Government Will Try to Sell J.M. Peters Co. : Thrifts: With the takeover of San Jacinto S&L; comes the burden of unloading the builder that shriveled in housing market’s downturn.

NEWPORT BEACH — The federal government last week acquired another piece of flotsam from the wreckage of the thrift industry: J.M. Peters Co. Inc., a local home builder owned mostly by San Jacinto Savings & Loan Assn.

Federal regulators seized San Jacinto on Friday, and on Monday the government said it would probably try to sell the home builder, which San Jacinto put up for sale more than a year ago.

An official from the federal Resolution Trust Corp. said the agency plans to push a sale “more aggressively” than San Jacinto. The RTC, the agency responsible for selling off insolvent S&Ls;, tries to trim busted thrifts of all their subsidiary companies until they hold nothing but their local depositors’ money before selling them.

J.M. Peters, however, may be a tough sell. Like other local home builders, the company has taken a buffeting this year as sales of the expensive new homes it builds all but dried up. Peters has hundreds of unsold houses in its inventory and recently stopped new construction.

Individual shareholders, who own 13% of the stock, aren’t too happy either. The stock has plummeted from a high of nearly $13 per share last year, when the housing market was still decent. It closed Monday at $1.125 per share in American Stock Exchange trading.

J.M. Peters is one of Southern California’s largest home builders, with operations from San Diego to Ventura County, and the only local home builder that large that’s also publicly held. The company, which rode the crest when sales swelled in the boom year of 1988, specializes in single-family homes costing from $350,000 to $500,000 that are purchased mostly by people trading up to a larger home.

Most of the homes being sold these days, however, are relatively inexpensive--for Southern California--because it’s mostly first-time buyers in the market.

But with a motivated seller like the federal government owning most of the company, and with the price of its stock down around its ankles, J.M. Peters might seem a good buy to someone willing to hold on until the housing market improves.

The federal government may ask for as much as $5 a share, said Mark Matheson, a Newport Beach analyst. That puts a value on the company of about $70 million for the 14 million shares outstanding. However, the government may have to settle for considerably less, Matheson says.

“With the stock down around $1 a share, they may be willing to settle for $3 or $4 a share to get the company off their hands,” he said. At $3 a share, the company would bring $42 million. That’s about twice what San Jacinto paid for the company in 1985. (But that figure doesn’t include the percentage of the company’s earnings paid to Chairman James M. Peters since 1985 as an incentive for him to stay on, an amount which has run into the millions of dollars.)

One potential purchaser is Peters, who would like to re-acquire the company, according to a spokesman.

That seems a possible scenario because, except for management, one home-building company is much like another. And the chairman seems to be a big part of the company’s attraction, since the incentive agreement San Jacinto gave Peters to stay on paid him as much as $6.3 million a few years ago, making Peters one of the best-compensated executives of a public company in Orange County that year.

The company might not be nearly as desirable unless the new owner could work out an agreement to keep Peters and his management team at the helm. On the other hand it may be easier to buy the company from the RTC than from San Jacinto, once a Houston-based high flier that reportedly rejected as too low a buyout offer of $12.50 a share, or about $175 million, a year ago.

Meanwhile, Peters said Monday that the RTC is reviewing “proposed modifications” to Peters’ lines of credit with its parent company, San Jacinto. Peters owed San Jacinto a whopping $200 million at the end of the last quarter, or about half its total debt.

The company said in a statement that it is negotiating with its other lenders for “loan modifications” but would not elaborate.

It also said former San Jacinto Chairman Lawrence Connell resigned from Peters’ board. There was no explanation, and Connell couldn’t be reached.

The seizure of San Jacinto had been expected for some time. It failed to meet all three federal tests for sufficient assets after several years of making risky real estate loans.

San Jacinto was in turn owned by Southmark Corp., a Dallas real estate firm that recently emerged from federal bankruptcy proceedings. Southmark, too, was hit by the downturn in the Texas real estate market.

Then, this year, things went sour for J.M. Peters as well. In September it reported its first quarterly loss since going public in 1987, a $451,000 deficit contrasted with a year-earlier profit of $3.5 million.

J.M. Peter’s Performance Revenue in millions of dollars 1988 1st-2nd-3rd-4th: $144.9 1991 1st-2nd-3rd-4th: $51.1 Fiscal year ends Feb. 28, 1991 Net Income in millions of dollars 1991 1st-2nd-3rd-4th: -$.5 Fiscal year ends Feb. 28, 1991 Source: J.M. Peters Co.