Venture capital flows for energy, other technologies; big boost for Napa tourism
It’s not even a close call on the top story of 2010. It was the economy — the persistent 10 percent unemployment, public fiscal crises and struggling real estate markets — that weighed on the North Bay.
But as is always the case, it wasn’t all bad. As one can see reading the comments of experts on the economy and employment in this issue, there were many successes in 2010. The stock market has touched two-year highs. Strong companies today have huge stocks of cash and the future in energy, medical and communications technology are bright spots across the North Bay.
And the economic and employment experts are unanimous that 2011 will be better. They are going confidently, if cautiously, forward. And while doing so, it never hurts to remember the major developments in 2010 that brought the North Bay to the New Year.
So here are the Business Journal’s Top 10 Stories of 2010:
No. 1: The economy.
No. 2: Boom in medical facilities.
Just as Kaiser Permanente was completing a five-story hospital tower and new emergency facility, Sutter Health broke ground for a new hospital in Santa Rosa.
Meanwhile, health centers that serve the under-and-uninsured were expanding rapidly from Santa Rosa Community Health Centers’ new Vista facility to other community clinics in Petaluma and Napa.
The total value of all of the projects was north of $500 million.
—Business Journal Staff Report
No. 3: The communications, energy, medical device and research technology sectors were among the bright spots of the North Bay economy in 2010.
Agilent Technologies’ Electronic Measurement Group reported fourth-quarter revenues up 35 percent from a year ago, the strongest growth the Santa Rosa division has shown in 10 years, according to group President Ron Nersesian.
Calix raised $100 million in debt and equity funding in June. The amount was the largest raised by a North Bay company in 10 years. In November, the Petaluma maker of broadband access equipment filed for an initial public offering, raising another $82 million.
Meanwhile, solar microinverter systems maker Enphase Energy in Petaluma closed a venture capital round of $40 million in March of this year, and another round of $63 million in June, for a total of $146 million since it was founded in 2008.
In July, abdominal stent graft maker TriVascular, announced new investment funding of $60 million, bringing the Santa Rosa company’s total funding since its restart two years ago to $155 million. TriVascular will add 100 to its staff as a result of the new funding. The year saw the launch of its first product in Europe.
Other technology companies such as Petaluma laser startup Raydiance were also poised for growth.
And in Marin County, the Buck Institute for Age Research announced in April it planned to sell tax-free bonds to the amount of $30 million toward the construction of a $41 million, 65,000-square-foot stem cell laboratory, partially funded by $20.5 from the California Institute for Regenerative Medicine. The showcase lab is expected to be completed during 2011.
No. 4. Innovative energy program takes blows but pushes forward.
The Sonoma County Energy Improvement Program, one of the first property assessed clean energy (PACE) loan programs in the U.S., suffered a one-two punch in 2010.
Early in the year it was determined that granting loans to underwater properties threatened the sale of bonds, a major source of funding for SCEIP along with a grant from the county.
Then in late spring Fannie Mae and Freddie Mac, the country’s largest insurers of home mortgages, warned banks they wouldn’t touch properties with a mortgage-trumping tax lien.
That announcement spooked fledgling PACE programs across the country and with the exception of SCEIP they all shut down or suspended operations.
But SCEIP soldiers on, according to Sonoma County, Sonoma County Treasurer and Tax Collector Rodney Dole.
Fannie Mae and Freddie Mac have shown themselves amenable to paying off the lien and taking over the mortgages of properties with energy improvements. That cuts off a source of revenue for SCEIP, which borrows at 3 percent and lends at 7 percent.
Meanwhile, SCEIP has loaned out $36 million for energy upgrades and although demand fell off during the summer, applications are on the rise. again.
No. 5: Job creators get politically active.
The North Coast Builders Exchange, North Bay Leadership Council and Sonoma County Alliance collaborated on the launch of the Jobs & Prosperity Project, a non-partisan, apolitical effort to collect and track the views of elected public officials on issues that create jobs for the region’s communities.
The Jobs & Prosperity Project was the most visible of multiple and continuing efforts under way to once-and-for-all connect the dots between a strong, jobs-producing economy and the fiscal health of public entities in the North Bay.
—Business Journal Staff Report
No. 6: Huge leap forward for Napa tourism.
The TBID will add a 2 percent assessment on visitors’ fees, which will then be distributed into a countywide marketing fund in conjunction with the Napa Valley Destination Council.
The destination council said the TBID could generate as much as $4 million for the county-wide effort, a tenfold increase from the bureau’s previous budget.
—Jenna V. Loceff
No. 7: Marin’s largest hospital returns to district operation.
At midnight June 29, the operation of Marin General Hospital was transferred from Sutter Health to the Marin Healthcare District.
Sutter had operating responsibility for the hospital since 1996.
Since the transfer, the district has joined in a foundation focused on physician recruitment.
But the battle between the district and Sutter is not over. In August, the district sued seeking to recover $120 million Sutter transferred out of Marin County. Sutter has vigorously defended the transfers.
—Business Journal Staff Report
No. 8: Marin’s launches its own energy program.
Marin Clean Energy was established in Marin to provide an alternative energy option for residents and business owners.
Marin Clean Energy is a Community Choice Aggregation. It was established by California Assembly Bill 117 in 2002, which gave cities and counties the authority to procure electricity on behalf of customers within their jurisdictions.
The agencies are set up so PG&E delivers the electricity, reads the electric meters and issue bills. But generation of electricity and the price would be determined locally.
The Marin-based energy authority was created in December 2008 to address climate change by attempting to reduce energy-related greenhouse gas emissions. The program launched in 2010.
Also, the authority is addressing issues relating to securing energy supply, price stability and energy efficiencies.
According to the MEA its intent is to promote the development of a wide range of renewable energy sources and energy efficiency programs including, but not limited to, solar and wind energy production at competitive rates for customers.
The authority has created a program that it hopes will help stimulate local renewable energy assets.
Starting Jan. 1, the Feed-In Tariff program will allow local residents and property owners who have small-scale renewable generation systems, like solar or wind, the opportunity to sell the electrical output directly to Marin Clean Energy. It will then sell it back to consumers.
—Jenna V. Loceff
No. 9: Banks navigate treacherous economy.
The banking industry across the nation has shifted dramatically in 2010, and the North Bay was no exception.
There were positives, Exchange Bank has now posted six straight profitable quarters, Summit State Bank reported third-quarter net income that nearly doubled year over year and AltaPacific Bank reported nine consecutive quarters of increased earnings.
Bank of Marin and Umpqua expanded their reach into Sonoma County and Sonoma Bank parent Sterling Savings was able to raise $730 million.
Meanwhile, Circle Bank has decided to raise funds through an initial public offering.
But there were problems as well. Tamalpais Bank and Sonoma Valley Bank were both taken over by regulators and sold, the first to Union Bank and the second to Westamerica. Charter Oak Bank in Napa was merged into Bay Commercial.
Credit has been tight and regulators have been scrutinizing closely what banks are doing, creating frustration industry-wide when loans are not able to be made. Some new SBA programs have helped, but bankers feel they are not able to make some of the loans they would like to.
—Jenna V. Loceff
No. 10: Wine mergers and acquisitions accelerate.
Merger and acquisition activity for North Coast wine-related operations was stronger in 2010 than in the past two years and is expected to pick up further in 2011.
“There’s going to be continued upward swing in activity, including bank-related operations where they are taking over assets,” said Sean Maher of St. Helena-based consultancy Maher Advisors. “There will be activity with profitable businesses and struggling businesses, with some distressed wineries, like in the 1990s, did not sell the brand and the asset as one piece.”
Operations with good cash flow and “reasonable expectations of value” will always have buyers, according to Robert Nicholson, whose Healdsburg-based firm International Wine Associates advised on four undisclosed transactions this year, with a total value of $50 million.
Brand equity and its ability to drive cash flow are prime drivers in valuation these days, he said.
“Underperforming assets will find it tough in the present environment and 2011,” Mr. Nicholson said.
For the North Coast, that includes a number of small-scale family-owned wineries or vineyards that became overleveraged when financing interest rates were low or obtained high-interest loans, according to Mr. Nicholson said.
The largest single transaction in 2010 was a $269 million sale-leaseback deal for Sterling Vineyards in Calistoga, Beaulieu Vineyards in Rutherford and 2,000 acres of winegrape vines in Napa Valley. London-based drinks conglomerate Diageo sold them to real estate investment trust Realty Income Corp. of Escondido in exchange for a 20-year lease for the properties. Diageo retained ownership and marketing of the brands.
Private wine groups were active acquirers and investors. At the beginning of 2010, Jay Thompson, chief executive officer of The Murano Group, acquired a minority stake in Copain Wine Cellars near Healdsburg and a majority stake in Copain Custom Crush of Santa Rosa, both founded by Kevin McQuown and Wells Guthrie in 1999 and 2000, respectively.
In February, Santa Rosa-based Vintage Wine Estates, which has a growing portfolio of wine operations including Windsor Vineyards and Girard Winery, purchased a minority stake in Kunde Family Estate winery in Kenwood.
In May, the Indelicato family, which operates Delicato Family Vineyards in Manteca, gained a platform for production of Napa Valley estate wines with the purchase Black Stallion Winery in the Oak Knoll district from the Maglich family.
Financial services industry giant turned vintner Bill Foley in June acquired Chalk Hill Winery and the associated 500-acre estate home from Fred Furth. Sonoma-based Foley Family Wines has grown over the past several years to include ownership or investments in more than a dozen North Coast, Pacific Northwest and New Zealand brands, including Sebastiani.
Also in June, the Trinchero family, whose St. Helena-based company owns Sutter Home and a number of other brands, acquired troubled Havens Wine Cellars from Entertainment Properties Trust’s VinREIT subsidiary for $6.5 million.
Another distressed VinREIT investment, the remaining Cosentino Signature Wines facility in Napa Valley, was turned back to lenders in bankruptcy court in December.
In August, Dan and Katy Leese partnered with Peter Kight, owner of Quivera and other wineries, to acquire Steelhead Wines of Dry Creek Valley and formed sales and marketing firm V2 Wine Group in Sonoma. The Leeses had just exited Sonoma-based 585 Wine Partners after a change in management by significant investor Fred Franzia of Bronco Wine Co.
In October, Derek Benham’s Graton-based Purple Wine Co. added a fifth brand as well as chardonnay and zinfandel selections to the portfolio with the acquisition of the Paso Robles-based Four Vines brand.
Also in October, Pelican Brands of Carmel, Ind., acquired the Napa Smith Brewery & Winery at the junction of Highway 29 and Jamieson Canyon Road in a trustee’s sale.
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