baseball teams need an assist to determine how to make fans happy. The Los Angeles Dodgers have hired J.D. Power and Associates, the consumer research company in Agoura Hills, to conduct a fan satisfaction survey and find out what it is fans want when they go to a game. No matter that the Dodgers are No. 2 in the National League’s Western Division. Or that Marquis Grissom is playing his heart out. “If you look at the entire experience, from coming into the parking lot to the concession stand and the availability of services, they want to find out what they think of the entire experience,” said Peter V. Marlow, a spokesman for J.D. Power. So when did the great go out of the American pastime? Who’s the Weakest Link Now? Secession talk, it turns out, makes such peculiar bedfellows. And, as last week’s Los Angeles mayoral election campaign wound down, just as peculiar was the endless commentating and speculating about how its results would affect the movement for the San Fernando Valley to break away. As a guest commentator for Time-Warner’s cable TV election night coverage, New Times columnist Jill Stewart confessed that, as a Valley resident, she had “an interest in seeing secession succeed.” Then she noted that in a discussion she had had earlier in the week, Valley VOTE President Richard Close had given her a juicy piece of news that, albeit on the record, she just hadn’t had room for in her column. Stewart told the television audience that Close had said he supported eventual winner James Hahn simply because he would be weaker than loser Antonio Villaraigosa in fighting secession. “That does sound a bit Machiavellian, doesn’t it?” she said. Ticket to Ride Woodland Hills-based filmmakers Joe and Harry Gantz don’t mind having a former New York taxi cab adorn their company’s parking lot. “That’s the cab we use on the show,” said Joe Gantz, who along with his brother, produce HBO’s “Taxicab Confessions” series. The cab, a 1995 Ford Crown Victoria, sits idle in front of the company’s main entrance awaiting its next HBO assignment, Joe said. “It’s been in all of our shows, from Las Vegas, Washington and New York, so now it’s waiting for the next show,” he said. Complete with taxi meter and traditional yellow paint, the cab is equipped with small, lipstick-sized cameras to record passengers who invariably wind up discussing their personal lives with the cab driver. By the end of the ride, they are told of the cameras and are asked to sign a waiver so the footage can be used for the show. “People get a kick out of seeing that cab when they come here,” Joe said Hail to the Chief Capstone Turbine Corp. CEO Ake Almgren had a special visitor recently when President George W. Bush visited the company’s Chatsworth headquarters. Almgren said he was thrilled to meet the president and to explain to him how his revolutionary micro turbine works. The micro turbine generates up to 60 kilowatts of power, enough to power about 10 homes, using clean burning natural gas. Almgren was joined by Mayor Richard Riordan and Gov. Gray Davis, all of whom spoke of the need for developing safe energy sources. “I was really impressed by the interest the president showed,” Almgren said. Capstone spokesmen said staff members were also thrilled at having VIP visitors touring the plant. “Everybody was looking forward to the visit,” said company spokesman Keith Field, “but nobody really wanted to get too close to the Secret Service.”

Funding promised to the San Fernando Valley for transit improvement projects is said to be secure, despite state budget threats resulting from the ongoing energy crisis and fallout from the so-called “tech wreck” of 2000. In fact, representatives from the San Fernando Valley Transportation Strike Force, formed earlier this year, and Caltrans officials insist the Valley is actually getting more money for local transit improvement projects than was initially promised. However, a large percentage of that funding has been delayed for two years. According to Caltrans spokesman Dennis Trujillo, state budget revisions, made last month by Gov. Gray Davis to offset massive expenditures for electrical power and a slowdown in tax revenue that had been an unintentional windfall from the dot-com gold rush, will not cut into the $5.2 billion Traffic Congestion Relief Program (TCRP). On the contrary, said Trujillo, the TCRP will get a $7.5 billion infusion over time through an extension of a relief program funded by gasoline sales tax revenue. But the money will trickle down to Valley transit programs later, not sooner. Initially, the TCRP was to be partially funded through sales taxes from gasoline for a period of five years, which should have begun this year. The distribution of those funds, though, has been delayed two years so that the money can be used to fund other state programs first, at least in part because so much state money has been spent on electricity purchases recently. “Essentially, what’s going on is the two years added on to the back end (of the TCRP program) will give the program more funding than we were initially going to get,” said Trujillo. Trujillo said the gasoline sales tax deferral will free up $1.06 billion in the 2001-2002 fiscal year for other state programs, and another $1.77 billion in the 2002-2003 fiscal year. The governor’s refinancing program for the DOT will also result in an additional $2.5 billion in relief from the general fund over the next four years, Trujillo said. Additional funding for transit programs is also expected to come over the next five years from local agencies, such as the Los Angeles Department of Transportation. “We originally reported that there is $500 million set aside for the Valley in the governor’s transit program, but the figure is actually closer to $750 million,” said David Grannis, with the Pasadena-based Planning Company Associates. Grannis is the chief consultant for the strike force, co-chaired by David Fleming, head of the Economic Alliance of the San Fernando Valley, and former Assemblyman Richard Katz, who leads the Valley Industry and Commerce Association’s transportation committee. Transit money still available Paul Hefner, a spokesman for Assembly Speaker Robert Hertzberg, who had encouraged Valley business leaders to create the transit strike force, said the gasoline sales tax deferral program is a direct result of the governor’s promise to keep transit improvement projects on the table. “The governor has said that no transportation projects are going to be threatened by budget revisions,” said Hefner. “So the extension of the program essentially guarantees that the projects will be protected.” Hefner said this is a result of the strike force’s work, which is exactly what Hertzberg called for roughly a year ago when the governor’s transit package was first being put together. “Our message to the folks in the Valley has always been you are going to have to watch this stuff and make sure that things get done,” said Hefner. “The nature of these transportation projects is very complex. It’s a mammoth engineering and environmental undertaking, so you really do need some folks who can do some bird dogging, and the strike force has worked very hard to push things forward.” The extra funding, along with what appears to be more attention from Sacramento, represents a much-needed shot in the arm for the strike force. Fleming and Katz took heat from Caltrans and the Governor’s office when they formed the group in March. At the time, officials said there was no need for additional pressure, that funding for local projects was in place and that the time frames for implementing those projects would not be affected by their efforts. Now, however, Caltrans Director Jeff Morales says the persistence of the strike force has played an integral role in making it possible to push up some of the original dates for completion, proving that the squeaky wheel does indeed get the grease, despite the delay in funding. “We’ve got a tremendous opportunity to get some real things done here,” said Morales. “And what’s new here is there is a spirit of cooperation and one of partnership. And I think it’s going to be done in a very short time frame.” “It’s amazing,” said Fleming. “We’ve got three quarters of a billion dollars more for local projects, so the time to move is now. And we now have the whole-hearted support of Sacramento.” Three projects are priorities The strike force is focusing on three major projects: a Valley-wide signal synchronization program, a new east-west busway route connecting North Hollywood and Warner Center, and a north-south busway, which would intersect with the east-west system. Grannis said the $84 million needed for the signal synchronization program is fully funded, meaning Caltrans has been given approval to release the money. But the timeline for getting that project off the drawing board and completed is 10 years. “That timeline is just ridiculous,” said Grannis. “And that’s our purpose. Our focus right now is making sure that those kinds of timelines come down to a one- to two-year timeframe. There is no reason in our minds it should take that long.” Grannis said money set aside for new carpool lanes along the Golden State (5) Freeway through the Valley and the Hollywood (170) Freeway to Route 14 (Antelope Valley Freeway) has also been cleared for release and the project should go into design phase sometime this month. The credit for the attention on Valley projects, said Grannis, is not his to take. Instead, he insisted it was Fleming and Katz, along with the collaborative efforts of local agencies, who are responsible for the progress made thus far. “We have been working very closely with (Morales) and he has committed to not only working with us, but also to seeing how we can deliver the projects, not just on schedule, but maybe accelerate that schedule,” Grannis said. “But it’s the work of Mr. Fleming and Richard Katz and the others who are pushing at the local level that should be credited for getting the ball rolling.” Grannis also said that the Valley has long been dismissed by Sacramento agencies because of a common view that those leading the efforts to get lawmakers to take their projects seriously have lacked a certain degree of consistency. But the creation of the strike force, he said, has dispelled those misconceptions and placed the needs of the region front and center in Sacramento. “From a regional standpoint, the San Fernando Valley has more funded projects than any other region in the state,” said Grannis. “The rap it took in the past has been, ‘Gosh, you guys don’t have your act together.’ Well, we are proving that that simply is not true.”

Like many, Mark Taylor last year looked out over a cyberspace horizon that seemed lined in gold and took the leap. Drawing on the expertise he had developed in more than two decades in the food distribution business, Taylor set up Volumefoods.com in Encino, an Internet company designed for food service buyers and suppliers. By using the Internet, Taylor figured that food service buyers, especially those with smaller needs, could join a pool with others looking for meats, groceries and other food products and take advantage of their combined purchasing power to get better prices. What Taylor didn’t anticipate was the tradition of personal relationships that prevails in the food service industry. As far as buyers were concerned, the bargains couldn’t compensate for the personal attention and direct-to-the-supplier communication the Web site lacked. Now back to focusing on his distribution company, Taylor & Associates, the entrepreneur has learned a thing or two about startups. The CEO shared his insights with Business Journal Senior Reporter Shelly Garcia. “At the time we designed this, there was such euphoria surrounding everything Internet. So we launched the company in October, but we really formed the basis for it a year earlier. Everyone we talked to said, ‘yeah, great idea.’ We had no trouble signing up manufacturers. “The food exchange model doesn’t work. People are not going to a third party to buy their food, so the whole model which Volumefoods was based on has basically been invalidated by the marketplace. “I thought I could broaden the trading base between buyers and sellers, and the reality is that people buy from the people they want to buy from, and it’s not just who has the best price. “Volumefoods is still up and alive, but the company is really looking to import pieces of the technology into other people’s Web sites to enable food companies to do business electronically (as an adjunct to their business). The business may end up being more valuable in its parts than it was in its totality. “I’m in negotiations with two companies. I haven’t closed any deals yet. I think I will but, in the meantime, my life is a combination of running and managing my offline food brokerage company and continuing to see value and maximize the value of what we had created in Volumefoods. “Regardless of whether people are using the exchange, we developed some wonderful tools. I don’t regret having developed this technology because I now have hundreds of new trading partners for my offline business.”

The economic forecast for the San Fernando Valley and the state as a whole is not as bleak as headlines on the East Coast may make them out to be. But don’t get too comfortable. That’s the underlying message of a report from the so-called “guru of the L.A. economy,” Jack Kyser, chief economist with the Los Angeles Economic Development Corp. Kyser gave his report May 31 during the San Fernando Valley Info Summit 2001, sponsored by the Economic Alliance of the San Fernando Valley. He said the Valley has a combination of economic factors and challenges to either confront or, if nothing else, keep a watchful eye on. “You’re looking at an economic situation that has a lot of moving parts,” said Kyser. “We don’t expect a classic recession, but we are coming off of a very strong 2000, so there is the ‘velocity shock impact’ to consider.” Kyser said a long period of strong economic growth is ending and a long, steady readjustment period is beginning. Valley businesses were in no way immune to the fallout from the tech wreck of 2000. There are plenty of war stories told by those who are at the end of the dot-com bonanza-gone-bad, including executives whose companies folded outright, and those who faced significant restructuring just to stay afloat. But there is a silver lining. All told, Kyser said, the Valley is actually poised to be on the cutting edge of the next phase in the technology industry because of the number of businesses producing back-end or support products for the personal computer and high-tech industry. “There is a very strong tech sector in the west end of the Valley and people are concerned,” said Kyser. “But it’s a strange situation, because what we are doing is looking at the tech industry in a new way. The old-line tech companies, like Intel, Sun Microsystems and Hewlett Packard, have enormous backup inventories now. But there are firms in the Valley that are on the cutting edge and developing what we are calling ‘enabling technology,’ or backup technology for existing products. So you have to say technology never sleeps, and it certainly never sleeps in the West Valley. So while the larger companies now are forced to refocus, we appear to be on the right track.” No free energy passes Valley businesses fortunate enough to be on the Los Angeles Department of Water and Power’s billing list may not be as concerned about energy shortages, increased fees and looming blackouts this summer as those who are set up inside Southern California Edison territory. But they should be. “While businesses in Burbank, Glendale and Los Angeles may have their own power sources, the energy crisis is still an issue for other parts of the Valley, and to be good neighbors all businesses should do what they can to help,” said Kyser. “If you are in DWP territory but one of your suppliers is in Calabasas, for example, you have to be concerned, and you have to take measures to conserve because of threats on a state-wide level.” Kyser said there is reason to worry that the state budget will be consumed by the expenses the state is incurring by buying up very expensive electrical power. As a result, he said, every region of California has to be concerned about losing funding for public programs. Kyser suggested that those businesses that haven’t already done so begin immediately to implement energy-saving measures, including the use of alternative fuels, and taking advantage of incentive programs offered by the utilities. “Regardless of where you are, you will need to make sure you are energy-efficient and look at your overall operation to see how efficient it is as well,” Kyser said. Kyser also said that small businesses across the state have not been taken as seriously by Sacramento as they should or could be. He suggested that efforts at the local level must be made in order to reverse the situation. “Companies have to get involved with some kind of local business association, like the Valley Industry and Commerce Association or the United Chambers of Commerce,” said Kyser. “What we sense is the voice of business around the state is not being heard in Sacramento. We are a small- to medium-sized business base with differing concerns, and it is up to us to bring those concerns forward.” Secession can be consuming The Valley secession movement, said Kyser, will also need to be taken very seriously by local businesses, particularly with regard to political redistricting. And even if it doesn’t secede, Valley constituents will have to be vigilant to insure that the city council, now with two new Valley representatives and a new mayor, work to make council districts more reflective of communities. “The secession issue is going to take a lot of physical and psychic energy, and I think that it is going to be a long drive,” said Kyser. “But without a secession, you have to figure out how to get as many Valley-specific council districts as you can. You are going to need discrete and smaller districts in order to accommodate the needs of the different parts of the Valley and the businesses located there.” Promoting the Valley business community should also be a high priority, said Kyser, particularly now because of the bad press the state is getting due to the energy crisis and the “dot-gone” syndrome. Kyser said job growth in the Valley will be moderate over the next year, centered in the entertainment, technology and financial services sectors. He said Valley entertainment companies need to take seriously the ongoing threat of losing production business to states and other countries where labor costs are cheaper and there is less red tape. “There’s no question that one other issue that has to concern the Valley is the issue of runaway production,” Kyser said. “While there are programs, such as the California First Program, which offers producers incentives to do business in the state, as well as the ongoing discussion in Washington about tax incentives for production companies who work here, we have to constantly remember and think of ways to be as user-friendly to the entertainment industry as we can.”

Venture capitalists have given Simi Valley-based Celetron International Ltd. $48 million to expand its business and increase production of computer chips and memory modules, power conversion equipment and circuit boards. Prescott Ashe, managing director and co-founder of San Francisco-based Golden Gate Capital, one of the investors, said the company’s low-cost computer chips and other equipment have helped increase its stable of customers, giving it sizable growth potential. “The company has such broad service offerings that it has numerous avenues to have strong growth,” Ashe said, noting the company could double or triple its revenue in the next few years. The $48 million in funding comes from a group of investors that include Golden Gate Capital, New Enterprise Associates, Baring Asia Private Equity Fund II and Alta Partners. C. Richard Kramlich, general managing partner with the investment firm New Enterprise Associates, said Celetron’s low overhead gives it the potential to rapidly increase revenue and profits. The company’s CEO, Jugi Tandon, and his four brothers founded Celetron in 1981 in India. Later that year, they moved its headquarters to the U.S. while keeping the manufacturing component in India. The company, Tandon said, is India’s largest exporter of electronics. The company has manufacturing plants in India where it employs the bulk of its 5,000 employees, 500 of which are engineers who develop its products. “The engineers we have in India, we pay $500 a month, but the engineers here we have to pay thousands of dollars a month, so we have that advantage,” Tandon said. “The business coming at us is very substantial and we needed working capital to expand. We definitely cannot meet all the demands customers are putting on us,” Tandon said, adding that customers from the broadband industry, in particular, have been increasing. With an initial infusion of “several million dollars” from investment firms in Asia, Tandon said, the company grew as it supplied low-cost circuit boards and computer components to the booming electronics and computer industry of the 1980s. Its rapid revenue growth helped it expand in recent years, but not enough to accommodate the company’s ambitious expansion plans. Tandon said the capital infusion could allow the company to increase production and double revenue from $250 million last year to $500 million next year. The company would not release its net income figures. Tandon said Celetron’s low labor costs have helped make it competitive with bigger rivals like Motorola. The influx of capital will push the company’s growth as never before, Tandon said. “We feel that we can’t meet our customers’ demand unless we expand significantly.” Tandon said the company is poised to further develop its U.S. and European markets. Already, the company plans to close a deal this month to acquire Golden Systems Inc. of Simi Valley, which manufactures and markets switching power supplies for electronics. Ashe said the potential for growth from the Internet and broadband industries will push Celetron’s growth. He also said the fact the company’s Indian engineers speak English and can interact with customers in the U.S. is an advantage over companies based in China and elsewhere. “There are very few companies that have that with a low cost structure,” he said. The company has a total of 500,000 square feet of assembly space and an additional 300,000 square feet of so-called clean rooms for assembling and developing its high end electronic chips and components, mostly in India and Sri Lanka. It also has a 7,000-square-foot facility in Simi Valley where some manufacturing is done. Dirk McCoy, co-founder of Hytel Group, an electronics manufacturer in Chicago which is also one of Celetron’s competitors, said the electronic and optical manufacturing field is growing at about 20 percent each year, giving small and large companies room to expand. Tandon said he anticipates the demand for equipment for Internet infrastructure to increase.

Alfred E. Mann wants to cure cancer, create an artificial pancreas and make life easier for diabetics. But he’s also a businessman. So when it came to his latest blockbuster deal, in which he sold MiniMed Inc. to Minnesota-based Medtronic Inc. for $3.3 billion in cash, Mann was characteristically candid: “It’s a great deal for us and the stockholders,” he said. Mann’s privately-owned Medical Research Group in Valencia also was sold for $420 million in cash and stock as part of the deal. An entrepreneur and biotech visionary, Mann built MiniMed, the insulin pump maker which employs 1,600 people, into a leader in its field. Last month, however, company officials agreed to be acquired by Medtronic, leaving Mann $816 million richer and with a handful of companies still to guide. The Business Journal caught up with Mann last week and spoke to him about what the changes mean to him, to MiniMed and to the biotech industry. Question: You have said before that, of all companies you have started, MiniMed was the one closest to your heart. Why then did you and the other stockholders decide to sell it to Medtronic? Answer: I believe this was the right thing for the company. There were other offers, but this one seemed to be the best because of the cash structure. They were willing to put up a lot of cash, unlike some of the others. We were influenced by our board and some of the people in the financial community who felt that this was a good deal. Q: You have also said that one of your most important goals was the development of an artificial pancreas, which is what Medical Research Group (the other company being sold) focuses on. What are you going to focus your attention on now? A: I have other ventures and, to the extent that my work load here decreases as the deal moves forward, I’ll be able to focus on them. In particular, Mannkind Corp. here in Sylmar (a firm that is developing vaccines for allergies). We’re making some excellent progress there. Q: What do you see for MiniMed’s future with new management? A: They’re not looking to give up any of our administrators or top people and they’ve said they’d like to keep everyone on. The plan for me is to continue on in some advisory capacity. I gave up the chief executive officer position a year ago and it’s time to move aside, so I’m not bothered by leaving the company I don’t see things changing much here and it’s more than likely that the company will continue in the way it has. It will continue to grow with Medtronic. Q: You’ve worked with a lot of the people at MiniMed for a long time. Did the personal relationship you have developed with so many here make it any more difficult to come to a decision about the future of the company? A: It wasn’t difficult at all. They assured me that they would keep our people and that things wouldn’t change that much. Terry Gregg, our president, will become chief executive officer as planned and that was important to me. It was really the best deal we could have hoped for I don’t have any issues at all about the deal. We’re actually getting pretty big now and we’re growing at 33 percent a year (in revenue), so I think that’s going to continue. Everything’s going pretty well and I’m happy. Q: What are your plans for the cash you’ll be receiving for your shares in the company (Mann owns 26 percent of MiniMed’s stock)? A: I’d like to give it to research, primarily. There is a lot of medical research that needs funding, but I haven’t made up my mind yet. It’s going to be an interesting process because there is need out there. Q: Will you take any time off once the deal with Medtronic is completed? A: Yeah, probably. I might take a weekend off (laughs). I don’t like to take time off. There’s way too much for me to do. I’m always working. There are a lot of things to do in my other companies and, now that I have the time, I’m going to be more involved in them. Q: Do you have any regrets about the sale of MiniMed? A: It’s hard to say but, more or less, one of my visions has been to create an artificial pancreas and it’s not complete. That’s something that’s been a really big interest of mine. But we were getting close.

Developers for the proposed Big Sky Ranch housing development in Simi Valley say they are frustrated after another developer backed out of a deal to build an access road to their planned community. John Franklin, who heads the project for Shea Homes Inc. and Sand Canyon Partnership LLC, said a plan to build an access road for the 763-home project is in jeopardy after Landmark National Inc. dropped its plans to build a segment of the road that runs through its Lost Canyons Golf Club because of so-called “site conditions.” Franklin would not say whether Big Sky proponents plan to sue Landmark over the broken agreement. Landmark officials did not return telephone calls from the Business Journal. Simi Valley Assistant City Manager Brian Gabler said Landmark had agreed in writing to build the road before it told the city that it would scale back its hotel and residential project nearby and that it would be financially impractical to build the road under those circumstances. It was unclear why Landmark scaled back its plans. Gabler said the city is attempting to resolve the issue in meetings with both Landmark and Shea/Sand Canyon developers.

Summary Business: Semiconductor photo mask manufacturer Headquarters: Burbank CEO: Constantine S. Macricostas Market Cap: $704.9 million Dividend Yield: N/A* Total Liabilities: $51.6 million P/E: 36.94 Long-Term Debt: $202.8 million *Photronics does not pay dividends The smaller they get, the harder they are to make. And that’s good news for Photronics Inc., which manufactures glass photomasks for mass production of semiconductors or microchips at its facility in Burbank. But things are changing quickly. Even though the semiconductor industry took a beating in 2000, Photronics, which changes the design of its products to suit the needs of the marketplace, is reporting record earnings for its second quarter ended April 30. Net income for the quarter increased 71 percent to $9.9 million, or 32 cents per share, compared to a loss of $5.3 for the same quarter in 2000. Revenues were $98.5 million in the recent quarter ended April 30, or a 29 percent increase over the same quarter the previous year at $76.4 million. The company’s stock price over the last year has remained relatively flat, considering the market downturn, trading at between $24 and $27 a share. The stock closed at $27.43 on Friday, June 8. According to Mark Fitzgerald, an analyst with San Francisco-based Banc of America Securities who has covered Photronics for the last decade, the company has managed to retain a leading position in the reticle industry. But it hasn’t been easy. Because of rapid advancement in computer design applications, the reticle production industry was in saturation mode until the late 1980s and early 1990s. “In the late 1980s, computer design tools dramatically changed and consequently those changes affected the industry,” said Fitzgerald. “So we suffered from huge excess; demand wasn’t growing with the number of the masks being produced. So companies like Photronics used to have to scrap a lot of bad product.” But today, there are only four companies in the business operating on a global scale, according to Fitzgerald, with Photronics now leading the pack. Fitzgerald said roughly 60 percent of the semiconductor manufacturers in business globally rely on those four companies. The other 40 percent manufacture their own products in house. Photronics’ revenue for the last fiscal year was $331 million. Fitzgerald said Photronics may be looking at a flat period over the next few quarters, but will recover. “The positive aspect of what is coming is the photomask technology is getting so complicated the prices are going to increase dramatically and that is going to boost annual revenues for the company,” Fitzgerald said. Its June 2000 merger with Los Angeles-based Align-Rite International resulted in a reduction of its global workforce by roughly 10 percent and a decrease in net revenues over 1999. But, the acquisition did help boost the company’s market share considerably. In August, the company also increased its holdings in the Netherlands-based Precision Semiconductor Mask Corp. from 33 percent to 51 percent. “Photronics has managed to weather a rough period because of its focus on newer products, but it has also come forward through its line of acquisitions over the last year or so,” said Aric Ng, an analyst with the San Francisco based firm SG Cowen Securities Corp. Ng agreed with Fitzgerald that Photronics would likely experience a slight downturn in the third quarter as the semiconductor industry slowly makes a comeback. But again, sales from new products with higher price tags will be key. “Looking ahead, I think their forecasts will be down slightly because of a slowdown in demand,” said Ng. “But we are still forecasting this company to grow by about 19 percent, given the state of the industry and how chip makers are coming out with these more complicated and more costly components.” Although demand for newer, high-end products has resulted in increased revenues for companies like Photronics, the market downturn for the semiconductor industry has also forced the company to look for ways to cut labor and operating costs. Consequently, Photronics will shut down its Burbank-based manufacturing facility Oct. 31 and move it to a new facility in Phoenix, where the demand for semiconductors and the high-end products is said to be greater. “Some 40 percent of the microchips processed in North America are now done in the Southwest,” said Michael McCarthy, a spokesman for Photronics. “From a manufacturing standpoint, we are seeing a lot movement into the Southwest, where there is also a growing demand for more mature components as well as cheaper land and operating costs.” Photronics is reducing its entire manufacturing system, cutting three of its 13 facilities in Burbank, Florida and Germany.