Downey S&L; Sells Most of Its Real Estate

Downey Savings & Loan, forced by a 1989 federal law to get rid of most of its lucrative real estate holdings, said Wednesday that it now has sold enough of those properties to comply with the rules.

The thrift said it has not yet decided, however, whether it will continue to develop a limited number of real estate projects or put to other uses the $110 million it had invested in such ventures.

The thrift, based in Newport Beach, had been the premier developer of neighborhood shopping centers in California and Arizona before Congress restructured the beleaguered thrift industry. The law requires all S&Ls; to reduce their investments in real estate and other ventures to 2% of their assets by mid-1994.

At the end of last year, Downey had reduced its investment in its real estate subsidiary, DSL Service Co., to $67 million, just under 2%. But the thrift itself still had several properties that it had to sell. Downey sold those properties to DSL for $13.7 million in cash, the appraised value, in a transaction that has no effect on the thrift’s consolidated operations. The subsidiary’s real estate portfolio now includes 32 shopping centers.

Two small properties will be sold to DSL as soon as appraisals are completed, said Thomas E. Prince, Downey’s chief financial officer. That transaction also will not affect consolidated operations.

Downey and its subsidiary still will have $110 million worth of properties and loans to joint ventures, but that money cannot be used to calculate the thrift’s capital, its final cushion against losses. Even without that money, though, Downey, which has assets of $3.5 billion, exceeds the government’s definition of a well-capitalized thrift.