Harvard's high-risk capital investment division has pulled out of an attempted takeover of the Kansas City real estate development company J.C. Nichols, the University said yesterday.

Nichols had requested an injunction in federal court to halt what the company characterized as a hostile takeover attempt by the Harvard Private Capital Group--a division of Harvard Management Corporation--and Allen & Co., a New York investment firm.

A statement released late in the day from the Harvard capital group confirmed that the University had pulled out of the takeover. Nichols also dropped its legal action against Harvard.

But the statement claimed that Harvard had participated in the bid only "at the invitation of" the Nichols company.

Allen & Co. sued Nichols for a list of stockholders on December 28.

The statement, HMC's first comment on the case, also said Nichols "voluntarily dismissed" the request for an injunction and "acknowledged that the lawsuit was without factual basis."

But Kelly Sherman, Nichols' vice president for public affairs, said yesterday that the attempted takeover was hostile and denied saying its lawsuit was without merit.

"Our lawsuit was completely with factual basis and we believe the claims could be proven true at trial," Sherman said. "We are dismissing Harvard [in the legal case] solely on the fact that they made this commitment [to withdraw] to us."

"We are extremely pleased that Harvard has agreed to do the right thing and not to do anything that is hostile towards our company," she said.

In its action, filed on January 4, Nichols alleged that Allen & Co. is using confidential information it obtained when it advised Nichols on financial matters. Officials at Allen & Co. could not be reached for comment yesterday.

Lynn L. McCarthy, president and chair of Nichols, wrote President Neil L. Rudenstine last December, questioning whether "it is appropriate for tax-exempt university endowment funds to be used to finance hostile takeovers."

A copy of the letter was sent to a number of senators, governors and other politicians.

Sherman said Nichols had received support from many of those politicians, including Sen. Christopher S. Bond (R-Mo.), Rep. Karen McCarthy, and Missouri Governor Mel Carnahan.

Harvard Private Capital Group said it pulled out because the propos- al they had made to Nichols "lapsed by its own terms in December 1994."

Tammy Mason, director of compliance at Harvard Management Company, which invests the University's endowment funds, at first refused to comment on the situation yesterday afternoon. "We're trying to meet with people here who are trying to sort this out," she said at first. "We're trying to find out what is going on."

Later in the day, however, Mason read a prepared statement and refused to comment further. Other HMC officials referred all calls to Mason.

Larry Rowe, an attorney who represents the Harvard capital group in its dealings with J.C. Nicholas, also confirmed that Nichols has dismissed, the group from its action to halt the hostile takeover.

But Rowe, an attorney at the Boston firm Ropes & Gray, declined to provide details.

University spokesperson Joe Wrinn also declined to comment on the details of Harvard's withdrawal.

Vice President for Government, Community and Public Affairs James H. Rowe was out of the office yesterday afternoon and could not be reached for comment.

Efforts to reach Allen J. Proctor '73, Harvard's vice president for finance, were also unsuccessful