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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 0-25731
Wells Real Estate Fund XI, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2250094
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(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
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 code (770) 449-7800
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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 XI, L.P. (the "Partnership") is a Georgia public limited
partnership having Leo F. Wells, III and Wells Partners, L.P., a Georgia
non-public limited partnership, as General Partners. The Partnership was formed
on June 20, 1996, for the purpose of acquiring, developing, constructing,
owning, operating, improving, leasing and otherwise managing for investment
purposes income-producing commercial or industrial properties.
On December 31, 1997, the Partnership commenced a public offering of up to
$35,000,000 of limited partnership units ($10 per unit) pursuant to a
registration statement on Form S-11 filed under the Securities Act of 1933. The
Partnership commenced active operations on March 3, 1998, when it received and
accepted subscriptions for 125,000 units. The offering was terminated on
December 31, 1998 at which time the Partnership had sold 1,314,906 Class A
status units and 338,374 Class B status units held by a total of 1,250 and 95
Class A and B limited partners, respectively, for total limited partner capital
contributions of $16,532,802. As of December 31, 2000, the Partnership has paid
$578,648 in acquisition and advisory fees and acquisition expenses, $2,066,600
in selling commissions and organization and offering expenses, and invested
$3,357,436 in the Fund IX-X-XI-REIT Joint Venture, $2,398,767 in Fund X-XI Joint
Venture, and $8,131,351 in the Fund XI-XII-REIT Joint Venture.
Employees
The Partnership has no direct employees. The employees of Wells Capital, Inc., a
General Partner of Wells Partners, L.P., perform a full range of real estate
services including leasing and property management, accounting, asset management
and investor relations for the Partnership.
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 properties through equity ownership in the
following joint ventures: (i) Fund X and Fund XI Joint Venture, a joint venture
between the Partnership and Wells Real Estate
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Fund X, L.P. (the "Fund X-XI Joint Venture"); (ii) the Fund IX-X-XI-REIT Joint
Venture, a joint venture among the Partnership, Wells Real Estate Fund IX, L.P.
("Wells Fund IX"), Wells Real Estate Fund X, L.P. ("Wells Fund X"), and Wells
Operating Partnership, L.P. ("Wells OP"), a Delaware limited partnership having
Wells Real Estate Investment Trust, Inc., as general partner (the "Fund IX-X-XI-
REIT Joint Venture"); and (iii) the Fund XI-XII-REIT Joint Venture, a joint
venture among the Partnership and Wells Real Estate Fund XII, L.P., and Wells OP
(the "Fund XI-XII REIT 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 in Knoxville, Tennessee (the "Alstom Power
Building"), formerly the ABB Building, which is owned by the Fund IX-X-XI-REIT
Joint Venture; (ii) a two-story office building in Boulder County, Colorado (the
"Ohmeda Building"), which is owned by the Fund IX-X-XI-REIT Joint Venture; (iii)
a three-story office building located in Broomfield, Colorado (the "360
Interlocken Building"), which is owned by the Fund IX-X-XI-REIT Joint Venture;
(iv) a one-story office building located in Oklahoma City, Oklahoma (the "Avaya
Building"), formerly the Lucent Technologies Building, which is owned by the
Fund IX-X-XI-REIT Joint Venture; (v) a single-story warehouse and office
building located in Ogden, Weber County, Utah (the "Iomega Building"), which is
owned by the Fund IX-X-XI-REIT Joint Venture; (vi) a two-story office building
located in Fremont, California (the "Fairchild Building"), which is owned by
Wells/Fremont Associates (the "Fremont Joint Venture"), a joint venture between
the Fund X-XI Joint Venture and Wells OP; (vii) a one-story office and warehouse
building located in Fountain Valley, California (the "Cort Building"), which is
owned by Wells/Orange County Associates (the "Cort Joint Venture"), a joint
venture between the Fund X-XI Joint Venture and Wells OP; (viii) a two-story
manufacturing and office building located in Fountain Inn, South Carolina (the
"EYBL CarTex Building"), which is owned by Fund XI-XII-REIT Joint Venture; (ix)
a three-story office building located in Leawood, Johnson County, Kansas (the
"Sprint Building"), which is owned by Fund XI-XII-REIT Joint Venture; (x) a
one-story office building and warehouse located in Tredyffin Township, Chester
County, Pennsylvania (the "Johnson Matthey Building"), which is owned by Fund
XI-XII-REIT Joint Venture; and (xi) a two-story office building located in Ft.
Myers, Lee County, Florida (the "Gartner Building"), which is owned by Fund
XI-XII-REIT Joint Venture.
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
Number Share of of Total Percentage
Year of Of Square Annualized Annualized Square of Total
Lease Leases Feet Gross Base Gross Base Feet Annualized
Expiration Expiring Expiring Rent (1) Rent (1) Expiring Base Rent
- -------------- ------------- ------------ -------------- -------------- ----------- -------------
2001 0 0 $ 0 $ 0 0.0% 0.0%
2002 5 33,610 174,909 15,464 3.5 2.5
2003(2) 2 69,146 1,003,330 205,319 7.3 14.3
2004(3) 1 58,424 902,946 87,586 6.2 12.9
2005(4) 1 106,750 83,710 7,401 11.2 1.2
2006 0 0 0 0 0.0 0.0
2007(5) 3 283,304 3,055,965 623,527 29.9 43.7
2008(6) 3 289,096 1,599,096 410,387 30.5 22.8
2009(7) 1 108,250 179,986 15,913 11.4 2.6
----------- ------------ -------------- -------------- ----------- ------------
16 948,580 $6,999,942 $1,365,597 100.0% 100.0%
=========== ============ ============== ============== =========== ============
(1) Average monthly gross rent over the life of the lease,
annualized.
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(2) Expiration of Cort Furniture lease, Fountain Valley,
California and ODS Technologies lease, Broomfield, Colorado.
(3) Expiration of Fairchild lease, Fremont, California
(4) Expiration of Ohmeda lease, Louisville, Colorado
(5) Expiration of Alstom Power lease, Knoxville, Tennessee;
Sprint lease, Leawood, Kansas; and the Johnson Matthey lease,
Chester County, Pennsylvania
(6) Expiration of Avaya lease, Oklahoma City, Oklahoma; Gartner
lease, Ft. Myers, Florida; and EYBL CarTex lease, Fountain
Inn, South Carolina
(7) Expiration of Iomega lease, Ogden, Utah
The following describes the properties in which the Partnership owns an interest
as of December 31, 2000
Fund IX-X-XI-REIT Joint Venture
On June 11, 1998, Fund IX and Fund X Associates (the "Joint Venture"),
a joint venture between Wells Real Estate Fund IX and Wells Real Estate
Fund X, L.P. ("Wells Fund IX-X"), a Georgia public limited partnership,
was amended and restated to admit the Partnership, a Georgia public
limited partnership, and Wells Operating Partnership, L.P. ("Wells OP),
a Delaware limited partnership having Wells Real Estate Investment
Trust, Inc. (the "Wells REIT"), a Maryland corporation, as its General
Partner. Wells Fund IX, Wells Fund X, Wells OP and the Wells REIT are
all affiliates of the Partnership and its General Partners.
The Joint Venture, which changed its name to the Fund IX-X-XI-REIT
Joint Venture, had previously acquired and owned the following three
properties: (i) the Alstom Power Building located in Knoxville, Knox
County, Tennessee, (ii) the Ohmeda Building located in Louisville,
Boulder County, Colorado, and (iii) the 360 Interlocken Building
located in Broomfield, Boulder County, Colorado. On June 24, 1998, the
Fund IX-X-XI-REIT Joint Venture purchased the Avaya Building located in
Oklahoma City, Oklahoma County, Oklahoma. On July 1, 1998, Wells Fund X
contributed the Iomega Building located in Ogden, Weber County, Utah to
the Fund IX-X-XI-REIT Joint Venture.
As of December 31, 2000, the Parntership had contributed $3,357,436 and
held an approximate 8.9% equity interest in the Fund IX-X-XI-REIT Joint
Venture. As of December 31, 2000, Wells Fund IX had an approximate
39.1% equity interest, Wells Fund X had an approximate 48.3% equity
interest, and Wells OP had an approximate 3.7% equity interest in the
Fund IX-X-XI-REIT Joint Venture.
The Alstom Power Building
On March 20, 1997, the Fund IX-X Joint Venture began construction on a
three-story office building containing approximately 84,404 rentable
square feet (the "Alstom Power Building") on a 5.62 acre tract of real
property in Knoxville, Knox County, Tennessee. The land purchase and
construction costs totaling approximately $8,137,994 were funded by
capital contributions of $4,221,973 by Wells Fund IX and $3,916,021 by
Wells Fund X.
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Alstom Power, Inc., successor in interest to ABB Environmental Systems,
a subsidiary of ABB, Inc., occupied its lease space of 56,012 rentable
square feet comprising approximately 67% of the building in December
1997. The initial term of the lease is 9 years and 11 months commencing
in December, 1997. Alstom Power has the option under its lease to
extend the initial term of the lease for two consecutive five year
periods. The annual base rent payable during the initial term is
$646,250 payable in equal monthly installments of $53,854 during the
first five years and $728,750 payable in equal monthly installments of
$60,729 during the last four years and 11 months of the initial term.
The annual base rent for each extended term will be at market rental
rates. In addition to the base rent, Alstom Power is required to pay
additional rent equal to its share of operating expenses during the
lease term.
Commencing December 1, 1999, Alstom Power Environmental exercised its
right of first refusal to lease an additional 23,992 square feet of
space vacated by the Associates in September 1999. This addition
increases their rentable floor area from 57,831 square feet to 81,823
square feet. On May 19, 2000, Alstom Power, Inc. executed the third
amendment to the lease agreement for the remaining 2,581 square feet of
rentable floor area on the second floor of the building. Accordingly,
Alstom Power now occupies 100% of the building and will pay base rent
at the same terms and conditions of their original lease.
The average effective annual rental per square foot at the Alstom Power
Building was $14.05 for 2000, $11.82 for 1999, $9.97 for 1998, and
$8.16 for 1997, respectively, the first year of occupancy. The
occupancy rate at year end was 100% for 2000, 98% for 1999, and 95% for
1998.
Ohmeda Building
On February 13, 1998, the Fund IX-X Joint Venture acquired a two story
office building that was completed in 1988 with approximately 106,750
rentable square feet (the "Ohmeda Building") on a 15-acre tract of land
located in Louisville, Boulder County, Colorado. The purchase price for
the Ohmeda Building was $10,325,000. The Fund IX-X Joint Venture also
incurred additional acquisition expenses in connection with the
purchase of the Ohmeda Building, including attorneys' fees, recording
fees, and other closing costs. As of December 31, 2000, Wells Fund IX
had contributed $3,460,192 and Wells Fund X had contributed $6,900,878
towards the purchase of this building.
The entire 106,750 rentable square feet of the Ohmeda Building is
currently under a net lease dated February 26, 1987, as amended by
First Amendment to Lease dated December 3, 1987, as amended by Second
Amendment to Lease dated October 20, 1997 (the "Lease") with Ohmeda,
Inc., a Delaware corporation. The lease was assigned to the Joint
Venture at the closing. The lease currently expires in January 2005,
subject to (i) Ohmeda's right to effectuate an early termination of the
lease under the terms and conditions described below, and (ii) Ohmeda's
right to extend the lease for two additional five year periods of time
at the then current market rental rates.
The monthly base rental payable under the lease is $83,709.79 through
January 31, 2003; $87,890.83 from February 1, 2003 through January 31,
2004; and $92,249.79 from February 1, 2004 through January 31, 2005.
Under the lease, Ohmeda is responsible for all utilities, taxes,
insurance, and other operating costs with respect to the Ohmeda
Building during the term of the lease. In addition, Ohmeda shall pay a
$21,000 per year management fee for maintenance and administrative
services of the Ohmeda Building. The Fund IX-X-XI-REIT Joint Venture,
as landlord, is responsible for maintenance of the roof, exterior and
structural walls, foundation,
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other structural members and floor slab, provided that the landlord's
obligation to make repairs specifically excludes items of cosmetic and
routine maintenance such as the painting of walls.
The average effective annual rental per square foot at the Ohmeda
Building was $9.62 for 2000, 1999, and 1998, the first year of
occupancy. The occupancy rate at year end was 100% for 2000, 1999, and
1998.
360 Interlocken Building
On March 20, 1998 the Fund IX-X Joint Venture acquired a three-story
multi-tenant office building containing approximately 51,974 rentable
square feet (the "360 Interlocken Building") on a 5.1 acre tract of
land in Broomfield, Boulder County, Colorado for a purchase price of
$8,275,000 excluding acquisition costs. The project was funded by
capital contributions of $6,642,466 by Wells Fund IX and $1,674,271 by
Wells Fund X.
The 360 Interlocken Building was completed in December 1996. The first
floor has multiple tenants and contain 15,599 rentable square feet; the
second floor is leased to ODS Technologies, L.P. and contains 17,146
rentable square feet; and the third floor is leased to Transecon, Inc.
and contains 19,229 rentable square feet.
As stated, the entire third floor of the Interlocken building
containing 19,229 rentable square feet is currently under lease to
Transecon and expires in October 2001, subject to Transecon's right to
extend for one additional term of five years upon 180 days' notice. The
monthly lease rent payable under the Transecon lease is approximately
$24,000 for the initial term of the lease. Under the lease Transecon is
responsible for its share of utilities, taxes, insurance, and other
operating expenses with respect to the Interlocken Building. In
addition, Transecon has a right of first floor space proposed to be
leased by the landlord.
The entire second floor of the Interlocken building containing 17,146
rentable square feet is currently under lease to ODS and expires in
September 2003, subject to ODS's right to extend for one additional
term of three years. The monthly base rent payable under the ODS lease
is $22,100 through January 1998; $22,150 through January 1999; $22,600
through January 2000; $23,100 through January 2001; $23,550 through
January 2002; $24,050 through January 2003, and $245,550 through
September 2003. The rental payments to be made by the tenant under the
ODS lease are also secured by the assignment of a $275,000 letter of
credit which may be drawn upon by the landlord in the event of a tenant
default under the lease. Under the lease, ODS is responsible for its
share of utilities, taxes, insurance, and other operating costs with
respect to the Interlocken building.
The average effective annual rental per square foot at the 360
Interlocken Building was $16.23 for 2000, $15.97 for 1999 and 1998, the
first year of occupancy. The occupancy rate at year end was 100% for
2000, 1999, and 1998.
Avaya Building (formerly Lucent Technologies Building)
On May 30, 1997, the Fund IX-X Joint Venture entered into an agreement
for the purchase and sale of real property with Wells Development
Corporation ("Wells Development"), an affiliate of the General
Partners, for the acquisition and development of a one-story office
building containing 57,186 net rentable square feet on 5.3 acres of
land (the "Avaya Building"). On June 24, 1998, the Fund IX-X Joint
Venture purchased this property for a purchase price of $5,504,276. The
purchase price was funded by capital contributions of $2,482,810 by the
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Partnership, $657,804 by Wells Fund IX, $950,392 by Wells Fund X, and
$1,421,466 by Wells OP.
Avaya, a world-wide leader in telecommunications technology producing a
variety of communication products, has occupied the entire Avaya
Building. The initial term of the lease is ten years commencing January
5, 1998. Avaya has the option to extend the initial term of the lease
for two additional five year periods. The annual base rent payable
during the initial term is $508,383 payable in equal monthly
installments of $42,365 during the first five years and $594,152
payable in equal monthly installments of $49,513 during the second five
years of the lease term. The annual base rent for each extendable term
will be at market rental rates. In addition to the base rent, Avaya
will be required to pay additional rent equal to its share of operating
expenses during the lease term.
The average effective annual rental per square foot at the Avaya
Building was $10.19 for 2000, 1999, and 1998, the first year of
occupancy. The occupancy rate at year-end was 100% for 2000, 1999, and
1998.
Iomega Building
On July 1, 1998, Fund X contributed a single story warehouse and office
building with 108,250 rentable square feet (the "Iomega Building") and
was credited with making a capital contribution to the IX-X-XI-REIT
Joint Venture in the amount of $5,050,425, which represents the
purchase price of $5,025,000 plus acquisition expenses of $25,425
originally paid by Fund X for the Iomega Building on April 1, 1998.
The building is 100% occupied by one tenant with a ten year lease term
that expires on July 31, 2006. The monthly base rent payable under the
lease is $40,000 through November 12, 1999. Beginning on the 40th and
80th months of the lease term, the monthly base rent payable under the
lease will be increased to reflect an amount equal to 100% of the
increase in the Consumer Price Index (as defined in the lease) during
the preceding 40 months; provided however, that in no event shall the
base rent be increased with respect to any one year by more than 6% or
by less than 3% per annum, compounded annually, on a cumulative basis
from the beginning of the lease term. The lease is a triple net lease,
whereby the terms require the tenant to reimburse the IX-X-XI-REIT
Joint Venture for certain operating expenses, as defined in the lease,
related to the building.
On March 22, 1999, the Fund IX-X-XI-REIT Joint Venture purchased a
four-acre tract of vacant land adjacent to the Iomega Building located
in Ogden, Utah. This site is intended to be additional parking and a
loading-dock area, and will include at least 400 new parking stalls and
new site work for truck maneuver space, in accordance with the
requirements of the tenants and the city of Ogden. The project was
completed on July 31, 1999. The tenant, Iomega Corporation, has agreed
to extend the term of its lease to April 30, 2009 and will pay an
additional base rent, an amount equal to 13% per annum payable in
monthly installments of the direct and indirect cost of acquiring the
property and construction of improvements. This additional base rent
commenced on May 1, 1999.
The land was purchased at a cost of $212,000, excluding acquisition
costs. The funds used to acquire the land and for the improvements are
funded entirely out of capital contributions made by Wells Real Estate
Fund XI, L.P. to the Fund IX-X-XI-REIT Joint Venture in the amount of
$874,625. The project was completed at a total cost of $874,625.
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The average effective annual rental per square foot at the Iomega
Building was $5.18 for 2000 and 1999, and $4.60 for 1998, the first
year of occupancy. The occupancy rate at year end was 100% for 2000,
1999, and 1998.
Fund X-XI Joint Venture
On July 17, 1998 the Partnership and Wells Real Estate Fund X, L.P.
("Wells Fund X"), a Georgia public limited partnership, affiliated with
the Partnership through common general partners, formed a joint venture
known as Fund X and Fund XI Associates (the "Fund X-XI Joint Venture").
The investment objectives of Wells Fund X are substantially identical
to those of the Partnership. As of December 31, 2000, the Partnership
had contributed $2,398,767 and Wells Fund X had contributed $3,296,233
for total contributions of $5,695,000 to the Fund X-Fund XI Joint
Venture. At this time, the Partnership's equity interest in the Fund
X-Fund XI Joint Venture is approximately 42% and Wells Fund X's equity
interest in the Fund X-Fund XI Joint Venture is approximately 58%.
Wells/Fremont Joint Venture - Fairchild Building
On July 15, 1998, Wells OP entered into a joint venture agreement known
as Wells/Fremont Associates ("Fremont Joint Venture") with Wells
Development Corporation, a Georgia Corporation ("Wells Development").
Wells Development is an affiliate of the Partnership and its General
Partners. On July 21, 1998, the Fremont Joint Venture acquired the
Fairchild Building, a 58,424 square-foot warehouse and office building
located in Fremont, California (the "Fairchild Building"), for a
purchase price of $8,900,000 plus acquisition expenses of approximately
$60,000. The Partnership contributed $1,000,000, Wells Fund X
contributed $1,000,000, and Wells OP contributed $6,900,000 towards the
purchase of this building.
The Fairchild Building is 100% occupied by one tenant with a seven-year
lease term that commenced on December 1, 1997 (with an early possession
date of October 1, 1997) and expires on November 30, 2004. The monthly
base rent payable under the lease is $68,128 with a 3% increase on each
anniversary of the commencement date. The lease is a triple net lease,
whereby the terms require the tenant to reimburse the landlord for
certain operating expenses, as defined in the lease, related to the
building.
On July 17,1998 a joint venture between the Partnership and Wells Fund
X (the "Fund X-XI Joint Venture") entered into an agreement for the
purchase and sale of Wells Development's interest in the Fremont Joint
Venture.
On October 8, 1998, the Fund X-XI Joint Venture exercised its rights
under the Fremont Joint Venture Contract and purchased Wells
Development's interest in the Fremont Joint Venture and became a joint
venture partner with Wells OP in the ownership of the Fairchild
Building.
As of December 31, 2000, Wells OP had contributed $6,983,110 and held
an approximate 78% equity percentage interest in the Fremont Joint
Venture, and Fund X-XI Joint Venture had contributed $2,000,000 and
held an approximate 22% equity percentage interest in the Fremont Joint
Venture.
The average effective annual rental per square foot at the Fairchild
Building was $15.46 for 2000, 1999, and 1998, the first year of
occupancy. The occupancy rate at year end was 100% for 2000, 1999, and
1998.
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Wells/Orange County Joint Venture
In July 1998, Wells OP entered into a joint venture agreement known as
Wells/Orange County Associates ("Cort Joint Venture") with Wells
Development Corporation. On July 31, 1998, the Cort Joint Venture
acquired the Cort Building for a purchase price of $6,400,000 plus
acquisition expenses of approximately $150,000. The Partnership
contributed $1,398,767, Wells Fund X contributed $2,296,233, and Wells
OP contributed $2,871,430 towards the purchase of this building.
The Cort Building is a 52,000-square-foot warehouse and office building
located in Fountain Valley California. The building is 100% occupied by
one tenant with a 15-year lease term that commenced on November 1, 1988
and expires on October 31, 2003. The monthly base rent payable under
the lease is $63,247 through April 30, 2001, at which time the monthly
base rent will be increased 10% to $69,574 for the remainder of the
lease term. The lease is a triple net lease, whereby the terms require
the tenant to reimburse the Cort Joint Venture for certain operating
expenses, as defined in the lease, related to the building.
On July 30, 1998, the Fund X-XI Joint Venture entered into an Agreement
for the Purchase and Sale of Wells Development's interest in the Cort
Joint Venture. On September 1, 1998, the Fund X-XI Joint Venture
exercised its rights under the Cort JV Contract and purchased Wells
Development's interest in the Cort Joint Venture and became a joint
venture partner with Wells OP in the ownership of the Cort Furniture
Building.
As of December 31, 2000, the Wells Operating Partnership had made total
capital contributions of $2,871,430 and held an approximate 44% equity
percentage interest in the Cort Joint Venture, and the Fund X-XI Joint
Venture had contributed $3,695,000 and held an approximate 56% equity
percentage interest in the Cort Joint Venture.
The average effective annual rental per square foot at the Cort
Building was $15.30 for 2000, 1999, and 1998, the first year of
occupancy. The occupancy rate at year end was 100% for 2000, 1999, and
1998.
Fund XI-XII-REIT Joint Venture
On June 21, 1999, Fund XI-REIT Joint Venture, a joint venture between
the Partnership and Wells Operating Partnership, L.P. ("Wells OP"), a
Delaware limited partnership, was amended and restated to admit the
Wells Real Estate Fund XII L.P. ("Wells Fund XII"), a Georgia public
limited partnership. Wells Fund XII and Wells OP are all affiliates of
the Partnership and its general partners. The XI-REIT Joint Venture
which changed its name to Wells Fund XI-XII-REIT Joint Venture had
previously acquired and owned the EYBL CarTex Building located in
Greenville, South Carolina. As of December 31, 2000, the Partnership
had contributed $8,131,351 for an approximate 26.1% equity interest in
the Fund XI-XII-REIT Joint Venture, Wells Fund XII had made capital
contributions of $5,300,000 for an approximate 17.1% equity interest,
and Wells OP had contributed $17,585,310 for an approximate 56.8%
interest in the Fund XI-XII-REIT Joint Venture.
EYBL CarTex Building
On May 18, 1999, Wells Real Estate, LLC-SC I ("Wells LLC"), a Georgia
limited liability company wholly owned by the Wells Fund XI-XII-REIT
Joint Venture, acquired a manufacturing and office building located in
Fountain Inn, unincorporated Greenville County, South Carolina
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(the "EYBL CarTex Building"). Wells LLC purchased the EYBL CarTex
Building from Liberty Property Limited Partnership, a Pennsylvania
limited partnership.
The rights under the Contract were assigned by Wells Capital, Inc., an
affiliate of the Partnership and the original purchaser under the
Contract, to Wells LLC at closing. The purchase price for the EYBL
CarTex Building was $5,085,000. Wells LLC also incurred additional
acquisitions expenses in connection with the purchase of the EYBL
CarTex Building including attorney's fees, recording fees, and other
closing costs, of approximately $37,000. The purchase cost was funded
by capital contributions of $1,530,000 by the Partnership and
$3,591,827 by Wells OP.
The EYBL CarTex Building is a manufacturing and office building
consisting of a total of 169,510 square feet comprised of approximately
140,580 square feet of manufacturing space, 25,300 square feet of
two-story office space and 3,360 square feet of cafeteria/training
space. An addition was constructed to the EYBL CarTex Building in 1989,
which consisted of an additional 64,000 square feet of warehouse space.
The entire 169,510 rentable square feet of the EYBL CarTex Building is
currently under an Agreement of Lease (the "Lease") with EYBL CarTex,
Inc., a South Carolina corporation ("EYBL CarTex"). The Lease was
assigned to Wells LLC at the closing. The initial term of the Lease is
ten years which commenced on March 1, 1998 and expires in February
2008. EYBL CarTex has the right to extend the Lease for two additional
five year periods of time. Each extension option must be exercised by
giving notice to the landlord at least 12 months prior to the
expiration date of the then current lease term. The annual lease rent
payable during the first four years of the lease is $508,530 in equal
monthly installments of $42,377.50. The annual lease rent for years
five and six is $550,907.50, year seven and eight is $593,285, and
years nine and ten is $610,236.
Under the lease, EYBL CarTex is required to pay as additional rent all
real estate taxes, special assessments, utilities, taxes, insurance,
and other operating costs with respect to the EYBL CarTex Building
during the term of the Lease. In addition, EYBL CarTex is responsible
for all routine maintenance and repairs to the EYBL CarTex Building.
Wells LLC, as landlord, is responsible for maintenance of the footings
and foundations and the structural steel columns and girders associated
with the building.
Pursuant to a lease commission agreement dated February 12, 1998
between the Seller and The McNamara Company, Inc., Wells LLC is
required to pay on or before March 1 of each year an amount equal to
$13,787 as a brokerage fee to the McNamara Company, Inc. through March
1, 2007.
The average effective annual rental per square foot at the EBYL CarTex
Building was $3.31 for 2000 and 1999, the first year of occupancy. The
occupancy rate at year end was 100% for 2000 and 1999.
The Sprint Building
On July 2, 1999, the Fund XI-XII-REIT Joint Venture acquired a
three-story office building with approximately 68,900 rentable square
feet on a 7.12-acre tract of land located in Leawood, Johnson County,
Kansas, from Bridge Information Systems America, Inc.
The purchase price for the Sprint Building was $9,500,000. The Fund
XI-XII-REIT Joint Venture also incurred additional acquisition expenses
in connection with the purchase of the
-10-
Sprint Building, including attorneys' fees, recording fees, and other
closing costs, of approximately $46,210. As of December 31, 2000, the
Partnership had contributed $3,000,000, Wells Fund XII had contributed
$1,000,000 and Wells OP had contributed $5,500,000 to the purchase of
this property.
The entire 68,900 rentable square feet of the Sprint Building is
currently under a net lease agreement with Sprint Communications, Inc.
("Sprint") dated February 14, 1997. The landlord's interest in the
lease was assigned to the Fund XI-XII-REIT Joint Venture at the
closing. The initial term of the lease is ten years which commenced on
May 19, 1997 and expires on May 18, 2007. Sprint has the right to
extend the lease for two additional five-year periods of time. The
monthly base rent payable under the lease is $83,254.17 through May 18,
2002 and $91,866.67 for the remainder of the lease term. The monthly
base rent payable for each extended term of the lease will be equal to
95% of the then "current market rate" which is calculated as a
full-service rental rate less anticipated annual operating expenses on
a rentable square foot basis charged for space of comparable location,
size, and conditions in comparable office buildings in the suburban
south Kansas City, Missouri, and south Johnson County, Kansas areas.
Under the lease, Sprint is required to pay as additional rent all real
estate taxes, special assessments, utilities, taxes, insurance, and
other operating costs with respect to the Sprint Building during the
term of the Lease. In addition, Sprint is responsible for all routine
maintenance and repairs including the interior mechanical and
electrical systems, the HVAC system, the parking lot, and the
landscaping to the Sprint Building. The Fund XI-XII-REIT Joint Venture,
as landlord, is responsible for repair and replacement of the exterior,
roof, foundation, and structure.
The lease contains a termination option which may be exercised by
Sprint effective as of May 18, 2004 provided that Sprint has not
exercised either expansion option, as described below. Sprint must
provide notice to the Fund XI-XII-REIT Joint Venture of its intent to
exercise its termination option on or before August 21, 2003. If Sprint
exercises its termination option, it will be required to pay the Fund
XI-XII-REIT Joint Venture a termination payment equal to $6.53 per
square foot, or $450,199.
Sprint also has an expansion option for an additional 20,000 square
feet of office space which may be exercised in two expansion phases.
Sprint's expansion rights involve building on unfinished grounded-level
space that is currently used as covered parking within the existing
building footprint and shell. At each exercise of an expansion option,
the remaining lease term will be extended to be a minimum of an
additional five years from the date of the completion of such expansion
space.
The average effective annual rental per square foot at the Sprint
Building was $15.44 for 2000 and 1999, the first year of occupancy. The
occupancy rate at year end was 100% for 2000 and 1999.
The Johnson Matthey Building
On August 17, 1999, the Fund XI-XII-REIT Joint Venture acquired a
research and development office and warehouse building (the "Johnson
Matthey Building") located in Chester County, Pennsylvania, from
Alliance Commercial Properties Ltd.
The purchase price paid for the Johnson Matthey Building was
$8,000,000. The Fund XI-XII-REIT Joint Venture also incurred additional
acquisition expenses in connection with the
-11-
purchase of the Johnson Matthey Building, including attorneys' fees,
recording fees, and other closing costs, of approximately $50,000. The
purchase of the building was funded by capital contributions of
$3,494,727 by the Partnership, $1,500,000 by Wells Fund XII and
$3,061,594 by Wells OP.
The Johnson Matthey Building is a 130,000 square foot research and
development office and warehouse building that was first constructed in
1973 as a multi-tenant facility. It was subsequently converted into a
single-tenant facility in 1998. The site consists of a ten-acre tract
of land located at 434-436 Devon Park Drive in the Tredyffrin Township,
Chester County, Pennsylvania.
The entire 130,000 rentable square feet of the Johnson Matthey Building
is currently leased to Johnson Matthey. The Johnson Matthey lease was
assigned to the Fund XI-XII-REIT Joint Venture at the closing with the
result that the joint venture is now the landlord under the lease. The
annual base rent payable under the Johnson Matthey lease for the
remainder of the lease term is as follows: year three--$789,750, year
four--$809,250, year five--$828,750, year six--$854,750, year
seven--$874,250, year eight--$897,000, year nine--$916,500, and year
ten--$939,250. The current lease term expires in June 2007. Johnson
Matthey has the right to extend the lease for two additional three-year
periods of time.
Under the lease, Johnson Matthey is required to pay as additional rent
all real estate taxes, special assessments, utilities, taxes,
insurance, and other operating costs with respect to the Johnson
Matthey Building during the term of the lease. In addition, Johnson
Matthey is responsible for all routine maintenance and repairs to the
Johnson Matthey Building. The Fund XI-XII-REIT Joint Venture, as
landlord, is responsible for maintenance of the footings and
foundations and the structural steel columns and girders associated
with the building.
Johnson Matthey has a right of first refusal to purchase the Johnson
Matthey Building in the event that the Fund XI-XII-REIT Joint Venture
desires to sell the building to an unrelated third party. The joint
venture must give Johnson Matthey written notice of its intent to sell
the Johnson Matthey Building, and Johnson Matthey will have ten days
from the date of such notice to provide written notice of its intent to
purchase the building. If Johnson Matthey exercises its right of first
refusal, it must purchase the Johnson Matthey Building on the same
terms contained in the offer.
The average effective annual rental per square foot at the Johnson
Matthey Building was $6.67 for 2000 and 1999, the first two years of
occupancy. The occupancy rate of year end was 100% for 2000 and 1999.
The Gartner Building
On September 20, 1999, the Fund XI-XII-REIT Joint Venture acquired a
two-story office building with approximately 62,400 rentable square
feet on a 4.9-acre tract of land located at 12600 Gateway Boulevard in
Fort Myers, Lee County, Florida, from Hogan Triad Ft. Myers I, Ltd., a
Florida limited partnership.
The rights under the contract were assigned by Wells Capital, Inc., the
original purchaser under the contract, to the Fund XI-XII-REIT Joint
Venture at closing. The purchase price for the Gartner Building was
$8,320,000. The Fund XI-XII-REIT Joint Venture also incurred additional
acquisition expenses in connection with the purchase of the Gartner
Building, including attorneys' fees, recording fees, and other closing
costs, of approximately $27,600. The purchase
-12-
was funded by capital contributions of $106,554 by the Partnership,
$2,800,000 by Wells Fund XII and $5,441,064 by Wells OP.
The entire 62,400 rentable square feet of the Gartner Building is
currently under a net lease agreement with Gartner dated July 30, 1997
(the "Gartner Lease"). The landlord's interest in the Gartner Lease was
assigned to the Fund XI-XII-REIT Joint Venture at the closing.
The initial term of the Gartner Lease is ten years which commenced on
February 1, 1998 and expires on January 31, 2008. Gartner has the right
to extend the Gartner Lease for two additional five-year periods of
time. The yearly base rent payable for the remainder of the Gartner
Lease term is $642,798 through January 2000, $790,642 through January
2001, and thereafter will increase by 2.5% through the remainder of the
Gartner Lease.
Under the Gartner Lease, Gartner is required to pay as additional rent
all real estate taxes, special assessments, utilities, taxes,
insurance, and other operating costs with respect to the Gartner
Building during the term of the Gartner Lease. In addition, Gartner is
responsible for all routine maintenance and repairs to the Gartner
Building. The Fund XI-XII-REIT Joint Venture, as landlord, is
responsible for repair and replacement of the roof, structure, and
paved parking areas.
Gartner also has two expansion options for additional buildings under
the Gartner Lease. The two option plans are described in the Gartner
Lease as the "Small Option Building" and the "Large Option Building."
The "Small Option Building" expansion option allows Gartner the ability
to expand into a separate, free-standing facility on the property
containing between 30,000 and 32,000 rentable square feet to be
constructed by the Fund XI-XII-REIT Joint Venture. Gartner may exercise
its expansion right for the "Small Option Building" by providing notice
in writing to the Fund XI-XII-REIT Joint Venture on or before February
15, 2002.
The "Large Option Building" expansion option allows Gartner the ability
to expand into a separate, free-standing facility on the property
containing between 60,000 and 75,000 rentable square feet to be
constructed by the Fund XI-XII-REIT Joint Venture. Gartner may exercise
its expansion right for the Small Option Building" by providing notice
in writing to the Fund XI-XII-REIT Joint Venture on or before February
15, 2002.
The average effective annual rental per square foot at the Gartner
Building was $13.68 for 2000 and 1999, the first year of occupancy. The
occupancy rate at year end was 100% for 2000 and 1999.
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 during the year
2000.
-13-
PART II
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS
The offering for sale of Units in the Partnership terminated on December 30,
1998, at which time the Partnership had 1,314,906 outstanding Class A status
units held by a total of 1,250 Limited Partners and 338,374 outstanding Class B
status units held by a total of 95 Limited Partners. As of February 28, 2001,
the Partnership had 1,341,356 outstanding Class A Units held by a total of 1,255
Limited Partners and 311,924 outstanding Class B Units held by a total of 86
Limited Partners. The capital contribution per unit is $10.00. 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 $9.62 per A unit and $11.42 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 in such an undertaking. The valuation does not include any
fractional interest valuation.
Class A status limited partners are entitled to a distribution from net cash
from operations, as defined in the partnership agreement to mean cash flow, less
adequate cash reserves for other obligations of the Partnership for which there
is no provision, on a per Unit basis until they have received distributions in
each fiscal year of the Partnership equal to 10% of their adjusted capital
contributions. After this preference is satisfied, the General Partners will
receive an amount of net cash from operations equal to 10% of the total amount
of net cash from operations distributed. Thereafter, the Limited Partners
holding Class A status units will receive 90% of net cash from operations and
the General Partners will receive 10%. No net cash from operations will be
distributed to Limited Partners holding Class B status units. Holders of Class A
status units will, except in limited circumstances, be allocated none of the
Partnership's net loss, depreciation and amortization deductions. These
deductions will be allocated to the Class B Status Units, until their capital
account balances have been reduced to zero. No distributions have been made to
the General Partners as of December 31, 2000.
Cash available for distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners select to have their cash distributed
monthly. Cash distributions made to Class A status limited partners during 1999
and 2000 and were as follows:
-14-
Distribution Per Class A Unit
-------------------------
for Quarter Total Cash Investment Return of General
-------------
Ended Distributed Income Capital Partner
---------------------------------------- ------------ ------------- ------------ ------------
March 31, 1999 $195,440 $0.15 $0.00 $0.00
June 30, 1999 196,635 0.15 0.00 0.00
September 30, 1999 262,930 0.20 0.00 0.00
June 30, 1999 275,736 0.21 0.00 0.00
March 31, 2000 300,802 0.23 0.00 0.00
June 30, 2000 310,189 0.23 0.00 0.00
September 30, 2000 318,572 0.24 0.00 0.00
December 31, 2000 326,954 0.24 0.00 0.00
The fourth quarter distribution was accrued for accounting purposes in 2000, and
was not actually paid to Limited Partners until February, 2001. Although there
is no assurance, the General Partners anticipate that cash distributions to
Limited Partners holding Class A Status 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
year ended December 31, 2000, 1999, and 1998:
2000 1999 1998
----------- ----------- -----------
Total assets $14,131,924 $14,440,800 $14,844,515
Total revenues 975,850 766,586 262,729
Net income 895,989 630,528 143,295
Net loss allocated to General Partners 0 0 (500)
Net income allocated to Class A Limited
Partners 1,381,547 1,009,368 254,862
Net loss allocated to Class B Limited Partners (485,558) (378,840) (111,067)
Net income per weighted average (1) Class A
Limited Partner unit $ 1.03 $ 0.77 $ 0.50
Net loss per weighted average (1) Class B
Limited Partner unit (1.55) (1.12) (0.77)
Cash distribution per weighted average (1)
Class A Limited Partner unit:
Investment income 0.94 0.71 0.30
Return of capital 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 were being
purchased 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 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
-15-
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
The Partnership commenced active operations on March 3, 1998, when it received
and accepted subscriptions for 125,000 units. An aggregate requirement of
$2,500,000 of offering proceeds was reached on March 30, 1998, thus allowing for
the admission of New York and Pennsylvania investors into the Partnership. As of
December 31, 2000, the Partnership had 1,336,906 Class A status units and
316,374 Class B status units, held by a total of 1,255 Class A and 90 Class B
limited partners, for total limited partner contributions of $16,532,802. After
payment of $578,648 in acquisition and advisory fees and acquisition expenses,
payment of $2,066,600 in selling commissions and organization and offering
expenses, the Partnership invested $3,357,436 in the Fund IX-X-XI-REIT Joint
Venture, $2,398,767 in Fund X-XI Joint Venture, and $8,131,351 in the Fund
XI-XII-REIT Joint Venture.
Gross revenues of the Partnership increased to $975,850 from $766,586 and
$262,729 for the years ended December 31, 2000, 1999, and 1998, respectively.
This increase in revenues was attributable primarily to an increase in equity in
income of joint ventures as the Partnership invested in four additional joint
venture properties offset partially by decreased interest income earned on funds
held by the Partnership prior to investment in properties.
Expenses of the Partnership were $79,861 for the year ended December 31, 2000,
$136,058 for the year ended December 31, 1999, and $119,434 for the year ended
December 31, 1998, and consisted primarily of legal, accounting, and partnership
administrative costs. In conformity with the recent accounting pronouncements
outlined below, organizational costs, which were previously capitalized, were
completely written off in 1999, hence the increase in total expenses for 1999
over 1998. Net income of the Partnership was $895,989, $630,528, and $143,295
for the years ended December 31, 2000, 1999, and 1998, respectively.
Recent Accounting Pronouncements
Effective April 3, 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 is effective for fiscal years beginning after December 15,
1998, and initial application is required to be reported as a cumulative effect
of change in accounting principle. This SOP provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. Adoption
of this Statement by the Partnership in the first quarter of 1999 resulted in
the write-off of certain capitalized organization costs.
-16-
Property Operations
As of December 31, 2000, the Partnership owned interests in the following
operational properties:
The Alstom Power-Knoxville Building (formerly the ABB Building)
IX-X-XI-REIT Joint Venture
For the Years Ended
--------------------------------------------------
December 31
--------------------------------------------------
2000 1999 1998
-------------- ------------ ----------
Revenues: $ 1,185,573 $ 987,327 $ 836,746
Rental income 73,676 58,768 20,192
------------- ------------ ----------
Interest income 1,259,249 1,046,095 856,938
------------- ------------ ----------
Expenses:
Depreciation 394,998 537,799 475,020
Management and leasing expense 149,378 120,325 107,338
Operating costs, net of reimbursements (77,526) (2,532) (40,641)
------------- ------------ ----------
466,850 655,592 541,717
------------- ------------ ----------
Net income $ 792,399 $ 390,503 $ 315,221
============= ============ ==========
Occupied percentage 100% 98% 95%
============= ============ ==========
Partnership ownership percentage 8.84% 8.9% 6.7%
============= ============ ==========
Cash distributed to the Partnership $ 104,796 $ 78,795 $ 36,360
============= ============ ==========
Net income allocated to the Partnership $ 70,138 $ 32,707 $ 16,508
============= ============ ==========
Rental income increased in 2000, over 1999 and 1998, due primarily to the
increased occupancy level of the property. Other operating expenses were
negative for 2000, 1999, and 1998 due to an offset of tenant reimbursements in
operating costs, as well as management and leasing reimbursements. Tenants are
billed an estimated amount for current year common area maintenance which is
then reconciled the following year and the difference billed to the tenant.
Total expenses decreased in 2000, due to a decrease in depreciation expense, but
increased for 1999, over 1998, due to increased depreciation and management and
leasing fees as the building was leased up. The decrease in depreciation
resulted from an accelerated depreciation on tenant improvement for a short-term
lease in 1999 for 23,092 square feet.
Cash distributions and net income allocated to the Partnership increased in
2000, over prior year levels, due to a combination of increased rental income
and decreased operating expenses. The Alstom Power-Knoxville Building incurred
property taxes of $63,198 for 2000, $47,616 for 1999, and $36,771 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 3. For additional information on tenants,
etc, refer to Item 2, Properties, page 3.
-17-
The Avaya Building (formerly Lucent Technologies Building)--
Fund IX-X-XI-REIT Joint Venture
Seven Months
For the Years Ended Ended
------------------------------
December 31 December 31,
------------------------------
2000 1999 1998
------------ ------------ -----------
Revenues:
Rental income $ 583,009 $ 583,009 $ 291,508
------------ ------------ -----------
Expenses:
Depreciation 183,204 183,204 106,871
Management and leasing expenses 21,479 21,479 11,281
Operating costs, net of reimbursements 12,753 15,809 9,883
------------ ------------ -----------
217,436 220,492 128,035
------------ ------------ -----------
Net income $ 365,573 $ 362,517 $ 163,473
============ ============ ===========
Occupied percentage 100% 100% 100%
============ ============ ===========
Partnership's ownership percentage 8.84% 8.9% 6.7%
============ ============ ===========
Cash distribution to the Partnership $ 44,586 $ 42,442 $ 26,677
============ ============ ===========
Net income allocated to the Partnership $ 32,356 $ 30,779 $ 11,025
============ ============ ===========
Rental income, depreciation and management, and leasing fees remained stable in
2000, as compared to 1999, while other operating expenses are slightly lower,
due primarily to a one-time charge for consulting fees in 1999, which did not
occur in 2000. Net income and cash distribution allocated to the Partnership
increased in 2000, compared to 1999, due primarily to the increase in net
income. The tenant is responsible for property taxes. Since the Avaya Building
was purchased in June 1998, comparative income and expense figures are available
for only seven months of 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 tenants,
etc, refer to Item 2, Properties, page 3.
-18-
The Ohmeda Building--Fund IX-X-XI-REIT Joint Venture
Eleven Months
For the Years Ended Ended
----------------------------------
December 31 December 31,
----------------------------------
2000 1999 1998
-------------- --------------- -------------
Revenues:
Rental income $ 1,027,314 $ 1,027,314 $ 898,901
-------------- --------------- -------------
Expenses:
Depreciation 326,305 326,304 299,112
Management and leasing expenses 54,482 46,911 41,688
Operating costs, net of reimbursements 65,152 (15,183) 2,863
-------------- --------------- -------------
445,939 358,032 343,663
-------------- --------------- -------------
Net income $ 581,375 $ 669,282 $ 555,238
============== =============== =============
Occupied percentage 100% 100% 100%
============== =============== =============
Partnership's ownership percentage 8.84% 8.9% 6.7%
============== =============== =============
Cash distribution to the Partnership $ 78,316 $ 82,761 $ 38,113
============== =============== =============
Net income allocated to the Partnership $ 51,452 $ 56,955 $ 25,656
============== =============== =============
Rental income remained stable in 2000, as compared to 1999. Total expenses
increased significantly due in part to a significant rise in real estate taxes,
which stemmed from the revaluation of the property by Boulder County authorities
in 1999. A later reduction in taxes resulting from an appeal in 2000 was offset
by a common area maintenance reimbursement credit to the tenant. The Ohmeda
Building incurred property taxes of $227,495 for 2000, $249,707 for 1999, and
$143,962 for 1998.
Cash distributions and net income allocated to the Partnership decreased in
2000, as compared to 1999, due to a decrease in net income resulting from the
increase in expenses discussed above. The Partnership's percentage ownership
interest in the Fund IX-X-XI-REIT Joint Venture decreased due to additional
capital contributions made by Fund IX and Fund X.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-19-
The 360 Interlocken Building--Fund IX-X-XI-REIT Joint Venture
Ten Months
For the Years Ended Ended
------------------------------
December 31 December 31,
------------------------------
2000 1999 1998
------------- -------------- ------------
Revenues:
Rental income $ 843,675 $ 829,827 $ 665,405
Interest income 0 0 246
----------- ----------- -----------
843,675 829,827 665,651
Expenses:
Depreciation 286,680 286,680 238,299
Management and leasing expenses 108,275 73,129 55,130
Operating costs, net of reimbursements (75,208) 42,431 (55,654)
----------- ----------- -----------
319,747 402,240 237,775
----------- ----------- -----------
Net income $ 523,928 $ 427,587 $ 427,876
=========== =========== ===========
Occupied percentage 100% 100% 100%
=========== =========== ===========
Partnership's ownership percentage 8.84% 8.9% 6.7%
=========== =========== ===========
Cash distribution to Partnership $ 72,155 $ 60,233 $ 31,653
=========== =========== ===========
Net income allocated to Partnership $ 46,374 $ 36,366 $ 21,963
=========== =========== ===========
Rental income increased due to a tenant occupying additional space previously
leased to another tenant at a lower rate. Other operating expenses are negative
due to an offset of tenant reimbursements in operating costs, as well as
management and leasing fee reimbursement. Tenants are billed an estimated amount
for current year common area maintenance which is then reconciled the following
year and the difference billed to the tenants. Management and leasing expenses
increased in 2000, as compared to 1999, due to differences in adjustments for
prior year billings to tenants. The 360 Interlocken Building incurred property
taxes of $268,744 for 2000, $244,025 for 1999, and $96,747 for 1998.
Net income and cash distributions allocated to the Partnership increased in
2000, as compared to 1999, due primarily to the increase in net income.
For comments on the general conditions to which the property may be subject, see
Item 1, Business, page 2. For additional information on tenants, etc., refer to
Item 2, Properties, page 3.
-20-
The Iomega Building-Fund IX-X-XI-REIT Joint Venture
Nine Months
For the Years Ended Ended
------------------------------
December 31 December 31,
------------------------------
2000 1999 1998
------------ ------------- ------------
Revenues:
Rental income $ 673,000 $ 560,906 $ 373,420
------------- ------------ -----------
Expenses:
Depreciation 220,248 204,925 145,975
Management and leasing expenses 29,159 24,295 23,058
Operating costs, net of reimbursements 17,725 9,368 (4,579)
------------- ------------ -----------
267,132 238,588 164,454
------------- ------------ -----------
Net income $ 405,868 $ 322,318 $ 208,966
============= ============ ===========
Occupied percentage 100% 100% 100%
============= ============ ===========
Partnership's ownership percentage 8.84% 8.9% 6.7%
============= ============ ===========
Cash distribution to the Partnership $ 53,706 $ 43,660 $ 15,803
============= ============ ===========
Net income allocated to the Partnership $ 35,922 $ 27,511 $ 10,197
============= ============ ===========
Rental income increased in 2000, as compared to 1999, due primarily to
completion of the parking lot complex in the second quarter of 1999. Total
expenses increased in 2000, over 1999, due to an increase in depreciation and
real estate tax expenses relating to the new parking lot. Other operating
expenses for 1998 are negative due to tenant reimbursement reflected in this
category, which includes management and leasing expense reimbursement. The
Iomega Building incurred property taxes of $76,754 for 2000, $73,020 for 1999,
and $44,559 for 1998, the first year of occupancy.
Net income and cash distribution allocated to the Partnership increased in 2000,
as compared to 1999, due primarily to the increase in net income.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc, refer to Item 2, Properties, page 3.
-21-
Wells/Fremont Joint Venture (Fairchild)
Six Months
For the Years Ended Ended
-------------------------------
December 31 December 31,
-------------------------------
2000 1999 1998
------------- ------------ ------------
Revenues:
Rental income $ 902,946 $ 902,946 $ 401,058
Interest income 0 0 3,896
------------ ------------ ------------
902,946 902,946 404,954
------------ ------------ ------------
Expenses:
Depreciation 285,527 285,526 142,720
Management and leasing expenses 36,787 37,355 16,726
Interest expense 0 0 73,919
Other operating expenses, net of reimbursements 17,499 20,891 9,670
------------ ------------ ------------
339,813 343,772 243,035
------------ ------------ ------------
Net income $ 563,133 $ 559,174 $ 161,919
============ ============ ============
Occupied percentage 100% 100% 100%
============ ============ ============
Partnership's ownership percentage 9.7% 9.7% 9.7%
============ ============ ============
Cash distribution to the Partnership $ 79,236 $ 76,544 $ 21,314
============ ============ ============
Net income allocated to the Partnership $ 54,601 $ 54,217 $ 19,724
============ ============ ============
The Partnership owns 42% in the Fund X-XI Joint Venture but owns 9.7% in the
Fairchild Building.
Rental income, net income, and cash distributions to the Partnership are
relatively stable for the year ended December 31, 2000, as compared to 1999.
Since the Fremont Building was purchased in July of 1998, comparable income and
expense figures are available for only six months of 1998. For further
information, refer to Item 2.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-22-
Wells/Orange County Joint Venture
Five Months
For the Years Ended Ended
-------------------------------
December 31 December 31,
-------------------------------
2000 1999 1998
------------- ------------- -----------
Revenues:
Rental income $ 795,545 $ 795,545 $ 331,477
Interest income 0 0 448
----------- ---------- ----------
795,545 795,545 331,925
----------- ---------- ----------
Expenses:
Depreciation 186,564 186,565 92,087
Management and leasing expenses 30,915 30,360 12,734
Interest expense 0 0 29,472
Other operating expenses, net of reimbursements 9,104 27,667 6,218
----------- ---------- ----------
226,583 244,592 140,511
----------- ---------- ----------
Net income $ 568,962 $ 550,953 $ 191,414
=========== ========== ==========
Occupied percentage 100% 100% 100%
=========== ========== ==========
Partnership's ownership percentage 23.5% 23.5% 23.5%
=========== ========== ==========
Cash distribution to the Partnership $ 169,194 $ 159,050 $ 57,258
=========== ========== ==========
Net income allocated to the Partnership $ 133,559 $ 129,654 $ 36,652
=========== ========== ==========
The Partnership owns 42% of the Fund X-XI Joint Venture but owns 23.5% of the
Cort Building.
Rental income remained stable in 2000, as compared to 1999. Other operating
expense decreased for the year ended December 31, 2000, as compared to 1999, due
to tenant billing of 2000 and 1999 insurance.
Since the Cort Building was purchased in July 1998, comparable income and
expense figures for the prior year are available for only five months. The
tenant is responsible for property taxes.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-23-
EYBL CarTex Building/Fund XI-XII-REIT Joint Venture
For the Year
Ended Eight Months Ended
---------------------- --------------------
December 31, 2000 December 31, 1999
---------------------- --------------------
Revenues:
Rental income $ 560,355 $ 350,221
Interest income 2,814 0
-------------- ------------
563,169 350,221
-------------- ------------
Expenses:
Depreciation 199,602 133,072
Management and leasing expenses 36,896 20,384
Operating costs, net of reimbursements 21,243 10,868
-------------- ------------
257,741 164,324
-------------- ------------
Net income $ 305,428 $ 185,897
============== ============
Occupied percentage 100% 100%
============== ============
Partnership's ownership percentage 26.1% 26.1%
============== ============
Cash distribution to the Partnership $ 118,504 $ 81,768
============== ============
Net income allocated to the Partnership $ 79,862 $ 53,319
============== ============
Real estate taxes and primarily all operational expenses for the building are
the responsibility of the tenant.
Since the EYBL CarTex Building was purchased in May of 1999, comparative income
and expense figures are available for only eight months of 1999.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-24-
Sprint Building/Fund XI-XII-REIT Joint Venture
For the Year Six Months
----------------------
Ended Ended
------------------- ----------------------
December 31, 2000 December 31, 1999
------------------- ----------------------
Revenues:
Rental income $ 1,063,988 $ 531,993
-------------- ---------------
Expenses:
Depreciation 327,114 163,553
Management and leasing expenses 44,957 18,732
Operating costs, net of reimbursements 20,095 6,069
-------------- ---------------
392,166 188,354
-------------- ---------------
Net income $ 671,822 $ 343,639
============== ===============
Occupied percentage 100% 100%
============== ===============
Partnership's ownership percentage 26.1% 26.1%
============== ===============
Cash distribution to the Partnership $ 244,222 $ 134,825
============== ===============
Net income allocated to the Partnership $ 175,667 $ 98,273
============== ===============
Real estate taxes and primarily all operational expenses for the building are
the responsibility of the tenant.
Since the Sprint Building was purchased in July 1999, comparative income and
expense figures are available for only six months of 1999.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc, refer to Item 2, Properties, page 3.
-25-
Johnson Matthey Building/Fund XI-XII-REIT Joint Venture
For the Year Five Months
----------------------
Ended Ended
-------------------- ----------------------
December 31, 2000 December 31, 1999
-------------------- ----------------------
Revenues:
Rental income $ 867,646 $ 325,368
---------------- ----------------
Expenses:
Depreciation 255,475 106,461
Management and leasing expenses 36,194 11,846
Operating expenses, net of reimbursements 12,926 4,841
---------------- ----------------
304,595 123,148
---------------- ----------------
Net income $ 563,051 $ 202,220
================ ================
Occupied percentage 100% 100%
================ ================
Partnership's ownership percentage 26.1% 26.1%
================ ================
Cash distribution to the Partnership $ 196,209 $ 83,845
================ ================
Net income allocated to the Partnership $ 147,226 $ 56,720
================ ================
Real estate taxes and primarily all operational expenses for the building are
the responsibility of the tenant.
Since the Johnson Matthey Building was purchased in August 1999, comparative
income and expense figures are available for only five months of 1999.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-26-
The Gartner Building/Fund XI-XII-REIT Joint Venture
For the Year Four Months
-------------------
Ended Ended
------------------- -------------------
December 31, 2000 December 31, 1999
------------------- -------------------
Revenues:
Rental income $ 853,943 $ 235,863
--------------- --------------
Expenses:
Depreciation 310,490 103,496
Management and leasing expenses 39,189 8,268
Other operating expenses, net of reimbursements (33,991) 2,783
--------------- --------------
315,688 114,547
--------------- --------------
Net income $ 538,255 $ 121,316
=============== ==============
Occupied percentage 100% 100%
=============== ==============
Partnership's ownership percentage 26.1% 26.1%
=============== ==============
Cash distribution to the Partnership $ 202,158 $ 43,904
=============== ==============
Net income allocated to the Partnership $ 140,743 $ 31,722
=============== ==============
Other operating expenses are negative due to an offset of tenant reimbursements
in operating costs both for 2000 as well as the fourth quarter of 1999. Since
the building was purchased in September of 1999, the Partnership could not
estimate the amount to be billed for 1999 until the first quarter of 2000.
The Gartner Building incurred property taxes of $7,260 on the undeveloped lot
for 2000. The tenant is responsible for the real estate taxes on the developed
lot.
Since the Gartner Building was purchased in September 1999, comparative income
and expense figures are available for only five months of 1999.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-27-
Liquidity and Capital Resources
The Partnership commenced active operations on March 3, 1998, when it received
and accepted subscriptions for 125,000 units. The Partnership terminated its
offering on December 30, 1998, the Partnership raised $16,532,802 in capital
through the sale of 1,653,280 units. After payment of $578,648 in acquisition
and advisory fees and acquisition expenses, payment of $2,066,600 in selling
commissions and organizational and offering expenses, the Partnership invested
$3,357,436 in Fund IX-X-XI-REIT Joint Venture, $2,398,767 in the Fund X-XI Joint
Venture, and $8,131,351 in the Fund XI-XII-REIT Joint Venture
The Partnership's net cash (used in) provided by operating activities of
$(72,925) in 2000, $40,906 in 1999, and $(50,858) in 1998 is due primarily to
equity in income of joint ventures and interest income earned on funds held by
the Partnership prior to investment in properties. Net cash provided by
investing activities of $1,333,337 in 2000 as compared to net cash used in
investing activities of ($8,300,585) in 1999 up from ($5,310,208) in 1998. This
was primarily the result of the Partnership investing all proceeds in the joint
ventures and increased distributions from its Joint Ventures. The net cash used
in financing activities of $1,205,303 in 2000 and $1,010,770 in 1999 as compared
to $14,653,266 which was provided by financing activities in 1998 was as a
result of the offering being terminated in 1998, as well as distributions to
partners from accumulated earnings which was greater in 2000 and 1999.
The Partnership's distributions to holders of Class A status units for the 4th
quarter ended December 31, 2000 were paid in February, 2001. Although there is
no assurance, 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. No cash distributions were paid to holders of Class B status units in
2000.
The Partnership expects to continue to meet its short-term liquidity
requirements 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 and properties in which the Partnership has
invested, there are no known improvements or 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.
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. These 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.
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.
-28-
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.
-29-
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., 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, Inc. He
is also the President, sole Director and sole shareholder of Wells Real Estate
Investment Funds, Inc., the parent corporation of Wells Capital, Inc. Mr. Wells
is also 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 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 all 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.
The following table summarizes the compensation and fees paid to the General
Partners and their affiliates during the year ended December 31, 2000:
(A) (B) (C)
--------------
Name of Individual Capacities in Which Served Cash
--------------
or Number in Group Form of Compensation Compensation
- ------------------------------------------------ ---------------------------------------- --------------
Property Manager-Management and Leasing
Wells Management Company, Inc. Fees $75,700(1)
(1) These fees are not paid directly by the Partnership but are paid
by the joint venture entities which owns the various properties
with respect to which the property management and leasing
services relate and include management and leasing fees.
ITEM 11. 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.
-30-
Set forth below is the security ownership of management as of December 31, 2000.
(2) (3)
(1) Name and Address of Amount and Nature of (4)
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
- ------------------------ ---------------------------- ------------------------------ ---------------------
109.22 units (IRA, 401(k)
Class A status units Leo F. Wells, III Plan) Less than 1%
No arrangements exist which would, upon implementation, result in a change in
control of the Partnership.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The 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 are as follows:
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 after the Limited Partners holding
Class A status units have received preferential distributions equal to 10% of
their adjusted capital accounts in each fiscal year. The General Partners will
also receive a subordinated participation in net sales proceeds and net
financing proceeds equal to 20% of residual proceeds available for distribution
after Limited Partners holding Class A status units have received a return of
their adjusted capital contributions plus a 10% cumulative return on their
adjusted capital contributions and Limited Partners holding Class B Units have
received a return of their adjusted capital contributions plus a 15% cumulative
return on their adjusted capital contributions; provided, however, that in no
event shall the General Partners receive in the aggregate in excess of 15% of
net sales 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 sales 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 lessor of (a) fees that would be paid to a comparable
outside firm or (b) 4.5% of the gross revenues generally paid over the life of
the lease plus a separate competitive fee for the one-time initial lease-up of
newly constructed properties generally paid in conjunction with the receipt of
the first month's rent. In the case of commercial properties which are leased on
a long-term (ten or more years) net lease basis, the maximum property management
fee from such leases shall be 1% of the gross revenues generally paid over the
life of the leases except for a one-time initial leasing fee of 3% of the gross
revenues on each lease payable over the first five full years of the original
lease term.
Wells Management Company, Inc. received $75,700 in cash compensations for the
year ended December 31, 2000.
-31-
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.)
-32-
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. The financial statements are contained on pages F-2 through F-29 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 during the fourth quarter 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)
-33-
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 XI, L.P.
(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 Corporate General
Partner
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
- ---------------------------
Leo F. Wells, III Individual General Partner, March 27, 2001
President and Sole Director
of Wells Capital, Inc., the
Corporate General Partner
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.
-34-
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 XI, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND XI,
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 XI, 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 XI, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
2000 1999
----------- -----------
INVESTMENT IN JOINT VENTURES $13,698,627 $14,093,790
CASH AND CASH EQUIVALENTS 77,460 22,351
DUE FROM AFFILIATES 343,825 314,099
ACCOUNTS RECEIVABLE 12,012 10,560
----------- -----------
Total assets $14,131,924 $14,440,800
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Due to affiliate $ 65,000 $ 65,000
Partnership distributions payable 326,952 275,737
Accounts payable 438 0
----------- -----------
Total liabilities 392,390 340,737
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Class A--1,341,356 units and 1,336,906 units as of December 31, 2000
and 1999, respectively 11,993,987 11,804,940
Class B--311,924 units and 316,374 units as of December 31, 2000 and
1999, respectively 1,745,547 2,295,123
----------- -----------
Total partners' capital 13,739,534 14,100,063
----------- -----------
Total liabilities and partners' capital $14,131,924 $14,440,800
=========== ===========
The accompanying notes are an integral part of these balance sheets.
F-3
WELLS REAL ESTATE FUND XI, 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 $ 967,900 $ 607,579 $ 142,163
Interest income 7,950 159,007 120,566
----------- ----------- ---------
975,850 766,586 262,729
----------- ----------- ---------
EXPENSES:
Partnership administration 45,050 51,047 46,649
Legal and accounting 22,939 51,565 64,052
Amortization of organizational costs 0 25,000 6,250
Computer costs 11,872 8,446 2,483
----------- ----------- ---------
79,861 136,058 119,434
----------- ----------- ---------
NET INCOME $ 895,989 $ 630,528 $ 143,295
=========== =========== =========
NET LOSS ALLOCATED TO GENERAL PARTNERS $ 0 $ 0 $ (500)
=========== =========== =========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 1,381,547 $ 1,009,368 $ 254,862
=========== =========== =========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ (485,558) $ (378,840) $(111,067)
=========== =========== =========
NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT $ 1.03 $ 0.77 $ 0.50
=========== =========== =========
NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER UNIT $ (1.55) $ (1.12) $ (0.77)
=========== =========== =========
CASH DISTRIBUTION PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER
UNIT $ 0.94 $ 0.71 $ 0.30
=========== =========== =========
The accompanying notes are an integral part of these statements.
F-4
WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
Limited Partners Total
-------------------------------------------------------
Class A Class B General Partners'
------------------------- -------------------------
Original Units Amount Units Amount Partner Capital
-------- --------- ----------- -------- ---------- -------- -----------
BALANCE, December 31, 1997 $ 100 0 $ 0 0 $ 0 $ 500 $ 600
Net income (loss) 0 0 254,862 0 (111,067) (500) 143,295
Partnership distributions 0 0 (240,881) 0 0 0 (240,881)
Limited partner contributions 0 1,302,942 13,029,423 350,338 3,503,378 0 16,532,801
Sales commissions and discounts 0 0 (1,237,834) 0 (332,821) 0 (1,570,655)
Other offering expenses 0 0 (366,255) 0 (98,479) 0 (464,734)
-------- --------- ----------- -------- ---------- -------- -----------
BALANCE, December 31, 1998 100 1,302,942 11,439,315 350,338 2,961,011 0 14,400,426
Net income (loss) 0 0 1,009,368 0 (378,840) 0 630,528
Partnership distributions 0 0 (930,791) 0 0 0 (930,791)
Class B conversions 0 33,964 287,048 (33,964) (287,048) 0 0
Return of capital (100) 0 0 0 0 0 (100)
-------- --------- ----------- -------- ---------- -------- -----------
BALANCE, December 31, 1999 0 1,336,906 11,804,940 316,374 2,295,123 0 14,100,063
Net income (loss) 0 0 1,381,547 0 (485,558) 0 895,989
Partnership distributions 0 0 (1,256,518) 0 0 0 (1,256,518)
Class B conversions 0 4,450 64,018 (4,450) (64,018) 0 0
-------- --------- ----------- -------- ---------- -------- -----------
BALANCE, December 31, 2000 $ 0 1,341,356 $11,993,987 311,924 $1,745,547 $ 0 $13,739,534
======== ========= =========== ======== ========== ======== ===========
The accompanying notes are an integral part of these statements.
F-5
WELLS REAL ESTATE FUND XI, 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 $ 895,989 $ 630,528 $ 143,295
----------- ----------- -------------
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
Equity in income of joint venture (967,900) (607,579) (142,163)
Amortization of organizational costs 0 25,000 6,250
Changes in assets and liabilities:
Accounts receivable (1,452) 16,430 (26,990)
Accounts payable 438 0 0
Due to affiliates 0 (23,473) 0
Organizational costs 0 0 (31,250)
----------- ----------- -------------
Total adjustments (968,914) (589,622) (194,153)
----------- ----------- -------------
Net cash (used in) provided by operating
activities (72,925) 40,906 (50,858)
----------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint venture 0 (9,005,979) (4,881,576)
Distributions received from joint ventures 1,333,337 705,394 102,662
Deferred project costs paid 0 0 (531,294)
----------- ----------- -------------
Net cash provided by (used in) investing
activities 1,333,337 (8,300,585) (5,310,208)
----------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Limited partners' contributions 0 0 16,532,801
Sales commissions and discounts paid 0 (214,609) (1,356,046)
Offering costs paid 0 0 (423,615)
Distributions to partners in excess of accumulated
earnings 0 (10,816) 0
Distributions to partners from accumulated earnings (1,205,303) (785,245) (99,874)
Return of capital 0 (100) 0
----------- ----------- -------------
Net cash (used in) provided by financing
activities (1,205,303) (1,010,770) 14,653,266
----------- ----------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 55,109 (9,270,449) 9,292,200
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 22,351 9,292,800 600
----------- ----------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 77,460 $ 22,351 $ 9,292,800
=========== =========== =============
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Deferred project costs contributed to joint ventures $ 0 $ 375,246 $ 203,402
=========== =========== =============
The accompanying notes are an integral part of these statements.
F-6
WELLS REAL ESTATE FUND XI, 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 XI, L.P. (the "Partnership") is a public limited
partnership organized on June 20, 1996 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners,
L.P., a Georgia nonpublic limited partnership. The Partnership has two
classes of limited partnership units. Upon subscription for units, each
limited partner must elect whether to have their units treated as Class A
units or Class B units. Thereafter, 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, (c) remove a
general partner, (d) elect a new general partner, (e) dissolve the
Partnership, and (f) approve a sale of assets, subject to certain
limitations. A majority vote on any of the described matters will bind the
Partnership, without concurrence of the general partners. Each limited
partnership unit has equal voting rights, regardless of class. The
Partnership commenced operations as of March 3, 1998.
The Partnership was formed to acquire and operate commercial real estate
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 several properties
through a joint venture between the Partnership, Wells Real Estate Fund IX,
L.P. ("Wells Fund IX"), Wells Real Estate Fund X, L.P. ("Wells Fund X"),
and Wells Operating Partnership, L.P. (the "Operating Partnership"), a
Delaware limited partnership having Wells Real Estate Investment Trust,
Inc. ("Wells REIT"), a Maryland corporation, as its general partner, which
is referred to as "Fund IX, X, XI, and REIT Joint Venture." The Partnership
also owns two properties through a joint venture between the Partnership
and Wells Fund X, referred to as "Fund X and XI Associates." In addition,
the Partnership owns an interest in several properties through a joint
venture between the Partnership, Wells Real Estate Fund XII, L.P. ("Wells
Fund XII") and the Operating Partnership, which is referred to as Fund XI,
XII, and REIT Joint Venture.
Through its investment in Fund IX, X, XI, and REIT Joint Venture, the
Partnership owns interests in the following properties: (i) a three-story
office building in Knoxville, Tennessee (the "Alstom Power Building,"
formerly the ABB Building), (ii) a two-story office building in Louisville,
Colorado (the "Ohmeda Building"), (iii) a three-story office building in
Broomfield, Colorado (the "360 Interlocken Building"), (iv) a one-story
warehouse facility in Ogden, Utah (the "Iomega Corporation Building"), and
(v) a one-story office building in Oklahoma City, Oklahoma (the "Avaya
Building," formerly the Lucent Technologies Building).
The following properties are owned by Fund X and XI Associates through
investment in joint ventures with the Operating Partnership: (i) a one-
story office and warehouse building in Fountain Valley, California (the
"Cort Building") and (ii) a warehouse and office building in Fremont,
California (the "Fairchild Building").
Through its investment in Fund XI, XII, and REIT Joint Venture, the
Partnership owns interests in the following properties: (i) a two-story
manufacturing and office building in Greenville County, South
F-7
Carolina (the "EYBL Cartex Building"), (ii) a three-story office building
in Leawood, Kansas (the "Sprint Building"), (iii) an office and warehouse
building in Chester County, Pennsylvania (the "Johnson Matthey Building"),
and (iv) a two-story office building in Fort Myers, Florida (the "Gartner
Building").
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 carrying values of real estate are based on management's current intent
to hold the real estate assets as long-term investments. 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 it is taking will enable
the Partnership to realize its investment in its assets.
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.
Distributions of Net Cash From Operations
Cash available for distribution, as defined by the partnership agreement,
will be distributed to the limited partners on a quarterly basis. 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 net capital contributions, as defined. Then, such
distributions are paid to the general partners until they have received 10%
of the total amount distributed thus far. Any remaining cash available for
distribution is split 90% to the limited partners holding Class A units and
10% to the general partners. No such distributions will be made to the
limited partners holding Class B units.
Distribution of Sales Proceeds
Upon sales of properties, the net sales proceeds will be distributed in the
following order:
. To limited partners holding units which at any time have been
treated as Class B units until they receive an amount necessary
to equal the net cash available for distribution received by the
limited partners holding Class A units
. To limited partners on a per unit basis until each limited
partner has received 100% of their net capital contributions, as
defined
. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their net capital
contributions, as defined
. To limited partners on a per unit basis until they receive an
amount equal to their preferential limited partner return
(defined as the sum of a 10% per annum cumulative return on net
capital contributions for all periods during which the units were
treated as Class A units and a 15% per annum cumulative return on
net capital contributions for all periods during which the units
were treated as Class B units)
. To the general partners until they have received 100% of their
capital contributions, as defined
F-8
. Then, if limited partners have received any excess limited
partner distributions (defined as distributions to limited
partners over the life of their investment in the Partnership in
excess of their net capital contributions, as defined, plus their
preferential limited partner return), to the general partners
until they have received distributions equal to 20% of the sum of
any such excess limited partner distributions plus distributions
made to the general partners pursuant to this provision
. Thereafter, 80% to the limited partners on a per unit basis 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
proportion 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 the qualified income offset
provisions of the partnership agreement; (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero; and (c) allocations to limited partners holding Class B
units 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, the Partnership's investment in the joint ventures is
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
repair 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 joint ventures as of December 31, 2000.
F-9
Depreciation for building and improvements is calculated using the
straight-line method over 25 years. Tenant improvements are amortized
over the life of the related lease or the life of the asset, whichever
is shorter.
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 agreement. Generally, these
items are allocated in proportion to the partners' respective
ownership interests. Cash is paid from the joint ventures to the
Partnership on a quarterly basis.
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
approximate fair value, and consist of investments in money market
accounts.
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. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner contributions to Wells
Capital, Inc. (the "Company"), the general partner of Wells Partners, for
acquisition and advisory fees and expenses. These payments, as stipulated
by the partnership agreement can be up to 3.5% of the limited partner
contributions, subject to certain overall limitations contained in the
partnership agreement. Aggregate fees paid through December 31, 2000 were
$578,648 and amounted to 3.5% of the limited partners' contributions
received. These fees are allocated to specific properties as they are
purchased or developed and are included in capitalized assets of the joint
ventures.
3. DEFERRED OFFERING COSTS
Offering expenses, to the extent they exceed 3% of gross proceeds, will be
paid by the Company and not by the Partnership. Offering expenses do not
include sales or underwriting commissions but do include such costs as
legal and accounting fees, printing costs, and other offering expenses.
F-10
As of December 31, 2000, the Company paid offering expenses on behalf of
the Partnership in the aggregate amount of $935,771 of which the Company
was reimbursed $495,979, which did not exceed the 3% limitation. The
Company absorbed $390,651 and $49,141 of the remaining offering expenses
which exceeded the 3% limitation during 1999 and 1998, respectively.
4. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 2000, 1999, and 1998 represent the
Partnership's share of cash to be distributed from its joint venture
investments for the fourth quarter of 2000, 1999, and 1998:
2000 1999 1998
--------- --------- ---------
Fund IX, X, XI, and REIT Joint Venture $ 89,332 $ 76,413 $ 59,692
Fund X and XI Associates 62,940 59,768 67,000
Fund XI, XII, and REIT 191,553 177,918 0
--------- --------- ---------
$ 343,825 $ 314,099 $ 126,692
========= ========= =========
In December 2000, 1999, and 1998, the Partnership received distributions
from Fund IX-X-XI and REIT Joint Venture and Fund X and XI Associates,
which are included in due to affiliate at December 31, 2000, 1999, and
1998.
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 and leasing of
the Partnership's properties, the Partnership will pay Wells Management
management and leasing fees equal to the lesser of (a) fees that would be
paid to a comparable outside firm, or (b) 4.5% of the gross revenues
generally paid over the life of the lease plus a separate competitive fee
for the one-time initial lease-up of newly constructed properties generally
paid in conjunction with the receipt of the first month's rent. In the case
of commercial properties which are leased on a long-term net basis (ten or
more years), the maximum property management fee from such leases shall be
1% of the gross revenues generally paid over the life of the leases except
for a one-time initial leasing fee of 3% of the gross revenues on each
lease payable over the first five full years of the original lease term.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $75,700, $45,039, and $14,281 for the
years ended December 31, 2000, 1999, and 1998, respectively, which were
paid to Wells Management.
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 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-11
5. 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 IX, X, XI, and REIT Joint Venture $ 3,191,093 9% $ 3,308,403 9%
Fund X and XI Associates 2,359,273 42 2,419,535 42
Fund XI, XII, and REIT 8,148,261 26 8,365,852 26
------------ ------------
$ 13,698,627 $ 14,093,790
============ ============
The following is a rollforward of the Partnership's investment in joint
ventures for the years ended December 31, 2000, 1999, and 1998:
2000 1999 1998
------------ ------------ -----------
Investment in joint ventures, beginning of year $ 14,093,790 $ 4,997,787 $ 0
Equity in income of joint ventures 967,900 607,579 142,163
Contributions to joint ventures 0 9,381,187 5,084,978
Distributions from joint ventures (1,363,063) (892,763) (229,354)
------------ ------------ -----------
Investment in joint ventures, end of year $ 13,698,627 $ 14,093,790 $ 4,997,787
============ ============ ===========
Fund IX, X, XI, and REIT Joint Venture
On March 20, 1997, Wells Fund IX and Wells Fund X entered into a joint
venture agreement. The joint venture, Fund IX and X Associates, was formed
to acquire, develop, operate, and sell real properties. On March 20, 1997,
Wells Fund IX contributed a 5.62-acre tract of real property in Knoxville,
Tennessee, and improvements thereon, known as the Alstom Power Building, to
the Fund IX and X Associates joint venture. An 84,404 square-foot, three-
story building was constructed and commenced operations at the end of 1997.
On February 13, 1998, the joint venture purchased a two-story office
building, known as the Ohmeda Building, in Louisville, Colorado. On March
20, 1998, the joint venture purchased a three-story office building, known
as the 360 Interlocken Building, in Broomfield, Colorado. On April 1, 1998,
Wells Fund X purchased a one-story warehouse facility, known as the Iomega
Corporation Building, in Ogden, Utah. On June 11, 1998, Fund IX and X
Associates was amended and restated to admit the Partnership and the
Operating Partnership. The joint venture was renamed Fund IX, X, XI, and
REIT Joint Venture. On June 24, 1998, the new joint venture purchased a
one-story office building, known as the Avaya Building, in Oklahoma City,
Oklahoma. On July 1, 1998, Wells Fund X contributed the Iomega Corporation
Building to Fund IX, X, XI, and REIT Joint Venture.
F-12
Following are the financial statements for the Fund IX, X, XI, and REIT
Joint Venture:
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
------------ ------------
Real estate assets, at cost:
Land $ 6,698,020 $ 6,698,020
Building and improvements, less accumulated depreciation of
$4,203,502 in 2000 and $2,792,068 in 1999 28,594,768 29,878,541
------------ ------------
Total real estate assets 35,292,788 36,576,561
Cash and cash equivalents 1,500,044 1,146,874
Accounts receivable 422,243 554,965
Prepaid expenses and other assets 487,276 526,409
------------ ------------
Total assets $ 37,702,351 $ 38,804,809
============ ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued liabilities $ 568,517 $ 613,574
Refundable security deposits 99,279 91,340
Due to affiliates 9,595 6,379
Partnership distributions payable 931,151 804,734
------------ ------------
Total liabilities 1,608,542 1,516,027
------------ ------------
Partners' capital:
Wells Real Estate Fund IX 14,117,803 14,590,626
Wells Real Estate Fund X 17,445,277 18,000,869
Wells Real Estate Fund XI 3,191,093 3,308,403
Wells Operating Partnership, L.P. 1,339,636 1,388,884
------------ ------------
Total partners' capital 36,093,809 37,288,782
------------ ------------
Total liabilities and partners' capital $ 37,702,351 $ 38,804,809
============ ============
F-13
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
---------- ---------- ----------
Revenues:
Rental income $4,198,388 $3,932,962 $2,945,980
Other income 116,129 61,312 0
Interest income 73,676 58,768 20,438
---------- ---------- ----------
4,388,193 4,053,042 2,966,418
---------- ---------- ----------
Expenses:
Depreciation 1,411,434 1,538,912 1,216,293
Management and leasing fees 362,774 286,139 226,643
Operating costs, net of reimbursements (154,001) (43,501) (140,506)
Property administration expense 78,420 63,311 34,821
Legal and accounting 20,423 35,937 15,351
---------- ---------- ----------
1,719,050 1,880,798 1,352,602
---------- ---------- ----------
Net income $2,669,143 $2,172,244 $1,613,816
========== ========== ==========
Net income allocated to Wells Real Estate Fund IX $1,045,094 $ 850,072 $ 692,116
========== ========== ==========
Net income allocated to Wells Real Estate Fund X $1,288,629 $1,056,316 $ 787,481
========== ========== ==========
Net income allocated to Wells Real Estate Fund XI $ 236,243 $ 184,355 $ 85,352
========== ========== ==========
Net income allocated to Wells Operating Partnership, L.P. $ 99,177 $ 81,501 $ 48,867
========== ========== ==========
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells
Wells Real Wells Real Wells Real Operating Total
Estate Estate Estate Partnership, Partners'
Fund IX Fund X Fund XI L.P. Capital
------------- ------------ ------------- ------------- -------------
Balance, December 31, 1997 $ 3,702,793 $ 3,662,803 $ 0 $ 0 $ 7,365,596
Net income 692,116 787,481 85,352 48,867 1,613,816
Partnership contributions 11,771,312 15,613,477 2,586,262 1,480,741 31,451,792
Partnership distributions (1,206,121) (1,356,622) (150,611) (86,230) (2,799,584)
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1998 14,960,100 18,707,139 2,521,003 1,443,378 37,631,620
Net income 850,072 1,056,316 184,355 81,501 2,172,244
Partnership contributions 198,989 0 911,027 0 1,110,016
Partnership distributions (1,418,535) (1,762,586) (307,982) (135,995) (3,625,098)
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1999 14,590,626 18,000,869 3,308,403 1,388,884 37,288,782
Net income 1,045,094 1,288,629 236,243 99,177 2,669,143
Partnership contributions 46,122 84,317 0 0 130,439
Partnership distributions (1,564,039) (1,928,538) (353,553) (148,425) (3,994,555)
------------- ------------- ------------ ------------ -------------
Balance, December 31, 2000 $ 14,117,803 $ 17,445,277 $ 3,191,093 $ 1,339,636 $ 36,093,809
============= ============= ============ ============ =============
F-14
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, and 1999, and 1998
2000 1999 1998
---------- ---------- ------------
Cash flows from operating activities:
Net income $2,669,143 $2,172,244 $ 1,613,816
---------- ---------- ------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,411,434 1,538,912 1,216,293
Changes in assets and liabilities:
Accounts receivable 132,722 (421,708) (92,745)
Prepaid expenses and other assets 39,133 (85,281) (111,818)
Accounts payable, accrued liabilities and
refundable security deposits (37,118) 295,177 29,967
Due to affiliates 3,216 1,973 1,927
---------- ---------- ------------
Total adjustments 1,549,387 1,329,073 1,043,624
---------- ---------- ------------
Net cash provided by operating activities 4,218,530 3,501,317 2,657,440
---------- ---------- ------------
Cash flows from investing activities:
Investment in real estate (127,661) (930,401) (24,788,070)
---------- ---------- ------------
Cash flows from financing activities:
Distributions to joint venture partners (3,868,138) (3,820,491) (1,799,457)
Contributions received from partners 130,439 1,066,992 24,970,373
---------- ---------- ------------
Net cash (used in) provided by financing
activities (3,737,699) (2,753,499) 23,170,916
---------- ---------- ------------
Net increase (decrease) in cash and cash equivalents 353,170 (182,583) 1,040,286
Cash and cash equivalents, beginning of year 1,146,874 1,329,457 289,171
---------- ---------- ------------
Cash and cash equivalents, end of year $1,500,044 $1,146,874 $ 1,329,457
========== ========== ============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 43,024 $ 1,470,780
========== ========== ============
Contribution of real estate assets to joint venture $ 0 $ 0 $ 5,010,639
========== ========== ============
Fund X and XI Associates
On July 17, 1998, the Partnership and Wells Fund XI entered into a joint
venture agreement. The joint venture, Fund X and XI Associates, was formed
to acquire, develop, operate, and sell real properties. On July 15, 1998,
the Operating Partnership entered into a joint venture agreement with Wells
Development Corporation, referred to as Wells/Fremont Associates. On July
21, 1998, Wells/Fremont Associates acquired a 58,424-square-foot warehouse
and office building located in Fremont, California, known as the Fairchild
Building.
On October 1998, Fund X and XI Associates acquired Wells Development
Corporation's interest in Wells/Fremont Associates which resulted in Fund X
and XI Associates becoming a joint venture partner with the Operating
Partnership in the ownership of the Fairchild Building.
On July 27, 1998, the Operating Partnership entered into a joint venture
agreement with Wells Development Corporation, referred to as Wells/Orange
County Associates. On July 31, 1998, Wells/Orange County Associates
acquired a 52,000-square-foot warehouse and office building located in
Fountain Valley, California, known as the Cort Building.
F-15
During 1998, Fund X and XI Associates acquired Wells Development
Corporation's interest in Wells/Orange County Associates which resulted in
Fund X and XI Associates becoming a joint venture partner with the
Operating Partnership in the ownership of the Cort Building.
Following are the financial statements for Fund X and XI Associates:
Fund X and XI Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
---------- ----------
Investment in joint ventures $5,618,953 $5,760,615
Due from affiliates 149,218 142,299
---------- ----------
Total assets $5,768,171 $5,902,914
========== ==========
Liabilities and Partners' Capital
Liabilities:
Partnership distributions payable $ 149,218 $ 142,299
---------- ----------
Partners' capital:
Wells Real Estate Fund X 3,259,680 3,341,081
Wells Real Estate Fund XI 2,359,273 2,419,534
---------- ----------
Total partners' capital 5,618,953 5,760,615
---------- ----------
Total liabilities and partners' capital $5,768,171 $5,902,914
========== ==========
Fund X and XI Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
-------- -------- --------
Equity in income of joint ventures $447,193 $436,158 $138,885
Expenses 0 0 0
-------- -------- --------
Net income $447,193 $436,158 $138,885
======== ======== ========
Net income allocated to Wells Real Estate Fund X $259,034 $252,966 $ 82,074
======== ======== =========
Net income allocated to Wells Real Estate Fund XI $188,159 $183,192 $ 56,811
======== ======== =========
F-16
Fund X and XI 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 X Fund XI Capital
------------ ------------ ------------
Balance, December 31, 1997 $ 0 $ 0 $ 0
Net income 82,074 56,811 138,885
Partnership contributions 3,447,890 2,498,716 5,946,606
Partnership distributions (109,827) (78,743) (188,570)
----------- ---------- ----------
Balance, December 31, 1998 3,420,137 2,476,784 5,896,921
Net income 252,966 183,192 436,158
Partnership distributions (332,022) (240,442) (572,464)
----------- ---------- ----------
Balance, December 31, 1999 3,341,081 2,419,534 5,760,615
Net income 259,034 188,159 447,193
Partnership distributions (340,435) (248,420) (588,855)
----------- ---------- ----------
Balance, December 31, 2000 $ 3,259,680 $2,359,273 $5,618,953
=========== ========== ==========
Fund X and XI 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 $ 477,193 $ 436,158 $ 138,885
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in income of joint ventures (477,193) (436,158) (138,885)
---------- ---------- -------------
Net cash provided by operating activities 0 0 0
---------- ---------- -------------
Cash flows from investing activities:
Distributions received from joint ventures 581,936 572,285 46,450
Investment in joint ventures 0 0 (5,695,000)
---------- ---------- -------------
Net cash provided by (used in) investing activities 581,936 572,285 (5,648,550)
---------- ---------- -------------
Cash flows from financing activities:
Contributions received from partners 0 0 5,695,000
Distributions to joint venture partners (581,936) (572,285) (46,450)
---------- ---------- -------------
Net cash (used in) provided by financing activities (581,936) (572,285) 5,648,550
---------- ---------- -------------
Net increase in cash and cash equivalents 0 0 0
Cash and cash equivalents, beginning of year 0 0 0
---------- ---------- -------------
Cash and cash equivalents, end of year $ 0 $ 0 $ 0
========== ========== =============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 0 $ 251,606
========== ========== =============
F-17
Fund X and XI Associates' investment and percentage ownership in joint ventures
at December 31, 2000 and 1999 are summarized as follows:
2000 1999
----------------------- -----------------------
Amount Percent Amount Percent
---------- ---------- ------------ ----------
Wells/Orange County Associates $3,647,758 56% $3,732,262 56%
Wells/Fremont Associates 1,971,195 22 2,028,353 22
---------- ------------
$5,618,953 $5,760,615
========== ============
The following is a rollforward of Fund X and XI Associates' investment in joint
ventures for the years ended December 31, 2000 and 1999:
2000 1999
---------- ----------
Investment in joint venture, beginning or year $ 5,760,615 $5,896,921
Equity in income of joint venture 447,193 436,158
Distributions from joint venture (588,855) (572,464)
----------- ----------
Investment in joint venture, end of year $ 5,618,953 $5,760,615
=========== ==========
Following are the financial statements for Wells/Orange County Associates:
Wells/Orange County Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
---------- ----------
Real estate assets, at cost:
Land $2,187,501 $2,187,501
Building, less accumulated depreciation of $465,216 in 2000 and
$278,652 in 1999 4,198,899 4,385,463
---------- ----------
Total real estate assets 6,386,400 6,572,964
Cash and cash equivalents 119,038 176,666
Accounts receivable 99,154 49,679
---------- ----------
Total assets $6,604,592 $6,799,309
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 1,000 $ 0
Partnership distributions payable 128,227 173,935
---------- ----------
Total liabilities 129,227 173,935
---------- ----------
Partners' capital:
Wells Operating Partnership, L.P. 2,827,607 2,893,112
Fund X and XI Associates 3,647,758 3,732,262
---------- ----------
Total partners' capital 6,475,365 6,625,374
---------- ----------
Total liabilities and partners' capital $6,604,592 $6,799,309
========== ==========
F-18
Wells/Orange County Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
--------- --------- ---------
Revenues:
Rental income $ 795,545 $ 795,545 $ 331,477
Interest income 0 0 448
--------- --------- ---------
795,545 795,545 331,925
--------- --------- ---------
Expenses:
Depreciation 186,564 186,565 92,087
Management and leasing fees 30,915 30,360 12,734
Operating costs, net of reimbursements 5,005 22,229 2,288
Interest 0 0 29,472
Legal and accounting 4,100 5,439 3,930
--------- --------- ---------
226,584 244,593 140,511
--------- --------- ---------
Net income $ 568,961 $ 550,952 $ 191,414
========= ========= =========
Net income allocated to Wells Operating Partnership, L.P. $ 248,449 $ 240,585 $ 91,978
========= ========= =========
Net income allocated to Fund X and XI Associates $ 320,512 $ 310,367 $ 99,436
========= ========= =========
Wells/Orange County Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells
Operating Fund X Total
Partnership, and XI Partners'
L.P. Associates Capital
--------------- ------------- -------------
Balance, December 31, 1997 $ 0 $ 0 $ 0
Net income 91,978 99,436 191,414
Partnership contributions 2,991,074 3,863,272 6,854,346
Partnership distributions (124,435) (145,942) (270,377)
--------------- ------------- -------------
Balance, December 31, 1998 2,958,617 3,816,766 6,775,383
Net income 240,585 310,367 550,952
Partnership distributions (306,090) (394,871) (700,961)
--------------- ------------- -------------
Balance, December 31, 1999 2,893,112 3,732,262 6,625,374
Net income 248,449 320,512 568,961
Partnership distributions (313,954) (405,016) (718,970)
--------------- ------------- -------------
Balance, December 31, 2000 $ 2,827,607 $ 3,647,758 $ 6,475,365
=============== ============= =============
F-19
Wells/Orange County 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 $ 568,961 $ 550,952 $ 191,414
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 186,564 186,565 92,087
Changes in assets and liabilities:
Accounts receivable (49,475) (36,556) (13,123)
Accounts payable 1,000 (1,550) 1,550
----------- ----------- -----------
Total adjustments 138,089 148,459 80,514
----------- ----------- -----------
Net cash provided by operating activities 707,050 699,411 271,928
----------- ----------- -----------
Cash flows from investing activities:
Investment in real estate 0 0 (6,563,700)
----------- ----------- -----------
Cash flows from financing activities:
Issuance of note payable 0 0 4,875,000
Payment of note payable 0 0 (4,875,000)
Distributions to partners (764,678) (703,640) (93,763)
Contributions received from partners 0 0 6,566,430
----------- ----------- -----------
Net cash (used in) provided by financing
activities (764,678) (703,640) 6,472,667
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (57,628) (4,229) 180,895
Cash and cash equivalents, beginning of year 176,666 180,895 0
----------- ----------- -----------
Cash and cash equivalents, end of year $ 119,038 $ 176,666 $ 180,895
=========== =========== ===========
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 0 $ 287,916
=========== =========== ===========
F-20
Following are the financial statements for Wells/Fremont Associates:
Wells/Fremont Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
----------- ----------
Real estate assets, at cost:
Land $ 2,219,251 $2,219,251
Building, less accumulated depreciation of $713,773 in 2000 and
$428,246 in 1999 6,424,385 6,709,912
----------- ----------
Total real estate assets 8,643,636 8,929,163
Cash and cash equivalents 92,564 189,012
Accounts receivable 126,433 92,979
----------- ----------
Total assets $ 8,862,633 $9,211,154
=========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 3,016 $ 2,015
Due to affiliate 7,586 5,579
Partnership distributions payable 89,549 186,997
----------- ----------
Total liabilities 100,151 194,591
----------- ----------
Partners' capital:
Wells Operating Partnership, L.P. 6,791,287 6,988,210
Fund X and XI Associates 1,971,195 2,028,353
----------- ----------
Total partners' capital 8,762,482 9,016,563
----------- ----------
Total liabilities and partners' capital $ 8,862,633 $9,211,154
=========== ==========
F-21
Wells/Fremont Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
--------- --------- ---------
Revenues:
Rental income $ 902,946 $ 902,946 $ 401,058
Interest income 0 0 3,896
--------- --------- ---------
902,946 902,946 404,954
--------- --------- ---------
Expenses:
Depreciation 285,527 285,526 142,720
Management and leasing fees 36,787 37,355 16,726
Operating costs, net of reimbursements 13,199 16,006 3,364
Interest 0 0 73,919
Legal and accounting 4,300 4,885 6,306
--------- --------- ---------
339,813 343,772 243,035
--------- --------- ---------
Net income $ 563,133 $ 559,174 $ 161,919
========= ========= =========
Net income allocated to Wells Operating Partnership, L.P. $ 436,452 $ 433,383 $ 122,470
========= ========= =========
Net income allocated to Fund X and XI Associates $ 126,681 $ 125,791 $ 39,449
========= ========= =========
Wells/Fremont Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells
Operating Fund X Total
Partnership, and XI Partners'
L.P. Associates Capital
-------------- ------------- -----------
Balance, December 31, 1997 $ 0 $ 0 $ 0
Net income 122,470 39,449 161,919
Partner contributions 7,274,075 2,083,334 9,357,409
Partnership distributions (229,863) (42,628) (272,491)
-------------- ------------- -----------
Balance, December 31, 1998 7,166,682 2,080,155 9,246,837
Net income 433,383 125,791 559,174
Partnership distributions (611,855) (177,593) (789,448)
-------------- ------------- -----------
Balance, December 31, 1999 6,988,210 2,028,353 9,016,563
Net income 436,452 126,681 563,133
Partnership distributions (633,375) (183,839) (817,214)
-------------- ------------- -----------
Balance, December 31, 2000 $ 6,791,287 $ 1,971,195 $ 8,762,482
============== ============= ===========
F-22
Wells/Fremont 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 $ 563,133 $ 559,174 $ 161,919
---------- --------- ----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 285,527 285,526 142,720
Changes in assets and liabilities:
Accounts receivable (33,454) (58,237) (34,742)
Accounts payable 1,001 (1,550) 3,565
Due to affiliate 2,007 3,527 2,052
---------- --------- ----------
Total adjustments 255,081 229,266 113,595
---------- --------- ----------
Net cash provided by operating activities 818,214 788,440 275,514
---------- --------- ----------
Cash flows from investing activities:
Investment in real estate 0 0 (8,983,111)
---------- --------- ----------
Cash flows from financing activities:
Issuance of note payable 0 0 5,960,000
Payment of note payable 0 0 (5,960,000)
Distributions to partners (914,662) (791,940) (83,001)
Contributions received from partners 0 0 8,983,110
---------- --------- ----------
Net cash (used in) provided by financing
activities (914,662) (791,940) 8,900,109
---------- --------- ----------
Net (decrease) increase in cash and cash equivalents (96,448) (3,500) 192,512
Cash and cash equivalents, beginning of year 189,012 192,512 0
---------- --------- ----------
Cash and cash equivalents, end of year $ 92,564 $ 189,012 $ 192,512
========== ========= ==========
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 0 $ 374,299
========== ========= ==========
Fund XI, XII, and REIT Joint Venture
On May 1, 1999, the Partnership entered into a joint venture with Wells Fund XII
and the Operating Partnership. On May 18, 1999, the joint venture purchased a
169,510 square foot, two-story manufacturing and office building, known as EYBL
CarTex, in Fountain Inn, South Carolina. On July 21, 1999, the joint venture
purchased a 68,900 square foot, three-story office building, known as the Sprint
Building, in Leawood, Kansas. On August 17, 1999, the joint venture purchased a
130,000 square foot office and warehouse building, known as the Johnson Matthey
Building, in Chester County Pennsylvania. On September 20, 1999, the joint
venture purchased a 62,400 square foot two-story office building, known as the
Gartner Building, in Fort Myers, Florida.
F-23
Following are the financial statements for the Fund XI, XII, and REIT Joint
Venture:
The Fund XI, XII, and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
------------- ------------
Real estate assets, at cost:
Land $ 5,048,797 $ 5,048,797
Building and improvements, less accumulated depreciation of
$1,599,262 in 2000 and $506,582 in 1999 25,719,189 26,811,869
------------- ------------
Total real estate assets 30,767,986 31,860,666
Cash and cash equivalents 541,089 766,278
Accounts receivable 394,314 133,777
Prepaid assets and other expenses 26,486 26,486
------------- ------------
Total assets $ 31,729,875 $ 32,787,207
============= ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 114,180 $ 112,457
Partnership distributions payable 453,395 680,294
------------- ------------
597,575 792,751
------------- ------------
Partners' capital:
Wells Real Estate Fund XI 8,148,261 8,365,852
Wells Real Estate Fund XII 5,325,424 5,467,634
Wells Operating Partnership, L.P. 17,688,615 18,160,970
------------- ------------
Total partners' capital 31,162,300 31,994,456
-------------- ------------
Total liabilities and partners' capital $ 31,729,875 $ 32,787,207
-------------- ------------
F-24
The Fund XI, XII, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000 and 1999
2000 1999
----------- -------------
Revenues:
Rental income $ 3,345,932 $ 1,443,446
Interest income 2,814 0
Other income 440 57
----------- -----------
3,349,186 1,443,503
----------- -----------
Expenses:
Depreciation 1,092,680 506,582
Management and leasing fees 157,236 59,230
Operating costs, net of reimbursements (24,798) 6,433
Property administration 30,787 14,185
Legal and accounting 14,725 4,000
----------- -----------
1,270,630 590,430
----------- -----------
Net income $ 2,078,556 $ 853,073
=========== ===========
Net income allocated to Wells Real Estate Fund XI $ 543,497 $ 240,031
=========== ===========
Net income allocated to Wells Real Estate Fund XII $ 355,211 $ 124,542
=========== ===========
Net income allocated to Wells Operating Partnership, L.P. $ 1,179,848 $ 488,500
=========== ===========
The Fund XI, XII, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000 and 1999
Wells
Wells Real Wells Real Operating Total
Estate Estate Partnership, Partners'
Fund XI Fund XII L.P. Capital
----------- ------------- ------------- -------------
Balance, December 31, 1998 $ 0 $ 0 $ 0 $ 0
Net income 240,031 124,542 488,500 853,073
Partnership contributions 8,470,160 5,520,835 18,376,267 32,367,262
Partnership distributions (344,339) (177,743) (703,797) (1,225,879)
---------- ---------- ----------- -----------
Balance, December 31, 1999 8,365,852 5,467,634 18,160,970 31,994,456
Net income 543,497 355,211 1,179,848 2,078,556
Partnership distributions (761,088) (497,421) (1,652,203) (2,910,712)
---------- ---------- ----------- -----------
Balance, December 31, 2000 $8,148,261 $5,325,424 $17,688,615 $31,162,300
========== ========== =========== ===========
F-25
The Fund XI, XII, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000 and 1999
2000 1999
----------- ------------
Cash flows from operating activities:
Net income $ 2,078,556 $ 853,073
----------- ------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 1,092,680 506,582
Changes in assets and liabilities:
Accounts receivable (260,537) (133,777)
Prepaid expenses and other assets 0 (26,486)
Accounts payable 1,723 112,457
----------- ------------
Total adjustments 833,866 458,776
----------- ------------
Net cash provided by operating activities 2,912,422 1,311,849
----------- ------------
Cash flows from financing activities:
Distributions to joint venture partners (3,137,611) (545,571)
----------- ------------
Net (decrease) increase in cash and cash equivalents (225,189) 766,278
----------- ------------
Cash and cash equivalents, beginning of year 766,278 0
----------- ------------
Cash and cash equivalents, end of year $ 541,089 $ 766,278
=========== ============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 1,294,686
=========== ============
Contribution of real estate assets to joint venture $ 0 $ 31,072,562
=========== ============
6. 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 $895,989 $630,528 $143,295
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes in excess
of amounts for income tax purposes 139,862 135,648 45,158
Expenses deducted for financial reporting purposes, capitalized
for income tax purposes 475 502 347
Rental income accrued for financial reporting purposes in
excess of amounts for income tax purposes (91,551) (62,570) (11,108)
-------- -------- --------
Income tax basis net income $944,775 $704,108 $177,692
======== ======== ========
The Partnership's income tax basis partners' capital at December 31, 2000,
1999, and 1998 is computed as follows:
F-26
2000 1999 1998
----------- ----------- -----------
Financial statements partners' capital $13,739,534 $14,100,063 $14,400,426
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income tax
purposes 320,668 180,806 45,158
Capitalization of syndication costs for income tax
purposes, which are accounted for as cost of
capital for financial reporting purposes 2,035,389 2,035,389 2,035,389
Accumulated rental income accrued for financial
reporting purposes in excess of amounts for
income tax purposes (165,229) (73,678) (11,108)
Accumulated expenses deducted for financial
reporting purposes, capitalized for income tax
purposes 1,324 849 347
Partnership's distributions payable 326,952 275,737 141,007
----------- ----------- -----------
Income tax basis partners' capital $16,258,638 $16,519,166 $16,611,219
=========== =========== ===========
7. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interest in the joint ventures under noncancelable operating leases
at December 31, 2000 is as follows:
Year ended December 31:
2001 $1,485,742
2002 1,295,367
2003 1,346,701
2004 1,297,359
2005 1,133,207
Thereafter 2,094,111
----------
$8,652,487
==========
Four tenants contributed 17%, 13%, 13%, and 13% of rental income. In
addition, four tenants will contribute 19%, 17%, 17%, and 12% of future
minimum rental income.
The future minimum rental income due Fund IX, X, XI, and REIT Joint Venture
under noncancelable operating leases at December 31, 2000 is as follows:
Year ended December 31:
2001 $ 4,413,780
2002 3,724,218
2003 3,617,437
2004 3,498,478
2005 2,482,821
Thereafter 5,436,524
-----------
$23,173,258
===========
Four tenants contributed 25%, 24%, 13%, and 13% of rental income for the year
ended December 31, 2000. In addition, four tenants will contribute 38%, 21%,
20%, and 19% of future minimum rental income.
F-27
The future minimum rental income due Wells/Orange County Associates under
noncancelable operating leases at December 31, 2000 is as follows:
Year ended December 31:
2001 $ 809,580
2002 834,888
2003 695,740
----------
$2,340,208
==========
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 Wells/Fremont Associates under
noncancelable operating leases at December 31, 2000 is as follows:
Year ended December 31:
2001 $ 869,492
2002 922,444
2003 950,118
2004 894,832
----------
$3,636,886
==========
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 from XI, XII and REIT under noncancelable
operating leases at December 31, 2000 is as follows:
Year ended December 31:
2001 $ 3,135,340
2002 2,598,606
2003 2,946,701
2004 3,445,193
2005 3,495,155
Thereafter 6,169,579
-----------
$21,790,574
===========
Four tenants contributed approximately 30%, 24%, 23%, and 15% of rental income
for the year ended December 31, 2000. In addition, four tenants will contribute
approximately 28%, 27%, 26%, and 19% of future minimum rental income.
F-28
8. 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 $ 237,447 $ 241,195 $ 250,198 $ 247,010
Net income 212,249 217,494 236,236 230,010
Net income allocated to Class A limited
partners 334,569 340,881 365,268 340,829
Net loss allocated to Class B limited
partners (122,320) (123,387) (129,032) (110,819)
Net income per weighted average Class A
limited partner unit outstanding (a) $ 0.25 $ 0.25 $ 0.27 $ 0.25
Net loss per weighted average Class B
limited partner unit outstanding (a) (0.39) (0.39) (0.41) (0.35)
Cash distribution per weighted average
Class A limited partner unit outstanding 0.23 0.23 0.24 0.24
(a) The totals of the four quarterly amounts for the year ended
December 31, 2000 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.
1999 Quarters Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
----------- ---------- -------------- --------------
Revenues $160,499 $172,481 $ 218,150 $ 215,456
Net income 125,995 136,013 187,312 181,208
Net income allocated to Class A limited
partners 174,372 199,995 313,127 321,874
Net loss allocated to Class B limited
partners (48,377) (63,983) (125,815) (140,665)
Net income per weighted average Class A
limited partner unit outstanding (a) $ 0.13 $ 0.15 $ 0.24 $ 0.24
Net loss per weighted average Class B
limited partner unit outstanding (a) (0.14) (0.19) (0.37) (0.45)
Cash distribution per weighted average
Class A limited partner unit outstanding 0.15 0.15 0.20 0.21
9. 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-29
EXHIBIT INDEX
(Wells Real Estate Fund XI, 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
Number Description of Document
- ------ -----------------------
*3(a) Amended and Restated Agreement of Limited Partnership of Wells Real
Estate Fund XI, L.P. (Exhibit 3(a) to Form S-11 Registration Statement
of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P.,
as amended to date, Commission File No. 333-7979)
*3(b) Certificate of Limited Partnership of Wells Real Estate Fund XI, L.P.
(Exhibit 3(c) to Form S-11 Registration Statement of Wells Real Estate
Fund X, L.P. and Wells Real Estate Fund XI, L.P., as amended to date,
Commission File No. 333-7979)
*10(a) Leasing and Tenant Coordinating Agreement with Wells Management
Company, Inc. (Exhibit 10(d) to Form S-11 Registration Statement of
Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as
amended to date, Commission File No. 333-7979)
*10(b) Management Agreement with Wells Management Company, Inc. (Exhibit
10(e) to Form S-11 Registration Statement of Wells Real Estate Fund X,
L.P. and Wells Real Estate Fund XI, L.P., as amended to date,
Commission File No. 333-7979)
*10(c) Custodial Agency Agreement with The Bank of New York (Exhibit 10(f) to
Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and
Wells Real Estate Fund XI, L.P., as amended to date, Commission File
No. 333-7979)
*10(d) Joint Venture Agreement of Fund IX and Fund X Associates dated March
20, 1997 (Exhibit 10(g) to Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund X, L.P. and Wells
Real Estate Fund XI, L.P., as amended to date, Commission File
No. 333-7979)
*10(e) Lease Agreement for the ABB Building dated December 10, 1996, between
Wells Real Estate Fund IX, L.P. and ABB Flakt, Inc. (Exhibit 10(kk) to
Post-Effective Amendment No. 13 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P.,
as amended to date, Commission File No. 33-83852)
*10(f) Development Agreement relating to the ABB Building dated December 10,
1996, between Wells Real Estate Fund IX, L.P. and ADEVCO Corporation
(Exhibit 10(ll) to Post-Effective Amendment No. 13 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P., as amended to date, Commission File
No. 33-83852)
*10(g) Owner-Contractor Agreement relating to the ABB Building dated November
1, 1996, between Wells Real Estate Fund IX, L.P. and Integra
Construction, Inc. (Exhibit 10(mm) to Post-Effective Amendment No. 13
to Form S-11 Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., as amended to date,
Commission File No. 33-83852)
*10(h) Agreement for the Purchase and Sale of Real Property relating to the
Lucent Technologies Building dated May 30, 1997, between Fund IX and
Fund X Associates and Wells Development Corporation (Exhibit 10(k) to
Post-Effective Amendment No. 2 to Form S-11 Registration Statement of
Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as
amended to date, Commission File No. 333-7979)
*10(i) Net Lease Agreement for the Lucent Technologies Building dated May 30,
1997 (Exhibit 10(l) to Post-Effective Amendment No. 2 to Form S-11
Registration Statement of Wells Real Estate Fund X, L.P. and Wells
Real Estate Fund XI, L.P., as amended to date, Commission File
No. 333-7979)
*10(j) Development Agreement relating to the Lucent Technologies Building
dated May 30, 1997, between Wells Development Corporation and ADEVCO
Corporation (Exhibit 10(m) to Post-Effective Amendment No. 2 to Form
S-11 Registration Statement of Wells Real Estate Fund X, L.P. and
Wells Real Estate Fund XI, L.P., as amended to date, Commission File
No. 333-7979)
*10(k) First Amendment to Net Lease Agreement for the Lucent Technologies
Building dated March 30, 1998 (Exhibit 10.10(a) to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(l) Amended and Restated Joint Venture Agreement of The Fund IX, Fund X,
Fund XI and REIT Joint Venture (the "IX-X-XI-REIT Joint Venture")
dated July 11, 1998 (Exhibit 10.4 to Form S-11 Registration Statement
of Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-32099)
*10(m) Agreement for the Purchase and Sale of Real Property relating to the
Ohmeda Building dated November 14, 1997 between Lincor Centennial,
Ltd. and Wells Real Estate Fund X, L.P. (Exhibit 10.6 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(n) Agreement for the Purchase and Sale of Property relating to the 360
Interlocken Building dated February 11, 1998 between Orix Prime West
Broomfield Venture and Wells Development Corporation (Exhibit 10.7 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(o) Purchase and Sale Agreement relating to the Iomega Building dated
February 4, 1998 with SCI Development Services Incorporated (Exhibit
10.11 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File
No. 333-32099)
*10(p) Lease Agreement for the Iomega Building dated April 9, 1996 (Exhibit
10.12 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File
No. 333-32099)
*10(q) Agreement for the Purchase and Sale of Property relating to the
Fairchild Building dated June 8, 1998 (Exhibit 10.13 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(r) Restatement of and First Amendment to Agreement for the Purchase and
Sale of Property relating to the Fairchild Building dated July 1, 1998
(Exhibit 10.14 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File
No. 333-32099)
*10(s) Joint Venture Agreement of Wells/Fremont Associates (the "Fremont
Joint Venture") dated July 15, 1998 between Wells Development
Corporation and Wells Operating Partnership, L.P. (Exhibit 10.17 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(t) Joint Venture Agreement of Fund X and Fund XI Associates dated July
15, 1998 (Exhibit 10.18 to Form S-11 Registration Statement of Wells
Real Estate Investment Trust, Inc., as amended to date, Commission
File No. 333-32099)
*10(u) Agreement for the Purchase and Sale of Joint Venture Interest relating
to the Fremont Joint Venture dated July 17, 1998 between Wells
Development Corporation and Fund X and Fund XI Associates (Exhibit
10.19 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File
No. 333-32099)
*10(v) Lease Agreement for the Fairchild Building dated September 19, 1997
between the Fremont Joint Venture (as successor in interest by
assignment) and Fairchild Technologies USA, Inc. (Exhibit 10.20 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(w) First Amendment to Joint Venture Agreement of Wells/Fremont Associates
dated October 8, 1998 (Exhibit 10(w) to Form 10-K of Wells Real Estate
Fund X, L.P. for the fiscal year ended December 31, 1998, Commission
File No. 0-23719)
*10(x) Purchase and Sale Agreement and Joint Escrow Instructions relating to
the Cort Furniture Building dated June 12, 1998 between the Cort Joint
Venture (as successor in interest by assignment) and Spencer Fountain
Valley Holdings, Inc. (Exhibit 10.21 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)
*10(y) First Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions relating to the Cort Furniture Building dated July 16,
1998 between the Cort Joint Venture (as successor in interest by
assignment) and Spencer Fountain Valley Holdings, Inc. (Exhibit 10.22
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(z) Joint Venture Agreement of Wells/Orange County Associates (the "Cort
Joint Venture") dated July 27, 1998 between Wells Development
Corporation and Wells Operating Partnership, L.P. (Exhibit 10.25 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(aa) Agreement for the Purchase and Sale of Joint Venture Interest relating
to the Cort Joint Venture dated July 30, 1998 between Wells
Development Corporation and Fund X and Fund XI Associates (Exhibit
10.26 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File
No. 333-32099)
*10(bb) First Amendment to Joint Venture Agreement of Wells/Orange County
Associates dated September 1, 1998 (Exhibit 10(dd) to Form 10-K of
Wells Real Estate Fund X, L.P. for the fiscal year ended December 31,
1998, Commission File No. 0-23719)
*10(cc) Temporary Lease Agreement for remainder of the ABB Building dated
September 10, 1998 between the IX-X-XI-REIT Joint Venture and
Associates Housing Finance, LLC (Exhibit 10.35 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(dd) Amended and Restated Joint Venture Partnership Agreement of The Wells
Fund XI - Fund XII - REIT Joint Venture (Exhibit 10.29 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-83933)
*10(ee) Agreement of Sale and Purchase relating to the EYBL CarTex Building
(Exhibit 10.54 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File
No. 333-32099)
*10(ff) Agreement of Purchase and Sale for the Sprint Building (Exhibit 10.5
to Form S-11 Registration Statement of Wells Real Estate Fund XII,
L.P., as amended to date, Commission File No. 33-66657)
*10(gg) Agreement of Sale and Purchase for the Johnson Matthey Building
(Exhibit 10.6 to Form S-11 Registration Statement of Wells Real Estate
Fund XII, L.P., as amended to date, Commission File No. 33-66657)
*10(hh) Fifth Amendment to Lease for the Johnson Matthey Building (Exhibit
10.7 to Form S-11 Registration Statement of Wells Real Estate Fund
XII, L.P., as amended to date, Commission File No. 33-66657)
*10(ii) Agreement of Purchase and Sale relating to the Gartner Building
(Exhibit 10.63 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File
No. 333-32009)
*10(jj) Lease Agreement for the Gartner Building (Exhibit 10.64 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)