May 18, 2007, GlobeSt.com, an online financial and real estate
industry news publication, published an article based
on an interview with Mr. Jess E. Jarratt, the president of Wells Timberland Management
Organization, LLC (“Wells TIMO”), the advisor to Wells Timberland REIT, Inc. (“Wells Timberland
REIT” and, together with its subsidiaries, “we,”“our,” and “us”), the full text of which is
is wholly unaffiliated with Wells Timberland REIT, and neither Wells
Timberland REIT, its sponsor, Wells Capital, Inc., Wells TIMO nor any
of their affiliates has made any payment or given any consideration to
GlobeSt.com in connection with the article or any other matter
published by GlobeSt.com concerning Wells Timberland REIT, or
Clarifications and Corrections
The article published by GlobeSt.com, was not reviewed by us prior to its publication, nor
were we aware of the publication of the article prior to May 18, 2007.
We believe that the following information is appropriate to clarify or correct information
included in the article:
1. The statement in the “Features” section of the article that “‘[t]he inventory isn’t impacted by
interest rates or markets’” is not adopted or endorsed by us as the statement may be misunderstood
taken out of the context in which it was intended. In his remarks during the interview, Mr.
Jarratt was restating a commonly-held belief in the industry that timberland investments may not be as sensitive
to fluctuations in interest rates or securities markets as other types of investments. For a
description of the timberland industry, please read the “Industry Overview” section of the
prospectus that we have filed with the Securities and Exchange Commission (“SEC”) in connection
with our initial public offering. Please also see “Risk Factors — Risks Related to Investments in
Timberland” in the prospectus.
2. The statement in the opening paragraph of the article that “[t]he initiative, Wells Timber
Management Organization, is headed by Jess Jarratt,” is incorrect. Wells Timberland REIT is the
entity formed to invest in timberland and Mr. Jarratt is the president of Wells TIMO, our advisor.
3. The statement in the opening paragraph of the article that Wells Timberland REIT is “‘a
$750-million fund with a $1 billion potential,’” is not endorsed or adopted by us in any manner.
Because we have not raised any proceeds in our initial public offering and have not acquired any
assets, it would be highly speculative to estimate the net proceeds to be received by us from the
sale of shares in our offering which cannot be determined at this time. As disclosed in the
prospectus for the offering, we may not be successful in raising any proceeds in the offering.
4. We caution that undue emphasis should not be placed on the following statements in the article:
(a) Wells Timberland REIT is “‘starting at a reasonably conservative level of $750 million in our
first fund. The fund should comfortably be able to handle a million acres,’” and (b) “‘[w]hen
you’re anticipating the purchases of a million acres...’”. Because we have not raised any proceeds
in our offering, have not purchased any timberland properties or other assets and have not
identified any timberland properties for acquisition which we have a reasonable probability of
acquiring, it would be speculative to identify a particular size or acreage of property that we may
acquire. As with any forward-looking information, this statement and any other forward-looking
statements in the article are subject to risks and uncertainties that could cause the
actual results to differ materially from those stated. Please read “Cautionary Note Regarding
Forward-Looking Statements” included in the prospectus that we have filed with the SEC in
connection with the offering.
5. With respect to Mr. Jarratt’s quote in the article that “‘[o]n a percentage basis, I would
expect that [proceeds from selling timber harvesting rights] will represent more than 80% of our
income,’” we caution that undue emphasis should not be placed on Wells TIMO’s internal estimates.
Wells TIMO’s estimates concerning the sources and percentages of income to be earned by Wells
Timberland REIT is inherently speculative and uncertain given that we have not acquired any
timberland properties or other assets.
6. We caution that undue emphasis should not be placed on the discussion of the
sustainable-forestry initiative contained in the article because Wells TIMO’s expectations with
regard to the industry programs that Wells Timberland REIT will participate in are speculative at
this time. For information concerning Wells Timberland REIT’s intended business plan, please read
the “Business and Policies” section of the prospectus that we have filed with the SEC in connection
with the offering.
Transcript of GlobeSt.com Interview
Wells’ Jess Jarratt
‘The inventory isn’t impacted by interest rates or markets.’
UpClose with Wells’ Jess Jarratt
By John Salustri May 18, 2007
GlobeSt.com: You don’t hear too much about timber REITs, even when the topic turns to alternative
plays. But timber REITs made news recently when Wells Real Estate Funds rolled out what it is
billing as the industry’s first public, non-traded pure play REIT. The initiative, Wells Timber
Management Organization, is headed by Jess Jarratt, a former managing director in the investment
operation at SunTrust Robinson Humphrey in Atlanta. The idea of a timber REIT — and Jarratt
reports that it’s a $750-million fund with a $1 billion potential — is intriguing because of its
similarity to more mainstream plays — in terms of the risk-avoidance that product diversity brings
and even the investors who play in the field. In a recent exclusive interview, Jarratt detailed
the operation and the goals.
GlobeSt.com: Frankly, I was expecting someone in a plaid shirt. How much competition could there
have been for this job? It is a narrow specialty.
Jarratt: I like to think there was a lot of competition for it. I am a graduate forester and
spent seven-plus years as a forester. So when I need to, I can put on the plaid shirt and get on
the ground with anybody. And we do. In fact, next week I’ll be out with some of our consultants
looking at timberland in Texas and Louisiana. On the finance and investment-banking side of my
skill set, I built a corporate-banking business at SunTrust and that’s very valuable here. You
really have to be half forester and half finance executive to do what we’re doing.
GlobeSt.com: Why a start up? Aren’t there forestry companies with which Wells could JV, or is
that a different model altogether?
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Jarratt: There are, but Wells historically has provided investment opportunities to individuals
through our independent broker/dealer network, and because those investment opportunities are
primarily REIT opportunities, they benefit from scale. Forestry investments adds to that scale.
The income from forest properties is a tax-advantaged income in that most of it is capital gains.
That was a big benefit for individual investors.
GlobeSt.com: What’s the size of the opportunity?
Jarratt: It’s several billion dollars. We’re starting at a reasonably conservative level of $750
million in our first fund. The fund should comfortably be able to handle a million acres.
GlobeSt.com: And what will you be targeting with that $750 million?
Jarratt: Timberland across the United States, and as we build scale in that portfolio, we’ll add
GlobeSt.com: To drill down a little farther, will the focus be on buying properties or would you
be buying out those companies?
Jarratt: We’ll be looking primarily at their timberland. A lot of our transactions will be with
large forest-products companies that have a land base that they are now monetizing. Once we buy
the land we’ll continue to manage those properties and supply them with wood.
GlobeSt.com: You’ve outlined three possible areas of income: timber-harvesting rights, leasing
land-use rights and sale of land for higher and better use. Please detail each.
Jarratt: Harvesting rights — selling standing timber — is the predominant source of income. It
includes selling trees to industry players, to conversion plants and mills, either on the stump or
on a contractual basis.
GlobeSt.com: How much could that part of the operation generate for your investors?
Jarratt: On a percentage basis, I would expect that it will represent more than 80% of our income.
The secondary category is recreational leases — which are very predictable and typically
represent a small component. These are primarily hunting leases to clubs and individuals. It
could also include mineral leases — oil, gas and coal.
The third piece is HBU — higher and better use. When you’re anticipating the purchases of a
million acres, it’s very likely that you’ll identify properties that have a use other than growing
timber, where the property value will be the function of some other purpose — a housing project or
the growth of an urban environment. When we identify that we’ll sell that property.
GlobeSt.com: When it comes to environmental stereotypes, tree-huggers and lumberjacks come to
mind. How does the industry address the issue of sustainability?
Jarratt: Good forest management — sound conservation — is symbiotic with economic returns. The
right thing to do for our forest is also the right thing to do economically. When we cut trees for
profit we’re cutting only a portion of those trees that are reaching maturity. When we cut those
trees at the end of their cycle, we replant them. Everything we do is under the umbrella of a
sustainable forestry initiative.
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GlobeSt.com: And that includes higher and better uses?
Jarratt: Absolutely. Once we sell an HBU piece, typically the economics of owning that property
from a timber-production standpoint no longer apply. But we’re really not focused on that
business. Our business is managing timberland commercially and inside the sustainable-forestry
initiative I mentioned, which, by the way, is third-party verified and audited.
GlobeSt.com: By a government body?
Jarratt: No. It’s an independent industry-funded entity that sets down minimum standards under
which property must be managed in ordered to be certified. Most of our wood converters and
manufacturers require that the wood they buy be certified.
GlobeSt.com: Who’s your competition?
Jarratt: There are maybe 15 significantly sized and capitalized investment organizations that buy
and manage timberland primarily for institutional investors. Our competition is also high
net-worth individuals that buy large blocks of timberland. Also, there are three other publicly
traded REITs, but these are not pure-plays. By contrast to all of these, our primary investor base
is private individuals. We’re the only registered, non-traded REIT in timberland that’s focused on
raising capital from individuals.
GlobeSt.com: To what extent does the stock matter?
Jarratt: We need to be diversified from a risk-management perspective. We do that in three
categories. First, we diversify geographically. We’ll own timberland in the major wood baskets
across the US — the biggest is the Southeast, the next is the Northwest. There are some
Lake-State and New England baskets, and then there’s the MidAtlantic. We’ll also diversify by age
class and by species.
GlobeSt.com: And species is determined largely by region?
Jarratt: Absolutely. In the South, loblolly pine is predominant species. Northeast is Douglas
fir and Western Hemlock. You get different spruces and fir in the Northeast, but neither is as
major as Doug fir. There are a lot of hardwood species we look for.
GlobeSt.com: So what’s the overall value proposition here?
Jarratt: This is unique. It’s not like any other commercial property. There’s no lease with a
group of tenants we can predict. The inventory isn’t impacted by interest rates or markets. Trees
grow at a rate at which many corporations would love to have their companies grow.
GlobeSt.com: But most companies don’t have blight or forest fires to contend with.
Jarratt: That’s why we diversify by region. But forest fires actually destroy less than one-tenth
of 1% of commercial forests annually. They’re spectacular and dangerous, but from a commercial
perspective, they aren’t that material. Add to that the sound forest-management initiatives I
mentioned and we can produce consistent, low-risk returns for our investor base.
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Wells Timberland REIT, Inc. has filed a registration statement (including a prospectus) with the
SEC for the offering to which this communication relates. Before you invest, you should read the
prospectus in that registration statement and other documents that Wells Timberland REIT, Inc. has
filed with the SEC for more complete information about Wells Timberland REIT, Inc. and this
offering. You may get these documents for free by visiting EDGAR on the SEC web site atwww.sec.gov.Alternatively, Wells Timberland REIT, Inc., the dealer manager or any dealer
participating in the offering will arrange to send you the prospectus if you request it by calling
toll-free (800) 557-4830.