Wageman to Push Mortgages As Salvation for HomeFed
Facing an uphill battle to revive ailing HomeFed Corp., turnaround veteran Thomas J. Wageman plans an expansion of mortgage lending that is unusually aggressive for a troubled company.
"We're going to move into markets where people are buying houses and paying for them," said Mr. Wageman, chairman and chief executive of the San Diego-based thrift company, which has $16.4 billion in assets.
He said HomeFed would write mortgages in "places where people have jobs and are likely to keep them." Among the possibilities he cited were Texas, Florida, Arizona, Colorado, Nevada, and Missouri.
Usually when new management is trying to turn around a thrift, it hunkers down by cutting costs and aggressively working out problem loans.
Mr. Wageman, who took HomeFed's reins last month, plans those steps, too, but will deviate from the blueprint by seeking broad geographic diversification of a product line at the same time. Ironically, it was diversification of another product -- commercial real estate lending -- that brought HomeFed to its knees.
The company's mortgage originations plummeted to $293.7 million in the second quarter, from $1.4 billion a year ago. Mr. Wageman declined to reveal the company's new lending target. He said HomeFed, which lost $286.4 million in the first half of this year, plans to open offices to help build volume, but he declined to say how many or where they might be located.
Any existing units that don't fit the new strategy of retail and mortgage banking will be sold or liquidated, the 57-year-old executive said.
Some Observers Skeptical
Some thrift industry observers don't hold out much hope for HomeFed's survival. Once one of the most respected and strongly capitalized thrifts in the country, HomeFed has been battered by losses and rising levels of soured loans. Its longtime guiding force, Robert F. Adelizzi, was forced out as chief executive on May 7.
It is $277.7 million shy of its risk-based capital requirement. Problem assets have skyrocketed to $1.6 billion, or a dangerously high 10% of total assets. Its stock is trading at $2 a share, down from a peak of about $48 less than two years ago.
"This fellow faces a monumental task," said Henry Peltz, thrift analyst at Nationar, a New York bank and thrift services firm. "The best thing he can hope for is that the economy picks up and real estate doesn't go further into the tank."
But Mr. Wageman is undaunted by the naysayers. "If I didn't believe we could to it, I wouldn't be here," he said flatly.
He has had several turn-around assignments (though two of the three institutions were subsequently seized).
Also, his appointment had the blessing of the regulators, and he has the support of stockholders. "I couldn't be more pleased with Mr. Wageman and his associates and the ongoing management of the bank," said new director David Dunn, managing partner of Idanta Partners, a San Diego venture capital firm. Idanta owns about 5% of HomeFed's common stock.
Before joining HomeFed, Mr. Wageman was president and chief executive of Sunbelt Savings, Dallas. Despite the efforts of Mr. Wageman and four colleagues who also joined HomeFed, Sunbelt was eventually taken over by the government.
LaSalle Readied for Sale
As president and chief executive, he worked to turn around First National Bank of Midland, but that was also seized. And previously, he was one of the executives who "dressed up" La Salle National Bank in Chicago, which was sold to ABN-Amro, the giant Dutch banking company.
But he is so confident in HomeFed's turnaround that he accepted some of his compensation in stock. Though he is making $650,000 a year, his "signing bonus" was a block of stock of undisclosed size. "It is enough to be important," he said.
Mr. Wagemen is trying to make a big cuts in HomeFed's overhead. "There will be a substantive reduction in expenses," he said, but declined to say how much could be cut. "The company is spending about $275 million a year to run itself, and we are not going to spend that."
Some changes are already taking place. Mr. Wageman has eliminated company cars, which will save $20,000 to $30,000 a year. He has reorganized one department, which he declines to specify, saving $4 million to $5 million a year.
As part of the cost cutting, the new CEO said some employees will lose their jobs, but declined to say how many or in what areas.
The team is currently reviewing real estate and loan portfolios to uncover any additional problems that could be lurking. A fresh eye is an advantage. "We are absolute realists. Either the borrowers can pay or they can't. If they can't, we want to operate the property," he said. "We are not inexperienced at this."
A separate unit for all commercial loans and investments has been created that includes the real estate development company and commercial real estate loans.
Mr. Wageman has also brought in new experts from the outside. Arthur Anderson & Co. has replaced KPMG Peat Marwick as the company's auditor. And last Friday, HomeFed announced it had hired Kidder, Peabody & Co. to "assist the bank in developing its program to secure capital needed to meet regulatory capital requirements."
PHOTO : Thomas J. Wageman Aggressive expansion plans