A turnaround company finds its home in the sunny West

The cars in the parking lot are mostly American made and mostly huge, and their license plates identify them as from Illinois, Wisconsin, Iowa, South Dakota, Kansas. The cars' owners, dressed in pastel slacks and sweaters, mill around the Del E. Webb Development Corporation sales pavilion and circulate through the little village of 17 one-story model homes.

These models, the current offerings of what's available here at Sun City West, are the stars of the Silver Edition Home Show. The show marks the 25th anniversary of Del Webb's Sun City, billed as the ``world's first active adult community.''

A short distance up the road, at the original Sun City, the place where retirees first discovered they could have a ``life style,'' construction has long since been complete. But Sun City West, a few miles northwest of Phoenix, is still abuilding, and the crowds of retirees and soon-to-be retirees flow through the living rooms and bedrooms and bathrooms of models with names like ``the Kensington'' and ``the Monterey.''

``The Sun Cities,'' as the company speaks of them, with their recreation centers and their swimming pools and their ubiquitous golf carts, are probably what the Del E. Webb Corporation is best known for by the public at large. Webb has also been active in the hotel-casino and resort business.

But among the investment community, Webb is known as a dramatic turnaround company.

The story at Webb over the past couple of years has been the happy tale of a seriously overextended company brought back to reality by new management.

It is also a tale of corporate restructuring -- selling properties and setting up management contracts for them instead.

``We're no longer primarily an owner of casino/hotels or a construction company,'' said Webb chairman Robert K. Swanson last month as 1984 earnings were released. ``We are now a developer and manager of leisure and real estate operations.''

With restructuring now complete, Webb is moving ahead with new projects. In the last couple of months the company has announced plans for a third retirement community, like the Sun Cities but away from Phoenix.

And Webb's commercial properties division is proceeding with a major mixed-use real estate development in Fort Collins, Colo. -- a project that is already turning a profit.

Webb's difficulties began during the late 1970s, when the company, whose main presence had always been in the West, went on a major construction and expansion program, including a renovation of the old Brighton Hotel (now the Claridge) in Atlantic City, N.J. (The eponymous Del E. Webb himself, onetime part-owner of the New York Yankees and subject of a Time magazine cover story, died in 1974.)

As time went on, Atlantic City was proving less than the gold mine first imagined, and interest rates were peaking. Webb was having to finance its project at 22 percent interest.

``It was apparent to the board,'' says a company official, ``that something had to be done.''

The something that was done was calling in Robert K. Swanson, a General Mills veteran with a reputation as a turnaround artist, and for great personal integrity -- both critical in persuading Webb's banks to hang in there with the company, as he was able to do, and in managing the troubled casino operations.

The popular wisdom is that Webb was facing bankruptcy when Swanson came in. ``No, we weren't facing bankruptcy,'' he says, ``but if we had continued on the course we were on, the banks would have put in a workout crew.''

The people at Morgan Guaranty, Webb's lead bank ``were very unhappy about the way the company was going,'' Mr. Swanson adds. ``But I realized this was an asset-rich company, and those assets could be used to turn it around.''

Specifically, this meant selling off some of the company's showplace resorts -- something Mr. Swanson's predecessors were too attached to the properties to do. Swanson also borrowed an idea from his friend Bill Marriott of Marriott Hotels fame, to liquefy some other assets.

Webb's financial team was able to work out the sale of some hotel-casinos to limited partnerships, leaving Webb with a management contract and hence a percentage of revenues rather than the high overhead of owning the entire hotel.

These deals were patterned after the limited partnerships which own Marriott Hotels but were a little trickier because of regulations governing casino operations.

Swanson's turnaround strategy also involved bringing in younger people and ``letting them spread their wings,'' as he puts it. Del Webb himself had a ``great vision,'' Swanson says, but the company had a ``construction company mentality'' that was no longer appropriate.

Some of the ``new talent'' was already aboard, but in hiding. The corporate culture did not look with favor upon such accoutrements as MBAs, and Swanson tells of employees discreetly pleading with personnel officers to have indications of their advanced degrees removed from their personnel files.

Webb officials have made much of the $1 million realized already on the Fort Collins project. But that sum came from merely selling half-interest in the property to a joint-venture partner -- thereby generating some cash but also limiting profit potential.

Swanson is undisturbed. ``I'd rather have half-interest in 20 projects than full interest in 10.

Is there reason to worry that Webb could slip back into the mire of excessive indebtedness? Emanuel J. Friedman, who follows Webb for Legg Mason Wood Walker in Baltimore, where he is vice-president, doesn't think so. ``If anything there's reason to worry they might be too cautious.''

Charles S. Harris, asistant analyst at Value Line, gives Webb high marks for structuring of deals.

``They have a very imaginative financial team -- they've done some interesting things, and `interesting' doesn't mean `questionable,' but rather, they've been structuring deals to protect their downside.''

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