Update on Securities Fraud Investigation Involving Wells Timberland REIT

Monday, February 4th, 2013

The White Law Group continues to investigate potential claims involving Wells Timberland REIT.

Wells Timberland REIT is a non-traded real estate investment trust.  Non-traded REITs, unlike most other investments, do not trade publicly and have a limited market to determine share prices.  The illiquid nature of non-traded REITs can make these investments unsuitable for conservative and/or retired investors.

Wells Timberland REIT recently announced that shares, once valued at $10 per share, have dropped approximately 35% to an estimated $6.56 per share. The company continues to blame the decline on the dismal housing industry.

According to their own website, the REIT was founded in 2006.  Upon information and belief, the REIT was closed to new investors in December of 2011 and the redemption program was suspended shortly thereafter.  The suspension of the redemption program and devaluation of the shares is a bad signal for Wells Timberland REIT investors.

The announcement of the share decline was made by Wells president, Leo Wells III, and represents a “book value” of $6.56.  However, due to the illiquid nature of non-traded REITs, investors may have a hard time actually getting that price and the secondary market may be dictating a lower “market value” for the shares.

According to the same announcement, the completion of new share value will allow stockholders to receive redemptions that were suspended last October. According to Wells, investors should be able to redeem shares for $6.23— or 95% of the estimated value.

While this may be promising news to some investors, this price still represents a 38% loss of the securities original value.

For investors that are upset by a 38% loss in value, there is good news.   Investors may be able to recover their losses through FINRA arbitration.

The White law group has years of experience in the arbitration and filing of FINRA claims against brokerage firms and financial professionals that recommend high risk non-traded REITS like Wells Timberland REIT.

Financial advisors and broker-dealers have a duty to their clients to perform the necessary due diligence on an investment before offering it for sale to their clients and to ensure that any investment recommendation that is made is suitable in light of the client’s age, investment experience, net worth, and investment objectives.    Unfortunately, many brokers often down play or hide the risk involved in non-traded REITs and sell the investments as safe, income producing investments.

Unknown to many investors is the high rate of commissions brokers receive for selling non-traded REITs, giving them the incentive to push the sale of high risk REITs such as Wells Timberland REITS to their clients. According to the Wells Timberland REIT prospectus, the selling commission to the broker/brokerage firm that sells the REIT is 7% (and an additional 1.8% is paid for the underwriting of the REIT).  So for everyone $100,000 that is invested in the REIT, only approximately $91,000 actually is invested in real estate and the rest goes to commissions and other charges.

Although Wells Timberland REIT does disclose in the prospectus that these investments are high risk and should only be purchased by investors that can afford the complete loss of their investment, it appears that many brokerage firms downplayed these risks.  The high risk of Well Timberland REIT makes the investment unsuitable for many individuals, especially those with a conservative portfolio or people who are retired or nearing retirement.

If you invested in Wells Timberland REIT and are interested in your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

Tags: , , , , , , , , , , , , , ,