Gains Allow SFSP to Keep Real Estate Slated for Sale
Santa Fe Southern Pacific said Wednesday that because “the income of its operating units is better than anticipated” it will not be forced to sell some real estate it had planned to dispose of.
The unexpectedly greater income has also enabled SFSP to make repayments on some bank financing ahead of schedule, the company said.
The Chicago-based transportation, land development and natural resources company said it plans to borrow against a large number of its developed properties. It said preliminary indications are that it can realize about $450 million from this financing.
A company spokesman, Robert Gehrt, said: “Borrowing on the property is better than selling it. When you sell it, it is gone forever.”
Robert D. Krebs, the company’s chairman, said the plan reflects “good progress the company had made in implementing its restructuring program.” He said the gains permit retention of properties previously scheduled for sale.
The restructuring includes the planned sale of the Southern Pacific railroad, for which the company is awaiting approval by the Interstate Commerce Commission, and the payment to shareholders of a special $30-a-share dividend.
“As a result of this plan,” Krebs said, “we will generate the cash needed to pay down the bank debt incurred in conjunction with our restructuring and still retain and enhance the upside from these properties as they appreciate in the future.”
The plans were approved by directors at a meeting Tuesday in San Francisco.
Krebs said Santa Fe’s real estate sales program will include about $300-million worth of property, an amount that he said is close to the traditional amount of property the company sells annually. Consequently, the chairman said, the strategy will result in the net value of the company’s real estate holdings being about $1 billion greater over the next five years than if it had proceeded with the planned sales program.
The properties that SFSP will borrow on include about 8.7 million square feet of office, distribution and warehouse space in Northern and Southern California and the Phoenix area.
