Pacific Coast Business Times Proudly serving Ventura, Santa Barbara and San Luis Obispo counties Fri, 24 Oct 2014 17:05:49 +0000 en-US hourly 1 Munger’s $65M gift raises the bar for UCSB Fri, 24 Oct 2014 16:52:50 +0000 Charles Munger, vice chairman of Berkshire Hathaway, speaks during an event in Pasadena in 2011. (Bloomberg News photo)

Charles Munger, vice chairman of Berkshire Hathaway, speaks during an event in Pasadena in 2011. (Bloomberg News photo)


Berkshire Hathaway Vice Chairman Charlie Munger’s $65 million gift to UC Santa Barbara will shatter the record for the biggest gift in the university’s history and provide funding for Towbes Group to build visitor housing for the Kavli Institute for Theoretical Physics.

As reported earlier, Munger is funding part of the gift with the sale of 100 shares of Berkshire Hathaway, a disclosure in SEC filings that set off a flurry of news reports about UCSB’s next major gift. The source of the remainder of the donation was not disclosed.

Munger’s gift outpaces a $50 million gift by Oracle Corp. Vice Chairman Jeff Henley to fund UCSB’s research into energy efficiency and other science programs.

UCSB Chancellor Henry Yang heralded the gift of what he described in a statement as an “unimaginable guesthouse” for visiting researchers. He said the residence would enable “increased collaborations and scientific progress.” Construction on the three-story structure will begin in October.

One of several centers for theoretical physics on research campuses around the country, the Kavli Center or KITP is named for the late Fred Kavli, a Ventura County entrepreneur and real estate investor. The institute’s timbered façade is a bit of an homage to Kavli’s Norwegian ancestry.

“There is no place like KIPT anywhere else—and no better program—so it’s great to be able to give them a nice home of their own,” Munger said in a statement.

Currently headed by Lars Bildsten, the center was founded in 1979 as the Institute for Theoretical Physics. It was renamed after a major gift from the Kavli Foundation helped fund a new building for the center.

Munger, who studied physics and mathematics as an undergraduate, first teamed up with Berkshire Hathaway Chairman Warren Buffett in 1978. The Oracle of Omaha and Munger, a lawyer-investor with offices in Los Angeles, have created one of the most successful partnerships in the history of investing.

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Deckers shares stumble as shopping season takes off Fri, 24 Oct 2014 15:53:23 +0000 In a modestly up day for the markets, Goleta-based Deckers Brands was trading lower on Oct. 24 after its earnings projections for the third quarter, which includes holiday shopping, came in below Wall Street expectations. The firm was formerly known as Deckers Outdoor Corp.

Deckers shares fell about 3 percent to $85.45 at mid-day trading after the footwear maker said that it expected to earn $4.46 per share, compared to average estimates of $4.75 per share. The announcement was made after the markets closed on Oct. 23.

The Goleta-based owner of Ugg, Teva, Simple, Sanuk and other popular footwear brands is a bit of a bellwether for holiday shopping and the overall retail climate.

On Oct. 23, the company said second quarter earnings, for the period ended Sept. 30 were $40.73 million or $1.17 per share, topping estimates of $1.03 per share and higher than the $33.06 million or 95 cents it earned a year ago.

Revenue for the quarter came in at $480.30 million for the quarter, up 24.2 percent from the 2013 quarter and higher than the consensus estimate of $457.81 million.

Deckers’ labels, notably Ugg, have become a large part of the footwear marketing effort for major retailers such as Nordstrom. The company also has been building up its own retail outlets as well as online sales channels.

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New AVAs put Paso in wine industry big leagues Fri, 24 Oct 2014 07:03:50 +0000 On the heels of a top national ranking from Wine Enthusiast Magazine, Paso Robles Wine Country is rolling out an expanded set of sub-brands to put it on equal footing with Napa and Sonoma counties.

The wine region is being divided into 11 new American Viticultural Areas, or AVAs, which means each of these separate regions will have a different name that will appear on wine produced in the area. The Paso Robles name will also appear on bottles, in line with a conjunctive labelling law also used by the Napa Valley region.

“The Paso Robles label will always be as, or more, prominent than the label for the ‘sub-AVA,’ ” said Chris Toronto, communications director for the Paso Robles Wine Country Alliance.

The region has 200 wineries and 32,000 vineyard acres, and wine grapes are the highest-grossing crop in San Luis Obispo County, bringing in an estimated $220.36 million in 2013.

Last year, Wine Enthusiast Magazine named Paso Robles Wine Region of the Year and many wines from the area have been recognized by outlets such as Wine Spectator magazine and the San Francisco Chronicle.

Now the up-and-coming region will divide itself into individual, more specific regions—which include names such as San Miguel, Santa Margarita Ranch and El Pomar—matching similar moves in Napa, Sonoma and Santa Barbara counties. Given more specific definitions for the wine that comes out of Paso Robles, the area can bring even more attention to this blooming industry, said Steve Lohr, chairman and CEO of J. Lohr Winery in Paso Robles.

“Certainly, if you take a look at what’s happened in Napa Valley over the years and how they’ve defined themselves…it definitely does help with tourism,” Lohr said. “This means better wine sales, and better wine sales generally mean better grape sales—either by having a better market for your grapes or being able to get a better value for them.”

The Alcohol and Tobacco Tax and Trade Bureau approved the new AVAs seven years after growers and vintners from the Paso Robles American Viticultural Area Committee first petitioned for the new changes.

“We started the process back in 2006. We decided that it was time, and Paso was ripe and mature enough to be able to have all these different areas recognized,” said Lohr, who was one of the growers that filed the petition for the new AVAs.

Richard Mendelson, the attorney who provided legal counseling for the petition, also assisted the Napa region in being divided into new AVAs. He said the Paso Robles region, which was first formed in 1983, will now feature AVAs that are better defined by the variations within each one.

“With the establishment of the 11 AVAs over 30 years later, the growers and vintners are now able to capture the differences of growing sites within the appellation—differences based on geography, geology, soils, elevation, climate and other natural factors, as well as the area’s rich history,” Mendelson said in an email.

Climatologists, geographers and geologists joined the effort for new AVAs by providing research on the natural variations between areas, thereby developing borders for the new AVAs. “You have to be able to identify what makes a very specific land region, for them to be able to ratify and draw those lines,” Toronto said.

Justin Smith, winemaker and founder of Saxum Winery in Paso Robles, said each new AVA is different as a result of the natural conditions that affect how wine grapes grow there.

Saxum Winery is located in the new Willow Creek District, which is distinguished by its terrain of shale bedrock, cooler temperatures and higher average rainfall than most areas of Paso Robles. “All of Willow Creek shares these similarities, so whatever fruit is coming out of Willow Creek should be fairly similar to any other fruit coming out of it,” Smith said. “We’re trying to bring some better recognition or just a better concept for the consumers about what is coming out of the Paso Robles area.”

Since the conjunctive labeling guarantees that the Paso Robles label stays on the bottle, consumers will still be keyed in to the better-known geographic origin of the wine, according to Gladys Horiuchi, a spokesperson for the Wine Institute.

“For the people who are unfamiliar with California AVAs, they will at least know Paso Robles,” she said. “And people who have more specific knowledge of the area may appreciate the smaller, sub-AVAs that will help distinguish particular varietals.”

Now given the newly-created areas, Paso Robles may be climbing even further. “Paso Robles has had the good fortune of getting a lot of attention from consumers, media and trade over the last decade,” Lohr said. “But having this further definition will definitely allow it to continue having the grand Paso ascend in its reputation.”

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Containment strategy: Steel structures get the nod for restaurants, offices Fri, 24 Oct 2014 07:02:53 +0000


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Big wheels keep on merging Fri, 24 Oct 2014 07:01:11 +0000 Buses are the kings of budget travel and demand for charters has been bolstered by a wave of overseas tourists visiting pouring into California for the first time.

That’s part of the reason why the recent merger of Silverado Stages with Silver State Coach positions the new, combined company to dominate the motor coach business in the Western states. With a total fleet of 160 buses and shuttles, the San Luis Obispo-based company expects to gobble up more market share as it expands services.

The merged companies will operate under the Silverado Stages brand name and will centralize dispatch, scheduling, sales and marketing, accounting, finance and administrative activities at Silverado’s current headquarters in SLO.

“The resulting larger network of operation bases, contracts and product offerings will create more growth opportunities for Silverado Stages,” spokesman Mike Watson told the Business Times in an email. “Once the merger is complete, the principal owners will be able to transition themselves from day-to-day operations and to devote more of their efforts toward further growing the combined company.”

Informal discussions between the two companies began about five years ago, but the deal was inked earlier this year. Silverado owner and President Jim Galusha will serve as CEO and Silver State owner Tony Fiorini will serve as senior vice president of business development. The rest of the post-merger corporate leadership structure still isn’t decided, the company said.

In an effort to gain efficiencies and drive down cost, Silverado said it made a substantial investment in software and hardware systems prior to the merger with Silver State. Upgrades include new operations and reporting software, CRM and sales automation software, a VOIP telephone system, and software integrations to manage scheduling, dispatch, sales, accounting and administrative activities.

“Our plans are to consolidate operations where possible, take advantage of best practices and efficiencies and to extend Silverado’s proven operational model,” Galusha said.

According to Watson, the two companies have been growing independently and expect the growth to accelerate as a result of the merger. There won’t be any layoffs from the merger and new hires are expected with the companies’ increased revenue projections, he said.

Silverado is also partially employee-owned. The company launched its Employee Stock Ownership Plan in 2012. Through the ESOP, Silverado employees currently own approximately 11 percent of the company, making it the largest motor coach company with an ESOP in California, according to the company.

With the merger, Silver State employees will be able to take advantage of the plan. Silverado touts the program as a major recruitment and retention tool that increases individual performance, margins and customer service.

According to the company, the ESOP has been integral to the growth Silverado has experienced over the last few years. Employee-owners have also have representation on the Silverado Board of Directors.

“I’m excited about the opportunity and challenges ahead,” Silver State’s Fiorini said in a release. “Silverado is an employee-owned company. The ESOP is a great benefit and reward for our loyal employees. The combined companies provide breadth and depth in the California and Nevada markets, allowing us to better serve all of our clients.”

Silver State Coach, a Nevada corporation, was founded in 1986. Silver State, with operating authorities in Nevada and California, operates a fleet of some 40 motor coaches from terminals in Placentia, California and Las Vegas.

Silverado was founded in 1987 and has grown into the 19th largest motor coach company in the US, operating about 120 vehicles, according to a January report from Metro Magazine.

Silverado Stages was acquired by Jim and Sharron Galusha in 2004, and in 2006, they merged a company they established in 1998, Quest Transportation, into Silverado Stages. Silverado had a combined fleet of approximately 24 motor coaches in 2006. The company currently employees more than 230 drivers, maintenance and administrative staff.

Silverado Stages provides transportation across the Western States from terminals in Sacramento, San Luis Obispo, Bakersfield, Santa Barbara, Orange County, Pomona, and Las Vegas. Services include charters, tours, scheduled fixed route service, commuter and campus shuttles, and convention and event services aboard large motor coaches, shuttles and vans.

“We are currently opening a terminal in Bakersfield and are evaluating other opportunities around both California and Nevada,” Watson said. “Possibilities include the San Francisco Bay Area, San Diego and Reno/Tahoe.”

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Dubroff: Author Michael Lewis is the master at spotting mispriced assets Fri, 24 Oct 2014 07:00:30 +0000 Henry Dubroff

Henry Dubroff

Even if the moderator is not exactly hitting the mark.

Even if you already have put in a 12-hour day.

And even if there is a World Series game that beckons, it is worth it to invest 90 minutes or so listening to author Michael Lewis, perhaps the premier financial journalist of our time.

Which is why I trekked to Santa Barbara’s Grenada Theater on Oct. 21, to hear Lewis talk his way through a disjointed conversation with Sonari Glinton of NPR West.

The reason why Lewis is worth a four-block walk is that he combines a rare set of gifts — a knack for storytelling with a talent for spotting unique ways that markets misprice assets.

Whether he is writing about the suddenly increased value of left tackles in the NFL in “The Blind Side,” the use of statistics and scientific theory to win baseball games on the cheap in “Money Ball” or how a Canadian banker with the temperament of a boy scout unmasked a massive stock fraud in “Flash Boys,” Lewis has a way of spotting market breakdowns and writing about them in a lively way.

Like another of my favorite authors, historian David McCullough, his talks about writing are highly entertaining. Even better, they make you think.

Lewis, who I met and spoke with at a journalism conference in Phoenix earlier this year, is reluctant to prognosticate on markets and economic trends — to his credit, he prefers to take the flotsam and jetsam that comes through his transom and weave it into a compelling tale. “I write about the transformation of value in the world,” he said. “I look for value in places people don’t think value exists.”

But thinking about his remarks, or rather the things not said as he professed an inability to see into the future, I felt compelled to come up with my own list of mispriced assets in today’s chaotic marketplace.

In the overvalued category, my first pick would be hedge fund managers posing as activist investors. Every day we read headlines about Wall Street types writing demand letters to managers of very large companies, ordering them to break up in order to create value.

Comments this week from Daniel Loeb of Third Point and directed at Amgen management are typical. But do the hedgies actually know what they are talking about? Hedge fund manager Bill Ackman’s “exposé” of Herbalife fell extremely short, reminding me of a Lewis dictum: “People on Wall Street have a great fear of seeming to be ignorant but no fear of actually being ignorant.”

In the undervalued category, my No. 1 candidate is the American small-business owner. There aren’t that many of us — just a few million.

We are targeted by the left for not paying living wages and wooed by the right with promises of much lower taxes. But the fact is that most of us are centrists who want a fiscally responsible government, are happy to pay reasonable taxes and want the freedom to grow our businesses without a lot of interference.

We still think the big banks were the ones who tanked the economy, and we hate the fact that they’ve not been held accountable.

But those of us who’ve persevered through the recession are now ready to grow our businesses at a measured pace, which is largely why the economy is creating a few million jobs this year.

Finally, and also in the undervalued category, the presidency of Barack Obama. Tipping his hand just a little bit, Lewis said he’s spent about six months with the president and wants to spend more time with him after he leaves office.

This is a president with low ratings. The midterms are not looking good. His plans for immigration reform and a tax overhaul are on the shelf. He’s been criticized for being too soft on ISIS, Syria and Iran; too hesitant about stimulus and ineffective in managing Congress.

But the U.S. economy has grown under his watch, the stock market has soared and the nation has been on a slow-but-steady recovery for more than half a decade. One suspects that Lewis thinks the public will soften its view and that Obama will be seen over time as a transformational president.

One thing is sure. Lewis, who redefined how we think about baseball, football and Wall Street, will have a lot to say about the Obama presidency.

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Sonos’ move into Territory Ahead HQ fills lower State Street Fri, 24 Oct 2014 07:00:30 +0000 Sonos is about to move 150 employees into Santa Barbara’s lower State Street.

The audio products maker is wrapping renovations to the building formerly occupied by clothing retailer Territory Ahead at 419 State St. and plans to occupy the property in early November.
Company spokesman Eric Nielsen confirmed the head count of employees moving to lower Street.

The new office is the latest in a series of planned moves for Sonos, which employs more than 400 people in downtown Santa Barbara, according to Nielsen. News that company is moving so many employees into the area should be a welcome sign for restaurant and retail businesses on a flagging lower State Street.

“It’s only positive for that area. The tenants, especially [restaurant] tenants, are going to be pleasantly surprised,” said Michael Martz, a broker with Hayes Commercial Group. “I think having that many employees in that neck of the woods is really going to help.”

According to the Business Times’ last count, Sonos is the only firm in downtown Santa Barbara that occupies more than 100,000 square feet of space, making it the largest private-sector employer within the city limits.
In 2013, the company signed leases collectively valued at more than $21 million. The last time Sonos released the number of employees it had in downtown, the total was 270. Just two years ago, the number was approximately 100 employees.

Recently the company rolled out new wireless offerings and is running a high-profile ad campaign on NFL football broadcasts.

“People really enjoy being downtown and enjoy the urban lifestyle that comes with it,” Ingvar Meijers, head of the firm’s global facilities team, previously told the Business Times. “We believe it’s kind of part of our culture.”

When Territory Ahead was in the building and going strong, it was good influence. But it’s been vacant for some time,” Martz said.

Sonos’ wholesale remodel of the building’s interior is nearly complete and it plans to move some customer support and software development operations there in early November.

“I know [Sonos] is investing a lot in fixing up the building and having it occupied will be a benefit to that area of State Street,” Martz said.

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