Mail Stop 4561
January 25, 2007
Jeffrey H. Lynford
Wellsford Real Properties, Inc.
535 Madison Avenue, 26th Floor
New York, New York 10022
Re: Wellsford Real Properties, Inc.
Registration Statement on Form S-4
Filed December 28, 2006
Registration No. 333-139705
Dear Mr. Lynford:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. Please confirm that you will file with the Commission all
materials used to aid in the solicitation of proxies. Please
provide
us with copies of these materials and indicate the date they were
first used. Please provide us with forms of the proxy cards.
2. Please provide us with any pictures, graphics or artwork that
will
be used in the prospectus.
Prospectus Cover Page
3. Please confirm that your cover page will not exceed one page.
In
this connection, please consider omitting the description of the
mechanics of the merger as presented in the first paragraph and
instead focus on the consequences to shareholders. For example,
please disclose that following the merger the combined company
business will primarily be the business of Reis because Wellsford
will dispose of its remaining real estate assets but that
Wellsford
stockholders will not receive the cash in the form of liquidating
distributions as had been contemplated under the plan of
liquidation.
4. In addition to disclosing the aggregate merger consideration,
please disclose the per share merger consideration.
5. Please disclose the consequences to shareholders of a fixed
exchange ratio, the consequences to Reis` shareholders from the
fact
that Reis is not public, and the percentage of stock of the
combined
company that the each of Reis and Wellsford shareholders will own.
Questions and Answers About the Merger, page 1
Q: Have any Reis stockholders agreed to vote their shares..., page
2
6. Please revise to clarify that you only need approximately 20%
of
the votes of the Reis Series C preferred stock and 16% of the
Series
D preferred stock to approve the merger.
Summary, page 5
7. Please include summary risk factors.
8. The discussion of the reasons why the boards recommend the
transaction should be presented in a balanced format to present
the
boards` concerns with the transaction. Please include a
discussion
of the negative factors regarding the merger considered by the
respective boards.
9. We note that you have included cross references from virtually
every subsection. Please revise per plain English to limit your
summary cross-references.
Wellsford`s Reason For the Merger, page 8
10. We note your reference in the final bullet to the "growth in
Reis`s value since the execution of the merger agreement. Please
disclose the basis for this statement and provide us any
supporting
materials.
Interests of Wellsford and Reis Directors..., page 11
11. Please disclose the ownership percentages of Messrs. Lowenthal
and Lynford.
12. Please disclose the dollar amount to be paid in connection
with
the termination of Reis options.
Termination of the Merger, page 13
13. Please revise to quantify the maximum reimbursement amount,
the
termination fee and the Reis Bank Loan expenses that Wellsford
will
pay if shareholder approval is not obtained.
Voting, page 14
14. Please quantify the percentage of shares covered by the Reis
voting agreement.
Risk Factors, page 23
The merger represents a significant..., page 23
15. Please move the last paragraph to a separate risk factor.
The number of shares of Wellsford common stock..., page 24
16. Please revise the header to clarify that the risk is that the
share price will decline to below $8.16 from the time of election
to
the time the merger is consummated.
17. Please include disclosure that the risk of the stock price
falling below $8.16 is increased to the extent the investor elects
to
receive 100% of the consideration in stock.
A portion of the merger consideration..., page 24
18. Please disclose that investors with shares subject to escrow
will
bear the risk that during the time the shares are escrowed the
stock
price will drop below $8.16.
Failure to consummate..., page 25
19. Please disclose the closing share price on the date preceding
announcement of the merger and a recent share price.
If Wellsford stockholders..., page 25
20. Please provide additional disclosure regarding the amount of
such
expenses.
The combined company`s ability..., page 27
21. We note that as a result of the merger the company will be
changing its business. Please advise us why you believe you may
satisfy the "continuity of business enterprise" requirement.
The success of the combined company depends..., page 29
22. We note your reference to Jeffrey Lynford`s employment
agreement.
Please advise us whether the diminution in duties or other
consequences of the merger will result in a breach or constructive
termination under the agreement. If so, please disclose this in
the
risk factor.
Increases in interest rates..., page 31
23. Please disclose the impact of a 1% increase in interest rates.
Wellsford is subject to environmental laws..., page 33
24. Please disclose the estimated cost of the East Lyme
remediation.
Background of the Merger, page 39
25. The disclosure reflects that on May 2006, Wellsford approached
Reis regarding a potential strategic transaction. Please confirm
to
us that there were no substantive discussions regarding such a
transaction prior to May 2006. Otherwise, please provide a brief
description of these discussions. We note, for example, that in
your
definitive proxy statement filed October 11, 2005 relating to the
liquidation plan, an acquisition of Reis appears to be the only
non-
liquidation activity permitted.
26. Please disclose the dollar amounts of the cash bids received
by
Reis in the spring of 2006.
27. In the first paragraph on page 40, please provide additional
disclosure regarding the "Veronis initiative" and the reasons why
the
board focused on the Wellsford proposal instead.
28. In the first paragraph on page 40 and in the fourth paragraph
on
page 41, please provide additional disclosure regarding the
ramifications of terminating the liquidation plan considered by
the
board.
29. In the seventh paragraph on page 43, please provide additional
disclosure regarding the "resolution of certain open items
discussed
at the September 25, 2006 special meeting."
Wellsford Board of Directors` Recommendation and Reason for the
Merger..., page 45
30. Please clarify the disclosure in the seventh bullet point on
page
45. In particular, please clarify how your investment was
"transformed" into a 100% ownership interest for only $9,600,000
in
cash.
31. Please revise to disclose whether the board considered the
fact
that shareholders would no longer be receiving distributions as
had
been contemplated by the Plan.
32. Please revise to disclose whether the board considered the
fact
that the consideration may be greater than fair market value since
Reis is not public.
Reis Board of Directors` Recommendation and Reasons for the
Merger,
page 46
33. Please revise to disclose whether the board considered the
fact
that the consideration to be received by Reis stockholders will be
based upon a fixed exchange ratio.
34. Please revise to discuss each factor to which you refer in the
last bullet point on page 48 rather than including a cross-
reference
to the Risk Factor section.
Opinions of Financial Advisors, pages 49 and 56
35. Please provide us with copies of any materials prepared by the
financial advisors in connection with their fairness opinions,
including, among other things, any "board books," drafts of
fairness
opinions provided to the boards of directors, and any summaries of
presentations made to the boards of directors. We may have
further
comment on your disclosure once we have had the opportunity to
review
those materials.
36. To the extent certain financial information, including
financial
projections, were exchanged among the parties and/or provided to
the
financial advisor, please provide the staff with copies of all non
public information received by the companies, their affiliates and
representatives that led to the execution of the merger agreement.
If you conclude that the non public information is not material
and
therefore need not be disclosed, please provide the basis for that
conclusion.
Opinion of Houlihan Lokey..., page 56
37. Please disclose that Houlihan has consented to use of the
opinion
in the registration statement.
38. We note the limitation on reliance by shareholders in the
fairness opinion provided by Houlihan and the disclosure regarding
such limitation in the first paragraph on page 59. Because it is
inconsistent with the disclosures relating to the opinion, the
limitation should be deleted. Alternatively, disclose the basis
for
Houlihan`s belief that shareholders cannot rely upon the opinion
to
support any claims against Houlihan arising under applicable state
law (e.g., the inclusion of an express disclaimer in Houlihan`s
engagement letter with the company). Describe any applicable
state-
law authority regarding the availability of such a potential
defense.
In the absence of applicable state-law authority, disclose that
the
availability of such a defense will be resolved by a court of
competent jurisdiction. Also disclose that resolution of the
question of the availability of such a defense will have no effect
on
the rights and responsibilities of the board of directors under
applicable state law. Further disclose that the availability of
such
a state-law defense to Houlihan would have no effect on the rights
and responsibilities of either Houlihan or the board of directors
under the federal securities laws.
Interests of Wellsford..., page 67
39. Please disclose the amount of the loans made to Messrs.
Lynford
and Garfield. Please disclose whether the value of the shares for
purposes of repayment of the loans will be $8.16 per share or the
value on the date the shares are delivered.
Wellsford Directors and Executive Officers After the Merger, page
68
40. We note your statement that all of Wellsford`s executive
officers
will continue to be executive officers after the merger. However,
it
appears that your Chief Executive Officer and President, Jeffrey
Lynford, will step down from those positions and will only remain
as
a board member. Please advise.
Material U.S. Federal Income Tax Consequences, page 76
41. In the carryover paragraph on the top of page 77, please
revise
the disclosure to clarify that the representation letters regard
factual matters.
Executive Compensation, page 116
42. Please provide updated executive compensation disclosure for
fiscal year 2006. Please note that Item 402 of Regulation S-K has
been revised for periods ending on or after December 15, 2006.
Refer
to Securities Act Release No. 33-8732 (published August 29, 2006).
Certain Relationships and Related Transactions, page 123
43. Please update this section to address recent changes to Item
404
of Regulation S-K, including Item 404(b) and (c).
44. Please advise us why you have not included disclosure
regarding
the Beekman transaction discussed on page 147.
Proposal No. 2, page 128
45. Rather than rely on a cross-reference, please disclose the
comparable consideration to be received by stockholders of each
series of Reis preferred stock in the merger.
46. Please disclose that as a result of proposal two, preferred
holders will not have priority over the common holders with
respect
to payment of the merger consideration.
Unaudited Pro Forma Combined Balance Sheet, page 183
47. Please clarify in Note C whether or not the historical cost of
real estate assets under development has been adjusted for
depreciation during the period in which they were accounted for on
a
liquidation basis, as well as the basis for your accounting
treatment.
48. Please clarify in Note Q why you have reduced the combined
entity`s other long term liabilities by $441,653.
49. We note that a value of $4 million has been assigned to Reis`
database in your purchase price allocation, but the database is
carried at $5.4 million on the pro forma balance sheet. Please
revise the balance sheet or purchase price allocation as
necessary.
50. Please expand footnote Q to disclose why the deferred tax
assets
were reduced to zero.
Wellsford Real Properties, Inc. and Subsidiaries Consolidated
Statements of Operations, page WF-6
51. We note that you have recorded interest earned as revenue on
your
consolidated statements of operations. It does not appear that
the
majority of this interest would meet the definition of revenue
pursuant to paragraph 78 of CON 6. Please revise to present
interest
income below operating expenses. Refer to Rule 5-03 of Regulation
S-
X.
52. Please revise to reflect the correct subtotals for Income
(loss)
before accrued distributions and amortization of costs on
Convertible
Trust Preferred Securities and discontinued operations for the
three
months and nine months ended September 30, 2005.
Wellsford Real Properties, Inc. and Subsidiaries Consolidated
Statements of Cash Flows, page WF-8
53. Please advise us why the sale of restricted cash, other assets
and accrued expenses and other liabilities have been characterized
as
non-cash investing and financing activities.
Wellsford Real Properties, Inc. and Subsidiaries Notes to
Consolidated Financial Statements, page WF-11
Note 2. Summary of Significant Accounting Policies, page WF-13
54. We note that you purchased LIBOR caps for the Gold Peak and
East
Lyme Construction Loans. Please advise us how you have accounted
for
the interest rate cap and revise to include the disclosures
required
by paragraphs 44 - 45 of SFAS 133 and Rule 4-08(n) of Regulation
S-X.
Net Assets in Liquidation, page WF-14
55. Please advise us how you determined to use an annualized
discount
rate of 17.5 - 26% when estimating the net realizable value of
your
investments in real estate under development.
Revenue Recognition, page WF-19
56. Please elaborate upon your revenue recognition policy as it
relates to the sale of real estate assets. Specifically tell us
what
method you use to account for the sales and how you determine the
adequacy of a buyer`s initial and continuing investment to
determine
the timing of revenue recognition. Refer to SFAS 66 and EITF 06-
08.
Please revise your disclosure on page 150 as well.
Note 6. Income Taxes, page WF-24
57. We note from your risk factor on page 27 that an ownership
change
not satisfying the "continuity of business enterprise" requirement
would preclude you from using any net operating loss from a pre-
change period to offset taxable income in post-change years.
Please
explain this restriction in Note 6 and quantify the amount by
which
you estimate usable net operating losses will be limited.
Note 11. Segment Information, page WF-34
Palomino Park, page WF-46
58. Please confirm to us and disclose in the note whether any
revenue
has been recognized for the Gold Peak units under contract. Cite
relevant accounting literature.
Other Developments, page WF-48
East Lyme, page WF-48
59. Please disclose the estimated remediation costs for the East
Lyme
Land, as well as the amount by which the carrying value of the
land
was adjusted for this liability. Please also disclose whether the
remediation costs were measured on a discounted basis. The
disclosures on pages 141 and 159 should be revised as well. Refer
to
paragraphs 152 - 159 of SOP 96-1.
REIS, Inc. Financial Statements, page RF-1
60. Please update the financial statements of Reis, Inc. in
accordance with Rule 3-12 of Regulation S-X.
Independent Auditors` Report, page RF-2
61. It appears that the second paragraph of the audit report has
been
amended to include some of the suggested language from AU Section
9508.18. The suggested modification from AU 9508.18 also includes
the following language "The Company is not required to have, nor
were
we engaged to perform, an audit of its internal control over
financial reporting." Either revise to include this additional
sentence or have your auditors tell us why they believe revision
is
not necessary. We may have further comment upon review of the
response.
REIS, Inc. Notes to Financial Statements, page RF-7
Note (6) Stock Options, page RF-12
62. It does not appear that any compensation expense was
recognized
for the intrinsic value of the 408,210 options issued on July 25,
2003. Please advise us of your basis of accounting for these
options, citing relevant accounting literature.
Part II.
Item 21. Exhibits.
63. Please file all required exhibits as promptly as possible. We
will review the exhibits prior to granting effectiveness of the
registration statement and may have further comments after our
review. If you are not in a position to file your legal opinion
with
the next amendment, please provide a draft copy for us to review.
64. Please advise us as to why the Bank of Montreal loan will not
be
filed as an exhibit.
Item 22. Undertakings.
65. Please include the undertakings required by Item 512(a)(5) and
512(a)(6).
Exhibit 23.3
66. We note that the consent provided by Marks Panth & Shron LLP
references a report dated December 28, 2006, but the report
included
in the registration statement is dated December 21, 2006. Please
have your auditor revise and update their consent in your next
amendment.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Kristina Beshears, Staff Accountant at 202-
551-
3429 or Daniel Gordon, Accounting Branch Chief, at 202-551-3486 if
you have questions regarding comments on the financial statements
and
related matters. Please contact Michael McTiernan at 202-551-3852
or
me at 202-551-3495 with any other questions.
Sincerely,
Elaine Wolff
Branch Chief
cc: Stephen Wiseman, Esq. (via facsimile)
Jeffrey H. Lynford
Wellsford Real Properties, Inc.
January 25, 2007
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