Great American Presses Santa Fe on Development
Apparently frustrated by Santa Fe Southern Pacific Corp.’s delay in signing a definitive joint-venture agreement to build its new high-rise headquarters, Great American First Savings Bank said Thursday that it is negotiating to possibly buy the 1.5-acre site outright to speed the project.
In May, 1987, Great American and Santa Fe announced that they had tentatively agreed to build a 30-story, 500,000-square-foot building on the 1.5-acre parcel owned by Santa Fe at the northeast corner of Broadway and Pacific Highway, nextto the Santa Fe Depot. The high-rise was to be the first phase of a 17-acre, 4.5-million-square-foot development to include office, hotel and retail space on Santa Fe-owned land.
Great American, the nation’s seventh largest savings and loan with $15.2 billion in assets, said then that it would move its headquarters from 600 B St. to the new building upon completion, possibly in 1991. Construction on the Great American building was to have begun in the spring of 1988, the partners said at the time.
But spring of 1988 is now sliding into summer and the partners have yet to sign a definitive development agreement or even agree on a design, a Great American spokesman said Thursday. Even if a joint-venture agreement were signed or the land sold to Great American soon, start of construction still would be several months away.
Santa Fe spokeswoman Susan Saltzer confirmed Thursday that Santa Fe is considering selling the parcel to Great American, but she said that Santa Fe may end up signing a joint-venture agreement with the S&L; after all. Santa Fe has no plans to sell off other parts of the prime downtown parcel, she said.
Santa Fe’s delay in signing an agreement was attributed by Great American officials to its preoccupation with fending off takeover attempts by the Henley Group of La Jolla and Olympia & York Developments of Toronto.
“Santa Fe has been sidetracked with other things and the whole development has been put on hold,” a Great American spokesman said Thursday.
Henley and Olympia & York were said to be particularly interested in Santa Fe’s real estate. Santa Fe’s main businesses are the Atchison, Topeka & Santa Fe and Southern Pacific railroads, but it also owns 8.1 million square feet of completed buildings and 3 million acres of undeveloped land, all worth by some estimates upwards of $5 billion.
Among Santa Fe’s prime undeveloped holdings is its downtown San Diego parcel and a 450-acre parcel on Chula Vista’s bayfront.
Santa Fe apparently succeeded in fighting off the takeovers, with Henley calling off a threatened proxy fight in March. But the victory came at a heavy cost. Santa Fe was forced to give suitor Olympia & York, the world’s largest office developer, two seats on its board of directors. To finance a $30-per-share payout of cash and securities to mollify Santa Fe shareholders, Santa Fe took on $3.8 billion in debt.
In fact, Santa Fe’s added debt has raised questions about its ability or desire to take on the additional loans that developing the Great American building and other projects would entail.
To pay down its debt, Santa Fe announced plans earlier this year to sell $800-million worth of completed real estate and several other assets, a package that may include 23 industrial buildings Santa Fe owns in north San Diego. The company has also sold three pipelines, as well as timber, finance and construction interests.
In a March interview, Santa Fe President Robert Krebs said specifically that the company does not plan to sell undeveloped parcels such as those in downtown San Diego and Chula Vista, but it will sell mainly completed buildings from which “we’ve already taken the value out.” Those sales will be completed by the end of this year, Saltzer said.
Santa Fe’s development activities have slowed significantly since the company began its restructuring efforts, Saltzer said. “(SFSP’s real estate development) hasn’t ground to a halt, but we’re not going at the breakneck pace of a year ago,” she said.
