ZAMANSKY INVESTIGATES WELLS TIMBERLAND REIT FOR FRAUD
Zamansky & Associates LLC announces that it has commenced an investigation on behalf on investors in the Wells Timberland REIT Inc. (”Wells Timberland”) Wells Timberland was sold to investors as a non-public REIT engaged in the business of investing in timberland, and generating income from harvesting and selling timber. From 2006 through 2009, Wells Timberland raised approximately $284 million in capital from investors.
On November 22, 2011, the Financial Industry Regulatory Authority (”FINRA”) fined Wells Timberland’s broker-dealer subsidiary $300,000 for using misleading advertising and sales materials in connection with sales to investors. FINRA found that Wells Timberland’s advertising and sales materials contained misleading, unwarranted or exaggerated statements. For example, Wells Timberland’s initial prospectus stated that it intended to qualify as a REIT for the tax year that ended Dec. 31, 2006; however, it did not qualify for REIT election until the tax year that ended Dec. 31, 2009. The advertisements and sales literature failed to disclose the significance of Wells Timberland’s non-REIT status and suggested that Wells Timberland was a REIT at a time when in fact that it had not qualified as a REIT. The advertising communications also contained misleading statements regarding Wells Timberland’s portfolio diversification and ability to make distributions and redemptions.
In addition to possibly being misled into making the investment, Wells Timberland’s investors have also not fared well. Since Dec. 9, 2010, investors have been locked up and unable to redeem their shares. Wells Timberland halted redemptions due to restrictions placed by its lenders to protect their loans. However, when Wells Timberland does open for redemptions, investors stand to receive back only 60% of their investment. Wells Timberland adopted a new policy that it will redeem shareholders at 95% of an estimate market valuation to be conducted in the future. As of Sept. 30, 2011, Wells Timberland reported net losses of $2.1 million, which increased its accumulated deficit to $126 million. Based on these figures, investors who purchased at $10 per share have likely seen their shares decline in value to $6 per share, for a 40% loss.
If you are an investor in Wells Timberland and suspect that you were misled into the investment, please contact Jake Zamansky at (212) 742-1414, or by email at jake@zamansky.com.