Great American Will Sell Off Its Real Estate : S&Ls;: A highly profitable subsidiary is the latest to be put on the block in an attempt to meet strict new capital requirements.

Straining to meet stringent new capital requirements imposed by last summer’s savings-and-loan rescue bill, Great American Bank said Thursday that it plans to sell its highly profitable real estate development subsidiary.

Great American, with $16.4 billion in assets, thus becomes the third major Southern California institution to put its real estate developments on the block in recent days. Coast Savings of Los Angeles and Downey Savings of Newport Beach also announced they were selling their real estate operations.

Great American did not specify the current value of real estate assets held in its Great American Development Co. subsidiary, or what price the assets might fetch. But at the end of 1988, the last year for which figures are available, Great American listed its real estate investment assets as having a book value of $377.4 million. Great American spokesman Kenn Ulrich said the S&L; expects the assets to sell at “a significant profit.”

GADCO’s property includes about 1.7 million square feet and 350 acres of completed office, industrial and retail properties. Also being sold are residential developments totaling 4,181 lots and housing units, as well as 1,300 apartment units. Most of the property is in Southern California.

Great American said the decision to sell GADCO was prompted by provisions of the Financial Institutions Reform, Recovery and Enforcement Act that require S&Ls; to set aside cash reserves of up to 8% of the value of riskier assets, including real estate developments.

The bill also prohibits thrifts from making loans to their own development subsidiaries and from counting investments in real estate toward the S&Ls;’ capital base, Ulrich said. Taken together, the rules make real estate an “unfeasible” investment, he said. Great American plans to have sold its real estate by July 1, when certain applicable FIRREA requirements take effect, Ulrich said.

Until recently, Great American had expressed hopes of hanging on to its real estate development business by folding it into a new holding company it plans to form later this year.

GADCO has been highly profitable, generating gains of $48.5 million for the nine months that ended Sept. 30. Those profits helped offset the huge losses the S&L; suffered in 1989, which resulted largely from problem loans in Arizona.

For the nine months ended Sept. 30, Great American posted losses totaling $65.6 million. It has not yet released its fourth-quarter and fiscal year 1989 results.

Last month, Great American was one of many S&Ls; that said it could not meet all three of FIRREA’s capital adequacy tests. It said it had sufficient tangible capital (1.5% of assets) and core capital (3% of assets) but that it could not meet the rules that call for S&Ls; to eventually keep on hand cash reserves that cover 8% of the value of riskier assets, including real estate.