WELLS TIMBERLAND REIT, INC.
Filed
Pursuant to Rule 424(b)(3)
Registration
No. 333-129651
WELLS
TIMBERLAND REIT, INC.
SUPPLEMENT NO. 6 DATED JULY 11, 2008
TO THE PROSPECTUS DATED DECEMBER 14, 2007
This document supplements, and should be read in conjunction
with, our prospectus dated December 14, 2007, as
supplemented by Supplement No. 1 dated February 11,
2008, Supplement No. 2 dated February 29, 2008,
Supplement No. 3 dated April 16, 2008, Supplement
No. 4 dated April 23, 2008 and Supplement No. 5
dated June 3, 2008, relating to our ongoing public offering
of up to 85,000,000 shares of common stock, which we refer
to herein as our “public offering.” Defined terms used
in this supplement have the same meanings as set forth in the
prospectus. The purpose of this supplement is to disclose:
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the status of our public offering; and
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our entry into a master purchase agreement with respect to the
offering of up to 53,763,441 shares of common stock to a
German closed end fund pursuant to Regulation S under the
Securities Act, which we refer to herein as the “German
offering.” The German offering is an unregistered offering
being made solely to a non-“U.S. person,” and is
separate and in addition to our ongoing, concurrent public
offering.
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Status of
Our Public Offering
As of July 11, 2008, we had received aggregate gross
offering proceeds of approximately $93.1 million from the
sale of approximately 9.3 million shares in our public
offering. As of July 11, 2008, approximately
65.7 million shares remained available for sale to the
public under our public offering, exclusive of shares available
under our distribution reinvestment plan.
Entry
into a Master Purchase Agreement with Respect to the German
Offering
Overview
of the Transaction
On July 11, 2008, we entered into a master purchase
agreement with our advisor, Wells TIMO, Wells-DFH Timberland
Nr.88 GmbH & Co. KG, a German closed end fund (the
“German Fund”), and Deutsche Fonds Holding AG, a
corporation organized under the laws of Germany
(“DFH”). DFH is not, and the German Fund (prior to
purchasing shares of common stock under the master purchase
agreement) was not, in any way affiliated with us or our
affiliates. Pursuant to the master purchase agreement, we have
agreed to sell up to 53,763,441 shares of our common stock
to the German Fund, at a price per share of $9.30, for an
aggregate purchase price of up to $500 million. The German
Fund’s right to purchase shares pursuant to the master
purchase agreement will continue until the earlier to occur of
(i) our sale of all of the shares offered thereby, or
(ii) December 31, 2008. During this offering period,
the German Fund may purchase some or all of the shares offered
pursuant to the master purchase agreement in one or more
subscriptions, in each case by signing and delivering to us a
subscription agreement relating to each such purchase. The
German Fund is not required to purchase any shares of our common
stock in the German offering, and we do not, and cannot, make
any assurances that the German Fund will purchase any minimum
number of shares of our common stock, or that the German
offering will result in our receipt of any minimum amount of
proceeds.
In connection with the German offering, Wells Germany GmbH, a
limited partnership organized under the laws of Germany
(“Wells Germany”), has performed, and in the future
will continue to perform, certain services for the German Fund.
Wells REF indirectly owns a minority interest in Wells Germany
and will receive compensation for services provided to the
German Fund by Wells Germany as described under
“Compensation in Connection with the German Offering”
on page 4 of this supplement.
Terms of
the German Offering
The German offering is an unregistered offering being made
solely to the German Fund, which is a
non-U.S. person,
pursuant to Regulation S under the Securities Act, and is
different and separate from our ongoing public offering. The
following description highlights the principal terms of the
German offering.
Voting
Agreement
As a condition to purchasing shares of our common stock in the
German offering, the German Fund entered into a voting agreement
with us (as part of the master purchase agreement to purchase
shares of our common stock) regarding the voting rights of its
shares, and delivered to us an irrevocable proxy, so that, in
some cases, we can vote its shares on its behalf, in accordance
with this voting agreement. In summary, the voting agreement
provides as follows:
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If and when the German Fund owns 50.0% or more of our total
outstanding shares of common stock, we will vote the German
Fund’s shares of common stock in a manner that supports the
vote cast by our other stockholders. Specifically, we will vote
the German Fund’s shares of common stock for or against any
matter upon which a stockholder vote is required in proportion
to the number of votes cast for or against such matter by our
other stockholders.
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During the period beginning on the date when, for the first
time, the German Fund owns less than 50.0% of our total
outstanding shares of common stock (we refer to such date as the
“Minority Ownership Date”), and ending on the date (we
refer to such date as the “Termination Date”) that is
the earlier of (1) the date when, for the first time, the
German Fund owns less than 30.0% of our total outstanding shares
of common stock, or (2) the date that is the three year
anniversary of the Minority Ownership Date, we will continue to
vote the German Fund’s shares of common stock in a manner
that supports the vote cast by our other stockholders, as
described above, in respect of the following matters:
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the election of directors to our Board of Directors;
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the ratification of our independent auditors;
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any proposed amendments to our charter that (x) are not
material to the German Fund’s interests as a stockholder of
the Company;
and/or
(y) are necessary or appropriate to ensure that our charter
complies with the regulatory requirements or comments of the
SEC, the Financial Industry Regulatory Authority, any of the
States or other jurisdictions in which we sell, or seek to sell,
any of our securities, or the applicable policies and guidelines
of the NASAA (including, without limitation, the NASAA Statement
of Policy Regarding Real Estate Investment Trusts); and
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any other matters the outcome of which could not reasonably be
expected to have a material and adverse effect on the German
Fund’s interest as a stockholder of the Company.
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With respect to all other matters requiring a vote of our
stockholders during this period, the German Fund is entitled to
freely vote its shares of common stock at the discretion of the
German Fund’s managing limited partner. Among other things,
the German Fund will be free to vote its shares in respect of
all material corporate decisions and all proposed strategic
transactions, such as a sale or merger of our company, a sale of
all or substantially all of our assets, and any decision
regarding the extension or modification of the liquidity
deadline set forth in our charter.
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If the Termination Date has not occurred on or before
July 31, 2013, then the voting agreement will terminate
upon such date.
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In all cases where the German Fund is entitled to freely vote
its shares, the managing limited partner of the German Fund will
vote the German Fund’s shares of common stock in a single
block, such that all of the German Fund’s shares will be
voted for or against any particular matter that is being voted
upon by our stockholders.
Purchase
Price
In our public offering, shares of our common stock are typically
sold to investors at a price per share of $10.00 and, after the
application of the 7.0% sales commission and the 1.8% dealer
manager fee, we receive net proceeds (before expenses) of $9.12
per share. In the German offering, we are selling shares of our
common stock to the German Fund at a price per share of $9.30.
The German Fund will not pay the sales
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commission or the dealer-manager fee in connection with the
German offering; however, we will pay DFH a distribution fee of
1.0% of the gross proceeds that we receive from the German
offering. As a result, in respect of those shares of our common
stock sold in the German offering, we will receive net proceeds
(before expenses) of $9.21 per share, which is greater than the
$9.12 per share that we receive in our public offering after
deducting the sales commission and dealer manager fee.
Compliance
Services
To the extent that we request the assistance of the German Fund
in connection with ongoing regulatory compliance needs beyond
those services that the German Fund has already agreed to
perform under the master purchase agreement, we have agreed to
reimburse the German Fund for its reasonable out of pocket
expenses.
Risk
Factors
The “Risk Factors” section of the prospectus is hereby
supplemented by the following additional risk factors:
Although the German Fund is subject to a voting agreement,
the German Fund may freely vote its shares of common stock in
many important circumstances, and the voting agreement will
terminate upon the occurrence of certain events.
As a condition to purchasing shares of common stock in the
German offering, the German Fund entered into a voting agreement
as described above under “Voting Agreement.” If
the German Fund subscribes for the maximum number of shares of
common stock we have agreed to sell to it pursuant to the master
purchase agreement by December 31, 2008, it will likely
hold a majority of our total outstanding shares of common stock
for some period of time, and perhaps indefinitely. As a result
of the German Fund’s majority ownership, the German Fund
will be subject to the voting agreement, pursuant to which we
will vote the German Fund’s shares for or against any
matter that requires a vote of our stockholders in proportion to
the number of votes cast for or against such matter by our other
stockholders. However, if the German Fund owns less than 50.0%
of our total outstanding shares of common stock, then it
generally will be free to vote its shares of common stock on all
matters, at the discretion of its managing limited partner,
except for those limited matters described above under
“Voting Agreement.” Among other things, the
German Fund will be free to vote its shares in respect of all
material corporate decisions and all proposed strategic
transactions, such as a sale or merger of our company, a sale of
all or substantially all of our assets, and any decision
regarding the extension or modification of the liquidity
deadline set forth in our charter. The German Fund’s
managing limited partner will vote the German Fund’s shares
in a single block, which may result in the German Fund having
the controlling vote in many cases. In addition, the voting
agreement will terminate upon the occurrence of those events
described above under “Voting Agreement,” after
which the German Fund will be entitled to freely vote its
shares, regardless of its level of ownership at that time.
The
German Fund may not have the same interests as our other
stockholders.
As a German limited partnership, the German Fund may have
different objectives and voting preferences than our other
stockholders. As described in the immediately preceding risk
factor, as well as in the section above entitled “Voting
Agreement,” notwithstanding the voting agreement, the
German Fund will be entitled to freely vote its shares on all
matters, at the discretion of its managing limited partner,
except for those limited matters described above under
“Voting Agreement.” As a result, if the German
Fund has different interests than our other stockholders, we may
be unable to pursue opportunities that would otherwise be in our
other stockholders’ best interests.
Use of
Proceeds
In the event that the German Fund purchases all of the shares of
common stock pursuant to the master purchase agreement, we
expect our net proceeds from those sales to be approximately
$495 million, based upon an offering price of $9.30 per
share, and after deducting the 1.0% distribution fee paid to DFH
of $5 million. However, the German Fund is not required to
purchase any shares of our common stock in the
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German offering, and we do not, and cannot, make any assurances
that the German Fund will purchase any minimum number of shares
of our common stock, or that the German offering will result in
our receipt of any minimum amount of proceeds.
After paying the 1.0% distribution fee to DFH, we presently
expect to use substantially all of the net proceeds from the
German offering for any of the following purposes:
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to pay outstanding indebtedness under our mezzanine loan related
to the acquisition of the Mahrt Timberland;
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to pay outstanding principal and interest due under our senior
loan related to the acquisition of the Mahrt Timberland until
our loan-to-value ratio is equal to 40% or less;
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to pay fees and expenses due to our advisor and its affiliates;
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to pay any operating and other expenses in connection with this
offering;
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to make regular debt payments on our senior loan;
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to acquire additional timberland properties; and
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for other general corporate purposes.
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Plan of
Distribution
The sale of shares of common stock in the German offering is
being made solely to the German Fund. The German Fund has
represented to us that it and each of its equity owners are not
“U.S. persons” as defined in Rule 902(k) of
Regulation S under the Securities Act. Offers and sales of
shares of common stock in the German offering are not being made
through Wells Investment Securities, Inc., the dealer-manager
for our public offering, and are not subject to the
dealer-manager fee described in the prospectus relating to our
public offering; however, we will pay DFH a distribution fee
equal to 1.0% of the gross proceeds that we receive from the
German offering. To the extent that the Company requires
additional information regarding the German Fund or its equity
owners, Wells TIMO shall reimburse the German Fund or DFH, as
the case may be, for its actual out of pocket expenses. No
underwriters or placement agents are involved in the German
offering, and no commissions or other remuneration will be paid
by us in connection with such selling activities, except as
otherwise described herein.
Compensation
in Connection with the German Offering
As discussed under “Overview of the Transaction” on
page 1, Wells Germany has performed, and in the future will
continue to perform, certain services for the German Fund, and
as such has entered into a services agreement with DFH and the
German Fund outlining these services, which are primarily
related to the organization of the German Fund’s prospectus
and the facilitation of tax and other operational requirements
that the German Fund and its investor have within the United
States. These services in no way relate to the distribution of
the German Fund’s partnership interests, which will be the
sole responsibility of DFH.
As a component of this services agreement, DFH and Wells Germany
will earn certain fees and reimbursements related to the
subscriptions in the German Fund, and will equally share in the
profitability of these fees and reimbursements. Wells REF
indirectly owns a minority interest in Wells Germany, and as
such, will participate in the profitability earned by Wells
Germany in proportion to its minority interest.
In the event that the German Fund purchases the maximum number
of shares made available to it under the master purchase
agreement, resulting in our receipt of aggregate gross proceeds
of $500 million, Wells REF will receive approximately
$5 million in connection with its ownership interest in
Wells Germany. However, the German Fund is not required to
purchase any shares of our common stock in the German offering,
and we do not, and cannot, make any assurances that the German
Fund will purchase any minimum number of shares of our common
stock, or that the German offering will result in our receipt of
any minimum amount of proceeds.
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Recent
Tax Legislation
We have not yet qualified to be taxed as a real estate
investment trust, or “REIT,” but we have indicated
that we plan to elect to be treated as a REIT in the future if
we qualify. Certain provisions in the recently enacted Food,
Conservation, and Energy Act of 2008 could enhance our chances
of qualifying in 2009. Special provisions for timber REITs in
the legislation are summarized as follows:
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The 75% and 95% gross income tests are amended to provide that
gains under sections 631(a) (provided that the timber is
cut by a TRS) and 631(b) from sales of timber is qualifying
income, without regard to how long the timber was held. Any such
sales are not subject to the 100% prohibited transaction tax.
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Certain mineral royalty income of a qualifying “timber real
estate investment trust” is treated as good income for
purposes of the 95% gross income test. A REIT is a “timber
real estate investment trust” if more than 50% in value of
its assets consists of real property held in connection with the
trade or business of producing timber.
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A “timber real estate investment trust” is permitted
to own taxable REIT subsidiary, or TRS, securities representing
up to 25% of the value of the REIT’s assets (expanding the
current limit of 20%).
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The prohibited transaction tax safe harbor is shortened to
2 years for certain conservation sales of timber property.
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For budgetary reasons, the timber REIT provisions would apply
only to our taxable year ending December 31, 2009. There is
no assurance that, even with such changes, we will qualify to be
taxed as a REIT in 2009 or that such changes will be extended to
subsequent years.
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