One of Hanover Capital Mortgage Holdings Inc.'s largest institutional shareholders announced an effort Wednesday to buy control of the New York-based real estate investment trust.
Demeter Asset Management Inc. of Greenwich, Conn., filed a schedule 13D form, which is required of anyone taking ownership of 5% or more of a public company, with the Securities and Exchange Commission on June 2. It updated its filing Wednesday to report additional share purchases and, more importantly, to state its intent to take control of Hanover.
The asset management company bought shares "for investment purposes initially but now seek[s] to acquire control" of the REIT, the filing said. Demeter president Jay Buck declined to comment on his activities, except to say that he now holds 8.4% of Hanover.
Mr. Buck's was the third 13D filing from a Hanover shareholder this year. On March 27 Apex Mortgage Capital of Los Angeles disclosed that it controlled 552,000 shares, or 9.5%, and in May it said it had reduced its stake to 2.9%. On April 11 Wallace R. Weitz & Co. disclosed that it held almost 2 million shares, or 28.4% of the company.
The Apex and Weitz filings did not state an intention for their investments.
Hanover chief financial officer Tom Kaplan said he and his colleagues had not heard of Mr. Buck before his investment group began buying shares. He declined to comment on how Mr. Buck's effort has been received.
Hanover buys subprime and seasoned single-family mortgage loans in bulk. Though Mr. Kaplan acknowledged that the company suffered serious losses last year and that several investors had taken large positions this year, he said management has been working hard to increase earnings and dividends.
"Fundamentally, people realize that the stock is trading below its intrinsic value, and we and our shareholders want to correct that situation," he said. "The problems we had last year are behind us, and I think we've been successful in moving from a big loss to gains. The market is starting to recognize our efforts, and it will continue to as we show increased earnings and dividends."
Hanover reported modest six-digit earnings in four of the last five quarters, the exception being a disastrous $14 million loss in last year's third quarter.
After hitting a two-year high of $10.375 in August 1998, Hanover's stock price has dropped to below $5 a share, where it has stalled for more than 18 months. It was trading at $4.50 at midday Wednesday, up 29% from Jan. 1.