Pacific Lighting Plans to Sell Real Estate Interests : Proceeds Would Be Used to Expand Specialty Retail Chains, Energy Ventures
Pacific Lighting, the parent of Southern California Gas, said Monday that it hopes to sell its real estate businesses and spend the proceeds--estimated at $300 million or more--on its drug store, sporting goods, and oil and gas ventures.
The company announced that it is offering its four land development companies for sale in the hope that they will bring a good price in today’s climate of low interest rates. The real estate group earned $24 million last year. Pacific Lighting reported total net income of $83.6 million for 1986.
Analysts said Pacific Lighting intends to use the proceeds of the sales to expand its Thrifty drugstore chain and acquire more sporting goods stores. The company got into the sporting goods business as part of its $886-million acquisition of the Los Angeles-based Thrifty chain in 1986.
Although the sale of the real estate unit might seem to mark a retreat from Pacific Lighting’s drive to diversify, analysts said the move would probably hasten rather than delay the day when the company gets its desired 50% of earnings from non-energy holdings.
“They have no intention of going back on diversification,” said analyst Jonathan Ziegler of Sutro & Co. in San Francisco.
Los Angeles-based Pacific Lighting told analysts last week that it intends a major expansion of a sporting goods business that, with the Thrifty-owned Big 5 chain and two recent acquisitions of small regional operations, is already the third-largest sporting goods chain in the country.
“My impression is they intend to really focus on specialty retailing. They’re very pleased with the Thrifty acquisition,” said Hugh F. Denison, director of research at The Milwaukee Co. in Milwaukee.
Denison said the real estate group isn’t as profitable as it could be, and commented, “I don’t think it fits as well in the corporate culture as Thrifty.” He said Pacific Lighting is seeking 20% annual growth from the Thrifty subsidiary, and will probably get it this year.
Today’s depressed prices for oil and gas have also made it a good time to find bargains in energy reserves, the other probable use for the proceeds from the real estate sale.
The real estate group includes three Southern California developers: Irvine-based Presley Cos., which build and sell single-family homes and condominiums; Santa Ana-based Fredricks Development Corp., developer and manager of apartment projects and small commercial centers, and Dunn Properties, also of Santa Ana, which develops and manages commercial and industrial properties. The group has about 800 employees, most in Southern California.
A fourth company, Blackfield Hawaii Corp., develops and manages homes, office buildings, shopping centers and condos in Hawaii.
Pacific Lighting would consider selling all or parts of the real estate group or, failing that, establishing a master limited partnership and a public offering of the equity in the companies, Chairman Paul A. Miller said.
It won’t sell the group if it can’t make a profit on the sale, Miller said. The book value of the company’s investment in land development is $224 million. At today’s low interest rates, analysts said they would expect the group to command at least $300 million.
