Wells Real Estate's Don Henry

NORCROSS, GA-If Don Henry ever had doubt as to the viability of Wells Real Estate Funds’ strategy–class A office with class A tenants–they surely have been laid to rest. The firm, which is currently raising funds and eying acquisitions for Wells REIT II, expects to make at least $500 million in acquisitions this year–and hopefully more, enough to meet last year’s $813 million tally. Furthermore, the company only has two debt facilities coming due this year in May, which Henry, who is the chief real estate officer with the locally-based company, feels are on track to be successfully refinanced.GlobeSt.com: How do you see 2009 shaping up for the industry?

Henry: I think 2009, at least in the early part, will feel a lot like 2008. Transaction volumes will continue to be low, compare to historical levels. That will be due to the fact that commercial lending for real estate loans will take a while to resume.

GlobeSt.com: When do you think that will happen?

Henry: Despite TARP (the Troubled Assets Relief Program) lending hasn’t happened yet, so that is hard to say. We have noticed, of course, that those financial institutions that have received federal assistance have not yet translated that aid into CRE lending. I don’t know when that will happen. But for all cash buyers, this may end up being a good year.

GlobeSt.com: You say you are doing $500 million minimum in acquisitions this year. Do you have anything specific in the pipeline?

Henry: There are a couple of deals we are looking at right now. They are typical “Wells” deals–high quality real estate leased to high quality tenants in class A buildings.

GlobeSt.com: Will you be focusing on any particularly region?

Henry: No, just the top 25 major markets.

GlobeSt.com: Is there anything at all that is making you nervous right now?

Henry: We recognized there is considerable stress in the economy and that real estate fundamentals aren’t as strong as we would like them to be–but we believe that high quality buildings leased to high quality tenants can ride out significant weaknesses.

GlobeSt.com: Do you focus on government tenants? Those are about the best bets rate now.

Henry: We haven’t intentionally steered away from government tenants, but we don’t have any in our portfolio. We found those deals to be very pricey in years past. But we certainly wouldn’t mind having exposure to government tenants.

GlobeSt.com: Are you looking to sell any of your portfolio right now?

Henry: We are not in the disposition stage right now, but we continuously are evaluating that prospect. We feel good about where we are right now. We don’t want to see the recession be too deep or too long of course, but on the buy side our fund raising is going well.

GlobeSt.com: And negotiations with your lenders?

Henry: That is going well too. They have a long-standing relationship with us and we are optimistic about our refinance capabilities. As we approach the due date we will have a more definitive idea of where we stand.

GlobeSt.com: How will you be leveraging debt this year in your purchases?

Henry: The $500 million target assumes very low debt utilization–we will be making these acquisitions mostly from our equity fund raising. Our LTV typically hovers around 25% and depending on where we are in our acquisition line of credit it could range from 20% to the high 20s. We are very conservative when it comes to the use of debt.

GlobeSt.com: Are you finding fundraising difficult now?

Henry: No not really. Our investment profile it is almost exclusively individual investors and they are looking for a safe place to put money – especially now.