Leo F. Wells has become one of the hottest names in real estate. His real estate investment trust is amassing an amazing amount of fresh capital: In 2003's first half he sold $1 billion of stock, amounting to nearly half what public REITs raised, and he's targeting another $1.5 billion by year's end. Like a latter-day Harry Helmsley, he is using the money for a buying binge of first-class office properties. In May his REIT bought Chicago's 83-story Aon Center, the third-tallest building in the U.S.
A cherubic fellow with an easy Southern charm, Wells, 59, combines a salesman's bonhomie with a religious conviction that he is doing good for his 100,000 investors. The company creed is "to glorify God and care for people." Meetings at headquarters in suburban Atlanta often begin with a prayer. Professions of atheism, casual dress at work and drinking are verboten. So are beards and moustaches. Last year Wells settled a lawsuit with Gregory Genovese, a broker for Wells until 1999, when he alleged he was fired for failing to shave.
Sure, but are they good investments?
Not if you ask real estate pros Mike Kirby and Jon Fosheim. From this week's Barron's (sub. req'd.):
Q: Any developing trends in REITs?
Fosheim: There is a relatively new product probably being marketed to a lot of Barron's readers: private REITs that are publicly registered but not traded. They market via commission-based financial planners. It has a lot of similarities to the syndication days of the 'Eighties. As a general rule, we tell people to stay away from them because the fees are very high -- in many cases you are looking at a front-end load around 15%.
Some examples are Wells, based in Atlanta and not affiliated with Wells Fargo; Inland; and CNL. The private REITs primarily own office and retail properties and are characterized by the high intermediaries' fees and by relatively low sponsor ownership in the entity. Often, the real-estate company also owns the advisory companies, which poses a conflict. Hundreds of millions of dollars a month are being raised in these things and we have a feeling that it may well end badly. Wells, for example, has been the biggest buyer of office properties for about the last year and a half, bigger than Equity Office Properties.
I know it's not illegal to sell investors crap at fantastically high commissions (15% front load!), but isn't it illegal to fire your employees for professing atheism?
The Forbes article further downplays the investment potential of shares in Wells's trusts by pointing out the stagnant stock price, weak earnings, deteriorating dividends, sky-high fees, and the fact that Leo Wells, man of so much faith in Jesus, has so little faith in his own enterprise that he owns just $15,000 of the shares he sells to the public through his cult, even as he rakes in fees of $400 million.
Leo Wells provides still more evidence of the crypto-Christian agenda supplanting American business and political life.