Buyer May Get a Windfall on J. M. Peters Deal
The sale of an Orange County home builder being negotiated by the federal government could cost taxpayers nearly $100 million because it would give the buyer 2,000 prime Southern California residential lots at discounts of 40% or more.
Capital Pacific Homes Inc., the prospective buyer of Newport Beach-based J. M. Peters Co., is already trying to sell some of the property at nearly twice the average price of $53,200 a lot that it would pay for them if the deal goes through, The Times has learned.
Several industry insiders have said that Peters Co. lots, located in Orange, Los Angeles and San Diego counties, are worth closer to an average of $90,000 each.
The Peters Co. sale, outlined in a letter of intent between the federal Resolution Trust Corp. and Capital Pacific, calls for the year-old Newport Beach builder to acquire 85.8% of publicly traded J. M. Peters Co.’s stock and $144.8 million of its debt for $47.2 million.
The RTC is involved in the transaction as receiver for failed San Jacinto Savings of Houston, which owns the controlling shares of J. M. Peters and is owed $126.5 million in principal and $18.3 million in interest.
Peters founder James M. Peters sold the luxury-home-building company to San Jacinto in 1985 for about $20 million and stayed on as chairman. Over the years, San Jacinto was J. M. Peters Co.’s major lender. It financed Peters Co. land acquisition and construction activities until 1990, when the thrift’s other real estate investments soured and regulators seized it.
Officials at Capital Pacific, based in Newport Beach, and the RTC declined comment. James Peters also would not comment.
Several sources with knowledge of the transaction said that by allowing Capital to purchase that debt from San Jacinto at a big discount, the deal effectively forgives $97.6 million in loans that J. M. Peters used to acquire property. Proceeds of the loans, had they been paid in full, would have helped erase the cost of liquidating San Jacinto Savings.
Late last week, J. M. Peters Co. filed documents with the Securities and Exchange Commission to satisfy disclosure rules. The filing reveals that the RTC has agreed to forgive any tax liability that Peters Co. might incur because of the value it received from federal funds used to assist its parent, San Jacinto.
In its audited financial report for its fiscal year ended Feb. 28, J. M. Peters Co. listed assets of $250.8 million, with land and improvements accounting for $224.6 million of the total.
The company’s liabilities for land and improvements included the $144.8-million debt to San Jacinto plus $46.9 million owed to other financial institutions and $12.3 million owed the seller for lots it purchased in the San Diego County community of La Quinta.
When the total liabilities of $204 million are reduced by the $97.6 million in debt forgiven under terms of the proposed purchase agreement, the net result is that Capital Pacific would acquire the 2,000 lots for about $106.4 million, or $53,200 apiece.
