Christiana Co. Waits for Victor in Share Battle : Seizure of Thrift Triggers Struggle for Control of Firm
Publicly, it’s business as usual for Christiana Co., the San Diego-based real estate development company that is wrapping up work on residential real estate developments in California, Texas and Georgia.
But behind the scenes, Christiana is a company in search of a controlling shareholder.
And a chairman.
And a chief executive.
At issue is who controls nearly 40% of Christiana stock, an extremely complicated but intriguing puzzle that investors and savings and loan regulators alike are trying to unravel.
Ownership of the stock was thrown into dispute last month when federal regulators closed Western Savings & Loan, a Dallas-based thrift that in December gained control of 39% of Christiana’s stock.
Regulators subsequently reopened the failed thrift as Western Federal Savings & Loan, a new, federally chartered mutual association. Regulators eventually determined that control of the Christiana stock rests with Western Federal, according to Federal Home Loan Bank Board spokeswoman Rebecca Vail.
Based on that determination, Western Federal reportedly advised Christiana’s stock transfer agent that it controls approximately 944,000 shares.
However, just days after the thrift was seized, Jarrett E. Woods Jr., Western’s sole owner and Christiana’s chairman since December, asked a federal judge in Dallas to return Western’s assets--including the 944,000 shares of Christiana stock--to his control.
One week ago in Dallas, U.S. District Judge Barefoot Sanders denied Woods’ request for a temporary restraining order that would have stopped regulators from seizing Western’s assets. Woods has maintained that regulators seized his S&L; even though it maintained a positive net worth and met all regulatory guidelines.
At least one other player--former Christiana chairman John Roberts--could have a role in determining who eventually controls a portion of the disputed stock. Roberts, according to a Christiana source, has an option that gives him until June of next year to buy back 245,000 shares that Western Federal claims to own.
During his year as Christiana chairman, Roberts orchestrated the company’s brief fling as owner of the upscale New York-based F.A.O. Schwarz chain of toy stores.
Roberts relinquished his chairmanship in December, when Woods’ Western S&L; foreclosed on a loan to Roberts. As a result of that foreclosure, Roberts turned over to Woods sole ownership of all of the stock in Dallas-based Summit Savings & Loan. Roberts also turned over to Woods ownership of a separate personally owned 10% block of Christiana stock.
Summit’s ownership of Christiana shares is further complicated, however, because Summit held the 29% block of Christiana’s stock through a wholly owned subsidiary, TransAmerican Capital Corp.
Control over the 29% of Christiana stock that Western Federal controls through Summit and its TransAmerican subsidiary became even more complicated earlier this year when regulators in Texas, reportedly determining that Summit had a negative net worth, forced the institution to accept an operating agreement.
The Texas Savings & Loan Department would not confirm that it is supervising Summit’s operations, but sources familiar with the S&L; said that state regulators are involved in day-to-day operations at Summit.
According to one S&L; official in Texas, control of the stock owned through TransAmerican might not be decided until federal and Texas regulators determine which of the two troubled S&Ls; should have control.
“There’s a bottom-line uncertainty over Western Federal’s ability to exercise control over the stock, due to a failure of regulatory authorities to take a position on ownership,” acknowledged an S&L; regulator in Texas.
TransAmerican officials, however, seem to have no doubts about who controls the 29% block of Christiana stock.
“TransAmerican owns 29% of Christiana’s stock and we’re going to vote that 29%,” said James M. Holbrook, a Texas attorney who serves on the boards of TransAmerican Capital and Christiana. “TransAmerican, as a service corporation (of Summit S&L;) is operated independently, so ownership (of the stock block) is at this point not an issue.”
However, Christiana’s board on Thursday decided not to name a new chairman and chief executive, preferring instead to act as an “executive committee,” according to newly named President Raymond Logan.
Christiana’s board realizes that “whoever owns it eventually will want to have voice in the operation of Christiana,” a Christiana officer said last month, shortly after Western S&L; was seized.
The federal seizure of Western S&L; is “itself a fascinating story,” suggested a source familiar with the thrift. “On the day Western was shut down, Woods claims its net worth was well in excess of statutory minimums, and he claims he had $150 million in cash.
“He did acknowledge (to regulators) that he had some problem loans that needed to be worked out and restructured, but given the real estate picture, who in Texas doesn’t?”
Despite the turmoil, Christiana has kept its focus on day-to-day operations, according to Logan, who said the company is winding down residential real estate operations in three states and getting readying to bid on new projects.
The company recently reported a $228,000 net profit and $18 million in revenue for the year ended June 30, contrasted with a $2.6 million loss on revenue of $11.9 million a year ago.
