February 1, 2007
Textron deal sets stage for defense rebound

Dealmakers of the Year: Pacific Coast Business Times

Barbara Pearson
Staff Writer
2/1/2007

Local teamwork resulted in the largest commercial real estate lease of the year in South Santa Barbara County, which brought a Fortune 500 company into Goleta.

In late August 2006, following its acquisition of Goleta-based Innovative Survivability Technologies, or IST, Textron Systems moved its company from a 12,000-square-foot location to 52,855 square feet of office and lab space in the Hollister Business Park, 7406 Hollister Ave. in Goleta.

Santa Barbara-based real estate brokers represented both parties in the 10-year lease. Mark Mattingly of Pacifica Commercial Realty represented the tenant, Textron Systems, and Steve Hayes and Francois DeJohn of Leider Hayes Commercial Real Estate represented the owner, Hollister Business Park. “The defense industry has come full-circle in Santa Barbara,” Mattingly said. “It evolved here, it grew here, in the 1990s, it downsized significantly here, and now in the last five years or so, we see demand for state-of-the-art armaments for our military is resurging here.”

Mattingly has a history with IST that dates back to when the company’s four principals left a company called Delco to start their own business. Both Mattingly and Hayes have been doing business for more than 20 years. DeJohn is close behind, with more than 15 year experience in the Santa Barbara commercial real estate community.

Though DeJohn and Hayes represented the owner, they already had a relationship with the tenant as well. Leider Hayes worked with IST?when it leased its former office location at 70 Santa Felicia in Santa Barbara.

“Mattingly and I work very well together, and the fact that I knew the principles of IST was helpful to make the transaction a little smoother,” Hayes said.

Hayes and Mattingly agreed that the deal was fairly straightforward. IST/Textron knew the amount and type of space it wanted. In fact, Mattingly said that Delco had formerly occupied the new IST/Textron space at Hollister Business park, so it was already equipped to do the same type of work.

“When the company started growing, it was really logical to look at buildings that had been used [by Delco] in the past,” Mattingly said.

The only special factor that created any complication in the lease was Texron’s acquisition of IST. Originally, IST?was looking for new space, but in the end, it was Textron that assumed the lease. The lease did not take effect until Textron’s acquisition of IST?was complete.

“If for some reason Textron had not finalized the acquisition of IST, no lease,” Hayes said.

Mattingly said Textron, a $10 billion a year Boston-based publilc company, began looking to lease space in Spring 2005.

“It is indicative of the health and vitality of the technology sector in the Santa Barbara market,” Mattingly said of the deal in an August 2006 interview.

The extra 30,000 square feet will mainly be utilized for lab sapce and research and development, said Frank Tempesta, cheif operating officer for Textron Systems, the division of Textron Inc. involved with the acquisition.

“This move to larger headquarters is to enable us to grow,”?Tempesta said. “If we have a bigger space, lab space, systems engineers, and what have you, it will enable us to get our customers interested. There’s a chicken and egg aspect to this.”

Textron Inc. is a multi-industry company serving the general aviation, aerospace and defense, industrial and commercial finace markets. Textron Systems focuses specifically on the global defense and aerospace industries, by developing products such as sensors and surveillance, specialty marine craft, aircraft and vehicles and intelligent ground munitions.

IST, founded by Rod Beach in 1999 after leaving General Motors Defense, specializes in research and development and rapid prototyping to develop sensors and counter measures for the military.

Tempesta said that with clients like the department of defense and military services, it is important to be able to test and develop products quickly, and IST offers that capability. In turn, Textron is able to share its technology with the smaller company and provide a forum to expand its marketplace.

“What it does for us is it provides a better image to our customers because everybody worries about the small business surviving, and this gives us the stability required to get some larger contracts,” said Beach, a physicist who earned his master’s degree from Brown University.