O.C. Home Builder Sells $100 Million in Bonds
In an ambitious move that positions J.M. Peters Co. for a recovery, the Newport Beach home builder said Tuesday it has raised $100 million through a private bond sale.
J.M. Peters, like other Southern California home builders, has been hard hit by the real estate downturn. Since reporting a string of losses in the early 1990s, it has struggled to obtain badly needed capital.
The cash infusion will allow the publicly traded company to pay off its $30 million in debt, set aside $40 million to build new homes in Orange County and Nevada and $14 million to buy lots for future development. The company also said it has arranged a $25-million line of credit with Bank One of Arizona.
“It sounds like a smart move,” said Barbara Allen, a housing analyst with the brokerage Donaldson, Lufkin & Jenrette in New York. “This is an opportune time for J.M. Peters to raise this money and try to respond to the increasing demand for homes in Orange County. It looks like a real estate recovery is well underway there.”
Founded in 1975, J.M. Peters was at one time considered the premier builder of luxury move-up homes in Southern California. It fell upon hard times, however, after being sold in 1985 by founder James M. Peters to San Jacinto Savings & Loan Assn. in Houston. The thrift was seized by federal regulators in December, 1990, and J.M. Peters was taken over along with other assets.
The company languished until 1992, when builders Hadi Makarechian and Dale Dowers paid $47 million to buy it from the Resolution Trust Corp.
“When we bought this company, it was in cardiac arrest and we had the paddles out,” said Dowers, the company’s president. “Now it’s not only breathing, it’s in a marathon. Soon we will pass everyone.”
J.M. Peters, which has built single-family homes in Rancho Santa Margarita, Portola Hills and Coto de Caza, now has 21 active projects, including seven in Orange County and 10 in Nevada. It will start construction on 14 new projects next year, company officials said, and is in escrow on three South County projects, including one in Coto de Caza.
For its current fiscal year, the company expects to close escrow on more than 1,000 homes, some priced as low as $200,000. By contrast, the company built only 28 homes in 1992.
With its bond financing, J.M. Peters follows it neighbor, Baldwin Builders of Newport Beach, in turning to the capital markets for funds. Last year, Baldwin sold a $155-million bond offering.
J.M. Peters’ bonds were sold through Morgan Stanley and Co., the New York investment bank, and mature in eight years. The bonds were bought mostly by institutional investors such as mutual funds, the company said.
The financing was announced after Tuesday’s stock market closed. In trading on the American Stock Exchange, the company’s stock fell 12.5 cents a share to close at $3.25.
