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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 2000 or
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[_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to ____________ to ______________
Commission file number 0-25606
WELLS REAL ESTATE FUND VII, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2022629
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6200 The Corners Parkway, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area (770) 449-7800
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code Securities registered pursuant to Section
12 (b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
CLASS A UNITS
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(Title of Class)
CLASS B UNITS
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
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Aggregate market value of the voting stock held by nonaffiliates: Not Applicable
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PART I
ITEM 1. BUSINESS
General
Wells Real Estate Fund VII, L.P. (the "Partnership"), is a Georgia public
limited partnership organized on December 1, 1992, under the laws of the state
of Georgia, having Leo F. Wells, III and Wells Partners, L.P., a Georgia non-
public partnership as general partners. The Partnership was formed on December
1, 1992, for the purpose of acquiring, developing, owning, operating, improving,
leasing, and otherwise managing for investment purposes income-producing
commercial properties.
On April 5, 1994, the Partnership commenced an offering of up to $25,000,000 of
Class A or Class B limited partnership units ($10 per unit) pursuant to a
Registration Statement on Form S-11 filed under the Securities Act of 1933. The
Partnership did not commence active operations until it received and accepted
subscriptions for a minimum of 125,000 units on April 26, 1994. The Partnership
terminated its offering on January 5, 1995, and received gross proceeds of
$24,180,174 representing subscriptions from 1910 Limited Partners, composed of
two classes of limited partnership interests, Class A and Class B limited
partnership units.
The Partnership owns interests in properties through ownership in the following
joint ventures: (i) Fund V, Fund VI, Fund VII Associates, a joint venture among
the Partnership, Wells Real Estate Fund V, L.P., and Wells Real Estate Fund VI,
L.P. ("Fund V-VI-VII Joint Venture"), (ii) Fund VI and Fund VII Associates, a
joint venture between the Partnership and Wells Real Estate Fund VI, L.P. ("Fund
VI-Fund VII Joint Venture"), (iii) Fund II, III, VI and VII Associates, a joint
venture among the Partnership, Wells Fund II-III Joint Venture and Wells Real
Estate Fund VI, L.P. (the "Fund II-III-VI-VII Joint Venture"), (iv) Fund VII and
Fund VIII Associates, a joint venture between the Partnership and Wells Real
Estate Fund VIII, L.P. ("Fund VII-Fund VIII Joint Venture"), (v) Fund VI, Fund
VII and Fund VIII Associates, a joint venture among the Partnership, Wells Real
Estate Fund VI, L.P., and Wells Real Estate Fund VIII, L.P. (the "Fund VI-VII-
VIII Joint Venture"), and (vi) Fund I, II, II-OW, VI, VII Associates, a joint
venture among the Partnership, Wells Real Estate Fund I, the Fund II and Fund
II-OW Joint Venture and Wells Real Estate Fund VI, L.P. (the "Fund I, II, II-OW,
VI, VII Joint Venture").
As of December 31, 2000, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a three-
story office building located in Appleton, Wisconsin (the "Marathon Building"),
(ii) two retail buildings located in Stockbridge, Georgia ("Stockbridge Village
III") and a retail shopping center expansion in Stockbridge, Georgia
("Stockbridge Village I Expansion"), (iii) an office/retail center located in
Roswell, Georgia ("Holcomb Bridge Road"), (iv) a retail center located in
Stockbridge, Georgia ("the Hannover Center"), (v) a four-story office building
located in Jacksonville, Florida ("BellSouth"), (vi) an office building located
in Gainesville, Florida ("CH2M Hill"), (vii) a retail center in Winston-Salem,
North Carolina ("Tanglewood Commons"), and (viii) a retail center located in
Cherokee County, Georgia ("Cherokee Commons").
Employees
The Partnership has no direct employees. The employees of Wells Capital, Inc., a
General Partner of the Partnership, perform a full range of real estate services
including leasing and property management, accounting, asset management and
investor relations for the Partnership. See Item 11--"Compensation of General
Partners and Affiliates" for a summary of the fees paid to the General Partners
and their affiliates during the fiscal year ended December 31, 2000.
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Insurance
Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all the properties
owned directly or indirectly by the Partnership. In the opinion of management,
the properties are adequately insured.
Competition
The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the General Partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements, and other inducements, all of which may
have an adverse impact on results of operations. At the time the Partnership
elects to dispose of its properties, the Partnership will also be in competition
with sellers of similar properties to locate suitable purchasers for its
properties.
ITEM 2. PROPERTIES
The Partnership owns interests in nine properties through its ownership in joint
ventures of which three are office buildings and six are retail centers. The
Partnership does not have control over the operations of the joint ventures,
however, it does exercise significant influence. Accordingly, investment in
joint ventures is recorded on the equity method. As of December 31, 2000, the
properties had an occupancy rate of 98.7%. As of December 31, 1999, the
properties had an occupancy rate of 97.4%. As of December 31, 1998, the seven
properties that were in operation had an occupancy rate of 95.7%.
The following table shows lease expirations during each of the next ten years as
of December 31, 2000, assuming no exercise of renewal options or termination
rights:
Partnership Percentage Percentage
Number Share of of Total of Total
Year of Of Square Annualized Annualized Square Annualized
Lease Leases Feet Gross Base Gross Base Feet Gross Base
Expiration Expiring Expiring Rent (1) Rent (1) Expiring Rent
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2001 12 42,294 $ 667,105 $ 242,593 11.0% 12.2%
2002 25 48,834 807,089 367,705 12.7 14.8
2003 17 31,492 435,768 142,670 8.2 8.0
2004 6 20,028 272,224 93,737 5.2 5.0
2005(2) 8 78,229 841,545 341,452 20.3 15.4
2006(3) 5 161,379 2,387,366 911,286 41.7 43.7
2007 1 3,600 46,793 5,011 0.9 0.9
2008 0 0 0 0 0.0 0.0
2009 0 0 0 0 0.0 0.0
2010 0 0 0 0 0 0.0
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74 385,856 $5,457,890 $2,104,454 100.0% 100.0%
============ ============ =============== ============== =============== ================
(1) Average monthly gross rent over the life of the lease,
annualized.
(2) Primarily expiration of CH2M Hill lease, Gainesville, Florida.
(3) Reflects expirations of Marathon Building, BellSouth, and
Bertucci's.
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The following describes the properties in which the Partnership owns an interest
as of December 31, 2000:
Fund V-VI-VII Joint Venture
On September 8, 1994, the Partnership, Wells Real Estate Fund V, L.P.
("Wells Fund V") and Wells Real Estate Fund VI, L.P. ("Wells Fund VI"),
both of which are Georgia public limited partnerships affiliated with
the Partnership through common general partners, entered into a Joint
Venture Agreement known as Fund V, Fund VI and Fund VII Associates (the
"Fund V-VI-VII Joint Venture"). The investment objectives of Wells Fund
V and Wells Fund VI are substantially identical to those of the
Partnership. The Partnership owns a 42% interest in the following
property through the Fund V-VI-VII Joint Venture:
The Marathon Building
On September 16, 1994, the Fund V-VI-VII Joint Venture
purchased a three-story office building for a purchase price
of $8,250,000, excluding acquisition costs, containing
approximately 76,000 rentable square feet, located on
approximately 6.2 acres of land in Appleton, Wisconsin (the
"Marathon Building"). The funds used by the Fund V-VI-VII
Joint Venture to acquire the Marathon Building were derived
from capital contributions made by the Partnership, Wells Fund
V and Wells Fund VI totaling $3,470,958, $1,337,505, and
$3,470,958, respectively, for total contributions to the Fund
V-VI-VII Joint Venture of $8,279,421 including acquisition
costs.
The entire Marathon Building is leased to Jaakko Poyry Fluor
Daniel for a period of twelve years, three and one-half
months, with options to renew the lease for two additional
five-year periods. The annual base rent is $910,000. The
current lease expires on December 31, 2006. The lease
agreement is a net lease in that the tenant is responsible for
the operational expenses including real estate taxes.
The occupancy rate at the Marathon Building was 100% for 2000,
1999, and 1998. The average effective annual rental per square
foot in the Marathon Building was $12.78 for 2000, 1999 and
1998, $12.74 for 1997, and $12.78 for 1996.
Fund VI-Fund VII Joint Venture
On December 9, 1994, the Partnership and Wells Fund VI entered into a
Joint Venture Agreement known as Fund VI and Fund VII Associates ("Fund
VI-Fund VII Joint Venture"). As of December 31, 2000, the Partnership
had contributed $3,358,633 and Wells Fund VI had contributed
$2,710,639, including its cost to acquire land, to the Fund VI-Fund VII
Joint Venture for the acquisition and development of the Stockbridge
Village III and the Stockbridge Village I Expansion. As of December 31,
2000, the Partnership's equity interest in the Fund VI-VII Joint
Venture was approximately 55.2%, and Wells Fund VI's equity interest in
the Fund VI-VII Joint Venture was approximately 44.8%. The Partnership
owns interests in the following two properties through the Fund VI-Fund
VII Joint Venture:
Stockbridge Village III
In April 1994, Wells Fund VI purchased 3.27 acres of real
property located on the north side of Georgia State Route 138
at Mt. Zion Road, Clayton County, Georgia for a cost of
$1,015,673. This tract of land is located directly across
Route 138 from the Stockbridge
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Village Shopping Center which was developed and is owned by an
affiliate of the Partnership. On December 9, 1994, Wells Fund
VI contributed the property as a capital contribution to the
Fund VI-Fund VII Joint Venture.
As of December 31, 2000, the Partnership had contributed
$1,917,483, and Wells Fund VI had contributed $1,033,285 to
the Fund VI-Fund VII Joint Venture for the acquisition and
development of the Stockbridge Village III Property.
The first building is a 3,200 square foot restaurant, which
was completed in March 1995, at a cost of approximately
$400,000 excluding land. The space is now being leased by
RMS/Fazoli's, which signed a 13-year lease that commenced on
December 10, 1998.
Construction began in January 1995, on a second out-parcel
building containing approximately 15,000 square feet for
approximately $1,500,000 excluding land. In October 1995,
Damon's Clubhouse occupied 6,732 square feet and the other
five tenants occupied 8,268 square feet. The term of the lease
is for nine years and 11 months commencing October 1995. The
initial annual base rent is $102,375 through March 2001 and
$115,375 thereafter.
The occupancy rate at year end at the Stockbridge Village III
Property was 100% for 2000, 1999, and 1998. The average
effective annual rental per square foot at the Stockbridge
Village III Property was $17.05 for 2000, $17.08 for 1999,
$13.08 for 1998, $15.67 for 1997, and $14.15 for 1996.
Stockbridge Village I Expansion
On June 7, 1995, the Fund VI-Fund VII Joint Venture purchased
3.38 acres of real property located in Clayton County, Georgia
for a total price of approximately $718,000. The Stockbridge
Village I Expansion consists of a multi-tenant shopping center
containing approximately 29,200 square feet. Construction was
substantially complete in April 1996, with Cici's Pizza
occupying a 4,000 square foot restaurant. The term of the
lease is for 9 years and 11 months commencing in April 1996.
The initial annual base rent is $48,000. In the third year,
the annual base rent increases to $50,000, in the sixth year
to $52,000, and in the ninth year to $56,000. Fourteen
additional tenants have occupied the remaining square feet at
the property in 2000.
As of December 31, 2000, the Partnership had contributed a
total of $1,441,150, and Wells Fund VI had contributed a total
of $1,677,354, for a total contribution of approximately
$3,118,504 toward the development and construction of the
Stockbridge Village I Expansion.
The occupancy rate at the Stockbridge Village I Expansion was
100% at the year end 2000, 86% for 1999, and 81% for 1998. The
average effective annual rental per square foot was $11.97 for
2000, $10.74 for 1999, $10.08 for 1998, $6.82 for 1997, and
$2.69 for 1996, the first year of occupancy.
Fund II-III-VI-VII Joint Venture--Holcomb Bridge Road Property
On January 10, 1995, the Partnership, Fund II-Fund III Joint Venture,
and Wells Fund VI entered into a Joint Venture Agreement known as Fund
II, III, VI, and VII Associates ("Fund II-III-VI-VII Joint Venture").
The Fund II-Fund III Joint Venture is a joint venture between Wells
Real
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Estate Fund III, L.P., a Georgia public limited partnership having
Leo F. Wells, III and Wells Capital, Inc. as general partners, and an
existing joint venture (the "Fund II-Fund II-OW Joint Venture") formed
by Wells Real Estate Fund II ("Wells Fund II"), a Georgia public
limited partnership having Leo F. Wells, III and Wells Capital, Inc. as
general partners, and Wells Real Estate Fund II-OW ("Wells Fund
II-OW"), a Georgia public limited partnership having Leo F. Wells, III
and Wells Capital, Inc. as general partners. The investment objectives
of Wells Fund II, Wells Fund II-OW, Wells Fund III and Wells Fund VI
are substantially identical to those of the Partnership.
In January 1995, the Fund II-Fund III Joint Venture contributed to the
Fund II-III-VI-VII Joint Venture approximately 4.3 acres of land at the
intersection of Warsaw Road and Holcomb Bridge Road in Roswell, Fulton
County, Georgia (the "Holcomb Bridge Road Property") including land
improvements for the development and construction on two buildings
containing a total of approximately 49,534 square feet. Fourteen
tenants occupied the Holcomb Bridge Road Property as of December 31,
2000, for an occupancy rate of 92% for 2000, 100% for 1999, and 94% for
1998. The average effective annual rental per square foot at the
Holcomb Bridge Property was $17.55 for 2000, $19.36 for 1999, $17.63
for 1998, $13.71 for 1997, and $9.87 for 1996, the first year of
occupancy.
As of December 31, 2000, Fund II-Fund III Joint Venture had contributed
$1,729,116 in land and improvements for an equity interest of
approximately 24.1%, Wells Fund VI had contributed $1,929,541 for an
equity interest of approximately 26.9%, and the Partnership had
contributed $3,525,041 for an equity interest of approximately 49.0%.
The total cost to develop the Holcomb Bridge Road Property is
approximately $5,454,582, excluding land.
Fund VII-Fund VIII Joint Venture
On February 10, 1995, the Partnership and Wells Real Estate Fund VIII,
L.P. ("Wells Fund VIII"), a Georgia public limited partnership
affiliated with the Partnership through common general partners,
entered into a Joint Venture Agreement known as Fund VII and Fund VIII
Associates (the "Fund VII-Fund VIII Joint Venture"). The investment
objectives of Wells Fund VIII are substantially identical to those of
the Partnership. The Partnership holds an approximate 37% equity
interest and Wells Fund VIII holds an approximate 63% equity interest
in the Fund VII-Fund VIII Joint Venture which owns and operates an
office building and a retail/office building as described below. As of
December 31, 2000, the Partnership had contributed $2,474,725 and Wells
Fund VIII had contributed $4,267,621 for a total cost of $6,742,346 to
the Fund VII-Fund VIII Joint Venture for the acquisition and
development of the property.
The Hannover Property
On April 1, 1996, the Partnership contributed 1.01 acres of
land located in Clayton County, Georgia, and improvements
thereon, valued at $512,000, to the Fund VII-Fund VIII Joint
Venture for the development of a 12,080 square foot, single
story combination retail/office building. As of December 31,
2000, the Partnership had funded approximately $1,437,801 for
the development of the Hannover property, in addition to the
cost of the land, and Wells Fund VIII had contributed $190,311
to the joint venture for the development of the property.
A five-year lease has been signed with Mattress King, a
mattress sale store, to occupy 6,020 square feet. The annual
base rent for the first three years is $88,795, and for the
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last two years is $91,805. The lease will expire in 2006. Two
additional tenants leased the remaining space at the property
with leases to expire in 2003.
The average effective annual rental per square foot at the
Hannover Property was $9.15 for 2000, $15.97 for 1999, $10.05
for 1998, $8.92 for 1997, and $8.14 for 1996, the first year
of occupancy. The occupancy as of December 31, 2000, 1999, and
1998 was 100%.
CH2M Hill at Gainesville
The Partnership made an initial contribution to the Fund
VII-Fund VIII Joint Venture of $677,534, which constituted the
total purchase price and all other acquisition and development
costs expended by the Fund VII-Fund VIII Joint Venture for the
purchase of a 5 acre parcel of land in Gainesville, Alachua
County, Florida. Construction of a 62,975 square foot office
building, containing 61,468 rentable square feet was completed
in December 1995. The average effective annual rental per
square foot at the Gainesville Property was $9.37 for 2000 and
1999, $9.19 for 1998, $8.63 for 1997, and $8.69 for 1996. The
occupancy rate for the years ended December 31, 2000, 1999,
and 1998 was 100%.
A 9 year, 11-month lease, to occupy 57,457 square feet has
been signed with CH2M Hill, Engineers, Planners, Economists,
Scientists, with an option to extend for an additional five
year period. The annual base rent during the initial term is
$530,313 payable in equal monthly installments of $44,193. The
annual rent for the extended term will be at market rate.
Assuming no options or termination rights, the lease with CH2M
Hill will expire in the year 2005.
As of December 31, 2000, the Partnership had contributed
$1,036,923, and Wells Fund VIII had contributed $4,077,310 to
the Fund VII-Fund VIII Joint Venture toward the completion of
this project.
Fund VI-VII-VIII Joint Venture
On April 17, 1995, the Partnership, Wells Fund VI and Wells Real Estate
Fund VIII, L.P. ("Wells Fund VIII"), a Georgia public limited
partnership affiliated with the Partnership through common general
partners, formed a joint venture known as the Fund VI, Fund VII, and
Fund VIII Associates (the "Fund VI-VII-VIII Joint Venture"). The
investment objectives of Wells Fund VI and Wells Fund VIII are
substantially identical to those of the Partnership. As of December 31,
2000, the Partnership had contributed approximately $5,932,312 for an
approximately 33.4% equity interest in the Fund VI-VII-VIII Joint
Venture, which owns an office building in Jacksonville, Florida and a
multi-tenant retail center in Clemmons, North Carolina. As of December
31, 2000, Wells Fund VIII had contributed $5,700,000 for an equity
interest in the Fund VI-VII-VIII Joint Venture of approximately 32.3%,
and Wells Fund VI had contributed approximately $6,067,688 for an
equity interest in the Fund VI-VII-VIII Joint Venture of approximately
34.3%, for a total cost of $17,700,000 to the Fund VI-VII-VIII Joint
Venture for the acquisition and development of the property.
BellSouth Property
On April 25, 1995, the Fund VI-VII-VIII Joint Venture
purchased a 5.55 acre parcel of land in Jacksonville, Florida
for a total of $1,245,059 including closing costs. In May
1996, the 92,964 square foot office building was completed
with BellSouth Advertising
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and Publishing Corporation, a subsidiary of BellSouth Company,
occupying approximately 66,333 square feet and American
Express Travel Related Services Company, Inc. occupying
approximately 22,607 square feet. BellSouth occupied an
additional 3,901 square feet in December 1996. The land
purchase and construction costs totaling approximately $9
million were funded by capital contributions of $3,500,000 by
the Partnership, $3,500,000 by Wells Fund VI, and $2,000,000
by Wells Fund VIII.
The BellSouth lease is for a term of nine years and eleven
months with an option to extend for an additional five-year
period at market rate. The annual base rent during the initial
term is $1,094,426 during the first five years and $1,202,034
for the balance of the initial lease term. The American
Express lease is for a term of five years at an annual base
rent of $369,851. BellSouth and American Express are required
to pay additional rent equal to their share of operating
expenses during their respective lease terms.
The average effective annual rental per square foot at the
BellSouth Property was $16.36 for 2000, 1999, and 1998, $16.40
for 1997, and $14.15 for 1996, the first year of occupancy.
The occupancy rate was 100% for 2000, 1999, and 1998.
Tanglewood Commons Shopping Center
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased
a 14.683 acre tract of real property located in Clemmons,
Forsyth County, North Carolina. The Fund VI-VII-VIII Joint
Venture constructed one large strip shopping center building
containing approximately 67,320 gross square feet on a 12.48
acre tract. The remaining 2.2 acre portion of the property
consists of four out-parcels which have been graded and are
held for future development or resale. As of December 31,
2000, the Partnership had contributed $2,432,312, Wells Fund
VI had contributed $2,567,688 and Wells Fund VIII had
contributed $3,700,000 for the development of this project.
Total cost and expenses incurred by the Fund VI-VII-VIII Joint
Venture for the acquisition, development, construction and
completion of the shopping center is approximately $8,700,000.
Construction of the project was substantially completed in the
first quarter of 1997.
Harris Teeter, Inc., a regional supermarket chain, executed a
lease for a minimum of 45,000 square feet with an initial term
of 20 years with extension options of four successive five
year periods with the same terms as the initial lease. The
annual base rent during the initial term is $488,250. In
addition, Harris Teeter has agreed to pay percentage rents
equal to one percent of the amount by which Harris Teeter's
gross sales at this location exceed $35,000,000 for any lease
year.
The average effective annual rental per square foot at
Tanglewood Commons was $12.53 for 2000, $11.48 for 1999,
$10.96 for 1998, and $9.12 for 1997, the first year of
occupancy. The occupancy rate was 100% for 2000, and 91% for
1999 and 1998.
Fund I-II-II-OW-VI-VII Joint Venture
On August 1, 1995, the Partnership, Wells Real Estate Fund I ("Wells
Fund I"), a Georgia public limited partnership, the Fund II-Fund II-0W
Joint Venture and Wells Fund VI, entered into a joint venture agreement
known as Fund I, II, II-OW, VI and VII Associates (the "Fund
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I-II-II-OW-VI-VII Joint Venture"), which was formed to own and operate
the Cherokee Property described below. Wells Fund I is a Georgia
limited partnership having Leo F. Wells, III and Wells Capital, Inc.,
as general partners. The investment objectives of Wells Fund I, the
Fund II-Fund II-OW Joint Venture and Wells Fund VI are substantially
identical to those of the Partnership.
Cherokee Property
The Cherokee Property consists of a retail shopping center
known as "Cherokee Commons Shopping Center" located in
metropolitan Atlanta, Cherokee County, Georgia (the "Cherokee
Property"). The Cherokee Property has been expanded to consist
of approximately 103,755 net leasable square feet. The
Cherokee Property was initially developed through a joint
venture between Wells Fund I and the Fund II-Fund II-OW Joint
Venture, which contributed the Cherokee Property to the Fund
I-II-II-OW-VI-VII Joint Venture on August 1, 1995 to complete
the required funding for the expansion.
As of December 31, 2000, Wells Fund I had contributed property
with a book value of $2,139,900, the Fund II-Fund II-OW Joint
Venture had contributed property with a book value of
$4,860,100, Wells Fund VI had contributed cash in the amount
of $953,798 and the Partnership had contributed cash in the
amount of $953,798 to the Fund I-II-II-OW-VI-VII Joint
Venture. As of December 31, 2000, the equity interests in the
Fund I-II-II-OW-VI-VII Joint Venture were approximately as
follows: Wells Fund I, 24%; Fund II-Fund II-OW Joint Venture,
54%; Wells Fund VI, 11%; and the Partnership, 11%.
The Cherokee Property is anchored by a 67,115 square foot
lease with Kroger Food/Drug which expires in 2011. Kroger's
original lease was for 45,528 square feet. In 1994, Kroger
expanded to the current 67,115 square feet which is
approximately 65% of the total rentable square feet in the
property. As of December 31, 2000, the Cherokee Property was
approximately 98% occupied by 22 tenants, including Kroger.
Kroger, a retail grocery chain, is the only tenant occupying
ten percent or more of the rentable square footage. The other
tenants in the shopping center provide typical retail shopping
services.
The Kroger lease provides for an annual rent of $392,915 which
increased to $589,102 on August 16, 1995 due to the expansion
from 45,528 square feet to 67,115 square feet. The lease
expires March 31, 2011 with Kroger entitled to five successive
renewals each for a term of five years at the same rental rate
as the original lease.
The occupancy rate at the Cherokee Property at year end was
98% in 2000, 97% in 1999, and 91% in 1998.
The average effective annual rental per square foot at the
Cherokee Property was $9.31 for 2000, $9.11 for 1999, $8.78
for 1998, $8.49 for 1997, and $8.59 for 1996.
The property is currently being marketed for sale by CB
Richard Ellis. The marketing piece is being broadly
distributed to investors throughout the country. The
Partnership's goal is to have this property sold by the end of
2002.
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ITEM 3. LEGAL PROCEEDINGS
There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Limited Partners for the year of
2000.
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PART II
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS
As of February 28, 2001, the Partnership had 2,045,428 outstanding Class A
Status Units held by a total of 1,669 Limited Partners and 372,590 of Class B
Status held by a total of 241 Limited Partners. There is no established public
trading for the Partnership's limited partnership units, and it is not
anticipated that a public trading market for the units will develop. Under the
Partnership Agreement, the General Partners have the right to prohibit transfers
of units.
The General Partners have estimated the investment value of properties held by
the Partnership as of December 31, 2000 to be $10.24 per A unit and $14.54 per B
unit based on market conditions existing in early December 2000. The methodology
used for this valuation was to estimate the amount a holder of Partnership Units
would receive if the Partnership's properties were all sold in the ordinary
course of business as of December 31, 2000, and the proceeds from such sales
(without reduction for selling expenses), together with Partnership funds held
as of such date, were distributed in a liquidation of the Partnership. This
value was confirmed as reasonable by an independent MAI appraiser, David L. Beal
Company, although no actual MAI appraisal was performed due to the inordinate
expense involved with such an undertaking. The valuation does not include any
fractional interest valuation.
Cash distribution from Net Cash from Operations are distributed to the Limited
Partners on a quarterly basis unless Limited Partners elect to have their cash
distributions paid monthly. Net Cash from Operations is defined in the
Partnership Agreement as Cash Flow less adequate cash reserves for other
obligations of the Partnership for which there is no provision, but are
initially allocated none of the depreciation, amortization, cost recovery, and
interest expense. These items are allocated to Class B Unit holders until their
capital account balances have been reduced to zero. Under the Partnership
Agreement, distributions are allocated first to the Limited Partners holding
Class A Units (and limited partners holding Class B Units that have elected a
conversion right that allows them to share in the distribution rights of limited
partners holding Class A Units) until they have received 10% of their adjusted
capital contributions, as defined. Cash available for distribution is then
distributed to the General Partners until they have received an amount equal to
10% of cash distributions. Any remaining cash available for distribution is
split between the Limited Partners holding Class A Units and the General
Partners in a ratio of 90% and 10% respectively. No distributions will be made
to the Limited Partners holding Class B Units. Holders of Class A Units will,
except in limited circumstances, be allocated none of the Partnership's Net
Loss, depreciation, amortization and cost recovery deductions. These deductions
will be allocated to Class B Units until their Capital account balances have
been reduced to zero.
No distributions have been made to the General Partner as of December 31, 2000.
Cash distributions made to Limited Partners holding Class A Units (and Limited
Partners holding Class B Units that have elected a conversion right) during 2000
and 1999 were as follows:
-11-
Per Class A Per Class A Per Class B
Total Unit Unit Unit
Distribution for Cash Investment Return of Return of
Quarter Ended Distributed Income Capital Capital
----------------------------- ----------------- ------------- ------------- -------------
March 31, 1999 $415,133 $0.21 $0.00 $0.00
June 30, 1999 433,974 0.22 0.00 0.00
September 30, 1999 442,683 0.22 0.00 0.00
December 31, 1999 458,148 0.22 0.00 0.00
March 31, 2000 471,887 0.23 0.00 0.00
June 30, 2000 485,206 0.24 0.00 0.00
September 30, 2000 471,945 0.11 0.12 0.00
December 31, 2000 453,613 0.10 0.12 0.00
The fourth quarter distribution was accrued for accounting purposes in 2000, and
was not actually paid to Limited Partners holding Class A Units until February
2001. The General Partners anticipate that cash distributions to Limited
Partners holding Class A units will continue in 2001 at a level at least
comparable with 2000 cash distributions on an annual basis.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of the selected financial data for the fiscal
years ended December 31, 2000, 1999, 1998, 1997, and 1996:
2000 1999 1998 1997 1996
---------------- --------------- ---------------- ----------------- -----------------
Total assets $16,992,526 $17,993,904 $18,789,678 $19,666,294 $20,312,730
Total revenues 961,858 982,630 846,306 816,237 543,291
Net income 882,982 895,795 754,334 733,149 452,776
Net income allocated to Class A
limited partners 1,286,161 1,879,410 1,704,213 1,615,965 1,062,605
Net loss allocated to Class B
limited partners (403,179) (983,615) (949,879) (882,816) (609,829)
Net income per weighted average
Class A limited partner unit (1) $ 0.63 $ 0.93 $ 0.85 $ 0.86 $ 0.62
Net loss per weighted average
Class B limited partner unit (1) (1.07) (2.48) (2.24) (1.68) (.98)
Cash distributions per weighted
average Class A limited
partner unit: (1)
Investment income 0.68 0.87 0.82 0.79 0.50
Return of capital 0.24 0.00 0.00 0.00 0.00
(1) The weighted average unit is calculated by averaging units over
the period they are outstanding during the time units are still
being purchased or converted by limited partners in the
Partnership.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND CONDITIONS
RESULTS OF OPERATION
The following discussion and analysis should be read in conjunction with the
selected financial data and the accompanying financial statements of the
Partnership and notes thereto. This Report contains forward-looking statements,
within the meaning of Section 27A of the Securities Act of 1933 and 21E of the
Securities Exchange Act of 1934, including discussion and analysis of the
financial condition of the Partnership, anticipated capital expenditures
required to complete certain projects, amounts of cash
-12-
distributions anticipated to be distributed to Limited Partners in the future
and certain other matters. Readers of this Report should be aware that there are
various factors that could cause actual results to differ materially from any
forward-looking statement made in this Report, which include construction costs
which may exceed estimates, construction delays, lease-up risks, inability to
obtain new tenants upon the expiration of existing leases, and the potential
need to Fund tenant improvements or other capital expenditures out of operating
cash flow.
Results of Operations and Changes in Financial Conditions
General
Gross revenue of the Partnership decreased to $961,858 in 2000 from $982,630 in
1999 due primarily to decreased income from the joint ventures, primarily due to
decreased occupancy at the Holcomb Bridge Road Property and Hannover Property.
Net income of the Partnership was $882,982 for the fiscal year ended December
31, 2000, compared to $895,795 in 1999 due primarily to the decrease in revenues
discussed above.
The Partnership made cash distributions to the Limited Partners holding Class A
Units of $0.92 per unit for the fiscal year ended December 31, 2000, $0.87 per
unit for fiscal year ended December 31, 1999, and $0.82 per unit for the fiscal
year ended December 31, 1998. No cash distributions were made to the Limited
Partners holding Class B Units for the fiscal years ended December 31, 2000,
1999, and 1998. Distributions were accrued for the fourth quarter of 2000 and
paid in February 2001. No distributions were made to General Partners.
Property Operations
As of December 31, 2000, the Partnership's percentage ownership in properties
was as follows: 10.7% in the Fund I-II-II-OW-VI-VII Joint Venture, 41.7% in the
Fund V-VI-VII Joint Venture, 55.2% in the Fund VI-Fund VII Joint Venture, 36.7%
in the Fund VII-Fund VIII Joint Venture, 49.1% in the Fund II-III-VI-VII Joint
Venture, and 33.4% in the Fund VI-VII-VIII Joint Venture.
As of December 31, 2000, the Partnership owned interests in the following
operational properties through its ownership of the foregoing joint ventures:
-13-
The Marathon Building/Fund V-VI-VII Joint Venture
For the Year Ended December 31
----------------------------------------------
2000 1999 1998
------------- -------------- -------------
Revenues:
Rental income $971,050 $971,051 $971,447
------------- -------------- -------------
Expenses:
Depreciation 350,585 350,585 350,585
Management and leasing expenses 9,442 39,659 34,632
Other operating expenses 20,791 19,441 12,261
------------- -------------- -------------
380,818 409,685 397,478
------------- -------------- -------------
Net income 590,232 $561,366 $573,969
============= ============== =============
Occupied percentage 100% 100% 100%
============= ============== =============
Partnership ownership percentage 41.7% 41.7% 41.7%
============= ============== =============
Cash distributed to the Partnership 395,999 $383,958 $388,835
============= ============== =============
Net income allocated to the Partnership 246,186 $234,146 $239,403
============= ============== =============
Rental income remained stable in 2000, 1999, and 1998. Management and leasing
fees decreased, as compared to 1999, due to a lower rate charged starting in
October 1999. The management and leasing agreement reduces fees to 1% after five
years on triple-net leases of ten years or more. As a result, net income and
cash distribution to the Partnership increased.
Real estate taxes and all operational expenses for the building are the
responsibility of the tenant.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.
-14-
Stockbridge Village III/Fund VI - Fund VII Joint Venture
For the Year Ended December 31
----------------------------------------------
2000 1999 1998
------------ -------------- -------------
Revenues:
Rental income $310,374 $310,887 $238,098
------------ -------------- -------------
Expenses:
Depreciation 85,635 86,459 91,053
Management and leasing expenses 38,094 36,146 32,844
Other operating expenses 14,843 26,158 145,402
------------ -------------- -------------
138,572 148,763 269,299
------------ -------------- -------------
Net income (loss) 171,802 $162,124 $(31,206)
============ ============== =============
Occupied percentage 100% 100% 100%
============ ============== =============
Partnership ownership percentage 55.2% 56.3% 56.3%
============ ============== =============
Cash distribution to the Partnership 147,515 $139,292 $ 36,772
============ ============== =============
Net income (loss) allocated to the Partnership 96,123 $ 91,273 $(17,686)
============ ============== =============
Rental income remained stable, as compared to 1999, due to 100% occupancy for
the whole two years at the property.
Net income and cash distributions have increased, as compared to 1999, due
primarily to decreased expenses for legal fees and administrative salaries.
Other operating expenses were higher in 1998 due to bad debt expense recorded in
1998.
The Stockbridge Village III Property incurred property taxes of $25,508 for
2000, $26,211 for 1999, and $25,248 for 1998.
The Partnership's ownership in the Fund VI-Fund VII Joint Venture decreased to
55.2%, as compared to 56.3% in 1999 and 1998, due to additional funding by Wells
Fund VI, which decreased the Partnership's ownership in the Fund VI-Fund VII
Joint Venture.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc. see Item 2, Properties, page 3.
-15-
Stockbridge Village I Expansion--Fund VI-Fund VII Joint Venture
For the Year Ended December 31
---------------------------------------------
2000 1999 1998
------------- ------------ ------------
Revenues:
Rental income $349,557 $313,566 $294,318
------------- ------------ ------------
Expenses:
Depreciation 147,577 149,132 141,843
Management and leasing expenses 46,590 43,918 44,398
Other operating expenses 38,142 12,461 18,181
------------- ------------ ------------
232,309 205,511 204,422
------------- ------------ ------------
Net income $117,248 $108,055 $ 89,896
============= ============ ============
Occupied percentage 93% 86% 81%
============= ============ ============
Partnership ownership percentage 55.2% 56.3% 56.3%
============= ============ ============
Cash distribution to the Partnership $156,430 $157,919 $127,292
============= ============ ============
Net income allocated to the Partnership $ 65,462 $ 60,833 $ 51,067
============= ============ ============
Rental income increased as compared to 1999 and 1998 due to increased rental
renewal rates this year and increased occupancy.
Other operating expenses increased due to increased legal fees and decreases in
common area maintenance billing to tenants. In 1999 monthly common area
maintenance billing to tenants were overcharged. Tenants are billed an estimated
amount for the current year common area maintenance which is then reconciled the
following year and the difference billed to the tenant.
The Stockbridge Village I Expansion incurred property taxes of $25,919 for 2000,
$23,085 for 1999, and $22,565 for 1998.
The Partnership's ownership percentage in the Fund VI-Fund VII Joint Venture
decreased to 55.2%, as compared to 56.3% in 1999 and 1998, due to additional
funding by Wells Fund VI, which decreased the Partnership's ownership in the
Fund VI-Fund VII Joint Venture.
For comments on the general competitive condition to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.
-16-
Holcomb Bridge Road Property/Fund II-III-VI-VII Joint Venture
For the Year Ended December 31
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues:
Rental income $869,390 $953,952 $872,978
Other income 0 23,843 36,000
------------ ------------ ------------
869,390 977,795 908,978
------------ ------------ ------------
Expenses:
Depreciation 355,293 415,165 376,290
Management and leasing expenses 111,567 129,797 97,701
Other operating expenses 171,997 93,535 107,418
------------ ------------ ------------
638,857 638,497 581,409
------------ ------------ ------------
Net income $230,533 $339,298 $327,569
============ ============ ============
Occupied percentage 92% 100% 94%
============ ============ ============
Partnership ownership percentage 49.1% 49.1% 49.0%
============ ============ ============
Cash distribution to the Partnership $319,584 $372,838 $365,964
============ ============ ============
Net income allocated to the Partnership $113,123 $166,494 $160,864
============ ============ ============
Rental income decreased in 2000, as compared to 1999 and 1998, due to decreased
occupancy. Depreciation expense was higher in 1999, as compared to 1998 and
2000, due to increased tenant improvement for new tenants for 1999 and some
tenant improvement becoming fully depreciated in 1999. Other operating expenses
increased due to appraisal fees for this property and a bad debt recorded in
this year.
The Holcomb Bridge Property incurred property taxes of $52,887 for 2000, $53,896
for 1999, and $52,162 for 1998.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.
-17-
The Hannover Center/Fund VII - Fund VIII Joint Venture
For the Year Ended December 31
----------------------------------------------
2000 1999 1998
------------- ------------ -------------
Revenues:
Rental income $ 110,502 $192,913 $121,056
--------- -------- --------
Expenses:
Depreciation 111,612 84,403 43,925
Management and leasing expenses 17,248 20,489 11,487
Other operating expenses 85,977 20,290 20,482
--------- -------- --------
214,837 $125,182 75,894
--------- -------- --------
Net (loss) income $(104,335) 67,731 $ 45,162
========= ======== ========
Occupied percentage 100% 100% 100%
========= ======== ========
Partnership ownership percentage 36.7% 36.7% 36.7%
========= ======== ========
Cash distribution to the Partnership $ 0 $ 53,227 $ 16,607
========= ======== ========
Net (loss) income allocated to the Partnership $ (38,239) $ 24,823 $ 6,962
========= ======== ========
Rental income decreased in 2000, as compared to 1999 and 1998, due to a partial
year occupancy in 2000. Net income and cash distributions to the Partnership
decreased in 2000, as compared to 1999 and 1998, due to one tenant defaulting on
the lease and moving out at the end of 1999. The management team is currently
taking legal action against that tenant. Depreciation increased in 2000 due to a
write-off of tenant improvement on the defaulted tenant. Other operating
expenses increased in 2000 due primarily to an uncollectable accounts
receivable.
Cash distribution to the Partnership was lower in 1998, as compared to 1999, due
to a $44,000 in construction being funded by operating cash in 1998.
The Hannover Property incurred property taxes of $12,967 for 2000, $12,995 for
1999, and 12,668 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.
-18-
CH2M Hill at Gainesville/Fund VII-Fund VIII Joint Venture
For the Year Ended December 31
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues:
Rental income $576,139 $576,139 $564,683
------------ ------------ ------------
Expenses:
Depreciation 263,963 263,243 251,783
Management and leasing expenses 97,086 103,551 82,031
Other operating expenses (45,517) (5,810) 49,250
------------ ------------ ------------
315,532 360,984 383,064
------------ ------------ ------------
Net income $260,607 $215,155 $181,619
============ ============ ============
Occupied percentage 100% 100% 100%
============ ============ ============
Partnership ownership percentage 36.7% 36.7% 36.7%
============ ============ ============
Cash distributed to the Partnership $190,894 $176,609 $161,604
============ ============ ============
Net income allocated to the Partnership $ 95,512 $ 78,854 $ 67,105
============ ============ ============
Rental income remained relatively stable in 2000, as compared to, 1999 and 1998.
Management and leasing expenses were higher in 1999 due to a change in estimates
of leasing fees. Other operating expenses decreased in 2000 due primarily to an
increase of 2000 monthly common area maintenance billing to tenants. Tenants are
billed an estimated amount for the current year common area maintenance which is
then reconciled the following year and the difference billed to the tenant.
Management and leasing fees reimbursement were included in other operating
expenses.
The CH2M Hill Property incurred property taxes of $81,509 for 2000, $81,703 for
1999, and $79,407 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.
-19-
BellSouth Property/Fund VI-VII-VIII Joint Venture
For the Year Ended December 31
--------------------------------------------------
2000 1999 1998
-------------- -------------- --------------
Revenues:
Rental income $1,521,109 $1,521,109 $1,521,109
Interest income 1,997 4,763 7,086
Other income 360 360 9,373
-------------- -------------- --------------
1,523,466 1,526,232 1,538,288
-------------- -------------- --------------
Expenses:
Depreciation 446,430 446,429 444,448
Management and leasing expenses 193,474 192,716 190,025
Other operating expenses 430,664 415,562 436,403
-------------- -------------- --------------
1,070,568 1,054,707 1,070,876
-------------- -------------- --------------
Net income $ 452,898 $ 471,525 $ 467,412
============== ============== ==============
Occupied percentage 100% 100% 100%
============== ============== ==============
Partnership ownership percentage in the Fund VI-VII-VIII
Joint Venture 33.4% 33.4% 33.4%
============== ============== ==============
Cash distribution to the Partnership $ 311,522 $ 317,821 $ 315,661
============== ============== ==============
Net income allocated to the Partnership $ 151,222 $ 157,467 $ 156,093
============== ============== ==============
Rental income, depreciation, and management and leasing expenses have remained
relatively stable in 2000, 1999, and 1998, while other operating expenses
increased, as compared to 1999, due primarily to increased janitorial expenses
and expenses for an application of water repellent on the building. As a result,
net income and cash distribution to the Partnership decreased in 2000.
The BellSouth Property incurred property taxes of $168,751 for 2000, $166,706
for 1999, and $171,629 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., see Item 2, Properties, page 3.
-20-
Tanglewood Commons/Fund VI-VII-VIII Joint Venture
For the Year Ended December 31
--------------------------------------
2000 1999 1998
---------- ---------- -----------
Revenues:
Rental income $ 843,761 $ 772,907 $ 737,862
Interest income 1,988 10,174 17,610
---------- ---------- -----------
845,749 783,081 1,538,288
---------- ---------- -----------
Expenses:
Depreciation 268,972 255,456 244,311
Management and leasing expenses 80,158 66,637 61,562
Other operating expenses (19,909) 67,726 49,338
---------- ---------- -----------
329,221 389,819 355,211
---------- ---------- -----------
Net income $ 516,528 $ 393,262 $ 400,261
========== ========== ===========
Occupied percentage 100% 91% 91%
========== ========== ===========
Partnership ownership percentage 33.4% 33.4% 33.4%
========== ========== ===========
Cash distribution to the Partnership $ 264,836 $ 218,381 $ 212,954
========== ========== ===========
Net income allocated to the Partnership $ 172,520 $ 131,330 $ 133,667
========== ========== ===========
Rental income, depreciation, and management and leasing expenses increased in
2000, as compared to 1999 and 1998, due to increased occupancy at the property.
Other operating expenses decreased due to monthly common area maintenance
billings to the tenants were increased in 2000 to offset 1999 under billing.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the following year and the difference
billed to the tenant. As a result, net income and cash distribution to the
Partnership increased.
The Tanglewood Commons Property incurred property taxes of $54,005 for 2000,
$53,259 for 1999, and $52,229 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc. see Item 2, Properties, page 3.
-21-
Cherokee Commons Shopping Center/Fund I-II-II-OW-VI and VII Joint Venture
For the Year Ended December 31
--------------------------------------
2000 1999 1998
---------- ---------- -----------
Revenues:
Rental income $ 965,305 $ 945,222 $ 909,831
Interest income 78 68 84
---------- ---------- ----------
965,383 945,290 909,915
---------- ---------- ----------
Expenses:
Depreciation 442,250 447,969 444,660
Management and leasing expenses 74,422 94,149 82,517
Other operating expenses 54,089 68,090 84,676
---------- ---------- ----------
570,761 610,208 611,853
---------- ---------- ----------
Net income $ 394,622 $ 335,082 $ 298,062
========== ========== ==========
Occupied percentage 98% 97% 91%
========== ========== ==========
Partnership ownership percentage 10.7% 10.7% 10.7%
========== ========== ==========
Cash distribution to the Partnership $ 89,038 $ 83,485 $ 79,238
========== ========== ==========
Net income allocated to the Partnership $ 42,256 $ 35,881 $ 31,916
========== ========== ==========
Rental income increased in 2000, as compared to 1999 and 1998, due to an
increase in occupancy and rental renewals. Management and leasing expenses
decreased in 2000, as compared to 1999, due to decreased leasing commission.
Management and leasing expenses increased in 1999, as compared to 1998, due to
an increase in occupancy and rental renewal rates. Depreciation expense
decreased in 2000, as compared to 1999, due to some tenant improvements becoming
fully depreciated in 1999. Operating expenses decreased in 2000, as compared to
1999, due to a reimbursable tenant improvement write-off in 1999, and decreased
in 1999, as compared to 1998, due to differences and adjustments of CAM billings
to tenants offset by increased expenses for tenant improvements, HVAC repairs,
and a partial demolition of a tenant suite in 1999. Tenants are billed an
estimate amount for the current year common area maintenance which is then
reconciled the next year and the difference is billed to the tenant.
Real estate taxes were $82,048 for 2000, $87,411 for 1999, and $ 77,311 for
1998.
For comments on the general conditions to which the property may be subject, see
Item 1, Business, page 2. For additional information on the property, tenants,
etc., see Item 2, Properties, page 3.
-22-
Liquidity and Capital Resources
On April 5, 1994, the Partnership commenced an offering of up to $25,000,000 of
Class A or Class B Limited Partnership Units ($10 per unit) pursuant to a
Registration Statement on Form S-11 filed under the Securities Act of 1933. The
offering was terminated on January 5, 1995, at which time the Partnership had
sold 1,678,810 Class A Units and 739,208 Class B Units, held by a total of 1,591
and 319 Limited Partners respectively, for total Limited Partner capital
contributions of $24,180,174. After payment of $846,306 in acquisition and
expense fees, payment of $3,627,026 in selling commissions and organization and
offering expenses and the investment of the Partnership of $3,358,633 in the
Fund VI-Fund VII Joint Venture, $3,470,958 in the Fund V-VI-VII Joint Venture,
$2,448,923 in the Fund VII-Fund VIII Joint Venture, 5,932,312 in the Fund
VI-VII-VIII Joint Venture, $953,798 in the Fund I-II-II-OW-VI-VII Joint Venture,
$3,525,041 in the Fund II-III-VI-VII Joint Venture, $2,547 in other acquisition
expenses, the Partnership is holding a balance of $14,630 as working reserves.
Pursuant to the terms of the Partnership Agreement, the Partnership is required
to maintain working capital reserves in an amount equal to the cash operating
expenses required to operate the Partnership for a six-month period not to be
reduced below 1% of Limited Partners' capital contributions. As set forth above,
in order to fund a portion of Holcomb Bridge Road Property and Stockbridge
Village III Project, the General Partners have used a portion of the
Partnership's working capital reserves to reduce the balance below this minimum
amount, rather than funding the tenant improvements out of operating cash flow,
which would have the effect of reducing cash flow distributions to Limited
Partners. The General Partners anticipate that the remaining $14,630 in working
capital reserves will be sufficient to meet future needs.
Net cash used in operating activities decreased from $82,763 in 1999 to $60,735
in 2000 due primarily to the decrease in equity income from joint ventures. Net
cash provided by investing activities increased in 2000, compared to 1999, due
primarily to the increase in the distributions from joint ventures. The increase
in net cash used in financing activities in 2000, compared to 1999, is the
result of the increase in distributions to partners.
The Partnership expects to continue to meet its short-term liquidity
requirements and budget demands generally through net cash provided by
operations which the Partnership believes will continue to be adequate to meet
both operating requirements and distributions to limited partners. At this time,
given the nature of the joint ventures in which the Partnership has invested,
there are no known improvements and renovations to the properties expected to be
funded from cash flow from operations.
Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
Cash distributions of $0.92 per weighted average Unit were made to Class A
Limited Partners for the year ended December 31, 2000. The Partnership's
distributions for the fourth quarter of 2000 will be paid in February 2001 from
net cash from operations and a return of capital. The Partnership anticipates
that distributions will continue to be paid on a quarterly basis from such
sources on a level at least consistent with 2000.
The Partnership is unaware of any known demands, commitments, events or capital
expenditures other than that which is required for the normal operations of its
properties that will result in the Partnership's liquidity increasing or
decreasing in any material way. The Partnership intends to fund any cash
requirements through operating cash flow.
-23-
Inflation
Real estate has not been affected significantly by inflation in the past three
years due to the relatively low inflation rate. There are provisions in the
majority of tenant leases executed by the Partnership to protect the Partnership
from the impact of inflation. Most leases contain common area maintenance
charges ("CAM charges"), real estate tax and insurance reimbursements on a per
square foot bases, or in some cases, annual reimbursement of operating expenses
above a certain per square foot allowance. These provisions should reduce the
Partnership's exposure to increases in costs and operating expenses resulting
from inflation. In addition, a number of the Partnership's leases are for terms
of less than five years which may permit the Partnership to replace existing
leases with new leases at higher base rental rates if the existing leases are
below market rate. There is no assurance, however, that the Partnership would be
able to replace existing leases with new leases at higher base rentals.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements of the Registrant and supplementary data are detailed
under Item 14(a) and filed as part of the report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with the Partnership's accountants or other
reportable events during 2000.
-24-
PART III
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP
Wells Partners, L.P.
Wells Partners, L.P. is a private Georgia limited partnership formed on October
25, 1990. The sole General Partner of Wells Partners, L.P. is Wells Capital,
Inc., ("Capital") a Georgia corporation. The executive offices of Wells Capital,
Inc. are located at 6200 The Corners Parkway, Norcross, Georgia 30092.
Leo F. Wells, III.
Mr. Wells is a resident of Atlanta, Georgia, is 57 years of age and holds a
Bachelor of Business Administration Degree in Economics from the University of
Georgia. Mr. Wells is the President and sole Director of Wells Capital. Mr.
Wells is the President of Wells & Associates, Inc., a real estate brokerage and
investment company formed in 1976 and incorporated in 1978, for which he serves
as principal broker. Mr. Wells is also currently the sole Director and President
of Wells Management Company, Inc., a property management company he founded in
1983. In addition, Mr. Wells is the President and Chairman of the Board of Wells
Investment Securities, Inc., Wells & Associates, Inc., and Wells Management
Company, Inc. which are affiliates of the General Partners. From 1980 to
February 1985, Mr. Wells served as Vice-President of Hill-Johnson, Inc., a
Georgia corporation engaged in the construction business. From 1973 to 1976, he
was associated with Sax Gaskin Real Estate Company and from 1970 to 1973, he was
a real estate salesman and property manager for Roy D. Warren & Company, an
Atlanta real estate company.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES
The following table summarizes the compensation and fees paid to the General
Partners and their affiliates during the year ended December 31, 2000:
(C)
----------------
(A) (B) Cash
Name of Individual Capacities in Which Served ----------------
or Number in Group Form of Compensation Compensation
- ------------------------------- ------------------------------- ----------------
Leo F. Wells, III General Partner $ 0
Property Manager--Management
Wells Management Company, Inc. And Leasing Fees $195,633(1)
(1) The majority of these fees are not paid directly by the Partnership
but are paid by the joint venture entities which own properties to
which the property management and leasing services relate and include
management and leasing fees.
-25-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.
Set forth below is the security ownership of management as of December 31, 2000.
(1) (2) (3) (4)
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
- --------------------- -------------------- ------------------------- ---------------------
69.322 Units (IRA, 401(k),
Class A units Leo F. Wells, III and profit sharing) Less than 1%
No arrangements exist which would, upon implementation, result in a change in
control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following are compensation and fees paid or to be paid by the Partnership to
the General Partners and their affiliates in connection with the operation of
the Partnership.
Interest in Partnership Cash Flow and Net Sale Proceeds
The General Partners will receive a subordinated participation in net cash flow
from operations equal to 10% of net cash flow from operations after the Limited
Partners holding Class A Units have received preferential distributions equal to
10% of their adjusted capital contribution. The General Partners will also
receive a subordinated participation in net sale proceeds and net financing
proceeds equal to 20% of residual proceeds available for distribution after the
Limited Partners holding Class B Units have received a return of their adjusted
capital contribution plus a 15% cumulative return on their adjusted capital
contribution; however, that in no event shall the General Partners receive in
the aggregate in excess of 15% of net sale proceeds and net financing proceeds
remaining after payments to Limited Partners from such proceeds of amounts equal
to the sum of their adjusted capital contributions plus a 6% cumulative return
on their adjusted capital contributions. The General Partners did not receive
any distributions from net cash flow from operations or net sale proceeds for
the year ended December 31, 2000.
Property Management and Leasing Fees
Wells Management Company, Inc., an affiliate of the General Partners, will
receive compensation for supervising the management of the Partnership
properties equal to the lesser of: (A)(i) % of the gross revenues for leasing
(aggregate maximum of 6%) plus a separate one-time fee for initial lease-up of
newly constructed properties in an amount not to exceed the fee customarily
charged in arm's-length transactions by others rendering similar services in the
same geographic area for similar properties; and (ii) n the cash of industrial
and commercial properties which are leased on a long-term basis (ten or more
years), 1% of the gross revenues except for initial leasing fees equal to 3% of
the gross revenues over the first five years of the lease term; or (B) the
amounts charged by unaffiliated persons rendering comparable services in the
same geographic area. Wells Management Company, Inc. received $195,633 in
property management and leasing fees relating to the Partnership in 2000.
-26-
Real Estate Commissions
In connection with the sale of Partnership properties, the General Partners or
their affiliates may receive commissions not exceeding the lesser of (A) 50% of
the commissions customarily charged by other brokers in arm's-length
transactions involving comparable properties in the same geographic area or (B)
3% of the gross sales price of the property, and provided that payments of such
commissions will be made only after Limited Partners have received prior
distributions totaling 100% of their capital contributions plus a 6% cumulative
return on their adjusted capital contributions. During 2000, no real estate
commissions were paid to the General Partners or their affiliates.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.)
-27-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. The financial statements are contained on pages F-2 through F-33 of this
Annual Report on Form 10-K, and the list of the financial statements
contained herein is set forth on page F-1, which is hereby incorporated
by reference.
(a)2. The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(b) No reports on Form 8-K were filed with the commission during the year of
2000.
(c) The exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(d) See (a) 2 above.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
-28-
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 27th day of March
2001.
Wells Real Estate Fund VII
(Registrant)
By: /s/ Leo F. Wells, III
-----------------------------
Leo F. Wells, III
Individual General Partner and as
President and Chief Financial
Officer of Wells Capital, Inc.,
the General Partner of Wells
Partners, L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.
Signature TITLE Date
- -------------------------------- ----------------------------------- ---------------------------
/s/ Leo F. Wells, III
- --------------------------------
Individual General Partner, March 27, 2001
President and Sole Director of Wells
Capital, Inc., the General Partner
Leo F. Wells, III of Wells Partners, L.P.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.
-29-
INDEX TO FINANCIAL STATEMENTS
Financial Statements Page
- ---------------------------------------------------------------------------------------------- -------
Independent Auditors' Report F2
Balance Sheets as of December 31, 2000 and 1999 F3
Statements of Income for the Years ended December 31, 2000, 1999, and 1998 F4
Statements of Partners' Capital for the Years Ended December 31, 2000, 1999 and 1998 F5
Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998 F6
Notes to Financial Statements for December 31, 2000, 1999, and 1998 F7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund VII, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND VII,
L.P. (a Georgia public limited partnership) as of December 31, 2000 and 1999 and
the related statements of income, partners' capital, and cash flows for each of
the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund VII,
L.P. as of December 31, 2000 and 1999 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 30, 2001
F-2
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
December 31, 2000 and 1999
ASSETS
2000 1999
----------- -----------
INVESTMENT IN JOINT VENTURES $16,519,029 $17,446,299
CASH AND CASH EQUIVALENTS 55,216 81,697
DUE FROM AFFILIATES 415,906 465,908
PREPAID EXPENSES AND OTHER ASSETS 2,375 0
----------- -----------
Total assets $16,992,526 $17,993,904
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 4,752 $ 1,929
Partnership distributions payable 453,615 458,148
----------- -----------
Total liabilities 458,367 460,077
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Class A--2,045,427 units and 2,036,267 units as of December 31, 2000
and 1999, respectively 16,534,159 17,125,194
Class B--372,590 units and 381,750 units as of December 31, 2000 and
1999, respectively 0 408,633
----------- -----------
Total partners' capital 16,534,159 17,533,827
----------- -----------
Total liabilities and partners' capital $16,992,526 $17,993,904
=========== ===========
The accompanying notes are an integral part of these balance sheets.
F-3
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998
----------- ----------- -----------
REVENUES:
Equity in income of joint ventures $ 944,165 $ 981,104 $ 839,037
Interest income 17,693 1,526 7,269
----------- ----------- -----------
961,858 982,630 846,306
----------- ----------- -----------
EXPENSES:
Partnership administration 61,128 65,049 66,168
Legal and accounting 17,748 20,224 19,554
Amortization of organization costs 0 1,562 6,250
----------- ----------- -----------
78,876 86,835 91,972
----------- ----------- -----------
Net INCOME $ 882,982 $ 895,795 $ 754,334
=========== =========== ===========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 1,286,161 $ 1,879,410 $ 1,704,213
=========== =========== ===========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ (403,179) $ (983,615) $ (949,879)
=========== =========== ===========
NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT $ 0.63 $ 0.93 $ 0.85
=========== =========== ===========
NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED
PARTNER UNIT $ (1.07) $ (2.48) $ (2.24)
=========== =========== ===========
CASH DISTRIBUTION PER WEIGHTED AVERAGE
CLASS A LIMITED PARTNER UNIT $ 0.92 $ 0.87 $ 0.82
=========== =========== ===========
The accompanying notes are an integral part of these statements.
F-4
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
Limited Partners
---------------------------------------------------------
Class A Class B Total
--------------------------- -------------------------- Partners'
Units Amount Units Amount Capital
--------- ----------- --------- ---------- -----------
BALANCE, December 31, 1997 1,971,399 $16,701,193 446,618 $2,560,972 $19,262,165
Net income (loss) 0 1,704,213 0 (949,879) 754,334
Partnership distributions 0 (1,628,529) 0 0 (1,628,529)
Class B conversion elections 38,118 159,058 (38,118) (159,058) 0
--------- ----------- --------- ---------- -----------
BALANCE, December 31, 1998 2,009,517 16,935,935 408,500 1,452,035 18,387,970
Net income (loss) 0 1,879,410 0 (983,615) 895,795
Partnership distributions 0 (1,749,938) 0 0 (1,749,938)
Class B conversion elections 26,750 59,787 (26,750) (59,787) 0
--------- ----------- --------- ---------- -----------
BALANCE, December 31, 1999 2,036,267 17,125,194 381,750 408,633 17,533,827
Net income (loss) 0 1,286,161 0 (403,179) 882,982
Partnership distributions 0 (1,882,650) 0 0 (1,882,650)
Class B conversion elections 9,160 5,454 (9,160) (5,454) 0
--------- ----------- --------- ---------- -----------
BALANCE, December 31, 2000 2,045,427 $16,534,159 372,590 $ 0 $16,534,159
========= =========== ========= ========== ===========
The accompanying notes are an integral part of these statements.
F-5
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 882,982 $ 895,795 $ 754,334
----------- ----------- -----------
Adjustments to reconcile net income to net cash used in
operating activities:
Equity in income of joint ventures (944,165) (981,104) (839,037)
Amortization of organization costs 0 1,562 6,250
Changes in assets and liabilities:
Prepaid expenses and other assets (2,375) 4,263 1,051
Accounts payable and accrued expenses 2,823 (3,279) 5,208
----------- ----------- -----------
Total adjustments (943,717) (978,558) (826,528)
----------- ----------- -----------
Net cash used in operating activities (60,735) (82,763) (72,194)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures 1,921,437 1,777,010 1,770,742
Investment in joint ventures 0 0 (181,070)
----------- ----------- -----------
Net cash provided by investing activities 1,921,437 1,777,010 1,589,672
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners from accumulated earnings (1,887,183) (1,688,290) (1,636,158)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (26,481) 5,957 (118,680)
CASH AND CASH EQUIVALENTS, beginning of year 81,697 75,740 194,420
----------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 55,216 $ 81,697 $ 75,740
=========== ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Deferred project costs contributed to joint ventures $ 0 $ 0 $ 4,070
=========== ============ ============
The accompanying notes are an integral part of these statements.
F-6
WELLS REAL ESTATE FUND VII, L.P.
(A Georgia Public Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999, AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund VII, L.P. (the "Partnership") is a public limited
partnership organized on December 1, 1992 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners,
L.P. ("Wells Partners"), a Georgia nonpublic limited partnership. The
Partnership has two classes of limited partnership interests, Class A and
Class B units. Limited partners shall have the right to change their prior
elections to have some or all of their units treated as Class A units or
Class B units one time during each quarterly accounting period. Limited
partners may vote to, among other things, (a) amend the partnership
agreement, subject to certain limitations, (b) change the business purpose
or investment objectives of the Partnership, and (c) remove a general
partner. A majority vote on any of the above described matters will bind
the Partnership, without the concurrence of the general partners. Each
limited partnership unit has equal voting rights, regardless of class.
The Partnership was formed to acquire and operate commercial real
properties, including properties which are either to be developed,
currently under development or construction, newly constructed, or have
operating histories. The Partnership owns an interest in the following
properties through joint ventures between the Partnership and other Wells
Real Estate Funds: (i) a shopping center located in Cherokee County,
Georgia, the Cherokee Commons Shopping Center ("Cherokee Commons"); (ii) an
office/retail center in Roswell, Georgia; (iii) the Marathon Building, a
three-story office building located in Appleton, Wisconsin; (iv) the
Stockbridge Village III Retail Center, two retail buildings located in
Stockbridge, Georgia; (v) a retail center expansion in Stockbridge,
Georgia; (vi) a four-story office building located in Jacksonville, Florida
("the BellSouth property"); (vii) a retail shopping center in Clemmons,
Forsyth County, North Carolina; (viii) an office building located in
Gainesville, Florida; and (ix) a retail office building in Stockbridge,
Georgia.
Use of Estimates and Factors Affecting the Partnership
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The Partnership recently began considering selling its properties.
Management estimates that the net realizable value of each of the
properties exceeds the carrying value of the corresponding real estate
assets; consequently, no impairment loss has been recorded. In the event
that the net sales proceeds are less than the carrying value of the
property sold the Partnership would recognize a loss on the sale.
Management is not contractually or financially obligated to sell any of its
properties, and it is management's current intent to fully realize the
Partnership's investment in real estate. The success of the Partnership's
future operations and the ability to realize the investment in its assets
will be dependent on the Partnership's ability to maintain rental rates,
occupancy, and an appropriate level of operating expenses in future years.
Management believes that the steps that it is taking will enable the
Partnership to realize its investment in its assets.
F-7
Income Taxes
The Partnership is not subject to federal or state income taxes, and therefore,
none have been provided for in the accompanying financial statements. The
partners are required to include their respective shares of profits and losses
in their individual income tax returns.
Distribution of Net Cash From Operations
Cash available for distribution, as defined by the partnership agreement, is
distributed to the limited partners quarterly. In accordance with the
partnership agreement, distributions are paid first to limited partners holding
Class A units until they have received a 10% per annum return on their adjusted
capital contributions, as defined. Cash available for distribution is then paid
to the general partners until they have received an amount equal to 10% of
distributions. Any remaining cash available for distribution is split between
the limited partners holding Class A units and the general partners on a basis
of 90% and 10%, respectively. No distributions will be made to the limited
partners holding Class B units.
Distribution of Sales Proceeds
Upon sales of properties, the net sales proceeds are distributed in the
following order:
. To limited partners, on a per unit basis, until all limited partners
have received 100% of their adjusted capital contributions, as defined
. To limited partners holding Class B units until they receive an amount
equal to the net cash available for distribution received by the
limited partners holding Class A units
. To all limited partners until they receive a cumulative 10% per annum
return on their adjusted capital contributions, as defined
. To all limited partners until they receive an amount equal to their
respective cumulative distributions, as defined
. To the general partners until they have received 100% of their capital
contributions, as defined
. Thereafter, 80% to the limited partners and 20% to the general
partners
Allocation of Net Income, Net Loss, and Gain on Sale
Net income is defined as net income recognized by the Partnership, excluding
deductions for depreciation and amortization. Net income, as defined, of the
Partnership will be allocated each year in the same proportions that net cash
from operations is distributed to the partners. To the extent the Partnership's
net income in any year exceeds net cash from operations, it will be allocated
99% to the limited partners holding Class A units and 1% to the general
partners.
Net loss, depreciation, and amortization deductions for each fiscal year will be
allocated as follows: (a) 99% to the limited partners holding Class B units and
1% to the general partners until their capital accounts are reduced to zero, (b)
then to any partner having a positive balance in his capital account in an
amount not to exceed such positive balance, and (c) thereafter to the general
partners.
Gain on the sale or exchange of the Partnership's properties will be allocated
generally in the same manner that the net proceeds from such sale are
distributed to partners after the following allocations are made, if applicable:
(a) allocations made pursuant to a qualified income offset provision in the
partnership agreement, (b) allocations to partners having negative capital
accounts until all negative capital accounts have been restored to zero, (c)
allocations to Class B limited partners in amounts equal to deductions for
depreciation and amortization previously allocated to them with respect to the
specific
F-8
partnership property sold, but not in excess of the amount of gain on sale
recognized by the Partnership with respect to the sale of such property, and (d)
allocations to Class A limited partners and general partners in amounts equal to
the deductions for depreciation and amortization previously allocated to them
with respect to the specific partnership property sold, but not in excess of the
amount of gain on sale recognized by the Partnership with respect to the sale of
such property.
Investment in Joint Ventures
Basis of Presentation
The Partnership does not have control over the operations of the joint
ventures; however, it does exercise significant influence. Accordingly,
investments in joint ventures are recorded using the equity method of
accounting.
Real Estate Assets
Real estate assets held by the joint ventures are stated at cost less
accumulated depreciation. Major improvements and betterments are
capitalized when they extend the useful life of the related asset. All
repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances
which could indicate that carrying amounts of real estate assets may
not be recoverable. When events or changes in circumstances are present
which indicate that the carrying amounts of real estate assets may not
be recoverable, management assesses the recoverability of real estate
assets by determining whether the carrying value of such real estate
assets will be recovered through the future cash flows expected from
the use of the asset and its eventual disposition. Management has
determined that there has been no impairment in the carrying value of
real estate assets held by the Partnership or its affiliated joint
ventures as of December 31, 2000.
Depreciation for buildings and improvements is calculated using the
straight-line method over 25 years.
Revenue Recognition
All leases on real estate assets held by the joint ventures are
classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective
leases.
Partners' Distributions and Allocations of Profit and Loss
Cash available for distribution and allocations of profit and loss to
the Partnership by the joint ventures are made in accordance with the
terms of the individual joint venture agreements. Generally, these
items are allocated in proportion to the partners' respective ownership
interests. Cash is paid from the joint ventures to the Partnership
quarterly.
Deferred Lease Acquisition Costs
Costs incurred to procure operating leases are capitalized and
amortized on a straight-line basis over the terms of the related
leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Partnership considers all
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents. Cash equivalents include cash and short-term
investments. Short-term investments are stated at cost, which approximates fair
value, and consist of investments in money market accounts.
F-9
Per Unit Data
Net income (loss) per unit with respect to the Partnership for the years
ended December 31, 2000, 1999, and 1998 is computed based on the weighted
average number of units outstanding during the period.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year financial statement presentation.
2. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 2000 and 1999 represents the
Partnership's share of cash to be distributed from its joint venture
investments for the fourth quarters of 2000 and 1999, respectively, as
follows:
2000 1999
-------- --------
Fund I, II, II-OW, VI, and VII Associates--Cherokee $ 20,703 $ 20,175
Fund II, III, VI, VII Associates 58,544 122,712
Fund V, VI, and VII Associates 98,745 99,145
Fund VI and VII Associates 79,380 73,394
Fund VI, VII, and VIII Associates 126,377 101,617
Fund VII and VIII Associates 32,157 48,865
-------- --------
$415,906 $465,908
======== ========
The Partnership entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for supervising the management of the
Partnership's properties, the Partnership will generally pay Wells
Management management and leasing fees equal to (a) 3% of the gross
revenues for management and 3% of the gross revenues for leasing (aggregate
maximum of 6%) plus a separate fee for the one-time initial lease-up of
newly constructed properties in an amount not to exceed the fee customarily
charged in arm's-length transactions by others rendering similar services
in the same geographic area for similar properties or (b) in the case of
commercial properties, which are leased on a long-term net basis (ten or
more years), 1% of the gross revenues except for initial leasing fees equal
to 3% of the gross revenues over the first five years of the lease term.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $195,633, $199,571, and $144,379 for
the years ended December 31, 2000, 1999, and 1998, respectively, which were
paid to Wells Management.
Wells Capital, Inc. (the "Company") performs certain administrative
services for the Partnership, such as accounting and other partnership
administration, and incurs the related expenses. Such expenses are
allocated among the various Wells Real Estate Funds based on time spent on
each fund by individual administrative personnel. In the opinion of
management, such allocation is a reasonable estimation of such expenses.
The general partners of the Partnership are also general partners in other
Wells Real Estate Funds. As such, there may exist conflicts of interest
where the general partners in the capacity as general partners for other
Wells Real Estate Funds may be in competition with the Partnership for
tenants in similar geographic markets.
F-10
3. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at
December 31, 2000 and 1999 are summarized as follows:
2000 1999
-------------------------- --------------------------
Amount Percent Amount Percent
----------- --------- ----------- ---------
Fund I, II, II-OW, VI, and VII Associates--Cherokee $ 747,076 11% $ 793,858 11%
Fund II, III, VI, and VII Associates 2,789,003 50 2,995,463 49
Fund V, VI, and VII Associates 2,805,246 42 2,955,059 42
Fund VI and VII Associates 2,947,337 56 3,089,767 56
Fund VI, VII, and VIII Associates 5,168,016 33 5,420,549 33
Fund VII and VIII Associates 2,062,351 37 2,191,603 37
----------- -----------
$16,519,029 $17,446,299
=========== ===========
The following is a rollforward of the Partnership's investment in joint
ventures for the years ended December 31, 2000 and 1999:
2000 1999
----------- -----------
Investment in joint ventures, beginning of year $17,446,299 $18,368,726
Equity in income of joint ventures 944,165 981,104
Distributions from joint ventures (1,871,435) (1,903,531)
----------- -----------
Investment in joint ventures, end of year $16,519,029 $17,446,299
=========== ===========
Fund I, II, II-OW, VI, and VII Associates--Cherokee
In August 1995, the Partnership entered into a joint venture agreement with
Wells Real Estate Fund I, Fund II and II-OW (a joint venture between Wells
Real Estate Fund II and Wells Real Estate Fund II-OW), and Wells Real
Estate Fund VI, L.P. ("Fund VI"). The joint venture, Fund I, II, II-OW, VI,
and VII Associates--Cherokee, was formed for the purpose of owning and
operating Cherokee Commons, a retail shopping center containing
approximately 103,755 square feet located in Cherokee County, Georgia.
Until the formation of this joint venture, Cherokee Commons was part of the
Fund I and II Tucker--Cherokee joint venture. Concurrent with the formation
of the Fund I, II, II-OW, VI, and VII Associates--Cherokee joint venture,
Cherokee Commons was transferred from the Fund I and II Tucker--Cherokee
joint venture. Percentage ownership interests in Fund I, II, II-OW, VI, and
VII Associates--Cherokee were determined at the time of formation based on
contributions. Under the terms of the joint venture agreement, Fund VI and
Fund VII each contributed approximately $1 million to the new joint venture
in return for a 10.7% ownership interest. Fund I's ownership interest in
the Cherokee joint venture changed from 30.6% to 24%, and Fund II and II-OW
joint venture's ownership interest changed from 69.4% to 54.6%. The $2
million in cash contributed to Cherokee was used to fund an expansion of
the property for an existing tenant.
F-11
Following are the financial statements for Fund I, II, II-OW, VI, and VII
Associates--Cherokee:
Fund I, II, II-OW, VI, and VII Associates--Cherokee
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
---------- ----------
Real estate assets, at cost:
Land $1,219,704 $1,219,704
Building and improvements, less accumulated depreciation of $3,606,079 in
2000 and $3,163,829 in 1999 5,624,924 6,067,174
---------- ----------
Total real estate assets 6,844,628 7,286,878
Cash and cash equivalents 214,940 206,540
Accounts receivable 31,356 27,703
Prepaid expenses and other assets 100,866 89,846
---------- ----------
Total assets $7,191,790 $7,610,967
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 23,716 $ 16,295
Refundable security deposits 23,839 18,562
Partnership distributions payable 197,191 192,184
Due to affiliates 137,334 122,272
---------- ----------
Total liabilities 382,080 349,313
---------- ----------
Partners' capital:
Wells Real Estate Fund I 1,498,120 1,618,133
Fund II and II-OW 3,814,737 4,053,105
Wells Real Estate Fund VI 749,777 796,558
Wells Real Estate Fund VII 747,076 793,858
---------- ----------
Total partners' capital 6,809,710 7,261,654
---------- ----------
Total liabilities and partners' capital $7,191,790 $7,610,967
========== ==========
F-12
Fund I, II, II-OW, VI and VII Associates--Cherokee
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
-------- -------- --------
Revenues:
Rental income $965,305 $945,222 $909,831
Interest income 78 68 84
-------- -------- --------
965,383 945,290 909,915
-------- -------- --------
Expenses:
Depreciation 442,250 447,969 444,660
Operating costs, net of reimbursements 24,557 37,583 35,715
Partnership administration 23,352 24,882 22,934
Management and leasing fees 74,422 94,149 82,517
Legal and accounting 6,180 5,624 7,363
Bad debt expense 0 0 18,664
-------- -------- --------
570,761 610,207 611,853
-------- -------- --------
Net income $394,622 $335,083 $298,062
======== ======== ========
Net income allocated to Wells Real Estate Fund I $ 94,800 $ 80,496 $ 71,604
======== ======== ========
Net income allocated to Fund II and II-OW $215,310 $182,825 $162,626
======== ======== ========
Net income allocated to Wells Real Estate Fund VI $ 42,256 $ 35,881 $ 31,916
======== ======== ========
Net income allocated to Wells Real Estate Fund VII $ 42,256 $ 35,881 $ 31,916
======== ======== ========
Fund I, II, II-OW, VI and VII Associates--Cherokee
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells Real Fund II Wells Real Wells Real Total
Estate and Estate Estate Partners'
Fund I II-OW Fund VI Fund VII Capital
---------- ---------- -------- -------- ----------
Balance, December 31, 1997 $1,863,173 $4,536,781 $891,482 $888,782 $8,180,218
Net income 71,604 162,626 31,916 31,916 298,062
Partnership distributions (193,285) (403,744) (79,238) (79,238) (755,505)
---------- ---------- -------- -------- ----------
Balance, December 31, 1998 1,741,492 4,295,663 844,160 841,460 7,722,775
Net income 80,496 182,825 35,881 35,881 335,083
Partnership distributions (203,855) (425,383) (83,483) (83,483) (796,204)
---------- ---------- -------- -------- ----------
Balance, December 31, 1999 1,618,133 4,053,105 796,558 793,858 7,261,654
Net income 94,800 215,310 42,256 42,256 394,622
Partnership distributions (214,813) (453,678) (89,037) (89,038) (846,566)
---------- ---------- -------- -------- ----------
Balance, December 31, 2000 $1,498,120 $3,814,737 $749,777 $747,076 $6,809,710
========== ========== ======== ======== ==========
F-13
Fund I, II, II-OW, VI, and VII Associates--Cherokee
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
--------- --------- ---------
Cash flows from operating activities:
Net income $ 394,622 $ 335,083 $ 298,062
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 442,250 447,969 444,660
Changes in assets and liabilities:
Accounts receivable (3,653) 7,814 56,999
Prepaid expenses and other assets (11,020) 1,133 8,890
Accounts payable, accrued expenses, and refundable
security deposits 12,694 (72,272) 70,278
Due to affiliates 15,062 13,005 15,327
--------- --------- ---------
Total adjustments 455,333 397,649 596,154
--------- --------- ---------
Net cash provided by operating activities 849,955 732,732 894,216
--------- --------- ---------
Cash flows from investing activities:
Investment in real estate 0 (14,148) (5,771)
--------- --------- ---------
Cash flows from financing activities:
Distributions to joint venture partners (841,555) (734,858) (818,790)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 8,400 (16,274) 69,655
Cash and cash equivalents, beginning of year 206,540 222,814 153,159
--------- --------- ---------
Cash and cash equivalents, end of year $ 214,940 $ 206,540 $ 222,814
========= ========= =========
Fund I, II, III, VI, and VII Associates
On January 1, 1995, the Partnership entered into a joint venture agreement with
Fund II and III Associates and Fund VI. The joint venture, Fund II, III, VI, and
VII Associates, was formed for the purpose of acquiring, developing, operating,
and selling real properties. During 1995, Fund II and III Associates contributed
a 4.3-acre tract of land from its 880 Property--Holcomb Bridge to the Fund II,
III, VI, and VII Associates joint venture. During 1998, 1997, and 1996, the
Partnership and Fund VI made contributions to the joint venture. Ownership
percentage interests were recomputed accordingly. Development was substantially
completed in 1996 on two buildings containing a total of approximately 49,500
square feet.
F-14
The following are the financial statements for Fund II, III, VI, and VII
Associates:
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
---------- ----------
Real estate assets, at cost:
Land $1,325,242 $1,325,242
Building and improvements, less accumulated depreciation of
$1,654,520 in 2000 and $1,299,227 in 1999 4,063,639 4,418,932
---------- ----------
Total real estate assets 5,388,881 5,744,174
Cash and cash equivalents 88,044 189,404
Accounts receivable 151,886 162,464
Prepaid expenses and other assets 158,872 213,443
---------- ----------
Total assets $5,787,683 $6,309,485
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 82,072 $ 87,926
Partnership distributions payable 154,874 250,075
---------- ----------
236,946 338,001
---------- ----------
Partners' capital:
Fund II and III Associates 1,305,317 1,406,591
Wells Real Estate Fund VI 1,456,417 1,569,430
Wells Real Estate Fund VII 2,789,003 2,995,463
---------- ----------
Total partners' capital 5,550,737 5,971,484
---------- ----------
Total liabilities and partners' capital $5,787,683 $6,309,485
========== ==========
F-15
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
-------- -------- --------
Revenues:
Rental income $869,390 $953,952 $872,978
Other income 0 23,843 36,000
-------- -------- --------
869,390 977,795 908,978
-------- -------- --------
Expenses:
Depreciation 355,293 415,165 376,290
Operating costs, net of reimbursements 70,693 68,691 85,983
Management and leasing fees 111,567 129,798 97,701
Legal and accounting 4,513 4,952 6,509
Partnership administration 22,646 19,891 14,926
Bad debt expense 74,145 0 0
-------- -------- --------
638,857 638,497 581,409
-------- -------- --------
Net income $230,533 $339,298 $327,569
======== ======== ========
Net income allocated to Fund II and III Associates $ 55,489 $ 81,669 $ 78,791
======== ======== ========
Net income allocated to Wells Real Estate Fund VI $ 61,921 $ 91,135 $ 87,914
======== ======== ========
Net income allocated to Wells Real Estate Fund VII $113,123 $166,494 $160,864
======== ======== ========
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Fund II Wells Wells Real Total
and III Real Estate Estate Partners'
Associates Fund VI Fund VII Capital
---------- ---------- ---------- ----------
Balance, December 31, 1997 $1,608,215 $1,789,811 $3,252,856 $6,650,882
Partnership contributions 0 4,600 154,049 158,649
Net income 78,791 87,914 160,864 327,569
Partnership distributions (179,199) (199,945) (365,964) (745,108)
---------- ---------- ---------- ----------
Balance, December 31, 1998 1,507,807 1,682,380 3,201,805 6,391,992
Net income 81,669 91,135 166,494 339,298
Partnership distributions (182,885) (204,085) (372,836) (759,806)
---------- ---------- ---------- ----------
Balance, December 31, 1999 1,406,591 1,569,430 2,995,463 5,971,484
Net income 55,489 61,921 113,123 230,533
Partnership distributions (156,763) (174,934) (319,583) (651,280)
---------- ---------- ---------- ----------
Balance, December 31, 2000 $1,305,317 $1,456,417 $2,789,003 $5,550,737
========== ========== ========== ==========
F-16
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
--------- --------- ---------
Cash flows from operating activities:
Net income $ 230,533 $ 339,298 $ 327,569
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 355,293 415,165 376,290
Changes in assets and liabilities:
Accounts receivable 10,578 (51,004) (56,936)
Prepaid expenses and other assets 54,571 20,522 35,603
Accounts payable and accrued expenses (5,854) (104,146) 21,296
--------- --------- ---------
Total adjustments 414,588 280,537 376,253
--------- --------- ---------
Net cash provided by operating activities 645,121 619,835 703,822
--------- --------- ---------
Cash flows from investing activities:
Investment in real estate 0 (19,772) (102,122)
--------- --------- ---------
Cash flows from financing activities:
Contributions from joint venture partners 0 0 154,996
Distributions to joint venture partners (746,481) (719,447) (667,299)
--------- --------- ---------
Net cash used in financing activities (746,481) (719,447) (512,303)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents (101,360) (119,384) 89,397
Cash and cash equivalents, beginning of year 189,404 308,788 219,391
--------- --------- ---------
Cash and cash equivalents, end of year $ 88,044 $ 189,404 $ 308,788
========= ========= =========
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 0 $ 3,653
========= ========= =========
Fund V, VI, and VII Associates
On September 8, 1994, the Partnership entered into a joint venture agreement
with Wells Real Estate Fund V, L.P. ("Fund V") and Fund VI. The joint venture,
Fund V, VI, and VII Associates, was formed for the purpose of investing in
commercial real properties. In September 1994, Fund V, VI, and VII Associates
purchased a 75,000-square-foot, three-story office building known as the
Marathon Building in Appleton, Wisconsin.
F-17
Following are the financial statements for Fund V, VI, and VII Associates:
Fund V, VI, and VII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
----------- -----------
Real estate assets, at cost:
Land $ 314,591 $ 314,591
Building and improvements, less accumulated depreciation of
$2,057,369 in 2000 and $1,706,784 in 1999 6,310,535 6,661,120
----------- -----------
Total real estate assets 6,625,126 6,975,711
Cash and cash equivalents 238,242 235,250
Due from affiliates 0 2,450
Accounts receivable 103,696 112,645
----------- -----------
Total assets $ 6,967,064 $ 7,326,056
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Partnership distributions payable $ 236,743 $ 237,700
Due to affiliates 5,648 4,506
----------- -----------
Total liabilities 242,391 242,206
----------- -----------
Partners' capital:
Wells Real Estate Fund V 1,106,655 1,165,776
Wells Real Estate Fund VI 2,812,772 2,963,015
Wells Real Estate Fund VII 2,805,246 2,955,059
----------- -----------
Total partners' capital 6,724,673 7,083,850
----------- -----------
Total liabilities and partners' capital $ 6,967,064 $ 7,326,056
=========== ===========
F-18
Fund V, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
---------- ---------- ----------
Revenues:
Rental income $971,050 $971,051 $971,447
-------- -------- --------
Expenses:
Depreciation 350,585 350,585 350,585
Management and leasing fees 9,442 39,659 34,632
Legal and accounting 5,750 5,750 3,450
Partnership administration 13,536 12,302 7,439
Operating costs 1,505 1,389 1,372
-------- -------- --------
380,818 409,685 397,478
-------- -------- --------
Net income $590,232 $561,366 $573,969
======== ======== ========
Net income allocated to Wells Real Estate Fund V $ 97,152 $ 92,401 $ 94,475
======== ======== ========
Net income allocated to Wells Real Estate fund VI $246,894 $234,819 $240,091
======== ======== ========
Net income allocated to Wells Real Estate fund VII $246,186 $234,146 $239,403
======== ======== ========
Fund V, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells Real Wells Real Wells Real Total
Estate Estate Estate Partners'
Fund V Fund VI Fund VII Capital
------------ ------------ ------------ ------------
Balance, December 31, 1997 $1,283,867 $3,263,121 $3,254,304 $7,801,292
Net income 94,475 240,091 239,403 573,969
Partnership distributions (153,446) (389,953) (388,835) (932,234)
---------- ---------- ---------- ----------
Balance, December 31, 1998 1,224,896 3,113,259 3,104,872 7,443,027
Net income 92,401 234,819 234,146 561,366
Partnership distributions (151,521) (385,063) (383,959) (920,543)
---------- ---------- ---------- ----------
Balance, December 31, 1999 1,165,776 2,963,015 2,955,059 7,083,850
Net income 97,152 246,894 246,186 590,232
Partnership distributions (156,273) (397,137) (395,999) (949,409)
---------- ---------- ---------- ----------
Balance, December 31, 2000 $1,106,655 $2,812,772 $2,805,246 $6,724,673
========== ========== ========== ==========
F-19
Fund V, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
-------- -------- --------
Cash flows from operating activities:
Net income $590,232 $561,366 $573,969
-------- -------- --------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 350,585 350,585 350,585
Changes in assets and liabilities:
Accounts receivable 8,949 8,949 8,983
Due from affiliates 2,450 (2,450) 0
Due to affiliates 1,142 (358) (1,302)
-------- -------- --------
Total adjustments 363,126 356,726 358,266
-------- -------- --------
Net cash provided by operating activities 953,358 918,092 932,235
Cash flows from financing activities:
Distributions to joint venture partners (950,366) (918,833) (927,476)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 2,992 (741) 4,759
Cash and cash equivalents, beginning of year 235,250 235,991 231,232
-------- -------- --------
Cash and cash equivalents, end of year $238,242 $235,250 $235,991
======== ======== ========
Fund VI and VII Associates
On December 9, 1994, the Partnership entered into a joint venture agreement with
Fund VI. The joint venture, Fund VI and VII Associates, was formed for the
purpose of investing in commercial properties. In December 1994, the Partnership
contributed its interest in a parcel of land, the Stockbridge Village III Retail
Center property, located in Stockbridge, Georgia, to the joint venture. The
Stockbridge Village III Retail Center property is comprised of two separate
outparcel buildings totaling approximately 18,500 square feet. One of the
outparcel buildings began operations during 1995. The other outparcel began
operations during 1996. On June 7, 1995, Fund VI and VII Associates purchased
3.38 acres of real property located in Stockbridge, Georgia. The retail center
expansion consists of a multi-tenant shopping center containing approximately
29,000 square feet.
During 1997 and 1998, both the Partnership and Fund VI made contributions to
Fund VI and VII Associates, and during 1996, the Partnership made additional
contributions to the joint venture. Ownership percentage interests were
recomputed accordingly.
F-20
Following are the financial statements for Fund VI and VII Associates:
Fund VI and VII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
2000 1999
Assets -------------- --------------
Real estate assets, at cost:
Land $1,812,447 $1,812,447
Building and improvements, less accumulated depreciation of $1,066,010 in
2000 and $832,798 in 1999 3,354,898 3,485,011
----------- ----------
Total real estate assets 5,167,345 5,297,458
Cash and cash equivalents 118,152 113,621
Accounts receivable 130,094 126,982
Prepaid expenses and other assets 106,422 115,743
---------- ----------
Total assets $5,522,013 $5,653,804
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 38,969 $ 35,235
Partnership distributions payable 143,693 130,366
---------- ----------
Total liabilities 182,662 165,601
---------- ----------
Partners' capital:
Wells Real Estate Fund VI 2,392,014 2,398,436
Wells Real Estate Fund VII 2,947,337 3,089,767
---------- ----------
Total partners' capital 5,339,351 5,488,203
---------- ----------
Total liabilities and partners' capital $5,522,013 $5,653,804
========== ==========
F-21
Fund VI and VII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
---------- ---------- ------------
Revenues:
Rental income $659,932 $624,453 $532,410
-------- -------- --------
Expenses:
Depreciation 233,212 235,591 232,896
Operating costs, net of reimbursements 4,652 (9,718) 36,099
Management and leasing fees 84,684 80,064 77,242
Partnership administration 23,259 33,090 22,119
Legal and accounting 25,075 15,247 26,676
Bad debt expense 0 0 78,689
-------- -------- --------
370,882 354,274 473,721
-------- -------- --------
Net income $289,050 $270,179 $ 58,689
======== ======== ========
Net income allocated to Wells Real Estate Fund VI $127,466 $118,073 $ 25,308
======== ======== ========
Net income allocated to Wells Real Estate Fund VII $161,584 $152,106 $ 33,381
======== ======== ========
Fund VI and VII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells Real Wells Real Total
Estate Estate Partners'
Fund VI Fund VII Capital
--------------- -------------- ---------------
Balance, December 31, 1997 $2,487,443 $3,360,265 $5,847,708
Net income 25,308 33,381 58,689
Partnership contributions 123,018 5,291 128,309
Partnership distributions (124,695) (164,064) (288,759)
---------- ---------- ----------
Balance, December 31, 1998 2,511,074 3,234,873 5,745,947
Net income 118,073 152,106 270,179
Partnership distributions (230,711) (297,212) (527,923)
---------- ---------- ----------
Balance, December 31, 1999 2,398,436 3,089,767 5,488,203
Net income 127,466 161,584 289,050
Partnership contributions 105,723 0 105,723
Partnership distributions (239,611) (304,014) (543,625)
---------- ---------- ----------
Balance, December 31, 2000 $2,392,014 $2,947,337 $5,339,351
========== ========== ==========
F-22
Funds VI and VII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
------------- ---------- ------------
Cash flows from operating activities:
Net income $ 289,050 $ 270,179 $ 58,689
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 233,212 235,591 232,896
Changes in assets and liabilities:
Accounts receivable (3,112) 6,152 58,720
Prepaid expenses and other assets 9,321 14,940 844
Accounts payable 3,734 (2,165) (27,644)
Due to affiliates 0 (5,338) 732
--------- --------- ---------
Total adjustments 243,155 249,180 265,548
--------- --------- ---------
Net cash provided by operating activities 532,205 519,359 324,237
--------- --------- ---------
Cash flows from investing activities:
Decrease in construction payables 0 0 (30,000)
Investment in real estate (103,099) (497) (83,957)
--------- --------- ---------
Net cash used in investing activities (103,099) (497) (113,957)
--------- --------- ---------
Cash flows from financing activities:
Contributions from joint venture partners 105,723 0 128,309
Distributions to joint venture partners (530,298) (465,500) (312,251)
--------- --------- ---------
Net cash used in financing activities (424,575) (465,500) (183,942)
--------- --------- ---------
Net increase in cash and cash equivalents 4,531 53,362 26,338
Cash and cash equivalents, beginning of year 113,621 60,259 33,921
--------- --------- ---------
Cash and cash equivalents, end of year $ 118,152 $ 113,621 $ 60,259
========= ========= =========
Fund VI, VII, and VIII Associates
On April 17, 1995, the Partnership entered into a joint venture with Fund VI and
Wells Real Estate Fund VIII, L.P. ("Fund VIII"). The joint venture, Fund VI,
VII, and VIII Associates, was formed to acquire, develop, operate, and sell real
properties. On April 25, 1995, the joint venture purchased a 5.55-acre parcel of
land in Jacksonville, Florida. A 92,964-square-foot office building, known as
the BellSouth property, was completed and commenced operations in 1996. On May
31, 1995, the joint venture purchased a 14.683-acre parcel of land located in
Clemmons, Forsyth County, North Carolina. A retail shopping center was developed
and was substantially complete at December 31, 1997.
During 1996, Fund VI and the Partnership each withdrew $500,000 from the joint
venture in order to contribute needed funds to Fund II, III, VI, and VII
Associates. In addition, deferred project costs related to Fund VI and the
Partnership of $23,160 and $21,739, respectively, were unapplied when the
contributions were withdrawn. During 1996, Fund VIII made an additional
contribution of $2,815,965, which included $115,965 of deferred project costs
that were applied. Ownership percentage interests were recomputed accordingly.
F-23
Following are the financial statements for Fund VI, VII, and VIII Associates:
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
-------------- --------------
Real estate assets, at cost:
Land $ 4,461,819 $ 4,461,819
Building and improvements, less accumulated depreciation of $3,031,152
in 2000 and $2,315,750 in 1999 10,074,417 10,657,052
Construction in progress 3,797 0
----------- -----------
Total real estate assets 14,540,033 15,118,871
Cash and cash equivalents 606,802 736,202
Accounts receivable 330,031 255,221
Prepaid expenses and other assets 487,645 545,816
----------- -----------
Total assets $15,964,511 $16,656,110
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 65,442 $ 84,159
Partnership distributions payable 408,291 324,100
Due to affiliates 15,407 16,281
----------- -----------
Total liabilities 489,140 424,540
----------- -----------
Partners' capital:
Wells Real Estate Fund VI 5,300,368 5,559,369
Wells Real Estate Fund VII 5,168,016 5,420,549
Wells Real Estate Fund VIII 5,006,987 5,251,652
----------- -----------
Total partners' capital 15,475,371 16,231,570
----------- -----------
Total liabilities and partners' capital $15,964,511 $16,656,110
=========== ===========
F-24
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
------------ -------------- -------------
Revenues:
Rental income $ 2,364,871 $ 2,294,016 $ 2,258,971
Interest income 3,985 14,937 25,416
Other income 360 360 9,373
----------- ----------- -----------
2,369,216 2,309,313 2,293,760
----------- ----------- -----------
Expenses:
Depreciation 715,402 701,885 688,759
Operating costs, net of reimbursements 371,191 444,156 451,299
Management and leasing fees 273,632 259,352 251,587
Legal and accounting 7,650 10,286 9,205
Partnership administration 30,330 27,804 25,109
Computer costs 1,585 1,043 128
----------- ----------- -----------
1,399,790 1,444,526 1,426,087
----------- ----------- -----------
Net income $ 969,426 $ 864,787 $ 867,673
=========== =========== ===========
Net income allocated to Wells Real Estate Fund VI $ 332,032 $ 296,193 $ 297,181
=========== =========== ===========
Net income allocated to Wells Real Estate Fund VII $ 323,741 $ 288,796 $ 289,760
=========== =========== ===========
Net income allocated to Wells Real Estate Fund VIII $ 313,653 $ 279,798 $ 280,732
=========== =========== ===========
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells Real Wells Real Wells Real Total
Estate Estate Estate Partners'
Fund VI Fund VII Fund VIII Capital
------------- -------------- -------------- --------------
Balance, December 31, 1997 $6,058,082 $5,906,810 $5,722,761 $17,687,653
Net income 297,181 289,760 280,732 867,673
Partnership distributions (542,153) (528,615) (512,146) (1,582,914)
---------- ---------- ---------- -----------
Balance, December 31, 1998 5,813,110 5,667,955 5,491,347 16,972,412
Net income 296,193 288,796 279,798 864,787
Partnership distributions (549,934) (536,202) (519,493) (1,605,629)
---------- ---------- ---------- -----------
Balance, December 31, 1999 5,559,369 5,420,549 5,251,652 16,231,570
Net income 332,032 323,741 313,653 969,426
Partnership distributions (591,033) (576,274) (558,318) (1,725,625)
---------- ---------- ---------- -----------
Balance, December 31, 2000 $5,300,368 $5,168,016 $5,006,987 $15,475,371
========== ========== ========== ===========
F-25
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
--------------- --------------- -------------
Cash flows from operating activities:
Net income $ 969,426 $ 864,787 $ 867,673
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 715,402 701,885 688,759
Changes in assets and liabilities:
Accounts receivable (74,810) (71,269) (79,931)
Prepaid expenses and other assets 58,171 87,773 79,225
Accounts payable (18,717) 32,133 6,234
Due to affiliates (874) 6,546 4,558
----------- ----------- -----------
Total adjustments 679,172 757,068 698,845
----------- ----------- -----------
Net cash provided by operating activities 1,648,598 1,621,855 1,566,518
----------- ----------- -----------
Cash flows from investing activities:
Decrease in construction payables 0 0 (55,000)
Investment in real estate (136,564) (64,749) (140,590)
----------- ----------- -----------
Net cash used in investing activities (136,564) (64,749) (195,590)
----------- ----------- -----------
Cash flows from financing activities:
Distributions to joint venture partners (1,641,434) (1,621,225) (1,629,608)
----------- ----------- -----------
Net decrease in cash and cash equivalents (129,400) (64,119) (258,680)
Cash and cash equivalents, beginning of year 736,202 800,321 1,059,001
----------- ----------- -----------
Cash and cash equivalents, end of year $ 606,802 $ 736,202 $ 800,321
=========== =========== ===========
Fund VII and VIII Associates
On February 10, 1995, the Partnership entered into a joint venture agreement
with Fund VIII. The joint venture, Fund VII and VIII Associates, was formed to
acquire, develop, operate, and sell real properties. During 1995, the joint
venture purchased a five-acre parcel of land in Gainesville, Alachua County,
Florida. A 62,975-square-foot office building was constructed and began
operations during 1995. In April 1996, the Partnership contributed 1.01 acres of
land located in Stockbridge, Georgia, and improvements thereon to the joint
venture for the development of a 12,000-square-foot, single-story combination
retail/office building. The building was completed and commenced operations in
1996.
F-26
The following are the financial statements for Fund VII and VIII Associates:
Fund VII and VIII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
------------- -------------
Real estate assets, at cost:
Land $ 822,320 $ 822,320
Building and improvements, less accumulated depreciation of $1,396,480 in
2000 and $1,056,143 in 1999 4,545,871 4,864,790
Personal property, less accumulated depreciation of $151,423 in 2000 and
$116,185 in 1999 146,460 181,212
---------- ----------
Total real estate assets 5,514,651 5,868,322
Cash and cash equivalents 76,565 68,008
Accounts receivable 70,209 111,285
Prepaid expenses and other assets 70,969 90,350
---------- ----------
Total assets $5,732,394 $6,137,965
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 13,160 $ 20,761
Due to affiliates 2,497 2,227
Partnership distributions payable 87,738 133,324
---------- ----------
Total liabilities 103,395 156,312
---------- ----------
Partners' capital:
Wells Real Estate Fund VII 2,062,351 2,191,603
Wells Real Estate Fund VIII 3,566,648 3,790,050
---------- ----------
Total partners' capital 5,628,999 5,981,653
---------- ----------
Total liabilities and partners' capital $5,732,394 $6,137,965
========== ==========
F-27
Fund VII and VIII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
-------- -------- --------
Revenues:
Rental income $686,642 $769,052 $685,637
Other income 360 300 0
-------- -------- --------
687,002 769,352 685,637
-------- -------- --------
Expenses:
Depreciation 375,575 347,646 295,708
Management and leasing fees 114,334 124,040 93,519
Legal and accounting 20,113 13,952 9,450
Partnership administration 26,162 29,182 26,095
Bad debt expense 42,564 0 0
Operating costs, net of reimbursements 48,019 (28,354) 34,084
-------- -------- --------
530,731 486,466 458,856
-------- -------- --------
Net income $156,271 $282,886 $226,781
======== ======== ========
Net income allocated to Wells Real Estate Fund VII $ 57,275 $103,681 $ 83,713
======== ======== ========
Net income allocated to Wells Real Estate Fund VIII $ 98,996 $179,205 $143,068
======== ======== ========
Fund VII And VIII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells Real Wells Real Total
Estate Estate Partners'
Fund VII Fund VIII Capital
---------- ---------- ----------
Balance, December 31, 1997 $2,376,818 $3,873,022 $6,249,840
Net income 83,713 143,068 226,781
Partnership contributions 25,800 279,626 305,426
Partnership distributions (168,570) (287,602) (456,172)
---------- ---------- ----------
Balance, December 31, 1998 2,317,761 4,008,114 6,325,875
Net income 103,681 179,205 282,886
Partnership distributions (229,839) (397,269) (627,108)
---------- ---------- ----------
Balance, December 31, 1999 2,191,603 3,790,050 5,981,653
Net income 57,275 98,996 156,271
Partnership distributions (186,527) (322,398) (508,925)
---------- ---------- ----------
Balance, December 31, 2000 $2,062,351 $3,566,648 $5,628,999
========== ========== ==========
F-28
Fund VII and VIII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
--------- --------- ---------
Cash flows from operating activities:
Net income $ 156,271 $ 282,886 $ 226,781
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 375,575 347,646 295,708
Changes in assets and liabilities:
Accounts receivable 41,076 (62,704) (34,183)
Prepaid expenses and other assets 19,381 13,919 (26,375)
Accounts payable (7,601) (3,707) (2,485)
Due to affiliates 270 727 656
--------- --------- ---------
Total adjustments 428,701 295,881 233,321
--------- --------- ---------
Net cash provided by operating activities 584,972 578,767 460,102
--------- --------- ---------
Cash flows from investing activities:
Investment in real estate (21,904) (5,294) (406,380)
--------- --------- ---------
Cash flows from financing activities:
Contributions from partners 0 0 293,511
Distributions to joint venture partners (554,511) (630,161) (460,759)
--------- --------- ---------
Net cash used in financing activities (554,511) (630,161) (167,248)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 8,557 (56,688) (113,526)
Cash and cash equivalents, beginning of year 68,008 124,696 238,222
--------- --------- ---------
Cash and cash equivalents, end of year $ 76,565 $ 68,008 $ 124,696
========= ========= =========
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 0 $ 11,915
========= ========= =========
4. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December
31, 2000, 1999, and 1998 is calculated as follows:
2000 1999 1998
----------- ----------- -----------
Financial statement net income $ 882,982 $ 895,795 $ 754,334
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes in
excess of amounts for income tax purposes 294,679 406,751 394,084
Expenses deducted for financial reporting purposes,
capitalized for income tax purposes 615 2,865 3,315
Rental income accrued for financial reporting purposes in
excess of amounts for income tax purposes (4,882) (49,745) (42,637)
----------- ----------- -----------
Income tax basis net income $ 1,173,394 $ 1,255,666 $ 1,109,096
=========== =========== ===========
F-29
The Partnership's income tax basis partners' capital at December 31, 1999 is
computed as follows:
2000 1999 1998
----------- ----------- -----------
Financial statement partners' capital $16,534,159 $17,533,827 $18,387,970
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 1,689,061 1,394,382 987,631
Joint venture change in ownership 7,814 7,814 7,814
Capitalization of syndication costs for income tax
purposes, which are accounted for as cost of
capital for financial reporting purposes 3,595,776 3,595,776 3,595,776
Accumulated rental income accrued for financial
reporting purposes in excess of amounts for income
tax purposes (238,779) (233,897) (184,152)
Accumulated expenses deducted for financial reporting
purposes, capitalized for income tax purposes 26,999 26,384 23,519
Partnership's distributions payable 453,615 458,148 396,500
----------- ----------- -----------
Income tax basis partners' capital $22,068,645 $22,782,434 $23,215,058
=========== =========== ===========
5. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interests in joint ventures under noncancelable operating leases at
December 31, 2000 is as follows:
Year ending December 31:
2001 $ 4,685,180
2002 3,730,266
2003 3,019,600
2004 2,848,772
2005 2,686,340
Thereafter 4,085,135
-----------
$21,055,293
===========
Two tenants contributed approximately 26% and 16% of rental income during the
year ended December 31, 2000. In addition, two tenants will contribute
approximately 14% and 10% of future minimum rental income.
The future minimum rental income due Fund I, II, II-OW, VI, and VII
Associates--Cherokee under noncancelable operating leases at December 31,
2000 is as follows:
Year ending December 31:
2001 $ 951,376
2002 908,795
2003 819,757
2004 689,164
2005 653,219
Thereafter 3,159,986
-----------
$ 7,182,297
===========
One tenant contributed approximately 61% of rental income for the year ended
December 31, 2000 and will contribute approximately 84% of future minimum
rental income.
F-30
The future minimum rental income due Fund II, III, VI, and VII Associates under
noncancelable operating leases at December 31, 2000 is as follows:
2001 $ 816,533
2002 539,270
2003 255,097
2004 219,319
2005 127,850
Thereafter 21,308
----------
$1,979,377
==========
Three tenants contributed approximately 15%, 14%, and 13% of rental income for
the year ended December 31, 2000. In addition, four tenants will contribute
approximately 33%, 13%, 13%, and 11% of future minimum rental income.
The future minimum rental income due Fund V, VI, and VII Associates under
noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 980,000
2002 990,000
2003 990,000
2004 990,000
2005 990,000
Thereafter 990,000
----------
$5,930,000
==========
One tenant contributed 100% of rental income for the year ended December 31,
2000 and will contribute 100% of future minimum rental income.
The future minimum rental income due Fund VI and VII Associates under
noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 713,760
2002 600,303
2003 428,888
2004 386,689
2005 360,359
Thereafter 691,945
----------
$3,181,944
==========
Two tenants contributed approximately 16% and 10% of rental income for the year
ended December 31, 2000. In addition, two tenants will contribute approximately
31% and 18% of future minimum rental income.
F-31
The future minimum rental income due Fund VI, VII, and VIII Associates under
noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 2,145,470
2002 1,971,001
2003 1,890,449
2004 1,754,853
2005 1,688,144
Thereafter 6,379,813
-----------
$15,829,730
===========
Three tenants contributed approximately 46%, 23%, and 16% of rental income
for the year ended December 31, 2000. In addition, two tenants will
contribute approximately 55% and 40% of future minimum rental income.
The future minimum rental income due Fund VII and VIII Associates under
noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 7,218,650
2002 5,328,605
2003 4,141,250
2004 3,950,473
2005 3,744,288
Thereafter 2,195,735
-----------
$26,579,001
===========
One tenant contributed approximately 10% of rental income for the year ended
December 31, 2000. In addition, two tenants will contribute approximately 77%
and 11% of future minimum rental income.
6. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information
for the years ended December 31, 2000 and 1999:
2000 Quarters Ended
-----------------------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------
Revenues $ 268,398 $ 239,136 $ 227,808 $ 226,516
Net income 244,065 213,500 216,964 208,453
Net income allocated to Class A limited
partners 487,666 373,078 216,964 208,453
Net loss allocated to Class B limited partners (243,601) (159,578) 0 0
Net income per weighted average Class A
limited partner unit $ 0.24 $ 0.18 $ 0.11 $ 0.10
Net loss per weighted average Class B limited
partner unit (0.65) (0.42) 0.00 0.00
Cash distribution per weighted average Class A
limited partner unit 0.23 0.24 0.23 0.22
F-32
1999 Quarters Ended
---------------------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------
Revenues $ 242,414 $ 266,916 $ 236,372 $ 236,928
Net income 213,658 242,660 221,802 217,675
Net income allocated to Class A limited
partners 454,393 480,530 468,238 476,249
Net loss allocated to Class B limited partners (240,735) (237,870) (246,436) (258,574)
Net income per weighted average Class A
limited partner unit $ 0.23 $ 0.24 $ 0.23 $ 0.23
Net loss per weighted average Class B limited
partner unit (a) (0.60) (0.57) (0.62) (0.68)
Cash distribution per weighted average Class A
limited partner unit 0.21 0.22 0.22 0.22
(a) The totals of the four quarterly amounts for the year ended
December 31, 1999 do not equal the totals for the year. This
difference results from the use of a weighted average to compute
the number of units outstanding for each quarter and the year.
7. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-33
EXHIBIT INDEX
-------------
(Wells Real Estate Fund VII, L.P.)
The following documents are filed as exhibits to this report. Those
exhibits previously filed and incorporated herein by reference are identified
below by an asterisk. For each such asterisked exhibit, there is shown below the
description of the previous filing. Exhibits which are not required for this
report are omitted.
Exhibit Sequential
Number Description of Document Page Number
- ------ ----------------------- -----------
*3(a) Certificate of Limited Partnership of Wells Real Estate Fund VII, N/A
L.P. (Exhibit 3(d) to Form S-11 Registration Statement of Wells
Real Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P.,
File No. 33-55908)
*4(a) Agreement of Limited Partnership of Wells Real Estate Fund VII, N/A
L.P. dated April 5, 1994 (Exhibit to Form 10-K of Wells Real Estate
Fund VII, L.P. for the fiscal year ended December 31, 1994, File
No. 0-25606)
*4(b) First Amendment to Agreement of Limited Partnership of Wells Real N/A
Estate Fund VII, L.P. dated April 5, 1994 (Exhibit to Form 10-K of
Wells Real Estate Fund VII, L.P. for the fiscal year ended
December 31, 1994, File No. 0-25606)
*10(a) Management Agreement dated April 5, 1994, between Wells Real Estate N/A
Fund VII, L.P. and Wells Management Company, Inc. (Exhibit to Form
10-K of Wells Real Estate Fund VII, L.P. for the fiscal year ended
December 31, 1994, File No. 0-25606)
*10(b) Leasing and Tenant Coordinating Agreement dated April 5, 1994, N/A
between Wells Real Estate Fund VII, L.P. and Wells Management
Company, Inc. (Exhibit to Form 10-K of Wells Real Estate Fund VII,
L.P. for the fiscal year ended December 31, 1994, File No. 0-25606)
*10(c) Custodial Agency Agreement dated April 1, 1994, between Wells Real N/A
Estate Fund VII, L.P. and NationsBank of Georgia, N.A. (Exhibit
10(f) to Post-Effective Amendment No. 5 to Form S-11 Registration
Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate
Fund VII, L.P., File No. 33-55908)
Exhibit Sequential
Number Description of Document Page Number
- ------ ----------------------- -----------
*10(d) Joint Venture Agreement of Fund V, Fund VI and Fund VII Associates N/A
dated September 8, 1994, among Wells Real Estate Fund V, L.P.,
Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII,
L.P. (Exhibit 10(j) to Post-Effective Amendment No. 6 to Form S-11
Registration Statement of Wells Real Estate Fund VI, L.P. and Wells
Real Estate Fund VII, L.P., File No. 33-55908)
*10(e) Agreement for the Purchase and Sale of Property dated August 24, N/A
1994, between Interglobia Inc. - Appleton and NationsBank of
Georgia, N.A., as Agent for Fund V and Fund VI Associates (Exhibit
10(k) to Post-Effective Amendment No. 6 to Form S-11 Registration
Statement of Wells Real Estate Fund VI, L.P. and Wells Real Estate
Fund VII, L.P., File No. 33-55908)
*10(f) Assignment and Assumption of Agreement for the Purchase and Sale of N/A
Real Property dated September 9, 1994, between NationsBank of Georgia,
N.A., as Agent for Fund V and Fund VI Associates, and NationsBank of
Georgia, N.A., as Agent for Fund V, Fund VI and Fund VII Associates
(Exhibit 10(l) to Post-Effective Amendment No. 6 to Form S-11
Registration Statement of Wells Real Estate Fund VI, L.P. and Wells Real
Estate Fund VII, L.P., File No. 33-55908)
*10(g) Building Lease dated February 14, 1991, between Interglobia Inc. - N/A
Appleton and Marathon Engineers/Architects/Planners, Inc.
(included as part of Exhibit D to Exhibit 10(k) to Post-Effective
Amendment No. 6 to Form S-11 Registration Statement of Wells Real Estate
Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No. 33-55908)
Exhibit Sequential
Number Description of Document Page Number
- ------ ----------------------- -----------
*10(h) Limited Guaranty of Lease dated January 1, 1993, by J. P. Finance N/A
OY and Fluor Daniel, Inc. for the benefit of Interglobia Inc. -
Appleton (included as Exhibit B to Assignment, Assumption and
Amendment of Lease referred to as Exhibit 10(i) below, which is
included as part of Exhibit D to Exhibit 10(k) to Post-Effective
Amendment No. 6 to Form S-11 Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No.
33-55908)
*10(i) Assignment, Assumption and Amendment of Lease dated January 1, N/A
1993, among Interglobia Inc. - Appleton, Marathon
Engineers/Architects/Planners, Inc. and Jaakko Poyry Fluor Daniel
(included as part of Exhibit D to Exhibit 10(k) to Post-Effective
Amendment No. 6 to Form S-11 Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No.
33-55908)
*10(j) Second Amendment to Building lease dated August 15, 1994, between N/A
Interglobia Inc. - Appleton and Jaakko Poyry Fluor Daniel
(successor-in-interest to Marathon Engineers/Architects/Planners,
Inc.) (included as Exhibit D-1 to Exhibit 10(k) to Post-Effective
Amendment No. 6 to Form S-11 Registration Statement of Wells Real
Estate Fund VI, L.P. and Wells Real Estate Fund VII, L.P., File No.
33-55908)
*10(k) Assignment and Assumption of Lease dated September 6, 1994, between N/A
Interglobia Inc. - Appleton and NationsBank of Georgia, N.A., as
Agent for Fund V, Fund VI and Fund VII Associates (Exhibit 10(q) to
Post-Effective Amendment No. 6 to Form S-11 Registration Statement
of Wells Real Estate Fund VI, L.P. and Wells Real Estate Fund VII,
L.P., File No. 33-55908)
Exhibit Sequential
Number Description of Document Page Number
- ------ ----------------------- -----------
*10(l) Agreement for the Purchase and Sale of Real Property dated April 7, N/A
1994, between 138 Industrial Ltd. and NationsBank of Georgia, N.A.,
as Agent for Wells Real Estate Fund VI, L.P. (Exhibit 10(s) to Form
10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended
December 31, 1994, File No. 0-23656)
*10(m) Land and Building Lease Agreement dated August 22, 1994, between N/A
KRR Stockbridge, Inc. d/b/a Kenny Rogers Roasters and NationsBank
of Georgia, N.A., as Agent for Wells Real Estate Fund VI, L.P.
(Exhibit 10(t) to Form 10-K of Wells Real Estate Fund VI, L.P. for
the fiscal year ended December 31, 1994, File No. 0-23656)
*10(n) Joint Venture Agreement of Fund VI and Fund VII Associates N/A
dated December 9, 1994 (Exhibit 10(u) to Form 10-K of Wells Real
Estate Fund VI, L.P. for the fiscal year ended December 31, 1994,
File No. 0-23656)
*10(o) Building Lease Agreement dated December 19, 1994, between Damon's N/A
of Stockbridge, LLC d/b/a Damon's Clubhouse and NationsBank of
Georgia, N.A., as Agent for Fund VI and Fund VII Associates,
(Exhibit 10(v) to Form 10-K of Wells Real Estate Fund VI, L.P. for
the fiscal year ended December 31, 1994, File No. 0-23656)
*10(p) Joint Venture Agreement of Fund II, III, VI and VII N/A
Associates dated January 10, 1995 (Exhibit 10(w) to
Form 10-K of Wells Real Estate Fund VI, L.P. for the
fiscal year ended December 31, 1995, File No. 0-23606)
*10(q) Fund VII and Fund VIII Associates Joint Venture Agreement dated N/A
February 10, 1995 (Exhibit 10(g) to Post-Effective Amendment No. 1
to Form S-11 Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
Exhibit Sequential
Number Description of Document Page Number
- ------ ----------------------- -----------
*10(r) Agreement for the Purchase and Sale of Real Property dated March N/A
31, 1994 (Exhibit 10(h) to Post-Effective Amendment No. 1 to Form
S-11 Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(s) Letter Agreement amending Agreement for the Purchase and Sale of N/A
Real Property dated July 27, 1994 (Exhibit 10(i) to Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(t) Letter Agreement amending Agreement for the Purchase and Sale of N/A
Real Property dated October 27, 1994 (Exhibit 10(j) to
Post-Effective Amendment No. 1 to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(u) Letter Agreement between NationsBank of Georgia, N.A., as Agent for N/A
Wells Real Estate Fund VII, L.P., as Landlord, and CH2M Hill, Inc.,
as Tenant (Exhibit 10(k) to Post-Effective Amendment No. 1 to Form
S-11 Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(v) First Amendment to Lease Agreement between NationsBank of Georgia, N/A
N.A., as Agent for Wells Real Estate Fund VII, L.P., as Landlord,
and CH2M Hill, Inc., as Tenant (Exhibit 10(l) to Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(w) Second Amendment to Lease Agreement between NationsBank of Georgia, N/A
N.A., as Agent for Wells Real Estate Fund VII, L.P., as Landlord,
and CH2M Hill, Inc, as Tenant (Exhibit 10(m) to Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File
No. 33-83852)
Exhibit Sequential
Number Description of Document Page Number
- ------ ----------------------- -----------
*10(x) Development Agreement between Wells Real Estate Fund VII, L.P. and N/A
ADEVCO Corporation (Exhibit 10(n) to Post-Effective Amendment No. 1
to Form S-11 Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(y) Owner-Contractor Agreement between Wells Real Estate Fund VII, N/A
L.P., as Owner, and Integra Construction, Inc., as Contractor
(Exhibit 10(o) to Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(z) Architect's Agreement between Wells Real Estate Fund VII, L.P., as N/A
Owner, and Smallwood, Reynolds, Stewart, Stewart & Associates,
Inc., as Architect (Exhibit 10(p) to Post-Effective Amendment No. 1
to Form S-11 Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(aa) Joint Venture Agreement of Fund VI, Fund VII and Fund VIII N/A
Associates dated April 17, 1995 (Exhibit 10(q) to Post-Effective
Amendment No. 3 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(bb) Agreement for the Purchase and Sale of Real Property dated N/A
February 13, 1995, between G.L. National, Inc. and Wells Capital,
Inc. (Exhibit 10(r) to Post-Effective Amendment No. 3 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P. and
Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(cc) Agreement to Lease dated February 15, 1995, between NationsBank of N/A
Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P., and
BellSouth Advertising & Publishing Corporation (Exhibit 10(s) to
Post-Effective Amendment No. 3 to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
Exhibit Sequential
Number Description of Document Page Number
- ------ ----------------------- -----------
*10(dd) Development Agreement dated April 25, 1995, between Fund VI, Fund N/A
VII and Fund VIII Associates and ADEVCO Corporation (Exhibit 10(t)
to Post-Effective Amendment No. 3 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
*10(ee) Owner-Contractor Agreement dated April 24, 1995, between Fund VI, N/A
Fund VII and Fund VIII Associates, as Owner, and McDevitt Street
Bovis, Inc., as Contractor (Exhibit 10(u) to Post-Effective
Amendment No. 3 to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File
No. 33-83852)
*10(ff) Architect's Agreement dated February 15, 1995, between Wells Real N/A
Estate Fund VII, L.P., as Owner, and Mayes, Suddereth & Etheredge,
Inc., as Architect (Exhibit 10(v) to Post-Effective Amendment No. 3
to Form S-11 Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(gg) First Amendment to Joint Venture Agreement of Fund VI and Fund VII N/A
Associates (Exhibit 10(dd) to Form 10-K of Wells Real Estate Fund
VI, L.P. for the fiscal year ended December 31, 1995, File No.
0-23656)
*10(hh) First Amendment to Joint Venture Agreement of Fund VI, Fund VII and N/A
Fund VIII Associates dated May 30, 1995 (Exhibit 10(w) to
Post-Effective Amendment No. 4 to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(ii) Real Estate Purchase Agreement dated April 13, 1995 (Exhibit 10(x) N/A
to Post-Effective Amendment No. 4 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
Exhibit Sequential
Number Description of Document Page Number
- ------ ----------------------- -----------
*10(jj) Lease Agreement dated February 27, 1995, between NationsBank of N/A
Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P., and
Harris Teeter, Inc. (Exhibit 10(y) to Post-Effective Amendment No.
4 to Form S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(kk) Development Agreement dated May 31, 1995, between Fund VI, Fund VII N/A
and Fund VIII Associates and Norcom Development, Inc. (Exhibit
10(z) to Post- Effective Amendment No. 4 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
*10(ll) Joint Venture Agreement of Fund I, II, II-OW, VI and VII N/A
Associates dated August 1, 1995 (Exhibit 10(ii) to
Form 10-K of Wells Real Estate Fund VI, L.P. for the
fiscal year ended December 31, 1995, File No. 0-23656)
*10(mm) Lease Modification Agreement No. 3 with The Kroger Co. dated N/A
December 31, 1993 (Exhibit 10(k) to Form 10-K of Wells Real Estate
Fund I for the fiscal year ended December 31, 1993, File No.
0-14463)
*10(nn) First Amendment to Joint Venture Agreement of Fund VII and N/A
Fund VIII Associates dated April 1, 1996, (Exhibit 10 (nn) to form
10-K of Wells Real Estate Fund VII, L.P. for the fiscal year ended
December 31, 1996, File No. 0-25606)
*10(oo) Lease Agreement with Moovies, Inc. dated May 20, 1996, (Exhibit 10 N/A
(oo) to Form 10-K of Wells Real Estate Fund VII, L.P. for the
fiscal year ended December 31, 1996, File No. 0-25606)