Leo Wells, President of Wells REIT, responded to the critical Forbes article in a Letter to the Editor (Sep 15, 2003). Wells argues that governance of the REIT is "extremely transparent" and justifies its management fee of 4.5% by listing a wide range of services. In Let's Set the Record Straight on Unlisted REITs' Success (National Real Estate Investor, Sep 1, 2003), Johnson writes about Wells' stringent acquisition strategy. In 2002, Wells reviewed 375 deals totaling $17.4 billion, made offers on 84 deals totaling $4.1 billion, and closed on 35 deals totaling $1.4 billion. "Currently, the maximum front-end load for the Wells REIT runs close to 14.5%, as disclosed in the prospectus. But can you put a price on the quality of the long-term financial planning assistance that investors receive from a qualified investment advisor?"

In the Dispatch, I wondered why a retail investor would incur a high sales load to acquire a relatively illiquid security with a fixed sales price, when publicly-traded REITs frequently offered better overall returns with great liquidity. But according to Scott Muldavin of The Muldavin Company, San Rafael, CA, unlisted REITs actually do work very well for other types of investors. "Private REITs are almost always the vehicle of choice for open and closed end funds that can swing the hundred-investor minimum because of significant structural and tax advantages for the broadest array of potential investors -- foreign, endowments, foundations, high net worth, etc."

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