Stein-Brief Financing Deal Reported Close

The Stein-Brief Group, which has been scrambling for new financing to save its giant Monarch Beach development in Laguna Niguel from foreclosure, is close to solving its problems by signing an agreement with Southmark Corp., a Dallas real estate and financial services conglomerate, according to real estate industry sources.

Neither Stein-Brief nor Southmark would officially comment on the pending negotiations.

“We have no comment yet, nothing,” said an aide to Paul Giuntini, president of Southmark Pacific Corp., Southmark’s subsidiary in Pasadena that handles all of the company’s development projects in Southern California. But she added that the company might have more to say in the next several days.

Real estate industry sources in Orange County, meanwhile, said that Stein-Brief officials have said privately that they have all but signed a financing agreement with Southmark. Several sources said that they had expected a final agreement last week, and that the deal could be signed at any time.

Southmark, a publicly traded corporation with $10 billion in assets, including a savings and loan institution, entered the Southern California real estate market six years ago when it purchased Penn Phillips Properties Inc., which became Southmark Pacific Corp.

Southmark’s first major move in Orange County came in 1984 with the purchase of 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.

It is unclear what kind of deal--whether a partnership, sale or merger--may be struck between Stein-Brief and Southmark. What is clear, however, is that Stein-Brief needs a new infusion of financing for the Monarch Beach project. One of the development firm’s lenders, Avco Community Developers, took the first step toward foreclosure on 400 remaining undeveloped acres in Monarch Beach by filing a notice of default after Stein-Brief missed a $4.3-million payment due last December on a $49-million loan against the property.

The default came only 2 1/2 years after partners David Stein and Barry Brief pulled off one of the biggest land buys in Orange County history by acquiring 550 acres of Laguna Niguel coastal property from Avco for $80 million. The partners convinced Avco to take back a $56-million loan, since reduced to $49 million. They also obtained a $28-million loan from Beverly Hills Savings & Loan, based in Mission Viejo, and a credit guarantee of up to $10 million from Western Savings & Loan.

In a recent interview, Stein said he was working “night and day” to restructure financing for the Monarch Beach resort community, planned as an upscale seaside enclave with more than 2,600 homes, as well as retail, office, recreational, business conference and hotel projects.

Stein said that Stein-Brief had experienced difficulty arranging for additional financing it needs for its developments from Beverly Hills Savings & Loan after the insolvent S&L; was taken over last year by federal regulators.

Southmark might provide such financing through San Jacinto Savings and Loan Assn., which has financed the purchase and continued multimillion-dollar development of Anaheim Hills.