Assets and Liabilities

CHATSWORTH — The command post for John Maher, Great Western Financial’s CEO, is on the 10th and top floor at his headquarters here. His office comes with a sweeping view of the Santa Susana Mountains, but he probably won’t have it much longer.

By next month, Great Western’s shareholders are finally expected to choose between competing $6-billion takeover offers from H.F. Ahmanson & Co. and Washington Mutual Inc.

So in the fall, Great Western Bank should be in new hands, and when that happens, much of its 1-million-square-foot Chatsworth office campus is likely to be leased or put up for sale.

Washington Mutual is based in Seattle, and Ahmanson, the parent for Home Savings of America, is based in Irwindale. Both companies said that they would expect to use some of the Chatsworth complex, but that their needs wouldn’t come close to filling the current space.

Not only are 3,000 Great Western jobs at stake in the Chatsworth campus--from a branch bank office to a day-care site and data processing center--but also, it represents a big chunk of commercial real estate for the local market to swallow.

“It’s going to take them months or years to get that project done” and leased out, said broker Seth Dudley, a senior vice president with Julian J. Studley Inc.

One challenge is rival office projects in nearby West Hills, Warner Center and Warner Ridge.

Another is that Great Western’s headquarters, with marble floors, fountains, underground parking, an elaborate employee cafeteria next-door, and expensive statuary lining the corridors, is something of a white elephant.

“We always suggest to big corporate clients that they look at real estate with an exit strategy. A lot of times you see corporate headquarters go up with beautiful granite complexes, and nobody is likely to take them” as-is after the company disappears, Dudley said. “And I would put this place in that category.”

But whoever wins the Great Western bidding war, landlord Jerry Katell will still be counting his rent checks.

His company leases nine office buildings with 700,000 square feet to Great Western, worth about $10 million a year in rent income, Katell says, and the leases still have nine to 15 years to run. According to the leases, the new owners “are obligated to pay the rent for the entire period,” Katell says.

One plus is that the Valley’s commercial real estate market is finally picking up. In the first quarter of this year, the Valley’s commercial office vacancy rate was 12%, the lowest in nine years, a vast improvement from the 17% vacancy rate in 1992, according to Grubb & Ellis.

Despite this improvement, brokers expect Great Western’s new owner to unload its unnecessary space piecemeal, because there are too many rival office projects.

“That’s a lot of square footage to absorb. I see it taking quite a bit of time,” said Douglas Brown, a principal with Regent Properties, which is developing an office complex in West Hills.

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That project, at the former Hughes Aircraft campus, is a joint venture between Roy Disney’s Shamrock Holdings and Regent. They bought 30 acres and 430,000 square feet of building space on part of the Hughes site, and plan to break ground next year on another 160,000 square feet of space. Brokers say the quiet, fenced-in property, with its tree-filled campus and low-rise buildings should lure tenants rather quickly.

Then there is the long-stalled Warner Ridge office project, next to Pierce College in Woodland Hills, which has recently been taken over by Katell’s group. He is still shopping for a lead tenant so he can break ground. And nearby in Warner Center is a 585,000-square-foot office tower that is still 80% vacant.

Great Western began leasing space in Chatsworth in 1979 and set up its headquarters here in 1992. Great Western owns two office buildings here, and leases nine more from Katell.

But the hot design trend in office space is “large floor plates,” broker lingo for long, wide offices where companies can set up many employees in an open space to improve communication. And the preference is to have all this in a low-rise building so employees can get around without having to rely on elevators.

With horizontal, not vertical buildings in demand, this might pose a problem selling or leasing Great Western’s 10-story, 240,000-square-foot headquarters. The tax assessor pegs this building at $23.4 million. But this headquarters is the tallest office building in the northwest Valley, and most corporate customers seeking high-rise locations head for Warner Center, Encino or Sherman Oaks.

“I think the market would not be terribly kind to that one,” Dudley said.

Across the street from Great Western’s headquarters is its two-story employee center with an expansive cafeteria, patios and fountains. “What they do with that building, I don’t know,” Katell said. “It’s pretty. But I don’t know who’s going to need a cafeteria out there.”

Andy Fisburn, with CB Commercial, who leases some office space in Warner Center, said because these two Great Western buildings are customized, “anybody going in there probably will have to demolish everything [inside] and have to start over” at great expense.

As for the remainder of the Great Western campus, Ahmanson or Washington Mutual would have to find new tenants, Katell said, or they might decide to offer him a buyout deal. “It would have to be very, very attractive to get our attention,” Katell said.

Ahmanson’s spokeswoman Mary Trigg said, “We will use some part of the Chatsworth campus,” but how much the company doesn’t know yet.

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Washington Mutual said it already has California regional centers in Irvine and Stockton, and by adding Chatsworth, “We will end up with three potential locations,” said Doug Wisdorf, Washington Mutual’s deputy chief financial officer. “There will be continued operations in Chatsworth. The scope and size of that has not yet been determined.”

Wisdorf added: “The Chatsworth property is divisible in many buildings.” How much local space it would use may “depend on the impact of the real estate market.”

However, paring down costs is part of the game plan. “Certainly the cost savings at Great Western is one thing the deal is all about. Whether Ahmanson or Washington Mutual wins, consolidation of operations is one of the biggest factors,” he said.