Wells Timberland REIT recently revised the estimated value of its shares down to $6.56 per share, 34.4% below its 2006 initial public offering price of $10 per share. The new estimate is reportedly based on appraisal information from a forest consulting firm and a certified public accounting firm; however, the REIT’s board made the new estimate itself. As of September 30, 2012, the REIT had timber assets worth $11.70 per share, $0.28 per share in other assets, and liabilities of $5.42, according to an SEC filing (“Timberland REIT takes axe to share price,” InvestmentNews). Notwithstanding this reduced valuation, investors are unlikely to be able liquidate their shares of the REIT for $6.56 per share, if at all, however, because nontraded REITs are illiquid investments.
The REIT is sponsored by Wells Real Estate Funds, one of the largest offerors of nontraded REITs. Wells blamed the 35% cut in share price on the floundering housing industry but said the REIT has increased its percentage of higher-value timberland.
Annual distribution are said to be just 1% and ordinary share redemptions have been suspended. Wells Timberland Management Organization LLC, the REIT’s investment manager, will reportedly forgo accrued advisory fees of $27 million.
Starting in January, shareholders will theoretically be able to redeem shares at $5.92 per share (95% of the estimated per share price of $6.23). In reality, however, there are no funds available for ordinary share redemptions, but $150,000 per month is being reserved for extraordinary redemptions in the event of death, qualifying disability or confinement to a long-term-care facility, according to the article.
Wells has been criticized in the past for its aggressive fee charges and myriad of conflicts of interest.
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