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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
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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 ______________________
Commission file number 0-30287
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Wells Real Estate Fund XII L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2438242
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6200 The Corners Parkway, Suite 250
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:
Cash Preferred
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(Title of Class)
Tax Preferred
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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 non-affiliates:
Not Applicable
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PART I
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ITEM 1. BUSINESS
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General
Wells Real Estate Fund XII, 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 September 15, 1998, for the purpose of acquiring, developing, constructing,
owning, operating, improving, leasing and otherwise managing for investment
purposes income-producing commercial or industrial properties.
On March 22, 1999, the Partnership commenced a public offering of up to
$70,000,000 of limited partnership units ($10.00 per unit) pursuant to a
Registration Statement filed on Form S-11 under the Securities Act of 1933. The
Partnership commenced active operations on June 1, 1999, when it received and
accepted subscriptions for 125,000 units. As of December 31, 2000, the
Partnership had sold 1,881,142 Cash Preferred Units, and 617,434 Tax Preferred
Units, held by a total of 1068 and 90 Limited Partners respectively, for total
Limited Partner capital contributions of $24,985,760. After payment of $874,502
in acquisition and advisory fees and expenses, payment of $3,123,220 in selling
commissions and organization and offering expenses, the investment of $5,300,000
in the Fund XI-XII-REIT Joint Venture and the investment of $15,687,245 in the
Fund XII-REIT Joint Venture, as of December 31, 2000, the Partnership was
holding net offering proceeds of $793 available for investment in properties.
The Partnership owns its interest in properties through equity ownership in the
following joint ventures: (i) Fund XI-XII-REIT Associates (the "Fund XI-XII-REIT
Joint Venture"), a joint venture among the Partnership, Wells Real Estate Fund
XI, L.P. and Wells Operating Partnership, L.P. ("Wells OP"), a Delaware limited
partnership having Wells Real Estate Investment Trust, Inc. (the "Wells REIT"),
as its General Partner; and (ii) the Fund XII-REIT Joint Venture, a joint
venture among the Partnership and Wells OP, (the "Fund XII-REIT Joint Venture").
As of December 31, 2000, the Partnership owned interests in the following
properties through its ownership of the foregoing ventures: (i) a two-story
manufacturing and office building located in Fountain Inn, South Carolina (the
"EBYL CarTex Building"), which is owned by the Fund XI-XII-REIT Joint Venture;
(ii) a three-story office building located in Leawood, Johnson County, Kansas
(the "Sprint Building"), which is owned by the Fund XI-XII-REIT Joint Venture;
(iii) a one-story office building and warehouse located in Tredyffin Township,
Chester County, Pennsylvania (the "Johnson Matthey Building"), which is owned by
the Fund XI-XII-REIT Joint Venture; (iv) a two story office building located in
Ft. Myers, Lee County, Florida, (the "Gartner Building"), which is owned by the
Fund XI-XII-REIT Joint Venture; (v) a three-story office building located in
Troy, Oakland County, Michigan, (the "Siemens Building"), which is owned by the
Fund XII-REIT Joint Venture; and (vi) a one-story office building and a
two-story office building located in Oklahoma City, Oklahoma County, Oklahoma
(the "AT&T Oklahoma Building"), which are owned by the Fund VII-REIT Joint
Venture.
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Employees
The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the sole 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 of
the registrant, 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 the 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.
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The Partnership owns interests in six buildings through its ownership in two
joint ventures. The Partnership does not have control over the operations of the
joint ventures; however, it does exercise significant influence. Accordingly,
investment in joint venture is recorded using the equity method. As of December
31, 2000, the Partnership was holding approximately $793 to invest in
properties.
The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 2000, assuming no exercise of renewal options
or termination rights:
Partnerships
Year of Number of Annualized Share of Percentage of Percentage of
Lease Leases Square Gross Base Annualized Total Square Total Annualized
Expiration Expiring Feet Expiring Rent(1) Gross Base Rent(1) Feet Expiring Base Rent
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2001 - - - - - -
2002 - - - - - -
2003 - - - - - -
2004 - - - - - -
2005 - - - - - -
2006 - - - - - -
2007(2) 2 198,900 2,041,656 348,899 31.3% 17.9%
2008(3) 3 256,910 1,872,684 434,841 40.4% 22.3%
2009 - - - - - -
2010(4) 2 180,554 2,187,498 1,162,808 28.3% 59.8%
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7 636,364 6,101,838 1,946,548 100.0% 100.0%
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(1). Average monthly gross rent over the life of the lease, annualized
(2). Expiration of Sprint lease, Leawood, Kansas and Johnson Matthey lease,
Chester County, Pennsylvania
(3). Expiration of Gartner lease, Ft. Myers, Florida and EYBL Cartex lease,
Fountain Inn, South Carolina, and Jordan Associates lease, Oklahoma
City, Oklahoma.
(4). Expiration of AT&T lease, Oklahoma City, Oklahoma and Siemens lease in
Troy, Michigan
The following describes additional information about the properties in which the
Partnership owns interests as of December 31, 2000:
Fund XI-XII-REIT Joint Venture
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On June 21, 1999, the Partnership was admitted to the Wells Fund XI - Fund XII -
REIT Associates Joint Venture (the "Fund XI-XII-REIT Joint Venture").
The Fund XI-XII-REIT Joint Venture is a joint venture partnership among the
Partnership, Wells Real Estate Fund XI, L.P. ("Wells Fund XI"), an affiliated
Georgia limited partnership, and Wells Operating Partnership, L.P. ("Wells OP"),
a Delaware limited partnership formed to acquire, own, lease, operate, and
manage real properties on behalf of Wells Real Estate Investment Trust, Inc.
(the "Wells REIT"), an affiliated Maryland corporation. This joint venture was
originally formed on May 1, 1999, as a joint venture between Wells Fund XI and
the Wells OP pursuant to a Joint Venture Partnership Agreement, which was
amended and restated on June 21, 1999, to admit the Partnership as a joint
venture partner. The Fund XI-XII-REIT Joint Venture was formed for the purpose
of acquisition, ownership, development, leasing, operation, sale and management
of real properties.
As of December 31, 2000, the Partnership had contributed $5,300,000 for an
approximate 17.1% equity interest in the Fund XI-XII-REIT Joint Venture, Wells
Fund XI had made capital contributions of $8,131,351 for an approximate 26.1%
equity interest in the Fund XI-XII-REIT Joint Venture, and Wells OP had
contributed $17,585,310 for an approximate 56.8% equity interest in the Fund
XI-XII-REIT Joint Venture.
The Sprint Building
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On July 2, 1999, the 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 (the "Sprint Building") from
Bridge Information Systems America, Inc.
The purchase price for the Sprint Building was $9,500,000. The Joint Venture
also incurred additional acquisition expenses in connection with the purchase of
the Sprint Building, including attorneys' fees, recording fees and other closing
costs, of approximately $46,210. As of December 31, 2000, the Partnership had
contributed $1,000,000, Wells Fund XI had contributed $3,000,000 and Wells OP
had contributed $5,500,000 towards the purchase of this building.
The entire 68,900 rentable square feet of the Sprint Building is currently under
a net lease agreement with Sprint dated February 14, 1997. The landlord's
interest in the lease was assigned to the X-XI-
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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.
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 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
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 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 ground 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.
EYBL Cartex Building
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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 (the "EBYL 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
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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 costs were funded by capital contributions of $1,530,000
by Wells Fund XI 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 EBYL CarTex Building is currently
under an Agreement of Lease (the "Lease") with EYBL CarTex, Inc., a South
Carolina corporation ("EBYL 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 EBYL CarTex Building. Wells LLC, as landlord, is responsible for
maintenance for 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 Johnson Matthey Building
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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 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
$1,500,000 by the Partnership, $3,494,727 by Wells Fund XI and $3,061,594 by
Wells OP.
The Johnson Matthey Building is a 130,000 square foot research and development,
office and
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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 10.0 acre tract of land located at 434-436 Devon Park
Drive in 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 closing with the result that the joint
venture is now the landlord under the lease. 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. 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.
Under its 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 year of occupancy. The occupancy
rate at year end was 100% for 2000 and 1999.
The Gartner Building
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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 Blvd. in Fort Meyers, Lee County, Florida
(the "Gartner Building") from Hogan Triad Ft. Meyers 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 XI-XII-REIT Joint Venture at closing. The
purchase price for the Gartner Building was $8,320,000. The 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 project was funded by capital
contributions of $2,800,000 by the Partnership, $106,554 by Wells Fund XI and
$5,441,064 by Wells OP.
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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 "Lease"). The
landlord's interest in the Lease was assigned to the XI-XII-REIT Joint Venture
at the closing.
The initial term of the Lease is ten years which commenced on February 1, 1998
and expires on January 31, 2008. Gartner has the right to extend the Lease for
two additional five year periods of time. The yearly base rent payable for the
remainder of the Lease term is $642,798 through January 2000, $790,642 though
January, 2001, and thereafter will increase by 2.5 percent through the remainder
of the lease.
Under the 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 Lease. In
addition, Gartner is responsible for all routine maintenance and repairs to the
Gartner Building. The 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 Lease.
The two option plans are described in the 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
XI-XII-REIT Joint Venture. Gartner may exercise its expansion right for the
Small Option Building by providing notice in writing to the 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
XI-XII-REIT Joint Venture. Gartner may exercise its expansion right for the
Small Option Building by providing notice in writing to the 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.
Fund XII-REIT Joint Venture
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On April 10, 2000, the Partnership and Wells OP, the operating partnership for
Wells Real Estate Investment Trust, Inc., entered into a Joint Venture
Partnership Agreement for the purpose of acquiring owning, leasing, operating
and managing real properties. The Joint Venture is known as the Fund XII-REIT
Joint Venture Partnership ("Fund XII-REIT Joint Venture").
As of December 31, 2000, the Partnership had contributed approximately
$15,687,245 for an approximate 53.2% equity interest in the Fund XII-REIT Joint
Venture. Wells OP had made capital contributions of $13,832,779 for an
approximate 46.8% equity interest in the Fund XII-REIT Joint Venture.
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Siemens
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On May 10, 2000, the Fund XII-REIT Joint Venture acquired a three-story office
building containing approximately 77,054 rentable square feet (the "Siemens
Building") on a 5.3 acre tract of land located in Troy, Oakland County,
Michigan. The purchase price for the Siemens Building was $14,265,000 excluding
acquisition costs. The purchase price was funded by capital contributions of
$7,096,245 by the Partnership and $7,096,245 by Wells OP.
The entire Siemens Building is currently under a net lease agreement with
Siemens and expires on August 31, 2010. Siemens has the right to extend the
lease for two additional five year periods of time at 95% of the then current
fair market rental rates.
The monthly lease rent payable under the Siemens lease for the remainder of the
lease term is $109,160 for year 1; $111,857 for year 2; $114,554 for year 3;
$117,251 for year 4; $119,947 for year 5; $122,644 for year 6; $125,341 for year
7; $128,038 for year 8; $130,735 for year 9; and $133,432 for year 10 and the
first six months of year 11.
Under the lease, Siemens is required to pay as additional monthly rent its gas,
water, and electricity costs and all operating expenses including, but not
limited to, garbage and waste disposal, telephone, sprinkler service, janitorial
service, security, insurance premiums, all taxes, assessments and other
governmental levies and such other operating expenses with respect to the
Siemens Building. In addition, Siemens is responsible for all routine
maintenance and repairs to its portion of the Siemens Building. Siemens is
responsible for maintaining the common and service areas and the central
heating, ventilation and air conditioning systems of the building.
The Fund XII-REIT Joint Venture, as landlord, is responsible for the repair and
replacement of the roof, foundation, load bearing items, exterior surface walls,
plumbing, pipes, conduits and electrical, mechanical and plumbing systems of the
Siemens Building. Siemens must obtain written consent from the Fund XII-REIT
Joint Venture before making alterations to the premises in excess of $100,000 in
the aggregate within any 12 month period.
Under the terms of the Siemens lease, the Fund XII-REIT Joint venture is
required to reimburse Siemens for tenant improvement costs in the amount of
$1,954,516. The Fund XII-REIT Joint Venture received a credit at closing in an
amount equal to this tenant improvement allowance.
Siemens has a one-time right to cancel the Siemens lease effective after the
90/th/ month of the term if Siemens (a) provides written notice of such
cancellation on or before the last day of the 78/th/ month, and (b) pays a
cancellation fee to the Fund XII-REIT Joint Venture currently calculated to be
approximately $1,234,160.
The average effective annual rental per square foot at the Siemens Building was
$12.65 for 2000, the first year of occupancy. The occupancy rate at year end was
100% for 2000.
For additional information regarding the Siemens Building, refer to Supplement
No. 5 dated July 25, 2000 to the Prospectus of Wells Real Estate Fund XII, L.P.
dated March 22, 1999, contained in Post-Effective Amendment No. 3 to the Form S-
11 Registration Statement of Wells Real Estate Fund XII, L.P., which was filed
with the Commission on July 25, 2000 (Commission File No. 33-66657).
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AT&T Oklahoma Building
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On December 28, 2000, the Wells Fund XII-REIT Joint Venture acquired a one-story
office building and a two-story office building containing an aggregate of
approximately 128,500 rentable square feet (the "AT&T Oklahoma Buildings") on a
11.34 acre tract of land located in Oklahoma City, Oklahoma County, Oklahoma
from OKC Real Estate Investments, Inc.
Wells Capital, Inc., as original purchaser under the agreement, assigned its
rights under the agreement to the Fund XII-REIT Joint Venture at closing. The
purchase price for the AT&T Oklahoma Buildings was $15,300,000. The Fund XII-
REIT Joint Venture also incurred additional acquisition expenses in connection
with purchase of the AT&T Building including attorney's fees, recording fees and
other closing costs of approximately $27,554. The purchase of the building was
funded by capital contributions of $8,591,000 by the Partnership and $6,736,554
by Wells OP.
The entire 78,500 rentable square feet of the two-story office building and
25,000 rentable square feet of the one-story office building are currently under
a net lease agreement with AT&T Corp. (AT&T). The landlord's interest in the
AT&T lease was assigned to the Fund XII-REIT Joint Venture at the closing. The
AT&T lease commenced on April 1, 2000, and the initial term expires on November
30, 2010. AT&T has the right to extend the AT&T lease for two additional
five-year periods of time at the then current fair market rental rate upon
delivering written notice within 240 days prior to expiration of the lease.
AT&T is among the world's leading voice and data communications companies,
serving consumers, businesses and governments worldwide. AT&T has one of the
largest digital wireless networks in North America and is one of the leading
suppliers of data and internet services for businesses. In addition, AT&T offers
outsourcing, consulting and networking-integration to large businesses and is
one of the largest direct internet access service providers for consumers in the
United States.
The base rent payable for the initial term of the lease of the AT&T lease is as
follows: months 1 to 8 $300,000; months 9 to 35 $1,242,000, months 36 to 65
$1,293,750; months 66 to 95 $1,345,500 and months 96 to 125 $1,437,750 all
payable in equal monthly installments.
Under the AT&T lease, AT&T is required to pay as additional monthly rent its
gas, water, and electricity costs and all operating expenses including, but not
limited to, garbage and waste disposal, telephone, sprinkler service, janitorial
service, security, insurance premiums, all taxes, assessments and other
governmental levies and such other operating expenses with respect to its
portion of the AT&T Oklahoma Buildings. In addition, AT&T is responsible for all
routine maintenance and repairs to its portion of the AT&T Oklahoma Buildings.
The Fund XII-REIT Joint Venture, as landlord, is responsible for the repair and
replacement of the roof, foundation, load bearing items, exterior surface walls,
plumbing, pipes, conduits and electrical mechanical and plumbing systems of the
AT&T Oklahoma Buildings. AT&T must obtain written consent from the Fund XII-REIT
Joint Venture before making any alterations to the premises in excess of
$10,000.
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AT&T has a right of first offer for the space occupied by Jordan Associates,
Inc., ("Jordan"), as described below, if Jordan vacates the premises before the
Fund XII-REIT Joint Venture can lease the space to a third party.
Jordan currently occupies the remaining 25,000 rentable square feet contained in
the one-story office building under a net lease agreement. The landlord's
interest in the Jordan lease was also assigned to the Fund XII-REIT Joint
Venture at closing. The Jordan lease commenced on April 1, 1998, and the initial
term expires on March 31, 2008. Jordan has the right to extend the Jordan lease
for one additional five-year period of time at the then-current fair market
rental rate upon delivering written notice within 240 days prior to expiration
of the initial lease term
Jordan provides businesses with advertising and related services including
public relations, research, direct marketing and sales promotion. Through this
corporate office and other offices in Tulsa, St. Louis, Indianapolis, and
Wausau, Wisconsin, Jordan provides services to major clients such as Bank One,
Oklahoma, N.A., BlueCross & BlueSheild of Oklahoma, Kraft Food Services, Inc.,
Logix Communications, and the American Dental Association. Jordan employs
approximately 100 employees and has been in business for over 35 years.
The base rent payable for the initial lease term of the Jordan lease is as
follows: months 1 to 60 $294,500 and months 61 to 120 $332,000 payable in equal
monthly installments.
Under the Jordan lease, Jordan is required to pay as additional monthly rent its
gas, water, and electricity costs and all operating expenses including, but not
limited to, garbage and waste disposal, telephone, sprinkler service, janitorial
service, security, insurance premiums, all taxes, assessments and other
governmental levies and such other operating expenses with respect to its
portion of the AT&T Oklahoma Buildings. In addition, Jordan is responsible
for all routine maintenance and repairs to its portion of the one-story
Building. The Fund XII-REIT Joint Venture, as landlord, is responsible for the
repair and replacement of the roof, foundation, load bearing items, exterior
surface walls, plumbing, pipes, conduits and electrical, mechanical and plumbing
systems of the AT&T Call Center Buildings.
For additional information regarding the AT&T Oklahoma Buildings, refer to
Supplement No. 6 dated February 5, 2001 to the Prospectus of Wells Real Estate
Fund XII, L.P. dated March 22, 1999, contained in Post-Effective Amendment No. 4
to the Form S-11 Registration Statement of Wells Real Estate Fund XII, L.P.,
which was filed with the Commission on February 9, 2001 (Commission File No.
33-66657).
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 of
2000.
11
PART II
-------
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
- ----------------------------------------------------------------------------
As of February 28, 2001, the Partnership had 2,261,987 outstanding Cash
Preferred Units held by a total of 1119 Limited partners and 694,334 Tax
Preferred Units held by a total of 94 Limited partners. The capital contribution
per unit is $10.00. There is no established public trading for the Partnerships
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.
Pursuant to Section 15.2 of the Partnership Agreement, for the first three
fiscal years following the termination of the offering of units in the
Partnership, the per unit value shall be deemed to be $10.00 per unit. After the
expiration of this three year period, the General Partners shall determine a per
unit value by estimating the amount a holder of Partnership units would receive
if the Partnership's properties were sold as of the close of the Partnership's
fiscal year and the proceeds from such sales (without reduction for selling
expenses), together with any other funds of the Partnership, were distributed in
a liquidation of the Partnership.
Cash Preferred 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 Cash Preferred 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 Tax Preferred Status
Units. Holders of Cash Preferred 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 Tax Preferred
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 Cash Preferred Status Limited Partners
during 2000 and 1999 were as follows:
12
Per Cash Preferred Status Unit
------------------------------
Distribution for Total Cash Investment Return of General
Quarter Ended Distributed Income Capital Partner
------------- ----------- ------ ------- -------
March 31, 1999 $ 0 $ 0 $0.00 $0.00
June 30, 1999 $ 0 $ 0 $0.00 $0.00
September 30, 1999 $ 62,935 $0.26 $0.00 $0.00
December 31, 1999 $113,083 $0.29 $0.00 $0.00
March 31, 2000 $142,481 $0.15 $0.00 $0.00
June 30, 2000 $223,365 $0.21 $0.00 $0.00
September 30, 2000 $300,895 $0.21 $0.00 $0.00
December 31, 2000 $375,995 $0.20 $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 Cash Preferred 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 and the seven months ended December 31, 1999.
2000 1999
------------- -----------
Total assets $22,251,3849 $8,607,630
Total revenues 929,868 160,379
Net income 856,228 122,817
Net loss allocated
to General Partners 0 (500)
Net income allocated to
Cash Preferred Limited Partners 1,209,438 195,244
Net loss allocated to
Tax Preferred Limited Partners (353,210) (71,927)
Net income per weighted
average (1) Cash Preferred
Limited Partner Unit 0.89 0.50
Net loss per weighted
average (1) Tax Preferred
Limited Partner Unit (0.92) (0.56)
Cash Distributions per
weighted average (1)
Cash Preferred Limited Partner
Unit:
Investment Income 0.77 0.55
Return of Capital 0.00 0.00
(1) The weighted average unit is calculated by averaging units over the period
they are outstanding during the time units are still being purchased by Limited
Partners in the Partnership.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND 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
differ materially from any forward-looking statement made in the 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 June 1, 1999, when it received
and accepted subscriptions for 125,000 units. As of December 31, 2000, the
Partnership had sold 1,881,142 Cash Preferred Status Units and 617,434 Tax
Preferred Status Units, held by a total of 1068 and 90 Limited Partners,
respectively, for total Limited Partner contributions of $24,985,760. After
payment of $874,502 in acquisition and advisory fees and acquisition expenses,
payment of $3,123,220 in selling commissions and organization and offering
expenses, the investment of $5,300,000 in the Fund XI-XII-REIT Joint Venture,
and the investment of $15,687,245 in the Fund XII-REIT Joint Venture, as of
December 31, 2000, the Partnership was holding net offering proceeds of $793
available for investment in properties.
Gross revenues of the Partnership of $929,868 for year ended December 31, 2000
and $160,379 for the year ended December 31, 1999, were attributable primarily
to interest income earned on funds held by the Partnership prior to the
investment in joint ventures, and equity in earnings of joint ventures. The
increase was due primarily to increased investments in joint ventures.
Expenses for the Partnership were $73,640 for the year ended December 31, 2000
and $37,562 for the year ended December 31, 1999, and consisted primarily of
legal, accounting and partnership administrative costs. Net income of the
Partnership was $856,228 and $122,817 for the years ended December 31, 2000 and
1999, respectively. The Partnership's cash distribution to the Cash Preferred
Status Limited Partners was $0.77 and $0.55 for the years ended December 31,
2000 and 1999. No cash distributions have been paid to Tax Preferred Status
Limited Partners or to the General Partners.
14
Property Operations
- --------------------
As of December 31, 2000, the Partnership owned interests in the following
operational properties:
EYBL CarTex Building/Fund XI-XII-REIT Joint Venture
- ---------------------------------------------------
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 & 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 % 100% 100%
Partnership ownership % 17.1% 17.1%
Cash distributed to the Partnership $ 77,448 $ 33,482
Net income allocated to the Partnership $ 52,196 $ 22,856
Real estate taxes and primarily all operational expenses for the building are
the responsibility of the tenant.
Since the EBYL 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.
15
The Sprint Building / Fund X-XII-REIT Joint Venture
- ---------------------------------------------------
Year Ended Six Months Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Revenues:
Rental income $ 1,063,988 $ 531,993
----------------- -----------------
Expenses:
Depreciation 327,114 163,553
Management & 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 % 100% 100%
Partnership ownership % 17.1% 17.1%
Cash distributed to the Partnership $ 159,611 $ 67,386
Net income allocated to the Partnership $ 114,810 $ 48,939
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.
16
Johnson Matthey Building / Fund XI-XII-REIT Joint Venture
- ---------------------------------------------------------
Year Ended Five Months Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Revenues:
Rental income $ 867,646 $ 325,368
----------------- -----------------
Expenses:
Depreciation 255,475 106,461
Management & leasing expenses 36,194 11,846
Operating costs, net of reimbursements 12,926 4,841
----------------- -----------------
304,595 123,148
----------------- -----------------
Net income $ 563,051 $ 202,220
================= =================
Occupied % 100% 100%
Partnership ownership % 17.1% 17.1%
Cash distributed to the Partnership $ 128,232 $ 48,178
Net income allocated to the Partnership $ 96,222 $ 32,015
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.
17
The Gartner Building / Fund XI-XII-REIT Joint Venture
- -----------------------------------------------------
Year Ended Four Months Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Revenues:
Rental income $ 853,943 $ 235,863
----------------- -----------------
Expenses:
Depreciation 310,490 103,496
Management & leasing expense 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 % 100% 100%
Partnership ownership % 17.1% 17.1%
Cash distributed to the Partnership $ 132,120 $ 28,693
Net income allocated to the Partnership $ 91,984 $ 20,732
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 Gartner 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. Real estate taxes and primarily all operational expenses for the
building are the responsibility of the tenant.
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.
18
Siemens Building / Fund XII-REIT Joint Venture
- ----------------------------------------------
Nine Months Ended
December 31, 2000
-----------------
Revenues:
Rental income $ 974,796
Interest income 2,069
-----------------
976,865
-----------------
Expenses:
Depreciation 324,732
Management & leasing expense 32,756
Other operating expenses, net of reimbursements 5,127
-----------------
362,615
-----------------
Net income $ 614,250
=================
Occupied % 100%
Partnership ownership % 53.2%
Cash distributed to the Partnership $ 407,948
Net income allocated to the Partnership $ 309,189
The Siemens Building incurred property taxes of $126,883 in 2000.
Since the Siemens Building was purchased in May, 2000, comparative income and
expense figures are not available for the prior year.
19
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.
20
Liquidity and Capital Resources
- -------------------------------
The Partnership commenced active operations on June 1, 1999, when it received
and accepted subscriptions for 125,000 Units.
After payment of $874,502 in acquisition and advisory fees and acquisition
expenses, payment of $3,123,220 in selling commissions and organizational and
offering expenses, the investment of $5,300,000 in the Fund XI-XII-REIT Joint
Venture, and the investment of $15,687,245 in the Fund XII-REIT Joint Venture,
as of December 31, 2000, the Partnership was holding net offering proceeds of
$793 available for investment in the Partnership.
The Partnership's net cash provided by operating activities increased to
$234,619 in 2000, as compared to $3,782 for 1999. This increase was due
primarily to equity earnings of joint ventures and interest income earned on
funds held by the Partnership prior to investment in properties. Net cash used
in investing activities increased to $15,496,594 in 2000, up from $5,553,776 in
1999. This was primarily the result of increased investment in joint ventures.
Net cash provided by financing activities of $12,885,560 in 2000 and $8,134,128
in 1999 is the result of raising $15,617,575 and $9,368,186 respectively in
Limited Partners contributions less commissions and organizational and offering
expenses.
The Partnership's distributions to holders of Cash Preferred Status Units for
the 4/th/ quarter ended December 31, 2000 were paid in February, 2001 from net
cash from operations 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 Tax Preferred 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.
The Partnership expects to make future real estate investments, directly or
through investments in joint ventures, from Limited Partners Capital
contributions until the termination of its offering on March 21, 2001. As of
December 31, 2000, the Partnership was holding net offering proceeds of $793 for
this purpose.
Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
Inflation
- ---------
The real estate market 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 to protect the Partnership from the impact of
inflation. Most leases contain common area maintenance charges (CAM charges),
real estate tax and insurance reimbursements on a per square foot bases, or in
some cases, annual reimbursement of operating expenses above a certain
21
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.
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.
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 Suite
250, 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. Mr. Wells is the President of Wells & Associates, Inc., a
real estate brokerage and investment company formed in 1976 and incorporated in
1978, for which he serves as principal broker. 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 currently the sole
Director and President of Wells Management Company, Inc., a property management
company he founded in 1983. In addition, Mr. Wells is the President and Chairman
of the Board of Wells Investment Securities, Inc., Wells & Associates, Inc., and
Wells Management Company, Inc. which are 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.
Item 11. Compensation of General Partners and Affiliates.
- ---------------------------------------------------------
The following table summarizes the compensation and fees (including
reimbursement of expenses) paid to the General Partners and their affiliates
during the year ended December 31, 2000.
22
CASH COMPENSATION TABLE
-----------------------
(A) (B) (C)
Name of individual or Capacities in which served -
number in group Form of Compensation Cash Compensation
- --------------------- ---------------------------- -----------------
Wells Capital, Inc. General Partner of Wells $ 546,616
Partners, L.P.
Acquisition and Advisory Fees
and Acquisition Expenses
Wells Capital, Inc. General Partner of Wells $ 468,527
Partners, L.P. Reimbursement
of Organization and Offering
Expenses
Leo F. Wells, III General Partner -0-
Wells Investment Dealer Manager - $1,483,669(1)
Securities, Inc. Selling Commissions
Wells Management Property Manager - $ 42,873
Company, Inc. Property Management and
Leasing Fees
(1) This amount includes all selling commissions paid or payable to Wells
Investment Securities, Inc., a substantial portion of which were reallocated to
other broker-dealers.
(2) These fees are not paid directly by the Partnership but are paid by the
joint venture entities which own the properties for which the property
management and leasing services relate and include management and leasing fees.
23
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------------------------------------------------------------------------
No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.
Set forth below is the security ownership of management as of February 29, 2001.
(1) (2) (3) (4)
Amount and Nature
Name of of Beneficial
Title of Class Beneficial Owner Ownership Percent of Class
- --------------- ---------------- ----------------- ----------------
Cash Preferred Leo F. Wells, III 23.501 Units (IRA, less than 1%
Status Units 401 (k) Plan
No arrangements exist which would, upon operation, result in a change in control
of the Partnership.
ITEM 13. 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 Sales 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
Cash Preferred 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 Cash Preferred
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 Tax Preferred 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.
24
Property Management and Leasing Fees. Wells Management Company, Inc., an
------------------------------------
affiliate of the General Partners, will receive compensation for 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.
Management and leasing fees are not paid directly by the Partnership but by
the joint venture entities which own the properties. The Partnership's
share of these fees was $42,873 for the year ended December 31, 2000.
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. No real estate commissions were paid
to the General Partners or affiliates for the year ended December 31, 2000.
Deferred Project Costs
----------------------
The Partnership pays Acquisition and Advisory Fees and Acquisition Expenses
to Wells Capital, Inc., the General Partner of Wells Partners, L.P., for
acquisition and advisory services as a reimbursement for acquisition
expenses. These payments, as provided by the Partnership Agreement, may not
exceed 3.5% of the Limited Partners' capital contributions. Acquisition and
Advisory Fees and Acquisition Expenses paid as of December 31, 2000,
amounted to $874,501 and represented approximately 3.5% of the Limited
Partners' capital contributions. These fees are allocated to specific
properties as they are purchased.
Deferred Offering Costs
-----------------------
Wells Capital, Inc. (the "Company"), the General Partner of Wells Partners,
L.P., pays all the offering expenses for the Partnership. The Company may
be reimbursed by the Partnership to the extent that such offering expenses
do not exceed 3% of total Limited Partners' capital contributions. As of
December 31, 2000, the Partnership had reimbursed the Company an aggregate
of $749,573 in offering expenses, which amounted to approximately 3% of
Limited Partners' capital contributions.
25
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a) 1. Financial Statements
The Financial Statements are contained on pages F-2 through F-27 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) The Partnership filed a Current Report on Form 8-K dated December 28,
2000 and an Amendment No. 1 to Current Report on Form 8-K/A dated
December 28, 2000 reporting the acquisition of an interest in the AT&T
Oklahoma Buildings located in Oklahoma City, Oklahoma.
(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.
26
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 27/th/ day of March,
2001.
Wells Real Estate Fund XII, 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 General
Partner of Wells Partners, L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.
Signature Title
- --------- -----
/s/ Leo F. Wells, III Individual General Partner, March 27, 2001
- ---------------------------
Leo F. Wells, III President and Sole Director
of Wells Capital, Inc., the
General Partner of Wells
Partners, L.P.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.
27
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Financial Statements Page
- -------------------- ----
Independent Auditors' Report F-2
Balance Sheets as of December 31, 2000 and 1999 F-3
Statements of Income for the Year Ended December 31, 2000 F-4
Statements of Partners' Capital for the Years Ended December 31, 2000
and 1999 F-5
Statements of Cash Flows for the Years Ended December 31, 2000 and 1999 F-6
Notes to Financial Statements for December 31, 2000 and 1999 F-7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund XII, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND XII,
L.P. (a Georgia public limited partnership) as of December 31, 2000 and 1999,
the related statements of income for the years then ended, and the related
statements of 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 XII,
L.P. as of December 31, 2000 and 1999, the results of its operations for the
years then ended, 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 XII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
2000 1999
----------- ----------
INVESTMENT IN JOINT VENTURES $21,567,551 $5,467,634
CASH AND CASH EQUIVALENTS 208,319 2,584,734
ACCOUNTS RECEIVABLE 10,718 0
DEFERRED PROJECT COSTS 27 107,051
DEFERRED OFFERING COSTS 180,409 331,953
DUE FROM AFFILIATES 284,360 116,258
----------- ----------
Total assets $22,251,384 $8,607,630
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable $ 47,653 $ 5,507
Due to affiliate 204,398 344,578
Partnership distributions payable 376,001 113,084
----------- ----------
628,052 463,169
----------- ----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Cash preferred--1,881,142 and 752,426 units as of December 31, 2000
and 1999, respectively 16,589,551 6,602,953
Tax preferred--617,434 and 184,393 units as of December 31, 2000 and
1999, respectively 5,033,781 1,541,508
----------- ----------
Total partners' capital 21,623,332 8,144,461
----------- ----------
Total liabilities and partners' capital $22,251,384 $8,607,630
=========== ==========
The accompanying notes are an integral part of these balance sheets.
F-3
WELLS REAL ESTATE FUND XII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
---------- --------
REVENUES:
Equity in income of joint ventures $ 664,401 $124,542
Interest income 265,467 35,837
---------- --------
929,868 160,379
---------- --------
EXPENSES:
Partnership administration 32,215 12,517
Legal and accounting 17,500 11,439
Operating costs, net of reimbursements 12,030 8,431
Computer costs 11,895 5,175
---------- --------
73,640 37,562
---------- --------
NET INCOME $ 856,228 $122,817
========== ========
NET LOSS ALLOCATED TO GENERAL PARTNERS $ 0 $ (500)
========== ========
NET INCOME ALLOCATED TO CASH PREFERRED LIMITED PARTNERS $1,209,438 $195,244
========== ========
NET LOSS ALLOCATED TO TAX PREFERRED LIMITED PARTNERS $ (353,210) $(71,927)
========== ========
ET INCOME PER WEIGHTED AVERAGE CASH PREFERRED LIMITED PARTNER UNIT $ 0.89 $ 0.50
========== ========
NET LOSS PER WEIGHTED AVERAGE TAX PREFERRED LIMITED PARTNER UNIT $ (0.92) $ (0.56)
========== ========
CASH DISTRIBUTION PER WEIGHTED AVERAGE CASH PREFERRED LIMITED PARTNER UNIT $ 0.77 $ 0.55
========== ========
The accompanying notes are an integral part of these statements.
F-4
WELLS REAL ESTATE FUND XII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
Limited Partners
------------------------------------------------------------------------
Cash Preferred Tax Preferred
Original Units Amount Units Amount
-------- ----------- ------------- ---------- ------------
BALANCE, December 31, 1997 $ 0 0 $ 0 0 $ 0
Original partner contribution 100 0 0 0 0
General partners' contributions 0 0 0 0 0
-------- ----------- ------------- ---------- ------------
BALANCE, December 31, 1998 100 0 0 0 0
Net income (loss) 0 0 195,244 0 (71,927)
Partnership distributions 0 0 (176,018) 0 0
Limited partner contributions 0 752,426 7,524,260 184,393 1,843,926
Sales commissions and discounts 0 0 (714,805) 0 (175,173)
Other offering expenses 0 0 (225,728) 0 (55,318)
Return of capital (100) 0 0 0 0
-------- ----------- ------------- ---------- ------------
BALANCE, December 31, 1999 0 752,426 6,602,953 184,393 1,541,508
Net income (loss) 0 0 1,209,438 (353,210)
Partnership distributions 0 0 (1,042,735) 0 0
Limited partner contributions 0 1,112,517 11,125,166 449,240 4,492,409
Sales commissions and discounts 0 0 (1,096,641) 0 (387,029)
Other offering expenses 0 0 (334,055) 0 (134,472)
Tax preferred conversion elections 0 16,199 125,425 (16,199) (125,425)
-------- ----------- ------------- ---------- ------------
BALANCE, December 31, 2000 $ 0 1,881,142 $16,589,551 617,434 $5,033,781
======== =========== ============= ========== ============
Total
General Partners'
Partners Capital
-------- -------------
BALANCE, December 31, 1997 $ 0 $ 0
Original partner contribution 0 100
General partners' contributions 500 500
-------- -------------
BALANCE, December 31, 1998 $ 500 600
Net income (loss) (500) 122,817
Partnership distributions 0 (176,018)
Limited partner contributions 0 9,368,186
Sales commissions and discounts 0 (889,978)
Other offering expenses 0 (281,046)
Return of capital 0 (100)
-------- -------------
BALANCE, December 31, 1999 0 8,144,461
Net income (loss) 0 856,228
Partnership distributions 0 (1,042,735)
Limited partner contributions 0 15,617,575
Sales commissions and discounts 0 (1,483,670)
Other offering expenses 0 (468,527)
Tax preferred conversion elections 0 0
-------- -------------
BALANCE, December 31, 2000 $ 0 $21,623,332
======== =============
The accompanying notes are an integral part of these statements.
F-5
WELLS REAL ESTATE FUND XII, 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 $ 856,228 $ 122,817 $ 0
-------------- ------------ ----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in income of joint venture (664,401) (124,542) 0
Changes in assets and liabilities:
Accounts receivable (10,718) 0 0
Accounts payable 42,146 5,507 0
Due to affiliates 11,364 0 0
-------------- ------------ ----------
Total adjustments (621,609) (119,035) 0
-------------- ------------ ----------
Net cash provided by operating activities 234,619 3,782 0
-------------- ------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint venture 737,266 61,485 0
Investment in joint venture (15,687,245) (5,300,000) 0
Deferred project costs paid (546,615) (315,261) 0
-------------- ------------ ----------
Net cash used in investing activities (15,496,594) (5,553,776) 0
-------------- ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
General partner's contribution 0 0 500
Limited partners' contributions 15,617,575 9,368,186 100
Sales commissions and discounts paid (1,483,670) (889,978) 0
Offering costs paid (468,527) (281,046) 0
Distributions to partners from accumulated earnings (779,818) (62,934) 0
Return of capital 0 (100) 0
-------------- ------------ ----------
Net cash provided by financing activities 12,885,560 8,134,128 600
-------------- ------------ ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,376,415) 2,584,134 600
CASH AND CASH EQUIVALENTS, beginning of year 2,584,734 600 0
-------------- ------------ ----------
CASH AND CASH EQUIVALENTS, end of year $ 208,319 $ 2,584,734 $ 600
============== ============ ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Deferred project costs contributed to joint venture $ 653,639 $ 220,835 $ 0
============== ============ ==========
Deferred project costs due to affiliate $ 0 $ 12,625 $ 0
============== ============ ==========
Deferred offering costs due to affiliate $ 193,034 $ 222,814 $109,139
============== ============ ==========
Write-off of deferred offering costs due to affiliate $ 151,544 $ 0 $ 0
============== ============ ==========
The accompanying notes are an integral part of these statements.
F-6
WELLS REAL ESTATE FUND XII, 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 XII, L.P. (the "Partnership") is a public limited
partnership organized on September 15, 1998 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners,
L.P. 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 cash preferred units or tax preferred units.
Thereafter, limited partners shall have the right to change their prior
elections to have some or all of their units treated as cash preferred
units or tax preferred 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. The majority vote on any of the described matters will bind
the Partnership, without the concurrence of the general partners. Each
limited partnership unit has equal voting rights, regardless of which class
of unit is selected. The Partnership commenced operations as of June 1,
1999.
The Partnership was formed to acquire and operate commercial real estate
properties, including properties which are either to be developed,
currently under construction, newly constructed, or have operating
histories. The Partnership owns an interest in several properties through a
joint venture between Wells Real Estate Fund XI, L.P. ("Wells Fund XI"),
the Partnership, 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 the Fund XI, XII, and REIT Joint
Venture. In addition, the Partnership owns an interest in two properties
through a joint venture with the Operating Partnership, which is referred
to as the Fund XII and REIT Joint Venture.
Through its investment in Wells 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 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").
The following properties are owned by the Partnership through its
investment in the Fund XII and REIT Joint Venture: (i) a three-story office
building in Troy, Michigan (the "Siemens Building") and (ii) a one-story
office building and a two-story office building in Oklahoma City, Oklahoma
(collectively referred to as the "AT&T Call Center Buildings").
Use of Estimates
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
F-7
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The carrying values of the real estate assets 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 an appropriate level of rental rates, occupancy, and 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 cash preferred 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
cash preferred units and 10% to the general partners. No such distributions
will be made to the limited partners holding tax preferred units.
Distribution of Sale Proceeds
Upon the sale of properties, the net sale proceeds will be distributed in
the following order:
. To limited partners holding units which at any time have been
treated as tax preferred units until they receive an amount
necessary to equal the net cash available for distribution
received by the limited partners holding cash preferred 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 cash preferred units and a 15% per annum cumulative
return on net capital contributions for all periods during which
the units were treated as tax preferred units);
. To the general partners until they have received 100% of their
capital contributions, as defined;
. 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.
F-8
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, amortization, and cost recovery. 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 cash preferred units and 1% to
the general partners.
Net loss, depreciation, amortization, and cost recovery deductions for each
fiscal year will be allocated as follows: (a) 99% to the limited partners
holding tax preferred 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 tax preferred units in amounts equal to
the deductions for depreciation, amortization, and cost recovery 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 joint ventures is
recorded using the equity method of accounting.
Real Estate Assets
Real estate assets held by the joint venture are stated at cost less
accumulated depreciation. Major improvements and betterments are
capitalized when they extend the useful life of the related asset. All
ordinary repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances
which could indicate that carrying amounts of real estate assets may
not be recoverable. When events or changes in circumstances are
present that indicate 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.
Depreciation for buildings 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 venture are
classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective
leases.
F-9
Partner's 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 joint venture agreements. Generally, these items are
allocated in proportion to the partners' respective ownership
interests. Cash is paid from the joint ventures to the Partnership
quarterly.
Deferred Lease Acquisition Costs
Costs incurred to procure operating leases are capitalized and
amortized on a straight-line basis over the terms of the related
leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Partnership considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market
accounts.
Per Unit Data
Net income per unit with respect to the partnership for the years ended
December 31, 2000 and 1999 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 services. These payments, as stipulated by the
partnership agreement, can be up to 5% of the limited partner
contributions, subject to certain overall limitations contained in the
partnership agreement. Aggregate fees paid through December 31, 2000 were
$874,501 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
venture. Deferred project costs at December 31, 2000 represent fees not yet
applied to properties.
3. DEFERRED OFFERING COSTS
Offering expenses, to the extent they exceed 3% of gross offering 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.
As of December 31, 2000, the Company paid offering expenses on behalf of
the Partnership in the aggregate amount of $929,982, of which the Company
was reimbursed $749,573, which did not exceed the 5% limitation. The unpaid
portion of deferred offering costs is $180,409 and is included in due to
affiliate in the accompanying balance sheet.
F-10
4. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 2000 represents the Partnership's share
of the cash to be distributed from its joint venture investments for the
fourth quarter of 2000 and 1999 as follows:
2000 1999
-------- --------
Fund XI, XII, and REIT Joint Venture $125,193 $116,258
Fund XII and REIT Joint Venture 159,167 0
-------- --------
$284,360 $116,258
======== ========
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 $42,873, $8,268, and $0 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.
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 XI, XII, and REIT $ 5,325,424 17% $5,467,634 17%
Fund XII and REIT 16,242,127 53 0 0
----------- ----------
$21,567,551 $5,467,634
=========== ==========
F-11
The following is a rollforward of the Partnership's investment in joint ventures
for the years ended December 31, 2000 and 1999:
2000 1999
----------- ----------
Investment in joint venture, beginning of year $ 5,467,634 $ 0
Equity in income of joint venture 664,401 124,542
Contributions to joint venture 16,340,884 5,520,835
Distributions from joint venture (905,368) (177,743)
----------- ----------
Investment in joint venture, end of year $21,567,551 $5,467,634
=========== ==========
Fund XI, XII, and REIT Joint Venture
On May 1, 1999, the Partnership entered into a joint venture with Wells Fund XI
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-12
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
----------- -----------
Total liabilities 567,575 792,751
----------- -----------
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-13
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-14
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
=========== ===========
Fund XII and REIT Joint Venture
On May 10, 2000, the Partnership entered into a joint venture with the Operating
Partnership. The joint venture, Fund XII and REIT Joint Venture, was formed to
acquire, develop, operate, and sell real property. On May 10, 2000, the joint
venture purchased a 77,054 square-foot, three-story office building, known as
the Siemens Building in Troy, Oakland County, Michigan. On December 28, 2000,
the joint venture purchased a 50,000 square-foot one-story office building and a
78,500 square-foot two-story office building, collectively known as the AT&T
Call Center Buildings in Oklahoma City, Oklahoma County, Oklahoma.
F-15
Following are the financial statements for Fund XII and REIT Joint Venture:
Fund XII and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheet
December 31, 2000
Assets
Real estate assets, at cost:
Land $ 4,420,405
Building and improvements, less accumulated depreciation of $324,732 26,004,918
------------
Total real estate assets 30,425,323
Cash and cash equivalents 207,475
Accounts receivable 130,490
------------
Total assets $ 30,763,288
============
Liabilities and Partners' Capital
Liabilities:
Partnership distributions payable $ 208,261
------------
Partners' capital:
Wells Real Estate Fund XII 16,242,127
Wells Operating Partnership, L.P. 14,312,900
------------
Total partners' capital 30,555,027
------------
Total liabilities and partners' capital $ 30,763,288
============
Fund XII and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Income
for the Period From Inception (May 10, 2000)
Through December 31, 2000
Revenues:
Rental income $ 974,796
Interest income 2,069
------------
976,865
------------
Expenses:
Depreciation 324,732
Management and leasing fees 32,756
Partnership administration 3,917
Operating costs, net of reimbursements 1,210
------------
362,615
------------
Net income $ 614,250
============
Net income allocated to Wells Real Estate Fund XII $ 309,190
============
Net income allocated to Wells Operating Partnership, L.P. $ 305,060
============
F-16
Fund XII and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Partners' Capital
for the Period From Inception (May 10, 2000)
Through December 31, 2000
Wells Real Wells Total
Estate Operating Partners'
Fund XII Partnership, L.P. Capital
------------ ----------------- ------------
Balance, May 10, 2000 $ 0 $ 0 $ 0
Net income 309,190 305,060 614,250
Partnership contributions 16,340,885 14,409,170 30,750,055
Partnership distributions (407,948) (401,330) (809,278)
------------ ----------------- ------------
Balance, December 31, 2000 $ 16,242,127 $ 14,312,900 $ 30,555,027
============ ================= ============
Fund XII and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Cash Flows
for the Period From Inception (May 10, 2000)
Through December 31, 2000
Cash flows from operating activities:
Net income $ 614,250
-------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 324,732
Changes in assets and liabilities:
Accounts receivable (130,490)
-------------
Total adjustments 194,242
-------------
Net cash provided by operating activities 808,492
-------------
Cash flows from investing activities:
Investment in real estate (29,520,043)
-------------
Cash flows from financing activities:
Distributions to joint venture partners (601,017)
Contributions received from partners 29,520,043
-------------
Net cash provided by financing activities 28,919,026
-------------
Net increase in cash and cash equivalents 207,475
Cash and cash equivalents, beginning of year 0
-------------
Cash and cash equivalents, end of year $ 207,475
=============
Supplemental disclosure of non cash activities:
Deferred project costs contributed to joint venture $ 1,230,012
=============
F-17
6. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the year ended December
31, 2000 is recalculated as follows:
2000 1999
---------- ----------
Financial statement net income $ 856,228 $ 122,817
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes in
excess of amounts for income tax purposes 116,721 27,541
Rental income accrued for financial reporting purposes in
excess of amounts for income tax purposes (109,459) (20,250)
---------- ----------
Income tax basis net income $ 863,490 $ 130,108
========== ==========
The Partnership's income tax basis partners' capital at December 31, 2000
is computed as follows:
2000 1999
------------ ------------
Financial statement partners' capital $ 21,623,332 $ 8,144,461
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 144,262 27,541
Capitalization of syndication costs for income tax
purposes, which are accounted for as cost of capital
for financial reporting purposes 3,123,221 1,171,024
Accumulated rental income accrued for financial
reporting purposes in excess of amounts for income
tax purposes (129,709) (20,250)
Partnership's distributions payable 376,001 113,084
------------ ------------
Income tax basis partners' capital $ 25,137,107 $ 9,435,860
============ ============
7. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interest in the joint venture under noncancelable operating
leases at December 31, 2000 is as follows:
Year ended December 31:
2001 $ 2,153,470
2002 2,079,811
2003 2,157,459
2004 2,260,824
2005 2,287,491
Thereafter 8,699,159
------------
$ 19,638,214
============
Four tenants contributed 40%, 16%, 13%, and 12% of rental income. In
addition, two tenants will contribute 40% and 37% of future minimum rental
income.
F-18
The future minimum rental income due Fund XI, XII and REIT under
noncancellable 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.
The future minimum rental income due Fund XII and REIT under noncancellable
operating leases at December 31, 2000 is as follows:
Year ended December 31:
2001 $ 2,888,084
2002 2,920,446
2003 2,952,809
2004 2,985,172
2005 3,017,534
Thereafter 13,650,288
------------
$ 28,414,333
============
One tenant contributed approximately 86% of rental income for the year
ended December 31, 2000. In addition, two tenants will contribute
approximately 49% and 45% of future minimum rental income.
8. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the years ended December 31, 2000 and 1999:
F-19
2000 Quarters Ended
--------------------------------------------------------------
March 31 June 30 September 30 December 31
------------ ----------- ---------------- ---------------
Revenues $ 134,213 $ 214,333 $ 278,564 $ 302,758
Net income 108,854 192,717 266,737 287,920
Net income allocated to cash preferred
limited partners 155,965 292,043 349,597 411,833
Net loss allocated to tax preferred
limited partners (47,111) (99,326) (83,360) (123,413)
Net income per weighted average cash
preferred limited partner unit
outstanding (a) $ 0.11 $ 0.21 $ 0.26 $ 0.30
Net loss per weighted average tax preferred
limited partner unit outstanding (a) (0.12) (0.26) (0.22) (0.32)
Cash distribution per weighted average cash
preferred limited partner unit
outstanding 0.16 0.21 0.21 0.19
(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 $ 0 $ 0 $ 61,667 $ 98,712
Net (loss) income 0 (2,615) 45,786 79,646
Net loss allocated to general partners 0 (26) (231) (243)
Net income allocated to cash preferred limited
partners 0 0 68,910 126,334
Net loss allocated to tax preferred limited
partners 0 (2,589) (22,893) (46,445)
Net income per weighted average cash preferred
limited partner unit outstanding (a) $ 0.00 $ 0.00 $ 0.28 $ 0.20
Net loss per weighted average tax preferred
limited partner unit outstanding (a) 0.00 (0.02) (0.21) (0.36)
Cash distribution per weighted average cash
preferred limited partner unit outstanding 0.00 0.00 0.26 0.29
(a) The totals of the four quarterly amounts for the year ended
December 31, 1999 do not equal the totals for the year.
This difference results from the use of a weighted average
to compute the number of units outstanding for each quarter
and the year.
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-20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund XII, L.P. and
Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying balance sheet of THE SIEMENS BUILDING as of
December 31, 2000 and the related statements of income, partners' capital, and
cash flows for the period from inception (May 10, 2000) to December 31, 2000.
These financial statements are the responsibility of the building's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audit 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 audit provides 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 the Siemens Building as of
December 31, 2000 and the results of its operations and its cash flows for the
period from inception (May 10, 2000) to December 31, 2000 in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 30, 2001
THE SIEMENS BUILDING
BALANCE SHEET
DECEMBER 31, 2000
ASSETS
REAL ESTATE ASSETS:
Land $ 2,232,904
Building and improvements, less accumulated depreciation of $324,732 12,226,211
-----------
Total real estate assets 14,459,115
CASH AND CASH EQUIVALENTS 207,475
ACCOUNTS RECEIVABLE 130,490
-----------
Total assets $14,797,080
===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Distributions payable to partners $ 208,261
-----------
COMMITMENTS AND CONTINGENCIES (Note 4)
PARTNERS' CAPITAL:
Wells Real Estate Fund XII, L.P. 7,294,409
Wells Real Estate Investment Trust, Inc. 7,294,410
-----------
Total partners' capital 14,588,819
-----------
Total liabilities and partners' capital $14,797,080
===========
The accompanying notes are an integral part of this balance sheet.
THE SIEMENS BUILDING
STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION (MAY 10, 2000)
TO DECEMBER 31, 2000
REVENUES:
Rental income $974,796
Interest income 1,715
--------
976,511
--------
EXPENSES:
Depreciation 324,732
Operating costs, net of reimbursements 4,773
Management and leasing fees 32,756
Legal and accounting 0
--------
362,261
--------
NET INCOME $614,250
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND XII, L.P. $307,125
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE INVESTMENT TRUST, INC. $307,125
========
The accompanying notes are an integral part of this statement.
THE SIEMENS BUILDING
STATEMENT OF PARTNERS' CAPITAL
FOR THE PERIOD FROM INCEPTION (MAY 10, 2000)
TO DECEMBER 31, 2000
Wells Real
Wells Real Estate Total
Estate Investment Partners'
Fund XII, L.P. Trust, Inc. Capital
-------------- ---------- -----------
BALANCE, at inception (May 10, 2000) $ 0 $ 0 $ 0
Contributions 7,391,923 7,391,924 14,783,847
Net income 307,125 307,125 614,250
Distributions (404,639) (404,639) (809,278)
---------- ---------- -----------
BALANCE, December 31, 2000 $7,294,409 $7,294,410 $14,588,819
========== ========== ===========
The accompanying notes are an integral part of this statement.
THE SIEMENS BUILDING
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (MAY 10, 2000)
TO DECEMBER 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 614,250
-------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 324,732
Changes in assets and liabilities:
Accounts receivable (130,490)
-------------
Total adjustments 194,242
-------------
Net cash provided by operating activities 808,492
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate assets (14,192,489)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from partners 14,192,489
Distributions paid to partners (601,017)
-------------
Net cash provided by financing activities 13,591,472
-------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 207,475
CASH AND CASH EQUIVALENTS, beginning of period 0
-------------
CASH AND CASH EQUIVALENTS, end of period $ 207,475
=============
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Deferred project costs applied to real estate assets $ 591,358
=============
The accompanying notes are an integral part of this statement.
THE SIEMENS BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Siemens Building ("Siemens") is a three-story office building located
in Troy, Michigan. The building is owned by Fund XII and REIT Associates, a
joint venture between Wells Real Estate Fund XII, L.P. ("Fund XII") and
Wells Real Estate Investment Trust, Inc. ("REIT"). Fund XII and REIT each
own 50% of Siemens at December 31, 2000. Allocation of net income and
distributions are made in accordance with ownership percentages.
Use of Estimates
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.
Income Taxes
Siemens is not deemed to be a taxable entity for federal income tax
purposes.
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation. Major
improvements and betterments are capitalized when they extend the useful
life of the related asset. All repairs and maintenance are expensed as
incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets
by determining whether the carrying value of such real estate assets will
be recovered through the future cash flows expected from the use of the
asset and its eventual disposition. Management has determined that there
has been no impairment in the carrying value of Siemens as of December 31,
2000.
Depreciation is calculated using the straight-line method over 25 years.
Revenue Recognition
The lease on Siemens is classified as an operating lease, and the related
rental income is recognized on a straight-line basis over the term of the
lease.
- 2 -
Cash and Cash Equivalents
For the purposes of the statements of cash flows, Siemens considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market
accounts.
2. RENTAL INCOME
The future minimum rental income due to Siemens under noncancelable
operating leases at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 1,339,584
2002 1,371,946
2003 1,404,309
2004 1,436,672
2005 1,469,034
Thereafter 7,133,788
------------
$ 14,199,333
============
One tenant contributed 100% of rental income for the year ended December
31, 2000 and represents 100% of the future minimum rental income above.
3. RELATED-PARTY TRANSACTIONS
Fund XII and REIT Associates entered into a property management agreement
with Wells Management Company, Inc. ("Wells Management"), an affiliate of
Fund XII, and REIT Associates. In consideration for supervising the
management of Siemens, Fund XII and REIT Associates will generally pay
Wells Management management and leasing fees equal to (a) 3% of the gross
revenues for management and 3% of the gross revenues for leasing (aggregate
maximum of 6%) plus a separate fee for the one-time initial lease-up of
newly constructed properties in an amount not to exceed the fee customarily
charged in arm's-length transactions by others rendering similar services
in the same geographic area for similar properties or (b) in the case of
commercial properties which are leased on a long-term net basis (ten or
more years), 1% of the gross revenues except for initial leasing fees equal
to 3% of the gross revenues over the first five years of the lease term.
Siemens incurred management and leasing fees of $32,756 for the year ended
December 31, 2000, which were paid to Wells Management.
4. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against Siemens and its partners. In the
normal course of business, Siemens and its partners may become subject to
such litigation or claims.
EXHIBIT INDEX
-------------
(Wells Real Estate Fund XII, 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 XII, L.P. (Exhibit 3.1 to Form S-11 Registration
Statement of Wells Real Estate Fund XII, L.P., as amended to date,
Commission File No. 33-66657)
*3(b) Certificate of Limited Partnership of Wells Real Estate Fund XII,
L.P. (Exhibit 3.2 to Form S-11 Registration Statement of Wells Real
Estate Fund XII, L.P., as amended to date, Commission File No. 33-
66657)
*10(a) Leasing and Tenant Coordinating Agreement with Wells Management
Company, Inc. (Exhibit 10.2 to Form S-11 Registration Statement of
Wells Real Estate Fund XII, L.P., as amended to date, Commission
File No. 33-66657)
*10(b) Management Agreement with Wells Management Company, Inc. (Exhibit
10.3 to Form S-11 Registration Statement of Wells Real Estate Fund
XII, L.P., as amended to date, Commission File No. 33-66657)
*10(c) Amended and Restated Joint Venture Partnership Agreement of The
Wells Fund XI - Fund XII - REIT Joint Venture (Exhibit 10.28 to Form
S-11 Registration Statement of Wells Real Estate Investment Trust,
Inc., as amended to date, Commission File No. 333-83933)
*10(d) 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(e) 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(f) 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(g) 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(h) 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(i) 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)
*10(j) Joint Venture Partnership Agreement of Wells Fund XII-REIT Joint
Venture Partnership (Exhibit 10.11 to Form S-11 Registration
Statement of Wells Real Estate Fund XII, L.P., as amended to date,
Commission File No. 33-66657)
*10(k) Agreement for the Purchase and Sale of Property for the Siemens
Building (Exhibit 10.12 to Form S-11 Registration Statement of Wells
Real Estate Fund XII, L.P., as amended to date, Commission File No.
33-66657)
*10(l) Office Lease for the Siemens Building (Exhibit 10.13 to Form S-11
Registration Statement of Wells Real Estate Fund XII, L.P., as
amended to date, Commission File No. 33-66657)
*10(m) Agreement for the Purchase and Sale of Property for the AT&T Call
Center Buildings in Oklahoma City, Oklahoma (Exhibit 10.14 to Form
S-11 Registration Statement of Wells Real Estate Fund XII, L.P., as
amended to date, Commission File No. 333-66657)
*10(n) First Amendment to Agreement for the Purchase and Sale of
Property for the AT&T Call Center Buildings in Oklahoma City,
Oklahoma (Exhibit 10.15 to Form S-11 Registration Statement of
Wells Real Estate Fund XII, L.P., as amended to date,
Commission File No. 333-66657)
*10(o) Lease Agreement with AT&T Corp. for a portion of the AT&T Call
Center Buildings in Oklahoma City, Oklahoma (Exhibit 10.16 to Form
S-11 Registration Statement of Wells Real Estate Fund XII, L.P., as
amended to date, Commission File No. 333-66657)
*10(p) Lease Agreement with Jordan Associates, Inc. for a portion of the
AT&T Call Center Buildings in Oklahoma City, Oklahoma (Exhibit 10.17
to Form S-11 Registration Statement of Wells Real Estate Fund XII,
L.P., as amended to date, Commission File No. 333-66657)