Santa Fe to Keep Properties Scheduled for Sale

Santa Fe Southern Pacific Corp. says it has scrapped plans to sell some West Coast properties as part of a corporate restructuring and will continue major building projects in the San Diego and San Francisco areas.

Santa Fe had intended to sell the properties to pay off a $3.8-billion debt incurred while thwarting a takeover bid by Henley Group Inc. of La Jolla. But better-than-anticipated income has allowed the shift, officials said Wednesday in Chicago.

Among Santa Fe’s prime developable holdings are 20 acres near San Diego’s harbor front and 450 acres of waterfront property in Chula Vista. Santa Fe also owns 23 industrial buildings in north San Diego.

Instead of the sell-off, the company said it plans to borrow against a large number of the developed properties.

The decision is expected to boost the company’s real estate assets nearly $1 billion over the next five years, Santa Fe said.

Robert D. Krebs, president of the Chicago-based company, said the revised plan reflects the progress the company has made in its restructuring plan.

“So far this year, the combined income of the operating units is better than anticipated, and we have made the debt repayments on our bank financing ahead of schedule,” he said. “This has given us greater flexibility in our real estate program, permitting retention of properties previously scheduled for sale.”

Under the new plan, the company will generate cash to pay off its bank debt and still gain from any appreciation of the property, Krebs said, adding that the new strategy was approved by the company’s directors Tuesday. He expects the plan to receive the required approval from a bank group holding the restructuring loans.

The properties to be financed include low-rise office, distribution and warehouse space primarily in California and Arizona, as well as 5,800 acres of ground leases. The company plans to construct about 1 million square feet of buildings next year.

Santa Fe said it intends to sell about $300 million in real estate assets in 1988, about the same amount as in previous years.