Sale of Home Builder J. M. Peters Falls Through During Last Stages

The $100-million sale of Newport Beach home builder J. M. Peters by majority owner Southmark Corp. to MDC Holdings Inc. has fallen through, the companies said Friday.

Denver-based MDC announced plans in February to buy the 87% of Peters’ stock held by Dallas-based Southmark. Only a week ago, MDC President David Mandarich said he was eager for the transaction to become final.

Mandarich declined to comment on the failed purchase Friday.

“There were certain things that we didn’t reach a meeting of the minds on,” said Leon Swails, vice president of MDC. Swails said MDC had arranged its financing and was ready to close the sale.

“(The two companies) couldn’t come to terms with the value,” said Susan Seiter, director of investor relations for Southmark, a real estate and financial services company. “I am not going to say who didn’t like what they saw.”

Steve Johnson of the Meyers Group, a real estate consulting firm in Corona, speculated that Southmark and MDC probably disagreed on the value of Peters’ properties in the development stage.

“Peters is an outstanding company. I think it’s a shame that they weren’t picked up by MDC,” Johnson said.

Seiter declined to say if Peters is back on the block. She said seeking another buyer and keeping the company are options that Southmark will consider.

“I think they’ll hold onto it. I would if I were Southmark,” Johnson said. “The next 18 months are going to be very good for the industry.”

The canceled deal was surprising because Southmark, which owned Peters through its San Jacinto Savings & Loan subsidiary, has been aggressively trying to sell assets, while MDC has been trying to increase its presence in Southern California.

Southmark is seeking to raise cash to help alleviate a $2.6-billion debt. “Here, anything’s for sale at the right price, including my desk,” Seiter said.

MDC already owns Richmond American Homes in Irvine. With the purchase of Peters, it would have become one of Southern California’s largest home builders.

The two companies would have complemented each other. Peters builds more expensive, “move-up” homes for second and third buyers in Orange, San Diego and Los Angeles counties. Richmond American builds less expensive homes for first-time buyers in Riverside and San Bernardino Counties.

MDC would have become Peters’ third owner in less than three years. In 1985, Southmark purchased the company for $21 million from James Peters, a local home builder who founded the firm in 1975.

Southmark tried to raise cash by selling shares of Peters to the public last year. Because of investor indifference, the amount of stock to be sold was scaled back twice.

Southmark finally sold nearly 2 million shares, or 13% of the company, in September for $12 million.