Safeco Plans To Sell Off Its Real-Estate Division

Safeco said today it will sell its real-estate subsidiary, Safeco Properties, so it can focus on insurance and financial services.

Safeco Properties developed and owns the 120-acre, $250 million Redmond Town Center that opened in August; Silverdale Mall in Kitsap County; Cascade Mall in Burlington and Washington Square in Tigard, Ore. It also owns many other retail and office projects around the nation.

The company set no value on the properties, saying it would let the market determine a price. Safeco expects to sell the real estate to one buyer.

The sale would end Safeco's involvement in real estate, which began in 1967 when it bought Winmar, a local developer.

The division also operates Safecare, which invests in medical real estate. It owns 78 properties in 16 states.

About 335 people work for Safeco Properties, 86 of them in the Seattle area. Most are expected to retain their jobs under any new ownership, said Pat Hillis, Safeco spokeswoman.

The company has hired Salomon Smith Barney to sell the division, which last year accounted for about 2 percent of Safeco's profit, or about $9.6 million in pretax income. That compares with $363 million in property and casualty operations and $148 million in life insurance.

Since Safeco acquired American States Financial in October, it has focused on providing insurance and financial products through the independent agency distribution system, said Boh Dickey, Safeco president and chief operating officer.

The real-estate business "no longer provides a good strategic fit for Safeco," said Dickey. He said he expects to close the sale this year.

"They worked hard to get the property yields up, and it's probably good timing to be selling because the real-estate market is solid right now," said Dan Nelson, an analyst with Ragen MacKenzie in Seattle.

He noted that Safeco, which had to borrow money to buy American States, doesn't like debt. "It makes sense to sell the properties now," he said.

Because leases have been signed for most of the developable land at Redmond Town Center, a switch in ownership isn't likely to change the look of the 1.6-million-square-foot project. When fully built out, Town Center will be a minicity of stores, restaurants, a Marriott hotel, offices for AT&T Wireless Services and the Lake Washington School District, and an apartment building.

But there could be changes in management style if the Winmar properties are bought by a company whose primary business is real estate rather than insurance, said commercial real-estate broker Craig Wilson of FEI Investment Properties. "They're going to be more hands-on than Safeco, which tends to let that entity (Safeco Properties) run on its own," Wilson said.

Information from Seattle Times Eastside business reporter Keith Ervin is included in this report.

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