350 workers laid off by Watt Industries as business plunges 40%.

350 workers laid off by Watt Industries as business plunges 40%

One of Los Angeles County's largest residential real estate developers has slashed its operations in half as the area's worst housing slump in a decade continues to worsen.

Santa Monica-based Watt Industries Inc. has cut its 700-plus workforce to about 350 in recent months, and about 200 of those workers were let go just this month, the Business Journal has learned.

"We are adjusting our staff to meet the needs of the market," conceded Ray Watt, the 71-year-old founder and chairman of Watt Industries. "Our sales are off 40 percent this year, and you just don't start houses unless sales continue."

Watt Industries reported sales of $682.6 million for the fiscal year ended March 31, 1990, and about 90 percent of that amount came from home sales throughout California, as well as in Phoenix and Las Vegas.

Ray Watt's companies have been building and selling homes in and around the Southland since 1947.

Watt, who was the assistant secretary of Housing and Urban Development under President Richard Nixon, has been building and selling homes at a clip of about 2,500 a year recently.

His local projects include Century Woods Estates in Century City, Deer Springs in Calabasas and Park del Amo in Torrance. Watt has also developed entire residential communities in Palmdale, the Inland Empire and the Coachella Valley.

But all that success is now apparently in a nosedive, as Watt and many other Southland home builders frantically retrench to survive the area's worsening housing slump.

Meanwhile, Ray Watt has turned his attentions away from his company's decimated residential operations, and has personally taken over as project manager of the company's long-stalled $650 million Watt City Center project near downtown Los Angeles.

Kent Mercelis, who until a few days ago had been in charge of the floundering mega-project, has been relegated to heading up the projects marketing effort.

"Kent's still an equity partner in the project, but he's definitely out of the picture, operationally. Ray's in charge now," reported one high-ranking company source.

Mercelis was in Wyoming on a fishing trip last week and unavailable for comment, Watt said.

Watt City Center, which is being developed by a Watt-Mercelis partnership named W&M Partners, calls for 1.6 million square feet to be built on the 6.48-acre former Thomas Cadillac site -- just west of the Harbor (110) Freeway, at Seventh and Bixel streets.

The massive project was approved earlier this year by the Los Angeles City Council, despite strong opposition from the Los Angeles City Planning Department and the Los Angeles Planning Commission.

It was opposed by city planners because a plan specifying development limits for the 400-acre Central City West area adjacent to downtown L.A. has not yet been approved.

"This approval gave them (Watt and Mercelis) a 10 year period in which to develop that site, when we don't even have a specific plan in place," said Dan O'Donnell, the city planner in charge of Central City West.

Despite its recent city approval, Watt City Center has remained stalled due to the developers' inability to prelease any of its proposed 1.6 million square feet of space.

However, Watt last week suddenly proclaimed that he now has an anchor tenant on the hook.

"We expect to have a letter of intent within 30 days and a signed lease within 60 to 90 days," Watt commented. "We have a couple banks, as soon as we have a major tenant in place, who are willing to provide the financing we need to proceed."

Leasing brokers in downtown Los Angeles and at least one high-ranking Watt official doubted Watt could soon sign up an anchor tenant to the long-stalled Watt City Center.

"He (Watt) is just putting out shark bait to attract a buyer," said one source.

Indeed, Watt and Mercelis, unable to secure financing for their massive project, have been trying unsuccessfully for months to sell Watt City Center's land and entitlements, as is, for a reported $150 million.

"You probably couldn't give that project away at this point in time," countered one Watt executive.

Another industry insider said, "They (Watt and Mercelis) conceded nearly $50 million in `giveaways' to get those entitlements; that project is buried before it even gets started."

Watt's "giveaways," or mitigation concessions, to the city include payments for substantial roadway improvements and other infrastructure improvements in the project area, and hefty fees for child-care facilities and replacement housing.

"The concessions might seem generous relative to what other developers have done in the past," city planner O'Donnell admitted. "But I wouldn't say they (Watt and Mercelis) were giving away the store."

Responding to claims that his report about an anchor tenant is merely "shark bait," Watt replied, "It has never been my style to waste time meeting with people if I didn't think it was a worthwhile transaction."

He then reiterated that a letter of intent would be signed by an anchor tenant within 30 days.

PHOTO : High wattage: Architectural model of the first-phase tower of $650 million Watt City

PHOTO : Center