Thursday, October 16, 2008

Dodging Another Bullet
Wells Timberland REIT filed its 8-K late today and it has received an extension on its mezzanine financing that had a large payment due today. The loan has been extended from March 2, 2009 to September 30, 2009. The principal reduction payments have also been modified. The next payment is due December 30, 2008, and the principal needs to be reduced to $67 million, then on March 30, 2009 it needs to be $45 million and on June 30, 2009 it needs to be $25 million and any remaining principal is due September 30, 2009. The interest rate did not change and stays at 11%, up from the original 9%. The balance on the mezzanine loan at October 15, 2008 was $81,857,312. Wells Real Estate Funds, as part of the negotiations, agreed to pledge its preferred stock in Timberland as collateral and agreed to pay a fee of $127,500 and give Wachovia 600 (1,000 per share that accrue 8.5% interest) preferred shares in Timberland.

Timberland dodged a bullet again. I see no sign of any German capital, and due to the Credit Crisis I'd be surprised to see any sizable German equity. Timberland is raising $8 million to $10 million per month. At this rate, it looks like Timberland will be able to meet its obligations under the new terms without any additional, outside capital.

Wachovia extracted more than its share of pain for this extension. The 11% interest is high and the preferred stock Wells had to give, basically came out of Leo's pocket. I will post more on my thoughts on Timberland later.


Anonymous said...

It amazes me that anyone would consider buying this common stock under these circumstances. I would be ashamed to market/sell this security.

Anonymous said...

This is not common stock. This is a REIT.