Investment News Is reporting that Wells Real Estate Funds is halting non-traded REIT offerings at this time. According to the report,
Wells Real Estate Investment Trust II is moving to become an independent company early this year and the Wells Core Office Income REIT will close to new investments in June, Mr. Wells wrote. The Wells Timberland REIT is also looking toward “its appropriate exit strategy,” he added.
Mr. Wells is one of the most noted real estate sponsors in the independent-broker-dealer industry. Many B-Ds have long sold his REITs, but the nontraded-REIT business is changing in the aftermath of the collapse of the commercial real estate market and credit crisis in 2008.
Mr. Wells is also one of the most outspoken and colorful figures in an industry that has generated plenty of headlines in the past decade. In October 2003, Finra’s precursor, NASD, sanctioned Wells Investment Securities for improperly rewarding broker-dealer reps who sold the company’s REITs. Those rewards included lavish entertainment and travel perquisites. At the time, the regulator also censured Mr. Wells and suspended him from acting in a principal capacity for one year.
Non-traded REITs have come under increased scrutiny recently as brokerage firms improperly recommended these illiquid investments to many of their clients. Recently regulators filed a complaint against LPL Financial concerning Cole Credit Property Trust II, Inc., Cole Credit Property Trust III, Inc., Cole Property 1031 Exchange, Wells Real Estate Investment Trust II, Inc., WP Carey Corporate Property Associates 17, and Dividend Capital Total Realty.