SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 14, 1998
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Date of report (Date of
earliest event reported)
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
(Exact name of registrant as specified in its charter)
Maryland 0-23911 52-2081138
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(State or other Commission File Number (I.R.S. Employer
jurisdiction of Identification Number)
incorporation)
1776 SW Madison Street, Portland, OR97205
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(Address of principal executive offices)(Zip Code)
(503) 223-5600
Registrant's telephone number, including area code
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Not Applicable
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(Former name or former address, if changed since
last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Between October 14 and October 16, 1998, Wilshire Real Estate
Investment Trust Inc. ("WREIT" or the "Company") sold certain real estate
related assets at their carrying value to various unrelated third parties for
$525.2 million. The sales price was determined through arms length negotiations
between the various purchasers and the Company. The cash proceeds from the sale
were used to repay principal and interest on the existing bonds payable and
repurchase agreements for which these securities served as collateral totaling
$518.6 million.
The assets sold consisted of 45 classes of subordinate mortgage-backed
securities representing interests in 39 securitizations by 11 different issuers
which had a carrying value at the date of sale of $152.9 million and a $372.3
million pool of one-to-four family fully amortizing mortgage loans secured by
first liens.
The market for mortgage-backed securities and, in particular,
subordinate credit related tranches of these securities has experienced
dramatically widening spreads throughout the last ten weeks. Liquidity problems
affecting certain Wall Street firms, hedge funds and other financial instruments
investors have exacerbated this market phenomenon through forced liquidations of
their assets. This has led to an increased need for liquidity at WREIT both to
meet collateral calls and as a preemptive measure to protect against future MBS
spread distortions that the Company expects may be experienced by the markets in
general.
As a result, the Company, through these asset sales, has reduced debt
and increased current liquidity, enabling it to meet collateral calls. The
Company recognized an impairment loss of approximately $28.6 million during the
quarter ended September 30, 1998. In addition, the Company may recognize
impairment losses on unsold assets and assets sold which are not required to be
covered under Form 8-K.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro forma financial information related to the assets sold listed under
Item 2 is attached hereto, and incorporated herein by reference, as Exhibit 99.
(c) Exhibits
The following exhibits are filed as part of this report:
99 Pro forma financial information
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WILSHIRE REAL ESTATE
INVESTMENT TRUST INC.
Date: November 5, 1998 By: /S/ Chris Tassos
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Chris Tassos
Executive Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS FILED HEREWITH
EXHIBIT DESCRIPTION PAGE
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99 PRO FORMA FINANCIAL INFORMATION B NARRATIVE FORMAT 5
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EXHIBIT 99
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
PRO FORMA FINANCIAL INFORMATION B NARRATIVE FORMAT
Wilshire Real Estate Investment Trust Inc. ("WREIT" or the "Company")
commenced operations on April 6, 1998. Accordingly, the acquisition of certain
real estate related assets subsequently disposed of occurred on or after this
date. The following pro forma financial information give effect to the operating
activity of the Company as if certain assets disposed of were not acquired by
the Company.
The unaudited pro forma financial information reflects the effect of
the disposition of the assets along with the required pro forma adjustments. The
unaudited pro forma financial information should be read in conjunction with the
historical consolidated financial statements of WREIT, together with the related
notes thereto, which were filed August 14, 1998 on Form 10-Q for the period
ended June 30, 1998.
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Between October 14 and October 16, 1998, the Company sold certain real
estate related assets at their carrying value to various unrelated third parties
for $525.2 million. The carrying value included an impairment provision of
approximately $28.6 million, which was recognized during the quarter ended
September 30, 1998. Of the assets sold, $472.0 million were acquired subsequent
to June 30, 1998, and accordingly, are not included in the amounts reported on
Form 10-Q for the interim period then ended. The sales price was determined
through arms length negotiations between the various purchasers and the Company.
The cash proceeds from the sale were used to repay principal and interest on the
existing bonds payable and repurchase agreements for which these securities
served as collateral totaling $518.6 million.
The pro forma effect of this transaction on the June 30, 1998 statement
of financial condition would have resulted in a decrease in total assets from
$441.9 million to $377.4 million and a decrease in total liabilities from $281.8
million to $227.1 million. The decrease in total assets of $64.5 million is the
result of the sale for $53.2 million of mortgage-backed securities and their
related impairment provision of $11.3 million. Liabilities decreased as a
result of terminating the short-term financing on the assets sold.
The pro forma effect of this transaction on Stockholders' Equity as of
June 30, 1998 would be a decrease from $160.1 million to $150.3 million. The
$9.8 million decrease is due to the loss recognized for the impairment provision
of the assets of $11.3 million and the pro forma effect of adjusting retained
earnings by $0.3 million for the income earned during the quarter ended
June 30, 1998 associated with the disposal of certain assets. However, this is
offset in part by a decrease of $1.8 million in the unrealized loss on
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available for sale securities component of shareholders' equity as would be
appropriate for the pro forma effect of the securities sold.
Additionally, the pro forma effect on the historical statement of
operations for the six-months ended June 30, 1998:
* Decrease in interest income of $0.7 million and a decrease in interest
expense of $0.3 million, which results in a decrease in net interest
income of $0.4 million.
* Increase in the impairment provision on certain securities of $11.3
million. Additionally, $17.3 million in impairment provision was
reflected in the quarter ended September 30, 1998 for certain assets
sold that were acquired after June 30, 1998.
* Net income would have decreased from $3.0 million to a net loss of $8.6
million. Basic and diluted earnings per share of $0.27 would decrease
to ($0.76) basic and diluted earnings per share.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. All of the statements
contained in this report which are not identified as historical should be
considered forward-looking. In connection with certain forward-looking
statements contained in this report and those that may be made in the future by
or on behalf of the Company which are identified as forward-looking, the Company
notes that there are various factors that could cause actual results to differ
materially from those set forth in any such forward-looking statements. Such
factors include but are not limited to, the real estate market, the availability
of real estate assets at acceptable prices, the availability of financing,
interest rates, and European expansion. Accordingly, there can be no assurance
that the forward-looking statements contained in this report will be realized or
that actual results will not be significantly higher or lower. The forward-
looking statements have not been audited by, examined by, or subjected to
agreed- upon procedures by independent accountants, and no third party has
independently verified or reviewed such statements. Readers of this report
should consider these facts in evaluating the information contained herein. The
inclusion of the forward-looking statements contained in this report should not
be regarded as a representation by the Company or any other person that the
forward-looking statements contained in this report will be achieved. In light
of the foregoing, readers of this report are cautioned not to place undue
reliance on the forward- looking statements contained herein.
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