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Bank Buy-Ups, Bailouts, Buying Buildings, Bioscience and Boondoggles

Columnist: Bill Meagher
April, 2009 Issue
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Bill Meagher
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Life isn’t easy these days if you’re in the banking business. In some circles, bankers have replaced lawyers—or, dare I say, journalists—as the people we love to hate. The public image of those who make a living taking deposits and making loans has been trashed thanks to a combination of a horrid economy, a federal bailout and senate hearings complete with tales of astronomical performance bonuses, staggering losses and corporate jets. The professional side isn’t much better, with tightened credit and setting aside more money to cover loans that may go bad.

But life at San Rafael’s Westamerica Bank is exciting these days, thanks to a deal with federal regulators. The Feds closed the $1.3 billion County Bank of Merced after it failed in February. Now, in a deal brokered by the FDIC, Westamerica will take over the 39-branch bank, giving it a significant presence in the Central Valley.

The deal calls for Westamerica to absorb up to 20 percent of losses up to $269 million, with the FDIC covering the remaining 80 percent. Of any loses above $269 million, Westamerica’s share is only 5 percent, with the FDIC covering 95 percent. The agreement covers all loans for three years and residential loans for 10 years. On paper, Westamerica’s share is $53.8 million plus 5 percent. The flip side of the equation is that County Bank has deposits of $1.3 billion, outstanding loans of $1.2 billion and non-performing loans equal to 7.2 percent of the $1.2 billion. To put that in perspective, Westamerica has deposits of $3.1 billion, loans of $2.4 billion and non-performing loans of just 0.337 percent.

The fact that Westamerica was in on the deal is a positive for the bank, because the Feds won’t let banks bid unless they’re in a strong position. On the other hand, Westamerica was also a recent recipient of $83.8 million in Troubled Asset Relief Program funds.

Cash flow no problem at LRG

Larkspur’s LRG Capital Group is certainly staying busy. The investment entity continues to buy up North Bay property as values head south. LRG Capital Real Estate Ventures, via LRG Capital Real Estate Partners I Fund, picked up the Mathews Building in San Rafael for $6.7 million. The acquisition was the sixth for the fund portfolio; others include apartment buildings in Sonoma and San Rafael, as well as office buildings in Novato and a historic brick kiln building on East Sir Francis Drake in Larkspur. The boutique investment firm likes to buy properties that are at least 90 percent leased with positive cash flow—but then, who doesn’t? LRG promptly renamed its latest acquisition the LRG Capital Building, which is something you get to do when you spend a few million buying a building. Tenants in the building include Bradley Real Estate and Tamalpais Bank.

LRG has many tentacles stretching into different investment areas. Besides the commercial real estate investment vehicles mentioned above, the firm invests via hedge fund partner Admiral Capital Management. LRG also invests private equity in companies, makes commercial loans and provides structured debt finance. It has an active hospitality practice and advises select clients with merger and acquisition moves. Led by founder Lawrence Goldfarb, the company also has offices in such far-flung locales as Miami and New York. 

BioMarin closes research down, Raptor opens it up

Novato’s BioMarin has put the breaks on research it was doing with La Jolla Pharmaceutical regarding a new drug to treat lupus. The local company had licensed the drug from La Jolla for up to $285.5 million in January, but a study of the drug’s effectiveness showed it going nowhere, and so the companies pulled the plug.

BioMarin was only into the research for $15 million.

Meanwhile, Raptor Pharmaceutical Corp. has entered trials to see if a compound, DR Cysteamine, can be used to treat liver disease in teens. Raptor, founded in 2005 by former BioMarin execs, has a dozen teens signed up to see how the new drug reacts in patients with diagnosed liver disease brought on by obesity. Liver disease has mostly been thought to be an affliction that strikes adults, but new research suggests that as many as half of obese kids may actually have non-alcoholic fatty liver disease.

Meet George Jetson

In the 1960s, there was a cartoon called “The Jetsons,” which featured a space age family that commuted in flying saucers and had a robot maid named Rosy. If Marin County Supervisors Judy Arnold and Charles McGlashan have anything to say about it, Marin could give the Jetsons a run for their money.

As one of Marin’s largest employers, the County of Marin prides itself on looking forward. Thus, the county sent a letter to Unimodal Transport Solutions, a Westlake Village company developing SkyTran, a monorail system that features two-person pods that can travel 150 miles an hour and don’t require a driver. The county promised to supply a right-of-way for the project, along with permits and access to state grants. The supes think the system could enhance bus and ferry service as well as work with the SMART trains. The hope is to set up a demo from the SMART stop near the Civic Center to the Center itself.

Arnold and McGlashan believe Marin is in a strong position to land state transit cash in the form of grants—and it may not take that much. According to Unimodal, the system is 10 times less expensive than light rail. On the other hand, it’s all theoretical, since Unimodal has yet to actually put a system in operation.

And then there’s this: The state is flat-ass broke, and a grant may be a long time coming.

In other commuter news, the Transportation Authority of Marin and the Metropolitan Transportation Commission are offering up to $4,500 over two years to people operating a vanpool that either starts or ends in Marin County. The cash can be used for gas, to pay for a lease or even to pay passengers.

Vanpools have never really been popular, in part because the county has never had a continuous carpool lane. But with the completion of the southbound lane in February, transportation officials are hoping vanpools will blossom in popularity.

Bill Meagher is a regular contributor to NorthBay biz. He has no accounts at Westamerica, no money invested with LRG, BioMarin or Raptor, and no intention of buying a van.

 

      

 

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