Thursday, June 22, 2006

Buying The Sizzle Not The Steak
Investments are an odd thing. Investments that seem marginal can attract loads of cash while good investment opportunities languish. The Wells Real Estate Investment Trusts have raised billions from investors over the past five years. Last July Wells introduced what it described as a mid-term value-added fund, a fitting product for a real estate environment that has seen prices soar making traditional income investments harder to fit into the traditional non-traded REIT structure. The fund, however, took almost a year to meet its impound of $10 million.

Rainier can sell its 1031 programs (which are by no means marginal) in about five minutes but its Income and Growth Fund II, which pays an 8% yield to Class A investors and has substantial diversification for a $10 million fund, has struggled to raise funds.

Why do good fund languish? I don't have an answer. I would not be suprised that the programs are sold by different reps, making it a tough sale for the wholesaler. The rep selling Wells for income and safety is not same rep looking to sel an upside opportunity. Maybe the wholsaler compensation is different? Whatever the reason it's unfortunate and investors are missing good opportunities.

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