Stein-Brief Group Reported in Escrow on New Financing

Striving to secure new financing for its giant Monarch Beach project in Laguna Niguel, the Stein-Brief Group opened a loan escrow April 1 with San Jacinto Savings Assn., a subsidiary of Dallas-based Southmark Corp., according to a source close to the transaction.

But as the real estate development firm attempts to shore up its finances and avoid foreclosure, four more companies that have done work on the Monarch Beach development have filed $485,715 in mechanic’s liens against Stein-Brief for unpaid bills.

All these claims have been filed since Stein-Brief fell into default on a $49-million note held by Avco Community Developers by missing a $4.38-million payment that was due Dec. 26.

A source close to Stein-Brief who didn’t wish to be named said Wednesday that on April 1 Stein-Brief and San Jacinto Savings Assn., which is based in Houston, entered escrow on an agreement by which San Jacinto would provide Stein-Brief enough money to completely pay off Avco. As a result, the source said, San Jacinto, like Avco before it, would hold a note secured by 400 undeveloped acres in the Monarch Beach project. He said that the escrow is of undetermined length but that he expects it to close within a week.

Chris Townsend, spokesman for Stein-Brief, who several weeks ago said that the company expected to restructure its finances and cure the default soon, declined to comment Wednesday on the report of an agreement with San Jacinto.

However, one of Stein-Brief’s creditors said an escrow official with First American Title Insurance Co. in Santa Ana had asked him to provide paper work arranging for a release of a mechanic’s lien he has placed on a portion of the Stein-Brief property. He said he had been assured that the money Stein-Brief owes him would be paid out of the pending escrow.

According to county records, liens have been filed against Monarch Beach by four contractors on the development: W.E. McKnight Construction Co. in Baldwin Park says it is owed $372,766 for supplying heavy equipment; Santa Ana-based Sanders Hydro-Seeding has filed two liens to collect a total of $4,608 for hydro-mulching; Irvine-based Leighton & Associates has filed two liens to collect a total of $45,675 for geotechnical services, and Hal-Mont Inc. of La Habra has filed a lien for alleged non-payment of a $62,666 bill for furnishing earth-moving equipment.

Don Gladden, president of W.E. McKnight Construction Co., said that although he filed a lien to protect his company’s interests, he is “optimistic” that Stein-Brief will pay its debt. He said Stein-Brief officials tell him that the money will come from Southmark, although he said he did not know any more details. “I consider that (the status of the financing) to be Stein-Brief’s business,” he said.

While neither Stein-Brief nor Southmark would discuss the negotiations, Orange County real estate industry officials say such an alliance is logical because Southmark, a $10-billion real estate and financial services conglomerate, has been increasing its activity in the county. In 1984, Southmark purchased the remaining 2,400 acres of the Anaheim Hills project in Anaheim from Texaco Inc. The following year it acquired Newport Beach-based J.M. Peters Co., one of Orange County’s largest home builders. Southmark used its San Jacinto Savings Assn. subsidiary to finance the Anaheim Hills acquisition and to continue that area’s multimillion-dollar development.