Western National Has Thrived on Astute Leadership, Analysis Say : Merger: The Orange-based apartment firm’s sophisticated financial planning is expected to enhance the new joint operation.

Sensing that a real estate downturn was coming, Western National Group stopped buying land in 1987 and instead offered its development and building skills for a fee to others.

The change was propitious. Southern California’s worst recession since the Great Depression choked numerous builders and developers. But privately held Western National earned more than $10 million in 1992 and 1993--the two worst years of the recession.

Meantime, the Orange-based company grew to become one of the nation’s larger apartment owners and managers, ranking 28th in an annual survey last year, with 27,000 units under management. It announced Wednesday that it will merge with land developer Santa Margarita Co. to create one of California’s largest real estate companies.

“So far, we can say that our mistakes are all deals we passed on, not the ones we did,” Michael K. Hayde, Western National’s president, said in a 1993 interview. He was out of town Wednesday and could not be reached for comment.

It is Western National’s astute leadership, analysts say, as well as its sophisticated financial planning that will enhance the joint operation with Santa Margarita Co.

“Western National is a real class act,” one real estate consultant said.

The company also has enriched its investors since it was formed in 1963 as Income Property Services by Merton Douglas. Through 1989, investors put $59 million in the company and its partnerships, according to securities documents. Through its first 30 years, the company returned $248 million in cash to them.

The company prides itself on knowing when to build its own projects and when to stop.

In 1979, it halted all development on its own properties as it foresaw the rising land prices and runaway inflation that led to the 1981-82 recession. Western National didn’t start buying land again until 1984.

Three years later, it again pulled out because it thought the market was overheating.

“In times like the ‘86-’87 boom, you can look pretty stupid” being so cautious, Hayde said in the 1993 interview. “Banks were telling us they’d loan us all the money we wanted. . . . Today the banks are telling us we were pretty smart.”

Founder Douglas brought in many of the executives who now run Western National, which was formed in 1981 from part of Income Property Services when Douglas, then 70, wanted to retire.

Douglas hired David M. Stone, a banker who became a partner in 1969 to run the development division, and Jerrold A. Glass, a certified public accountant who joined in 1971 to run the property management group. Hayde, Glass’ partner in the accounting firm, joined a few years later.

Glass now is chairman and, after the merger, will be Santa Margarita’s vice chairman and chairman of the executive committee. Hayde is Western National’s president and chief executive and, after the merger, will become chief operating officer. Stone retired in 1988.

The fact that the top executives will now be known by their titles grates on Hayde and the others. Several years ago, they abolished titles and simply called themselves managing partners. Four were in charge of operating units, and the three with the most seniority worked on projects and planning.

Long before the deal with Santa Margarita, the company had set its sights on a bigger target.

“Our next goal, maybe by the year 2000, is that we would like to be the dominant apartment company on the West Coast,” Hayde said two years ago. “Not necessarily the largest, but the best run and most knowledgeable.”

Now it will be as part of Santa Margarita Co. that the executives may enjoy that status.