Peekskill Financial Corp. has rejected an unsolicited takeover offer from a local real estate investment trust.

BRT Realty Trust of Great Neck, N.Y., on Tuesday offered $49 million, or $17.25 per share, for the $199 million-asset thrift holding company.

But instead of agreeing, Peekskill Financial officials said they would proceed with a modified Dutch auction they had announced Dec. 18. The company has offered to buy back up to 800,000 shares of its common stock for up to $16.75 per share.

"We had determined before that the auction was the way to go," said William J. LaCalamito, president of Peekskill Financial, in an interview Wednesday. "The offer did not give us reason to alter that plan."

Mr. LaCalamito said his company, the parent of First Federal Savings Bank of Peekskill, N.Y., had had no merger talks with BRT.

Shares of Peekskill Financial fell 6.25 cents Wednesday, to $16.4375, on heavy volume. BRT shares closed at $6.1875, up 12.5 cents.

BRT earns revenues both from rents on properties it owns and from interest on real estate loans, but its specialty is mortgage lending. An executive at the REIT said he believes the two companies would make a good fit.

"Essentially, we are in the same industry," said Simeon Brinberg, senior vice president at BRT. "We believe we have the expertise and experience in lending to operate the thrift very successfully."

Despite their similarities, few if any REITs have bought thrifts. A representative of the National Association of Real Estate Investment Trusts, a Washington trade group, said such combinations are rare if not unheard of.

A takeover would cost BRT its special tax status: REITs are prohibited from owning more than 10% of the voting stock of another company.

BRT has not decided whether it will further pursue Peekskill Financial, Mr. Brinberg said. The REIT already owns 264,000 shares, or 9.29%, of the thrift company through Gould Investors LP, an affiliated company.

"We have to digest it and look at the alternatives," he said. "It is much too soon to speculate on what we will do now."

Neither company has wowed investors of late. BRT's total return to shareholders declined about 26% in 1998, more than the industry average of an 18% drop, according to NAREIT, the trade group.

Peekskill Financial, meanwhile, returned 0.91% on assets in the first three quarters of 1998, and its return on equity was 4.03%, according to Federal Deposit Insurance Corp. data.

Mr. LaCalamito said he hopes the stock buyback will improve those ratios. The thrift has been burdened with excess capital since going public three years ago, he said.

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