Another Realty Firm On The Auction Block? by Lesley Hensell
With insiders stocking up and a newly adopted shareholder rights plan, Wilshire Real Estate Investment Inc. (Nasdaq: WREI) may be the next realty firm on the auction block. In September, the Oregon-based company asked for and received shareholder approval not to elect status as a real estate investment trust. It also changed its name from Wilshire Real Estate Investment Trust, for obvious reasons. Wilshire invests in residential and commercial loans, as well as real estate and mortgage-backed securities. Earlier this month, Wilshire announced the repurchase of almost 1 million shares, or 8.7 percent, of its common stock from former affiliate Wilshire Financial Services Group (OTC BB: WFSG). In addition to these shares, each of which was valued at about $2.50, the company purchased 1.1 million options and cumulative dividends payable of almost $400,000. "This transaction is consistent with WREI's objective of being internally managed," said Andrew Wiederhorn, chairman and CEO. "We believe that WREI's shares, which currently trade at approximately 50 percent of book value as of Sept. 30, represent good value, particularly when we have the opportunity to repurchase the shares while preserving cash for liquidity purposes." Now, in late December, Wilshire is setting the scene for a transaction. The board of directors adopted a stockholder rights plan, which will protect the company's net operating loss carryforwards and "encourage any potential acquirer to deal equally with all shareholders." Under Internal Revenue Service Rules, the company must take these steps to utilize NOLs if it undergoes a significant change in ownership. Such a plan will make the company more attractive to buyers, as well as encourage current investors to hang in there. Under the plan, stock purchase rights will be distributed to all shareholders of record as a dividend at the rate of one right for each share of common stock held at close of business Jan. 3. The plan dilutes any new 5 percent holder or any existing 5 percent holder that increases its stake by 1 percent or more. There are a lot of other confusing legalistic details that rule the plan. Suffice to say that company insiders, who have done nothing but buy shares since April, want to protect everybody's interests, including their own. The company stock price peaked for the year at $5 ½ in late May, but has since fallen steadily to its current level, hovering around 2 ¼. But you can bet something is in the works. Of the two investment houses following the stock, one has issued a strong buy recommendation, while the other is a hold. And volume currently is extremely strong for such a low-priced, low-demand issue, with around a half-million shares trading in a single day. This is high, even for a company undergoing a repurchase program. Now the only question is, who will buy, and how much? A sure bet is to get in on the action before the Jan. 3 cut-off for rights. | 
