Shares in the Wells REIT [real estate investment trust] aren't traded on any major exchange -- so their value is difficult to determine. Investors pay a total of 14% in commissions and other fees, which effectively dilutes their capital. The REIT's management structure allows other Wells companies to pocket millions of dollars in management and other fees. And despite the goal of listing in 2008, the company could simply begin to liquidate its assets then, a process that could take years depending on market conditions. In fact, Mr. Wells has never fully repaid investors in any of his funds over the last 20 years.
Most large brokerage firms -- including American Express Co. and Merrill Lynch & Co. -- won't handle Wells, despite the hefty commissions. Mutual funds that invest in REITs don't buy Wells or other nonlisted REITs, saying their high fees and illiquidity make them a poor choice for investors. "We don't bother with those," says Steven R. Brown, portfolio manager for Lehman Brothers Inc.'s Neuberger Berman Real Estate Fund. "There's really no way to make those numbers work."
...a big drawback of the nonlisted REITs: Investors who want to sell their shares are often stuck. Mr. Wells's REIT, for instance, buys back 3% of outstanding shares a year on a first-come, first-served basis. The stock has careened around various secondary markets, trading at $5, $10.25 and $8.43 in May and June, the latest data available. At a gathering last year of real-estate executives at a posh private club in New York, Michael Fascitelli, president of Vornado Realty Trust, a giant public REIT, teased Mr. Wells on his stock's illiquidity, comparing it to a "roach motel."
"You can check in, but you can't check out," Mr. Fascitelli joked to raucous laughter, according to a person who was there. Through a spokeswoman, Mr. Fascitelli declined to comment.
Robert Beneda, a 64-year-old retired engineer in Stone Mountain, Ga., invested in a 1984 Wells limited partnership fund. The fund, Wells Real Estate Fund I-B, has suspended its dividend; its units, which originally sold for $250, traded at $105 as of May 30, according to Direct Investments Spectrum, a Dallas-based newsletter. Mr. Beneda says he asked Mr. Wells at an investor presentation several years ago when principal would be returned. "He gave me this thing about 'the corn not being ready to harvest,' or something," Mr. Beneda says.
Some planners refuse to sell Wells or any nonlisted REIT because of the fees and illiquidity. Indeed, one of two main financial-planning trade groups says its members mostly shun Wells and other nonlisted REITs. "What does it have? Incredibly high operating costs; lack of liquidity; and what disclosure exists makes me uncomfortable," says Gary H. Schatsky, president of the National Association of Personal Financial Advisors, an Arlington Heights, Ill., trade group of about 1,000 planners, known as fee-only planners because they don't accept commissions. "It doesn't make a lot of sense."
Sprinkled around the article above are these observations:
"In an interview at his office on the company's leafy campus in Norcross, an Atlanta suburb, Mr. Wells peered over wire-rimmed glasses, straightforwardly affirming his belief in prayer as an important part ofthe company's business practice. He compared his firm's role in investors' lives to that of the patriarch Joseph, who, the Bible says, served as steward to Potiphar, an official in Pharaonic Egypt. "His job was to run things," Mr. Wells says of Joseph. "It really is a higher calling."
...the rush to add employees also brought problems. Earlier this year, for instance, a candidate for an executive-level job sued the Wells organization, alleging that during job interviews Wells executives pressed for information about his "spiritual background" and made "very direct inquiries" about his religious practices. In the suit, pending in Atlanta federal court, L. James Richards, a Minnesota resident, alleges that his response -- that he and his wife had been raised Baptists but had stopped attending church -- cost him the job.
You see, Leo Wells is a Christian nut who fires his employees for professing atheism or even having facial hair (so much for biblical authenticity).
Leo Wells sells transactions of impossible optimism to people who think they're getting ahead even when they're not. He does it at the most exorbitant costs on a track record of zero success in a folksy Christian style. He doesn't care whose rights he tramples on to achieve his self-proclaimed mission of divine inspiration.