REAL ESTATE : Hammond Co. Wants to Buy Back Shares Owned by Public

In 1983, a young mortgage banker named Thomas Hammond made waves by taking his Newport Beach company public, raising nearly $6.5 million.

The move was newsworthy in that it made the Hammond Co. one of only a handful of publicly traded mortgage firms in the country. Hammond and 20 investors started the firm in 1976 with a total investment of just $125,000.

At the time of the public offering, the nation was still recovering from the recession and Southern California was on the mend from a residential real estate slump. Hammond said going public would create new sources of financing.

But with another recession under way and the housing market again in the dumps, Hammond has discovered the downside of public ownership. Without increasing profits to boost share value, stockholders can get awfully disgruntled.

In a brief telephone interview from New York, Hammond said the company’s current emphasis on servicing existing loans rather than originating new loans has yielded short-term losses.

But “because it is hard for our public shareholders to understand” the need to take those short-term losses, the company has decided “we could better operate as a private company,” he said.

In the past two years, as the recession and housing industry depression has pummeled Hammond’s stock price, the company has invested $3.9 million to repurchase 797,308 of its shares. Thomas Hammond and other company insiders now hold a 70% stake in the firm.

Now, Hammond said, company directors want to buy the remaining shares held by the public, about 380,000 shares. They are contemplating a tender offer at about $4 per share, or $1.52 million.

The offer is contingent on Hammond and other insiders selling newly issued shares of preferred stock to private investors.

Hammond said, however, that he is “confident that we will be able to raise the money needed to buy out the minority shareholders and optimistic that we will have the tender offer completed” by March 31, the end of the company’s fiscal year.