Unocal to Sell Headquarters, Other Properties : Hartley’s Resignation as CEO Also Accelerated
Unocal hung a for-sale sign Wednesday on its headquarters building and 13 acres of downtown Los Angeles real estate, saying it would use the money to reduce debt and look for oil and gas. Analysts and brokers said the property could fetch $150 million or more.
The company also disclosed plans to sell real estate in San Diego County and industrial holdings in the South Bay area and the Pacific Northwest, calling it part of a new program to put its money to better use.
The decision to unload real estate--including the largest contiguous piece of undeveloped downtown real estate west of the Harbor Freeway--was seen by some as further evidence of Chairman Fred L. Hartley’s diminishing role at Unocal.
The oil and gas company has been acquiring land in the downtown area for years and closed on one of the parcels a matter of weeks ago, company officials said. Development of the “west bank” area was considered inside the company to be a favorite Hartley project.
The sale offering was announced just a day after the company announced that Hartley’s resignation as chief executive had been moved up a month. His resignation, originally scheduled to take effect Aug. 1, had been accelerated to July 1, at Hartley’s request, for “personal reasons.” He remains chairman.
The unexplained speedup of the timetable led to speculation that the 71-year-old Hartley has developed health problems or that he was unhappy with policy actions planned under his successor as chief executive, Richard J. Stegemeier.
‘Non-Producing Assets’
Hartley did not return a call to his office, where a secretary said he planned to be out of the office for most of July and August. A company spokesman said he has “not been made aware” of any medical problem and that it would be a personal matter he couldn’t comment on.
In a statement, Stegemeier called the proposed real estate sale “part of an overall effort to make additional cash available to repay debt and for oil and gas exploration.” Stegemeier also could not be reached for comment.
Hartley has generally opposed the sale of assets to reduce the heavy debt that Unocal took on in 1985 in fending off a takeover bid by T. Boone Pickens Jr. Though Unocal has gradually reduced the debt since then, Hartley often declared that low debt attracted takeover artists.
Unocal has previously put 178 acres of industrial land in Schaumberg, Ill., up for sale and said it expects to realize $30 million to $40 million for one prime 70-acre parcel. The company added that it is soliciting buyers for unspecified San Diego County, South Bay and Pacific Northwest real estate.
“These are all non-producing assets, and we’re trying to put it to productive use,” the company said.
Proceeds from real estate sales would make only a minor dent in Unocal’s total debt of $4.5 billion, and a former company executive cautioned that it is a “tiny step” that doesn’t signal any radical change in policy or severing of ties with Hartley. But others saw more significance in it and other recent moves, including this week’s promotion to top-level jobs of four executives with an average age of 42.
“It’s true that there isn’t all that much a company like Unocal can do with $100 (million) or $200 million. But it’s very clear to me that Unocal has embarked on a wholly different tack than it was on under Mr. Hartley,” said analyst Bernard J. Picchi of Salomon Bros. Asked whether the downtown real estate sale had anything to do with Hartley’s abrupt departure, the company spokesman said, “It’s a company decision, not necessarily a Hartley or a Stegemeier decision.”
Unocal observers said another policy action since Hartley announced his resignation--a big cutback at Unocal’s Beaumont, Tex., refinery--reversed a longstanding Hartley policy. Hartley had repeatedly overridden proposals to close the unprofitable refinery, leading to the mistaken belief in industry circles that Hartley’s first Unocal job was at Beaumont. (It was in San Francisco.)
“Every recommendation that has come through Unocal in the last 10 years said to shut down Beaumont,” said a former Unocal executive. “Even the senior vice president for refining and marketing wanted to shut it down. Everybody wanted it shut down except Fred Hartley.”
Should Hasten Development
Stegemeier announced June 24 that Unocal will phase out petroleum fuels production at the refinery, reducing total output by two-thirds and laying off 300 of the 670 workers. He said the action would help “increase the profitability of our operations.”
The downtown real estate involved in the proposed sale includes most of the land in an area bordered by 4th Street on the north, Beaudry Avenue on the east, 6th Street on the south and Bixel Street on the west. It includes Unocal’s 13-story headquarters, built in 1958. Unocal said Cushman Realty of Los Angeles was retained as exclusive agent for the sale.
Joseph Faulkner of Faulkner Co., a downtown real estate broker, said Unocal’s effort to sell the property will probably hasten development because “a change in ownership won’t take place without an accompanying plan for development.”
Faulkner said the property could bring anywhere from $125 million to $200 million, depending on the use of the land. The site is part of the new Center City West master plan being developed by the city of Los Angeles, the company said. Unocal is a founder of Center City West Associates, a private-public partnership with the city.
Stegemeier said a sale would not necessarily mean that Unocal was planning to move its corporate headquarters.
