Posted by Keith on March 27, 2007 at 8:41 am
Thanks for the insight in Wells. I recieved an offer from Madison Liquidity Investors at $8.00 a share, is that a good deal? Wells told me they don’t buy these back, that their redemption is suspended. Should I take Madison’s offer? They are based out of Kansas City. Love your show!
Good question. Actually, the $8 per-share offer you received came from a group specializing in what we used to call “The Widows and Orphans Market” — and you should not accept the offer.
Here’s what happens: Dad buys a non-liquid (not publicly traded) REIT. Dad dies. Mom now has an illiquid asset in the estate. She does not understand that good private REITS have respectable redemption programs at a true fair market value.
Mom receives a letter in the mail offering $8 per share (or whatever) for this “illiquid” asset she may know little about. She is sooooo grateful! She accepts the offer. The problem is, she could either have sold or redeemed the shares for $14 each — their fair market value.
Now back to your situation: To my knowledge, Wells REITS are publicly traded — although there may be some non-publicly traded versions of their REITS with which I am not familiar. There are four publicly traded version of Wells REITS. Their tickers are WSPZX, WSPBX, WSPCX and WSPIX. At this writing the first three were selling on on NASDAQ for about 14.50, and the third was selling on NASDAQ for about 14.30 — well above the $8.00 per share you are being offered.
The fact that Wells is not redeeming your shares any longer may reflect the fact that your shares are now publicly traded. If so, you can be out today — and I recommend you bail on these Wells REITS — at over $14.00 per share — more than a $6.00 per-share difference from what you were offered.
Private REITS, such as the Inland series, do not trade on the exchanges. This can be an advantage since the market will not push the per-share price above or below its true value. Instead, these REITS have sensible redemption programs based on formulas contained in the prospectus. The Inland formulas, for example, are imminently fair. My point is that even if you have a non-publicly traded REIT, don’t be too quick to jump at those unsolicited in-the-mail, discounted offers. They are almost always a bad deal.
After reading this, somewhere a widow or an orphan weeps…