This summary highlights selected information contained in this joint proxy statement/prospectus and may not contain all the information that is important to you. Wellsford and Reis urge you to read carefully this joint proxy statement/prospectus in its entirety, including the annexes.

 

Unless the context otherwise requires, references in this joint proxy statement/prospectus to “Wellsford” are to Wellsford Real Properties, Inc. and its subsidiaries and references to “the combined company” are to Wellsford and Reis together. References to “Wellsford common stock” are to Wellsford’s common stock, par value $0.02 per share. References to “Reis” are to Reis, Inc. and references to “Reis common stock” are to Reis’s common stock, par value $0.01 per share; references to “Reis Series A preferred stock, Series B preferred stock, Series C preferred stock and Series D preferred stock” are to Reis’s Series A preferred stock, Series B preferred stock, Series C preferred stock and Series D preferred stock, in each case, par value $0.01 per share; references to the “Reis preferred stock” are to all of the series of Reis preferred stock, collectively; and references to “Reis capital stock” are to the Reis common stock and the Reis preferred stock, collectively.

 

535 Madison Avenue, 26th Floor

New York, New York 10022
(212) 838-3400

 

Wellsford was formed as a Maryland corporation on January 8, 1997, as a corporate subsidiary of Wellsford Residential Property Trust, which we refer to as the Residential Property Trust, to operate as a real estate merchant banking firm to acquire, develop, finance and operate real properties and invest in private and public real estate companies. On May 30, 1997, the Residential Property Trust merged with Equity Residential, which we refer to as EQR. Immediately prior to that merger, the Residential Property Trust contributed certain of its assets to Wellsford and Wellsford assumed certain of its liabilities. Immediately after the contribution of assets to Wellsford and immediately prior to that merger, the Residential Property Trust distributed to its common stockholders all of its outstanding shares of Wellsford.

 

On May 19, 2005, Wellsford’s board of directors approved the Plan and on November 17, 2005, Wellsford’s stockholders ratified the Plan. The Plan contemplates the orderly sale of each of Wellsford’s remaining assets, which are either owned directly or through Wellsford’s joint ventures, the collection of all outstanding loans from third parties, the orderly disposition or completion of construction of development properties, the discharge of all outstanding liabilities to third parties and, after the establishment of appropriate reserves, the distribution of all remaining cash to stockholders. The Plan also permits Wellsford’s board of directors to acquire more Reis shares and/or discontinue the Plan without further stockholder approval.

 

After the approval of the Plan by the stockholders, Wellsford completed the sale of its largest asset, the three residential rental phases of its Palomino Park project for $176,000,000 and on December 14, 2005, Wellsford made the initial liquidating distribution of $14.00 per common share, aggregating approximately $90,597,000, to its stockholders.

 

If the proposed merger with Reis is consummated, Wellsford will terminate the Plan, but will continue with its residential development and sales activities related to its real estate assets over a period of years. If the merger is not consummated, Wellsford will not terminate the Plan and will continue to operate under it. The merger represents a significant change in strategy for Wellsford which may be unsuccessful. See “The Merger — Impact on Wellsford’s Plan of Liquidation” beginning on page 48.

 

530 Fifth Avenue

New York, New York 10036
(212) 921-1122

 

Reis is a leading provider of commercial real estate market information to investors, lenders and other professionals in the debt and equity capital markets. Reis’s proprietary database has been developed over the past 25 years and contains detailed historical and current information on over 250,000 properties in over 1,800 neighborhoods and 81 metropolitan markets in the U.S. This database contains information on approximately 20 billion square feet of space, consisting primarily of 7.9 million apartment units, 5.4 billion square feet of office space, and 4.2 billion square feet of retail space and information on select industrial properties throughout the U.S.

 

Founded in 1980, Reis provides web-based information products and related analytical tools using this database. Reis products support a variety of strategic business activities, including loan origination, due diligence, asset management, appraisals and dispositions by sale or securitization. Reis’s flagship product, Reis Subscriber Edition, or Reis SE, incorporates hundreds of building level data points including occupancy rates, rents, rent discounts, rent allowances, lease terms and operating expenses. Since launching the flagship product in February 2001, Reis has approximately 14,800 users at 600 subscribing organizations. Reis’s customers download more than 35,000 reports each month for use in deal books, presentations and research reports and include investment banks, insurance companies, lenders and real estate investment trusts, or REITs.

 

Reis employs a large group of real estate market researchers. Researchers survey properties on an ongoing basis, and also track property sales and new construction activities in each of the covered markets. Information is subject to rigorous validation and quality assurance procedures. Reis economists synthesize this data into quarterly advisory reports, and develop forecasts at the neighborhood and city level which are available to subscribers. Reis data is cited frequently in The Wall Street Journal and real estate industry publications.

 

535 Madison Avenue, 26th Floor
New York, New York 10022
(212) 838-3400

 

Merger Sub was formed as a Maryland limited liability company, with Wellsford as its sole member, on October 2, 2006 and exists solely for the purpose of entering into the merger agreement with Wellsford and Reis and consummating the merger. Upon completion of the merger, Merger Sub will be the surviving company and will remain a wholly-owned subsidiary of Wellsford. Merger Sub has not carried on any activities to date other than those incident to its formation and to the signing of the merger agreement.

Risk Factors

 

Wellsford and Reis are each subject to various risks associated with their respective businesses. In addition, the merger, including the possibility that the merger may not be completed, poses a number of risks to both companies and their stockholders, including the following risks:

 

 

 

These risks and other risks are discussed in greater detail under the heading “Risk Factors” beginning on page 25. You should consider all of these risks carefully.

 

A copy of the Agreement and Plan of Merger, dated as of October 11, 2006, as amended on March 30, 2007, which we refer to as the merger agreement, is attached as Annex A to this joint proxy statement/prospectus. The following section summarizes the proposed merger and related transactions. We encourage you to read the entire merger agreement carefully because it is the principal document governing the merger. Statements made in this joint proxy statement/prospectus with respect to the terms and conditions of the merger and related transactions are qualified by reference to the merger agreement and the other agreements attached as exhibits to the registration statement on Form S-4, of which this joint proxy statement/prospectus is a part.

 

At the effective time of the merger, Reis stockholders will be entitled to receive, in the aggregate, approximately $34,579,414 in cash and 4,237,673 shares of newly issued Wellsford common stock, not including shares to be issued to Wellsford Capital. Reis stockholders, other than Wellsford Capital, Lloyd Lynford, and Jonathan Garfield, the Chief Executive Officer and Executive Vice President, respectively, of Reis, may elect to receive 100% of their merger consideration in shares of Wellsford common stock, subject to the limitation that the aggregate merger consideration paid to all Reis stockholders, other than Wellsford Capital, consists of 50% cash and 50% shares of Wellsford common stock. Reis stockholders who do not make an election will be entitled to receive 50% of their merger consideration in cash and 50% in shares of Wellsford common stock. The merger agreement does not provide for any of the Reis stockholders, other than Lloyd Lynford and Mr. Garfield, to receive more than 50% of their merger consideration in cash. Reis stockholders who elect to receive 100% of their merger consideration in shares of Wellsford common stock

may ultimately receive a portion of their merger consideration in cash depending upon the elections of all Reis stockholders entitled to make an election. Lloyd Lynford and Mr. Garfield will receive a portion of their merger consideration in shares of Wellsford common stock and a portion in cash depending upon the elections of all other Reis stockholders. Any additional shares of Wellsford common stock paid to electing stockholders as merger consideration will reduce the number of shares of Wellsford common stock to be received by each of Lloyd Lynford and Mr. Garfield as merger consideration (and increase their respective cash consideration in an amount equal to the value of the stock consideration that each of them would have otherwise been entitled to receive). However, the merger agreement provides that each of Lloyd Lynford and Mr. Garfield may receive a maximum of 2/3 of his merger consideration in cash. Wellsford Capital will be entitled to receive 100% of its merger consideration in shares of Wellsford common stock and will not be entitled to receive any portion of its merger consideration in cash. If no Reis stockholders elect to receive 100% of their merger consideration in shares of Wellsford common stock, Lloyd Lynford and Mr. Garfield will receive 50% of their merger consideration in cash and 50% in shares of Wellsford common stock. Only merger consideration to be received by Lloyd Lynford, Mr. Garfield, and the Reis stockholders electing to receive 100% of their merger consideration in shares of Wellsford common stock, will be subject to adjustment.

 

Under the terms of the merger agreement and subject to the election rights and the terms and limitations described above (including that each Reis stockholder (other than Lloyd Lynford and Mr. Garfield) receive at least 50% of its merger consideration in shares of Wellsford common stock), at the effective time of the merger:

 

 

Wellsford will not issue any fractional shares of Wellsford common stock in the merger but will pay cash instead of issuing fractional shares that Reis stockholders otherwise would have received. In no event will the aggregate merger consideration exceed $34,579,414 in cash and 6,795,266 shares of Wellsford common stock to be issued to Reis stockholders, including the approximately 2,557,592 shares of Wellsford common stock to be issued to Wellsford Capital. Upon consummation of the merger, an aggregate of $4,343,456 in cash and 532,286 shares of Wellsford common stock otherwise payable to the Reis stockholders (other than Wellsford Capital) will be held in three escrow accounts.

 

Through its wholly-owned subsidiary, Wellsford Capital, Wellsford currently holds shares of Reis preferred stock equivalent to an approximate 23% ownership interest in Reis. Pursuant to the merger agreement, Wellsford Capital will be entitled to receive 100% of its merger consideration (approximately 2,557,592 shares) in shares of Wellsford common stock and will not be entitled to receive any portion of the merger consideration in cash. The shares of Reis preferred stock held by Wellsford Capital will not be taken into account in determining the allocation of the merger consideration to all other Reis stockholders, but will be converted solely into the right to receive Wellsford common stock in the merger. In accordance with Maryland corporate law, the shares of Wellsford common stock that will be held by Wellsford Capital after the consummation of the merger cannot be voted and will not be considered outstanding for quorum purposes.

 

For a more complete discussion of consideration to be received in the merger, including the election and allocation procedures, see “The Merger Agreement — Consideration to be Received in the Merger” beginning on page 87 and “The Merger Agreement — Elections” beginning on page 89.

At the effective time of the merger, all options granted under the Reis 1999 Stock Option Plan and all outstanding options granted outside of this plan to purchase shares of Reis common stock, whether vested or unvested, will be converted into the right to receive a cash payment from Reis aggregating $4,714,386.

 

Wellsford’s management and board of directors has determined that the merger is in the best interests of Wellsford and its stockholders for numerous reasons, including but not limited to:

 

 

 

 

During the course of its deliberations concerning the merger, Wellsford’s management and board of directors also identified and considered a variety of potentially negative factors that could materialize as a result of the merger, including, but not limited to:

 

 

For a complete description of Wellsford’s reasons for the merger, see “The Merger — Wellsford Board of Directors’ Recommendation and Reasons for the Merger” beginning on page 49.

 

Reis’s management and board of directors believe that the merger presents a unique opportunity to create liquidity and potentially to maximize value for Reis stockholders. A review of Reis’s business, operations, assets, financial condition and operating results have led to the conclusion that financing and access to capital is required in order to continue growth. To that end, Wellsford is attractive as a merger partner given its current cash resources and potential access to additional cash flow through the sale of its real estate assets, its increased access to capital markets as a result of its status as a public company, and the fact that Reis stockholders will be entitled to receive 50% of the merger consideration in cash and 50% in shares of Wellsford common stock, thereby providing some immediate liquidity while also allowing Reis stockholders to continue to participate in any future growth and any increase in value of the combined company.

 

In addition, in its deliberations concerning the merger, Reis’s management and board of directors also considered a variety of potentially negative factors, including:

 

 

 

 

For a complete description of Reis’s reasons for the merger, see “The Merger — Reis Board of Directors’ Recommendation and Reasons for the Merger” beginning on page 51.

 

Wellsford stockholders ratified the Plan on November 17, 2005. If the proposed merger is consummated, the Plan will be terminated. The Plan contemplates the orderly sale of each of Wellsford’s remaining assets, which are either owned directly or through Wellsford’s joint ventures, the collection of all outstanding loans from third parties, the orderly disposition or completion of construction of development properties, the discharge of all outstanding liabilities to third parties and, after the establishment of appropriate reserves, the distribution of all remaining cash to stockholders. The Plan also permits Wellsford’s board of directors to acquire more Reis shares and/or discontinue the Plan without further stockholder approval.

 

If Wellsford’s stockholders approve the issuance of additional shares in connection with the Reis acquisition and the proposed merger is consummated, then Wellsford will change its basis of accounting from a liquidation basis, adopted as of the close of business on November 17, 2005, back to a going-concern basis in accordance with generally accepted accounting principles. If the proposed merger is consummated, Wellsford will terminate the Plan and, although Wellsford will continue with its residential development and sales activities related to its real estate assets over a period of years, Reis’s business will be the primary business activity of the combined company. Under the liquidation basis of accounting, assets are stated at their estimated net realization value and liabilities are stated at their estimated settlement amounts. Wellsford’s assets and liabilities will be presented on a going concern basis of accounting with assets being reported at the lower of historical cost, as adjusted for activity, or market value as of the date of termination of the Plan.

 

The termination of the Plan would result in the retention by the combined entity of Wellsford’s cash balances (after the payment of transaction costs and the cash portion of the merger consideration that is not being funded by the Bank Loan) and subsequent cash flow from the sales of residential development assets, after operating costs, for working capital and re-investment purposes. Such cash would not be distributed to Wellsford stockholders in the form of a liquidating distribution as had been contemplated under the Plan.

 

Wellsford has determined that, as a consequence of the consummation of the proposed merger and termination of the Plan, it would be necessary to recharacterize a portion of the December 14, 2005 cash distribution of $14.00 per share from what may have been characterized as a return of capital for Wellsford stockholders at that time to taxable dividend income. Wellsford estimates that $1.15 of the $14.00 per share cash distribution will be recharacterized as taxable dividend income.

 

Wellsford

 

The Wellsford board of directors has approved the merger and the merger agreement. It recommends that holders of Wellsford common stock vote FOR the issuance of shares of Wellsford common stock in the merger.

 

Reis

 

The Reis board of directors has declared advisable and adopted and approved the merger and the merger agreement and recommends that Reis stockholders vote FOR the adoption of the merger agreement and FOR the approval of the amendment to its amended and restated certificate of incorporation.

 

Wellsford

 

On October 11, 2006, Lazard Frères & Co. LLC, which we refer to as Lazard, rendered its oral opinion to Wellsford’s board of directors, which Lazard subsequently confirmed in writing by delivery of its written opinion, dated October 11, 2006, that, as of that date and based upon and subject to the assumptions, qualifications, limitations and other matters described in its written opinion, the aggregate merger consideration payable in connection with the merger was fair to Wellsford from a financial point of view.

 

For a more complete description, see “The Merger — Opinion of Financial Advisor to the Wellsford Board of Directors” beginning on page 55. See also Annex B of this joint proxy statement/prospectus for the full text of Lazard’s written opinion, dated October 11, 2006, to Wellsford’s board of directors, which sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Lazard in preparing its opinion.

 

Reis

 

On October 11, 2006, Houlihan Lokey Howard & Zukin Financial Advisors, Inc., which we refer to as Houlihan Lokey, rendered its oral opinion to Reis’s board of directors, which Houlihan Lokey subsequently confirmed in writing by delivery of its written opinion, dated October 11, 2006, that, as of that date and based upon and subject to the assumptions, qualifications, limitations and other matters described in its written opinion, the merger consideration to be received by the holders of Reis common stock (other than Wellsford Capital, and treating Reis preferred stock on an as converted to common stock basis) in the merger was fair to them from a financial point of view.

 

For a more complete description, see “The Merger — Opinion of Financial Advisor to the Reis Board of Directors” beginning on page 62. See also Annex C of this joint proxy statement/prospectus for the full text of Houlihan Lokey’s written opinion, dated October 11, 2006, to Reis’s board of directors, which sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion.

 

Reis’s amended and restated certificate of incorporation requires Reis to mail to the holders of Reis preferred stock written notice of certain events not less than 45 days prior to the consummation of certain transactions, including a merger. The proposed amendment provides that no such notice will be required with respect to the merger, but will not affect this requirement with respect to any other transaction to which it would apply.

 

The proposed amendment will also clarify Article Fourth, I.B, Section 6 of Reis’s amended and restated certificate of incorporation. The proposed amendment clarifies that holders of Reis preferred stock will be entitled to receive consideration in connection with the merger that would have been payable to them if the Reis preferred stock had been converted into Reis common stock prior to the merger and that this

consideration will be subject to adjustment and all escrow, indemnification and other obligations applicable to the consideration that will be paid to Reis stockholders pursuant to the merger agreement. This summary of the proposed amendment is qualified in its entirety by reference to the full text of the proposed amendment, which is attached to this joint proxy statement/prospectus as Annex E.

 

After the consummation of the proposed merger, it is contemplated that the board of directors of Wellsford will be composed of ten members, including the six existing Wellsford directors, as well as Lloyd Lynford, Jonathan Garfield, and another two individuals, Michael J. Del Giudice and M. Christian Mitchell, both of whom have been appointed by Wellsford’s board of directors effective on the consummation of the merger and both of whom will meet the appropriate independence standards.

 

Pursuant to both the merger agreement and employment agreements among Wellsford, Merger Sub, and each of Lloyd Lynford, Mr. Garfield and William Sander, Reis’s current Chief Operating Officer, that will become effective as of the effective time of the merger, Lloyd Lynford will serve as Chief Executive Officer and President of Wellsford and Merger Sub, Mr. Garfield will serve as the Executive Vice President of Wellsford and Merger Sub and Mr. Sander will serve as Chief Operating Officer of Merger Sub. Each employment agreement has a three-year term, which commences on the closing date of the merger. Jeffrey Lynford will remain as Chairman of the board of directors of Wellsford. Before the effective time of the merger, Wellsford or Merger Sub, as applicable, expects to enter into employment agreements, or amended employment agreements, as applicable, with Jeffrey Lynford, Mark Cantaluppi, Wellsford’s Chief Financial Officer and a Vice President, and certain other senior officers currently employed by Wellsford or Reis.

 

For a more complete discussion of the management of Merger Sub and Wellsford, including expected directors and senior management, see “The Merger — Interests of Wellsford and Reis Directors and Executive Officers in the Merger” beginning on page 73.

 

Wellsford

 

In considering the recommendation of the Wellsford board of directors with respect to issuing shares of Wellsford common stock in connection with the merger and the other matters to be acted upon by Wellsford stockholders at the Wellsford annual meeting, Wellsford stockholders should be aware that certain members of the board of directors and executive officers of Wellsford have interests in the merger that may be different from, or in addition to, interests they may have as Wellsford stockholders. For example, Edward Lowenthal and Jeffrey Lynford, two of Wellsford’s directors, are direct or indirect stockholders of Reis. As of January 31, 2007, Jeffrey Lynford beneficially owned approximately 5.9% of the outstanding shares of Reis common stock and approximately 0.5% of the outstanding shares of Reis Series D preferred stock, or an aggregate of approximately 2.6% of Reis capital stock on an as converted to common stock basis. As of that date, Mr. Lowenthal beneficially owned approximately 0.5% of Reis Series C preferred stock and approximately 0.5% of Reis Series D preferred stock through a family holding company, or an aggregate of less than 1% of Reis capital stock on an as converted to common stock basis. In addition, since the third quarter of 2000, Mr. Lowenthal has represented Wellsford’s approximate 23% ownership interest in Reis by serving on the board of directors of Reis.

 

Jeffrey Lynford is the brother of Lloyd Lynford, the Chief Executive Officer and a stockholder of Reis.

 

For a further discussion, see “The Merger — Interests of Wellsford and Reis Directors and Executive Officers in the Merger” and “Wellsford Annual Meeting — Certain Relationships and Other Related Transactions” beginning on pages 73 and 159, respectively.

 

Reis

 

In considering the recommendation of the Reis board of directors with respect to adopting the merger agreement, Reis stockholders should be aware that certain members of the Reis board of directors and executive officers, as well as several other members of Reis senior management, have interests in the merger that may be different from, or in addition to, interests they may have as Reis stockholders. For example, the

parties have agreed pursuant to a letter agreement dated October 11, 2006, among Wellsford, Merger Sub, Reis, Lloyd Lynford and Mr. Garfield and which we refer to as the Lynford/Garfield letter agreement, that immediately on consummation of the merger, Reis will pay to each of Lloyd Lynford and Jonathan Garfield an amount equal to the “change of control” payment which they would have been paid following a change of control event, as defined by their employment agreements with Reis (which employment agreements remain effective until the consummation of the merger), although the merger would not constitute a “change of control” under their employment agreements. If the merger had been consummated on January 31, 2007, Lloyd Lynford and Mr. Garfield would have been paid $1,474,649 and $1,256,780, respectively, pursuant to the Lynford/Garfield letter agreement. Following the effective time of the merger, Lloyd Lynford and Mr. Garfield will serve on the board of directors and will be executive officers of Wellsford and Merger Sub. Lloyd Lynford and Mr. Garfield have entered into or will be entering into, effective as of the time of the merger, certain agreements with Wellsford and Merger Sub, including a registration rights agreement and employment agreements. In addition, certain of Reis’s directors and all of Reis’s executive officers hold options to purchase shares of Reis common stock, which options will convert to a right to receive cash payments at the effective time of the merger. Lloyd Lynford, Mr. Garfield and all executive officers aggregated as a group (consisting of the four executive officers who hold options) will receive cash payments of $1,425,469, $950,313 and $4,241,321, respectively, in connection with the termination of their options. Also, as described above, Edward Lowenthal is a member of the board of directors of Wellsford and Reis (representing Wellsford’s ownership interest in Reis) and Lloyd Lynford is the brother of Jeffrey Lynford, the Chairman and Chief Executive Officer of Wellsford.

 

For a further discussion, see “The Merger — Interests of Wellsford and Reis Directors and Executive Officers in the Merger” beginning on page 73.

 

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which we refer to as the Hart-Scott-Rodino Act, and the related rules, the merger may not be consummated until certain information and materials have been furnished to the Antitrust Division of the U.S. Department of Justice, which we refer to as the Antitrust Division, and the applicable waiting period has been terminated or has expired.

 

Wellsford and Reis filed the required notification and report forms under the Hart-Scott-Rodino Act with the Antitrust Division on November 15, 2006, and received notice from the Antitrust Division on November 27, 2006, that early termination of the applicable waiting period had been granted.

 

Each party’s obligation to effect the merger is subject to the satisfaction or waiver of various conditions, including the following:

 

 

 

For a more complete discussion of the conditions to the merger, see “The Merger Agreement — Principal Conditions to Consummation of the Merger” beginning on page 99.

 

The merger is expected to be consummated in the second quarter of 2007, subject to the receipt of necessary regulatory approvals and the satisfaction or waiver of other closing conditions.

 

The merger agreement may be terminated by Wellsford or Reis before consummation of the merger under the circumstances specified in the merger agreement, including, but not limited to, if a change of control of Wellsford occurs prior to the consummation of the merger. The merger agreement provides that if it is terminated under specified circumstances, (1) Reis may be required to pay a termination fee to Wellsford of $500,000 and to reimburse Wellsford for its out-of-pocket expenses related to the merger up to a maximum of $3,500,000, and (2) Wellsford may be required to reimburse Reis for certain expenses related to obtaining the Bank Loan, which reimbursement is estimated to be approximately $450,000.

 

See “The Merger Agreement — Termination Events and Termination Fees” beginning on page 101 for a discussion of the circumstances under which the parties may terminate the merger agreement and under which expenses and a termination fee will be required to be paid.

 

Record holders of Reis capital stock who comply with the applicable requirements of Delaware law will be entitled to seek an appraisal of the fair value of their shares of Reis capital stock in connection with the merger. Wellsford stockholders are not entitled to appraisal rights.

 

This joint proxy statement/prospectus constitutes notice to holders of Reis capital stock of their right to exercise appraisal rights.

 

For a more complete description of the appraisal rights and procedures, see “The Merger — Appraisal Rights” beginning on page 78. For the full text of Section 262 of the General Corporation Law of the State of Delaware, which we refer to as the DGCL, see Annex D.

 

Wellsford will account for the merger, only to the extent of the interests in Reis being acquired, under the purchase method of accounting for business transactions as Wellsford is the acquiror for accounting purposes in accordance with accounting principles generally accepted in the U.S., or GAAP.

Material U.S. Federal Income Tax Consequences

 

The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. The merger is conditioned on, among other things, the receipt by Wellsford and Reis of a legal opinion from their respective counsel, to the effect that the merger will constitute a reorganization within the meaning of Section 368(a) of the Code and that each of Wellsford and Reis will be a party to such reorganization as described in and pursuant to Section 368(b) of the Code.

 

Assuming the merger qualifies as a reorganization, (1) a Reis stockholder that receives only Wellsford common stock in the merger generally will not recognize any gain or loss, and (2) a Reis stockholder that

receives Wellsford common stock and cash in the merger generally will recognize gain (but not loss) in an amount not to exceed the amount of cash received.

 

Tax matters are very complicated and the consequences of the merger to any particular stockholder will depend on that stockholder’s particular facts and circumstances. You are urged to consult your own tax advisor to determine your own tax consequences from the merger.

 

For a more complete description of the material U.S. Federal income tax consequences of the merger, including a discussion of certain consequences to Wellsford stockholders that would result from Wellsford’s termination of the Plan in connection with the merger, see “Material U.S. Federal Income Tax Consequences” beginning on page 83.

 

Currently, the rights of Reis stockholders are governed by Delaware law. Upon consummation of the merger, Reis stockholders will become stockholders of Wellsford and their rights will be governed by Maryland law. Stockholder rights under Maryland and Delaware law are different. In addition, the articles of amendment and restatement and bylaws of Wellsford contain provisions that are different from the amended and restated certificate of incorporation and by-laws of Reis.

 

For a summary of certain differences between the rights of stockholders of Wellsford and Reis under the laws of the states of Maryland and Delaware, respectively, and the articles of amendment and restatement and bylaws of Wellsford and the amended and restated certificate of incorporation and by-laws of Reis, respectively, see “Comparison of Rights of Stockholders of Wellsford and Reis” beginning on page 230.

 

Wellsford has entered into a voting agreement with Lloyd Lynford and Jonathan Garfield pursuant to which they have agreed to vote all of their shares of Reis capital stock in favor of the approval of the amendment to Reis’s amended and restated certificate of incorporation and the adoption of the merger agreement and all actions that could reasonably be expected to facilitate, or are in furtherance of, the merger and other transactions contemplated by the merger agreement. Together they own 84.4% of Reis common stock and 1.7% of Reis Series D preferred stock, which together represents 37.2% of all Reis capital stock on an as converted to common stock basis. Each of them also agreed to waive his rights of appraisal, pursuant to the DGCL or otherwise, with respect to the merger. The voting agreement does not limit Lloyd Lynford’s or Mr. Garfield’s actions as directors of Reis. The voting agreement will terminate if the merger agreement is terminated.

 

Additionally, Wellsford Capital holds approximately 23% of the voting power of Reis capital stock, on an as converted to common stock basis, and it is expected that it will vote its shares of Reis preferred stock in favor of the proposals to adopt the merger agreement and to approve the amendment to Reis’s amended and restated certificate of incorporation.

 

As of December 31, 2006, directors and executive officers of Wellsford and their affiliates owned approximately 9% of the shares of Wellsford common stock outstanding on that date. To Wellsford’s knowledge, the directors and executive officers of Wellsford intend to vote their shares of Wellsford common stock in favor of the issuance of Wellsford common stock pursuant to the merger agreement.

 

In connection with the consummation of the merger, Lloyd Lynford and Jonathan Garfield will enter into a lock-up agreement with Wellsford, pursuant to which each will agree for a period of nine months beginning at the effective time of the merger, among other things, not to sell (with certain limited exceptions and subject to certain conditions), any shares of Wellsford common stock without the prior written consent of Wellsford. The lock-up agreement also provides that Lloyd Lynford and Mr. Garfield may not exercise, during the lock-up period, their registration rights (as more fully described below) with respect to any Wellsford common stock.

After the expiration of the lock-up period, Lloyd Lynford and Mr. Garfield will be subject to other restrictions on resale in compliance with securities laws.

 

As an inducement to Lloyd Lynford and Jonathan Garfield to enter into the voting agreement and the lock-up agreement, Wellsford will enter into a registration rights agreement, effective as of the effective time of the merger, pursuant to which Wellsford will grant to each of them rights, under certain circumstances and subject to various conditions, to (1) demand that Wellsford prepare a shelf registration statement or other registration statement covering the shares of Wellsford common stock that each receives in the merger and (2) have the shares of Wellsford common stock that each receives in the merger included in certain registration statements prepared and filed by Wellsford for its own account or the account of third parties. Lloyd Lynford and Mr. Garfield may not exercise the rights described in clause (1) until the third anniversary of the effective date of the Registration Rights Agreement.

 

Shares of Wellsford common stock are currently listed on the AMEX under the symbol “WRP.” Wellsford has agreed to use its reasonable best efforts to cause the shares of Wellsford common stock to be issued in the merger to be authorized for listing on the AMEX. Wellsford has also agreed to use its reasonable best efforts to cause the Wellsford common stock to be approved for listing on the NASDAQ Stock Market LLC, which we refer to as NASDAQ, as soon as practicable after the consummation of the merger. When the Wellsford common stock has been approved for listing on NASDAQ, Wellsford will delist its common stock from the AMEX. On May 1, 2007, the last trading day before the date of this joint proxy statement/prospectus, the closing sale price of Wellsford common stock on the AMEX was $8.20 per share.

Matters to be Considered at the Stockholders’ Meetings

 

 

The table below presents the closing sales price per share of Wellsford common stock, which trades on the AMEX under the symbol “WRP.” These prices are presented on two dates:

 

 

 

 

We urge you to obtain current market quotations for Wellsford common stock. We cannot give any assurance as to the future prices or markets for Wellsford common stock.

 

Reis’s capital stock is not listed for trading on any exchange or automated quotation service.

 

Wellsford

 

Wellsford made its initial liquidating distribution, pursuant to the Plan, of $14.00 per share on December 14, 2005. It did not declare or distribute any other dividends during 2006 or 2005. Wellsford does not currently intend to declare or distribute any dividends after the consummation of the merger. All decisions regarding the declaration and payment of dividends will be at the discretion of Wellsford’s board of directors and will be evaluated from time to time by the board of directors in light of Wellsford’s financial condition, earnings, cash flows, growth prospects, funding requirements, applicable law and other factors that Wellsford’s board of directors deems relevant.

 

Reis

 

Reis did not declare or distribute any dividends on any shares of Reis capital stock during 2006 or 2005.

 

See “Market Prices and Dividend Information” beginning on page 114.

 

Following the consummation of the merger, Wellsford’s board of directors may determine to effect a reverse stock split of the Wellsford common stock. All decisions regarding the declaration of a reverse stock split will be at the discretion of Wellsford’s board of directors and will be evaluated from time to time by the board of directors in light of the price per share of Wellsford common stock, the number of shares of Wellsford common stock outstanding, applicable AMEX or NASDAQ rules, applicable law and other factors that Wellsford’s board of directors deems relevant. If the board of directors determines to effect a reverse stock split, Wellsford will provide stockholders with appropriate notice at that time.

 

The following tables set forth selected historical consolidated financial data for Wellsford and should be read in conjunction with Wellsford’s consolidated financial statements and the notes related to those financial statements and the “Wellsford’s Business — Wellsford Management’s Discussion and Analysis of Financial Condition and Results of Operations,” both of which are included as separate sections of this joint proxy statement/prospectus. As further described in Footnotes 1 and 2 in the accompanying consolidated financial statements of Wellsford, also included in this joint proxy statement/prospectus, the information set forth below is not necessarily indicative of the results of future operations. Wellsford adopted the liquidation basis of accounting effective as of the close of business on November 17, 2005. Information prior to that date is presented on the going concern basis of accounting.

 

Selected Historical Consolidated Financial Data of Wellsford (continued)

 

 

 

 

 

The following tables set forth selected historical financial data for Reis and should be read in conjunction with Reis’s financial statements and the notes related to those financial statements and the “Reis’s Business — Reis Management’s Discussion and Analysis of Financial Condition and Results of Operations,” both of which are included in this joint proxy statement/prospectus. As further described in Footnote 1 in the accompanying financial statements of Reis, also included in this joint proxy statement/prospectus, the information set forth below is not necessarily indicative of the results of future operations.

 

Selected Historical Financial Data of Reis (continued)

 

 

 

The following tables set forth selected financial data on a pro forma basis as if the merger is consummated, the proceeds from the Bank Loan are used to pay part of the cash portion of the merger consideration, and Wellsford has terminated the Plan and thereby changed the presentation of its historical financial information from the liquidation basis of accounting to the going concern basis of accounting. The unaudited pro forma operating data for the year ended December 31, 2006 is presented as if the merger had been consummated, the proceeds from the Bank Loan had been received, and Wellsford terminated the Plan on January 1, 2006. The unaudited pro forma balance sheet as of December 31, 2006 is presented as if the merger had been consummated, the proceeds from the Bank Loan had been received, and Wellsford terminated the Plan on December 31, 2006.

 

The pro forma information is based on the assumptions that are included in the notes to the pro forma financial statements included elsewhere in this joint proxy statement/prospectus. The pro forma information is unaudited and is not necessarily indicative of what the financial position and results of operations would have been as of and for the dates and periods indicated, nor does it purport to represent the financial position and results of operations for future dates and periods.