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                                                                    EXHIBIT 99.1

                                                                    CONFIDENTIAL




                       [Southmark Corporation Letterhead]


                                 May ___, 2000


Dear Stockholder:

     Enclosed is a copy of a Current Report on Form 8-K recently filed with the
Securities and Exchange Commission that discloses a recent transaction affecting
your ownership of Common Stock and Redeemable Series A Preferred Stock of
Southmark Corporation.

     As described in more detail in the enclosed Report, the Board of Directors
of Southmark has approved a transaction where I, individually, will sell
178,270.25 shares of Redeemable Series A Preferred Stock and 2,358 shares of
Common Stock of Southmark (constituting all of the shares of Southmark's capital
stock that I own) to A&B Capital Corporation for a purchase price calculated on
the basis of $1.50 per share of Redeemable Series A Preferred Stock. The Board
has also approved the sale by Grace Bros. Ltd. of 787,271 shares of Redeemable
Series A Preferred Stock and 7,343,156 shares of Common Stock to A&B Capital
Corporation. Since Grace's shares will allow A&B Capital to obtain a controlling
interest in Southmark, A&B Capital has agreed to pay Grace an additional 50
cents per share of Redeemable Series A Preferred Stock. Upon the closing of
these transactions, A&B Capital will own approximately 34 percent of the
outstanding shares of Redeemable Series A Preferred Stock and approximately 20
percent of the outstanding shares of Common Stock. In addition, I intend to
resign from my positions as President, Chief Executive Officer and Chairman of
the Board, and appoint two individuals designated by A&B Capital as members of
the Board of Directors of Southmark.

     It was a condition to the Board's approval of these transactions that all
other holders of Redeemable Series A Preferred Stock receive at least the same
consideration per share as I receive from A&B Capital. Therefore, A&B Capital
agreed to cause Southmark to have an amount of funds or other value sufficient
to enable Southmark to make a distribution of $1.50 in cash for each outstanding
share of Redeemable Series A Preferred Stock by no later than July 31, 2000.
Although not obligated to do so, I presently intend to remain in my current
capacities with Southmark until this distribution is made. A&B will contribute
or loan funds to Southmark to enable Southmark to make the distribution. If A&B
loans funds to enable Southmark to effect the cash distribution, the loan will
be repaid from the potential recoveries from items of pending litigation
described below. After the distribution, Southmark stockholders will continue to
own their shares of Redeemable Series A Preferred Stock and/or Common Stock.
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     As Chairman of the Board of Southmark, my goal has been to maximize the
ultimate distribution in liquidation to the holders of the Southmark's Series A
Redeemable Preferred Stock. For this reason, I have postponed the planned
liquidation and dissolution of Southmark in order to continue to pursue various
litigation claims in which Southmark has a high probability of recovering
significant damages. Southmark has recovered a total of $5,953,834 since January
1997 in connection with a successful outcome in Securities and Exchange
Commission v. Drexel Burnham Lambert Incorporated, et al. Further, Southmark
recovered $580,918 in the settlement of Harmon Envicon Associates v. Southmark
Corporation.

     As of the date hereof, Southmark is currently pursuing two claims in which
the potential recovery is approximately $3 million in the aggregate. In
Southmark Corporation v. Shulte, Roth & Zabel, L.L.P., Southmark has a judgment
in the amount of $1 million in its favor, plus pre-judgment interest. The
defendants in this action have obtained an irrevocable standby letter of credit
in favor of Southmark in the amount of $1,419,652.22 on December 9, 1999 to
cover the required bond pending defendants' appeal of the judgment. The judgment
has, in fact, been appealed to the Fifth Circuit and it is expected that oral
arguments on the appeal will be heard in the next six months. In Southmark
Corporation v. Jerri Coppa-Knudson, Liquidation Agent, the bankruptcy court
following a trial in November 1998 determined that Southmark has a claim for
damages against Double Diamond Ranch Limited Partnership in the approximate
amount of $1,251,868. The bankruptcy court also ruled, however, that Southmark
is entitled to no distributions of assets on account of that claim in that the
Partnership has no right of contribution against its affiliated debtors.
Southmark appealed this ruling and the amount of Southmark's damages to the
District Court. On March 21, 2000, the District Court affirmed the bankruptcy
court's calculation of Southmark's damages at $1,251,868, but vacated the
portion of the bankruptcy court ruling denying the Partnership's right of
contribution. We expect that this issue should be resolved in the next few
months.

     In approving the transaction with A&B Capital, the Board carefully
considered the timing and amount of potential recoveries in the two outstanding
claims of Southmark, as compared with the opportunity for the holders of
Redeemable Series A Preferred stock to receive $1.50 cash per share by July 31,
2000. The Board determined that the transaction with A&B Capital presented the
best course of action for the Southmark stockholders, especially in light of the
fact that you are not being asked to sell or otherwise part with your shares of
Redeemable Series A Preferred Stock or your Common Stock and, therefore, you may
participate as a continuing stockholder in any potential opportunities created
by Southmark's new management. Although A&B has not provided us with specific
details on its plans for Southmark, we understand that A&B intends to explore
the possibility of adding to Southmark one or more business operations not yet
identified.
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Stockholders of Southmark Corporation
May __, 2000
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     If you have any questions about how this transaction affects your ownership
of capital stock in Southmark, please do not hesitate to call me.

                                        Sincerely,



                                        Charles B. Brewer
                                        Chief Executive Officer, President
                                        and Chairman of the Board