Refinance Boom Fuels Real Estate Rush by Countrywide

By DANNY KING
Staff Reporter

Countrywide Credit Industries Inc., flush from the recent spate of residential refinancings and anticipating further growth in mortgage servicing operations, has been on a real estate buying spree.

The Calabasas-based financial services company has purchased more than 300,000 square feet of office space in the West San Fernando and San Gabriel valley markets, spending $54 million.

It also has been in the market since April for a block of more than 150,000 square feet in the San Gabriel Valley, according to several sources, which could add another $20 million to its real estate expenditures.

"They've expanded their commission sales force, and they're being a lot more proactive about going after purchase buyers rather than refinances," said Richard Eckert, an analyst at Wedbush Morgan Securities. "If you're going to service and process those loans, you're going to have to add people and facilities."

Neither officials from Countrywide nor Travers Realty, which represents it, would comment at all on the acquisitions.

The company, which has 13 offices in Los Angeles County and two in Orange County, is in escrow to acquire the 160,000-square-foot Thousand Oaks Corporate Center from Adler Realty Investments Inc. The property, former West Coast headquarters for Exxon Corp., is fully leased, and its largest tenant, with 70,000 square feet, is the financially troubled Homestore Inc.

Room to grow

"My guess is Countrywide is buying it for future expansion purposes," said Mike Adler, president of Adler Realty. "If and when tenants move out, they'd take the space as it becomes available." He would not comment on the sales price, but West Valley real estate sources valued it at $29 million.

Last month, Countrywide closed on its purchase of a 165,000-square-foot former Litton Industries complex in Agoura Hills, spending $25 million for the empty two-building property at 29851 Agoura Road.

"The objective for Countrywide was to move in very quickly," said Bob Scullin, chief executive at NAI Capital Commercial, who led the team that represented the seller, Nearon Enterprises, in the deal.

The company opened a 100,000-square-foor office at the Lancaster Business Park last week, part of a lease with an option to purchase, and is still looking for a property of at least 150,000 square feet to buy in the San Gabriel Valley.

Among the potential sites are the old Chicago Title Co. site in Rosemead, individual buildings at Flair Business Park in El Monte and Ratkovich Co.-owned Alhambra development on Fremont Avenue. Sources estimate the cost of such a property at between $14 million and $20 million.

"The growth is coming out of the Rosemead location," said one source, who speculated that Countrywide would step up its efforts in the San Gabriel Valley once its West Valley deals were completed.

Volume pumped

The activity reflects a company that is rapidly growing but likes to keep its operations geographically contained.

"They tend to run a tight ship, and they've been able to do so by keeping things close to the vest and making decisions centrally," said Eckert.

Having increased its Los Angeles County employee base by 48 percent over the last year, Countrywide has benefited from the combination of a mortgage boom generated by declining interest rates and its focus on growing its loan-servicing portfolio.

Last year, a record $2 trillion in mortgages were generated in the U.S., with more than $1.5 trillion expected this year, according to the Mortgage Bankers Association. Meanwhile, Countrywide's loan-servicing portfolio was $375 billion as of the end of June, up from $337 billion at the end of 2001. A decade ago, its portfolio was $24 billion.

"You tend to have smaller offices do the originations," said Jay Brinkman, an economist at the mortgage association. "Servicing operations is where you need the back office support."

Brinkman added that Countrywide's increased loan servicing-portfolio serves as a hedge against the diminishing effect on loan originations once interest rates rise, so over-expansion is considered unlikely.

"(Loan-servicing income) is tied to the residual effect of the originations over the last year or so," he said. "The fall-off shouldn't impact their level of servicing."

As for expansion beyond these three sites, Adler doesn't see Countrywide buying more properties after its current spree. "With our building and the others, that probably should alleviate their growing pains for a while," said Adler.

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