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Regional Offices Of S & L; Put on Selling Block

Regional Offices Of S & L; Put on Selling Block By SHELLY GARCIA Senior Reporter Washington Mutual is divesting its Chatsworth regional headquarters properties as it moves to boost its bottom line and strengthen some of its faltering business units. The Seattle-based savings and loan’s decision puts on the market properties it acquired in 1986 when it purchased Great Western Bank. The s & l; is expected to remain in the buildings as a tenant once deals are reached, but it is exiting the real estate investment business. Wamu is in escrow to sell its share of four properties on the campus, and it has begun to market another three properties that it fully owns. A spokesman for Washington Mutual said the bank does not comment on transactions that are underway, but he added that the decision follows moves Wamu has made in other areas of the country where it owns real estate. “This is part of an asset management strategy,” said Adrian Rodriguez. “We’re going to redeploy the capital in other areas of Washington Mutual.” Three of the properties, including a 10-story office building, totaling about 800,000 square feet, are expected to fetch at least $70 million, according to Steven Marcussen, executive director at Cushman & Wakefield, who, along with Cushman’s Bill Puget, is representing Washington Mutual in the offering. “In the San Fernando Valley there are only two or three of these parks,” said Marcussen, referring to the huge campus consisting of 30 different buildings and several million square feet that also houses facilities for the Los Angeles Times and Southern California Gas Co. The thrift, which also has a stake in four other buildings on the campus, is in escrow to sell its share in those properties back to the other investors, several partnership groups that include Ray Watt and Jerry Katell. Terms of that deal were not disclosed. “We just thought it was a good deal, and it was the best way to go,” said Katell, whose company, Katell Properties, developed much of the campus. “They wanted to sell their interest, and they wanted to control the process, and we didn’t want them to do that.” A partnership that includes Katell and Watt sold two other buildings occupied by Wamu earlier this year to a private investor. The proceeds of the sales are expected to be pumped back into the company’s operating divisions, several of which have recently seen their fortunes shift dramatically. Net loss in unit In the recently announced second quarter, Wamu reported a net loss of $63 million in its mortgage banking unit, compared to net income of $489 million for the second quarter of 2003. Wamu, which is slashing thousands of jobs and closing more than 150 branches and offices to better bring costs in line with revenues, has also told investors it expects earnings from its mortgage banking division to fall to zero for the full year. Company-wide, the s & l; is projecting earnings to plummet to $2.5 billion from $3.9 billion last year. Wamu’s problems have been attributed to its inability to integrate the many banks, including Great Western, it has acquired in recent years, and to its strategy of hedging against interest rate fluctuations, which failed miserably. Wamu’s CEO has told investors that he plans to cut some $1 billion in fixed expenses in an effort to return the thrift to its former stature. The decision to divest its local headquarters real estate will not help Wamu to cut costs per se because the s & l; plans to remain in the buildings as a tenant. But by divesting, Wamu can pour the millions back to help fix such problems as an antiquated computer system that forced the thrift to turn down loans because it could not process them. “Wall Street is always after publicly-traded companies to optimize the return on their capital,” said Marcussen. “This is capital that was just sitting in real estate. They do better putting it in their core business than putting it in real estate. I don’t want to speak for the bank, but that’s common business practice.” Wamu has reduced the space it occupies in the campus from about 1.5 million feet to a current 800,000 square feet. A number of the buildings on which it holds a master lease are currently being sublet. But Marcussen pointed out that the prospects for a long term tenant, coupled with the current market for such properties has already garnered a great deal of interest from prospective buyers. “There’s tremendous interest because of the Washington Mutual credit and the high quality of the buildings,” said Marcussen.

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