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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 2000 or
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[_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to ________________ to _______________
Commission file number 0-27888
Wells Real Estate Fund VIII, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2126618
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(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
6200 The Corners Parkway, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
Class A Unit
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(Title of Class)
Class B Unit
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Aggregate market value of the voting stock held by
nonaffiliates: Not Applicable
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PART I
ITEM 1. BUSINESS
General
Wells Real Estate Fund VIII, 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 August 15, 1994, for the purpose of acquiring, developing, constructing,
owning, operating, improving, leasing, and otherwise managing for investment
purposes income-producing commercial or industrial properties.
On January 6, 1995, the Partnership commenced a public offering of up to
$35,000,000 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 February 24, 1995, when it received
and accepted subscriptions for 125,000 units. The offering was terminated on
January 5, 1996, and received gross proceeds of $32,042,689 representing
subscriptions from 3,204,269 Limited Partners units, composed of two classes of
limited partnership interests, Class A and Class B limited partnership units.
The Partnership owns interests in properties through the following joint
ventures: (i) Fund VII and Fund VIII Associates, a joint venture between the
Partnership and Wells Real Estate Fund VII, L.P. (the "Fund VII-Fund VIII Joint
Venture"); (ii) Fund VI, Fund VII and Fund VIII Associates, a joint venture
among the Partnership, Wells Real Estate Fund VI, L.P., and Wells Real Estate
Fund VII, L.P. (the "Fund VI-VII-VIII Joint Venture"); and (iii) Fund VIII and
Fund IX Associates, a joint venture between the Partnership and Wells Real
Estate Fund IX, L.P. (the "Fund VIII-Fund IX Joint Venture"); (iv) Fund
VIII-IX-REIT Joint Venture, a joint venture between Wells OP and the Fund
VIII-IX Joint Venture.
As of December 31, 2000, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a
single-story retail/office building located in Clayton County, Georgia (the
"Hannover Center") and (ii) a two-story office building located in Gainesville,
Florida (the "CH2M Hill") which are owned by the Fund VII-Fund VIII Joint
Venture; (iii) a four-story office building located in Jacksonville, Florida
(the "BellSouth Property") and (iv) a retail shopping center located in
Clemmons, North Carolina (the "Tanglewood Commons") which are owned by the Fund
VI-VII-VIII Joint Venture; and (v) a four-story office building in Madison,
Wisconsin (the "US Cellular Building"), (vi) a one-story office building located
in Farmers Branch, Texas (the "TCI Building"), (vii) a two-story office building
located in Orange County, California (the "Quest Building"), formerly the "Bake
Parkway Building" previously owned by the Fund VIII-IX Joint Venture, which is
now owned by the Fund VIII-IX-REIT Joint Venture; and (viii) a two-story office
building located in Boulder County, Colorado (the "Cirrus Logic Building") which
are owned by the Fund VIII-Fund IX Joint Venture.
Employees
The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the sole general partner of Wells Partners, L.P., a General Partner of the
Partnership, perform a full range of real estate services including leasing and
property management, accounting, asset management and investor relations for the
Partnership. See Item 11 "Compensation of General Partners and Affiliates," for
a summary of the fees paid to the General Partners and their affiliates during
the fiscal year ended December 31, 2000.
-2-
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 results of operations. At the time the Partnership
elects to dispose of its properties, the Partnership will also be in competition
with sellers of similar properties to locate suitable purchasers for its
properties.
ITEM 2. PROPERTIES
The Partnership owns interests in eight properties through its investment in
joint ventures of which six are office buildings and two are retail buildings.
The Partnership does not have control over the operations of the joint ventures;
however, it does exercise significant influence. Accordingly, investment in
joint ventures is recorded on the equity method. As of December 31, 2000, these
properties were 100% occupied as compared to 99% occupied as of December 31,
1999 and 1998.
-3-
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:
Partnership Percentage Percentage
Number Share of of Total of Total
Year of of Square Annualized Annualized Square Annualized
Lease Leases Feet Gross Base Gross Base Feet Gross Base
Expiration Expiring Expiring Rent (1) Rent (1) Expiring Rent
- -------------- ------------- ------------- --------------- ---------------- --------------- ----------------
2001 1 22,607 $ 369,852 $ 119,647 6.4% 7.2%
2002 5 29,901 389,064 198,348 8.4 7.6
2003 8 17,542 255,611 129,487 4.9 5.0
2004 2 70,606 1,295,628 586,080 19.9 25.3
2005(2) 3 62,097 601,184 358,880 17.5 11.8
2006(3) 2 75,444 1,241,556 429,636 21.3 24.3
2007(4) 1 76,276 959,148 525,581 21.6 18.8
2008 0 0 0 0 0.0 0.0
2009 0 0 0 0 0.0 0.0
2010 0 0 0 0 0 0
------------- ------------- --------------- ---------------- --------------- ----------------
22 354,473 $ 5,112,043 $ 2,347,659 100% 100%
============= ============= =============== ================ =============== ================
(1) Average monthly gross rent over the life of the lease,
annualized.
(2) Expiration of 57,457 square feet CH2M Hill lease, Gainesville,
Florida.
(3) Expiration of 69,424 square feet BellSouth lease, Jacksonville,
Florida.
(4) Expiration of US Cellular lease, Madison, Wisconsin.
The following describes the properties in which the Partnership owns an interest
as of December 31, 2000:
Fund VII--Fund VIII Joint Venture
On February 10, 1995, the Partnership and Wells Real Estate Fund VII,
L.P. ("Wells Fund VII"), a Georgia public limited partnership
affiliated with the Partnership through common general partners,
entered into a Joint Venture Agreement known as Fund VII and Fund VIII
Associates (the "Fund VII--Fund VIII Joint Venture"). The investment
objectives of Wells Fund VII are substantially identical to those of
the Partnership. The Partnership holds an approximate 63% equity
interest and Wells Fund VII holds an approximate 37% equity interest
in the Fund VII--Fund VIII Joint Venture which owns and operates an
office building and a retail/office building as described below. As of
December 31, 2000, the Partnership had contributed $4,267,621 and
Wells Fund VII had contributed $2,474,725 for a total cost of
$6,742,346 to the Fund VII--Fund VIII Joint Venture for the
acquisition and development of the property.
The Hannover Center
On April 1996, Wells Fund VII contributed 1.01 acres of land
located in Clayton County, Georgia and improvements thereon
valued at $512,000 to the Fund VII--Fund VIII Joint Venture
for the development of a 12,080 square foot, single story
combination retail/office building. As of December 31, 2000,
Wells Fund VII had funded approximately $1,437,801 for the
development of the Hannover property in addition to the cost
of the land, and the Partnership had contributed $190,311 to
the joint venture for the development of the property.
-4-
A five-year lease has been signed with Mattress King, a
mattress sale store, to occupy 6,020 square feet. The annual
base rent for the first three years is $88,795, and for the
last two years is $91,805. The lease will expire in 2006. Two
additional tenants leased the remaining space at the property
with leases to expire in 2003.
The average effective annual rental per square foot at the
Hannover Property was $9.15 for 2000, $15.97 for 1999, $10.05
for 1998, and $8.92 for 1997. The occupancy as of December 31,
2000, 1999, and 1998 was 100%.
CH2M Hill at Gainesville
Wells Fund VII made an initial contribution to the Fund
VII--Fund VIII Joint Venture of $677,534, which constituted
the total purchase price and all other acquisition and
development costs expended by the Fund VII--Fund VIII Joint
Venture for the purchase of a 5.0 acre parcel of land in
Gainesville, Alachua County, Florida. Construction of a 62,975
square foot office building, containing 61,468 rentable square
feet was completed in December 1995. The average effective
annual rental per square foot at the Gainesville Property was
$9.37 for 2000 and 1999, $9.19 for 1998, $8.63 for 1997, and
$8.69 for 1996. The occupancy rate at year end for 2000, 1999,
and 1998 was 100%.
A 9 year, 11 month lease, to occupy 57,457 square feet has
been signed with CH2M Hill, Engineers, Planners, Economists,
Scientists, with an option to extend for an additional five
year period. The annual base rent during the initial term is
$530,313 payable in equal monthly installments of $44,193. The
annual rent for the extended term will be at market rate.
Assuming no options or termination rights, the lease with CH2M
Hill will expire in the year 2005.
As of December 31, 2000, the Partnership had contributed
$4,077,310, and Wells Fund VII had contributed $1,036,923 to
the Fund VII--Fund VIII Joint Venture toward the completion of
this project.
Fund VI-VII-VIII Joint Venture
On April 17, 1995, the Partnership, Wells Fund VII and Wells Real
Estate Fund VI, L.P. ("Wells Fund VI") a Georgia public limited
partnership, affiliated with the Partnership through common general
partners, formed a joint venture known as the Fund VI, Fund VII, and
Fund VIII Associates (the "Fund VI-VII-VIII Joint Venture"). The
investment objectives of Wells Fund VI are substantially identical to
those of the Partnership. As of December 31, 2000, the Partnership had
contributed approximately $5,700,000 for an approximately 32.3% equity
interest in the Fund VI-VII-VIII Joint Venture which owns an office
building in Jacksonville, Florida and a multi-tenant retail center in
Clemmons, North Carolina. As of December 31, 2000, Wells Fund VI had
contributed $6,067,688 for an equity interest in the Fund VI-VII-VIII
Joint Venture of approximately 34.3%, and Wells Fund VII contributed
approximately $5,932,312 for an equity interest in the Fund VI-VII-VIII
Joint Venture of approximately 33.4%, for a total of $17,700,000 to the
Fund VI-VII-VIII Joint Venture for the acquisition and development of
the property.
BellSouth Property
On April 25, 1995, the Fund VI-VII-VIII Joint Venture
purchased a 5.55 acre parcel of land in Jacksonville, Florida
for a total of $1,245,059 including closing costs. In May
-5-
1996, the 92,964 square foot office building was completed
with BellSouth Advertising and Publishing Corporation, a
subsidiary of BellSouth Company, occupying approximately
66,333 square feet and American Express Travel Related
Services Company, Inc. occupying approximately 22,607 square
feet. BellSouth occupied an additional 3,901 square feet in
December 1996. The land purchase and construction costs,
totaling approximately $9 million, were funded by capital
contributions of $2,000,000 by the Partnership, $3,500,000 by
Wells Fund VI and $3,500,000 by Wells Fund VII.
The BellSouth lease is for a term of nine years and eleven
months with an option to extend for an additional five-year
period at market rate. The annual base rent during the initial
term is $1,094,426 during the first five years and $1,202,034
for the balance of the initial lease term. The American
Express lease is for a term of five years at an annual base
rent of $369,851. BellSouth and American Express are required
to pay additional rent equal to their share of operating
expenses during their respective lease terms.
The average effective annual rental per square foot at the
BellSouth property was $16.36 for 2000, 1999, and 1998, $16.40
for 1997 and $14.15 for 1996, the first year of occupancy. The
occupancy rate at year end was 100% for 2000, 1999, and 1998.
Tanglewood Commons Shopping Center
On May 31, 1995, the Fund VI-VII-VIII Joint Venture purchased
a 14.683 acre tract of real property located in Clemmons,
Forsyth County, North Carolina. The land purchase costs were
funded by a capital contribution made by Wells Fund VI. As of
December 31, 2000, Fund VI had contributed $2,567,688, and
Fund VII had contributed $2,432,312 and the Partnership had
contributed $3,700,000 for the development of this project.
The Fund VI-VII-VIII Joint Venture developed and constructed
one large strip shopping center building containing
approximately 67,320 gross square feet on a 12.48 acre tract.
The remaining 2.2 acre portion of the property consists of
four outparcels which have been graded and are held for future
development or resale.
Total costs and expenses incurred by the Fund VI-VII-VIII
Joint Venture for the acquisition, development, construction
and completion of the shopping center are approximately
$8,700,000. Construction of the project began in March, 1996,
and was substantially completed in the first quarter of 1997.
Harris Teeter, Inc., a regional supermarket chain, executed a
lease for a minimum of 45,000 square feet with an initial term
of 20 years with extension options of four successive five
year periods with the same terms as the initial lease. The
annual base rent during the initial term is $488,250. In
addition, Harris Teeter has agreed to pay percentage rents
equal to one percent of the amount by which Harris Teeter's
gross sales exceed $35,000,000 for any lease year.
The average effective annual rental per square foot at
Tanglewood Commons was $12.53 for 2000, $11.48 for 1999,
$10.96 for 1998 and $9.12 for 1997, the first year of
occupancy. The occupancy rate at year end was 100% for 2000
and 91% for 1999 and 1998.
-6-
Fund VIII-Fund IX Joint Venture
On June 10, 1996, the Partnership and Wells Real Estate Fund IX, L.P.
("Wells Fund IX"), a Georgia public limited partnership, affiliated
with the Partnership through common general partners, formed a joint
venture known as Fund VIII and Fund IX Associates (the "Fund VIII-Fund
IX Joint Venture"). The investment objectives of Wells Fund IX are
substantially identical to those of the Partnership. As of December 31,
2000, the Partnership had contributed $15,987,323 for an approximately
55% equity interest, and Wells Fund IX had contributed $13,289,358 for
an approximately 45% equity interest in the Fund VIII-Fund IX Joint
Venture.
US Cellular Building
On June 17, 1996, the Fund VIII-Fund IX Joint Venture
purchased a 7.09 acre tract of real property in Madison, Dane
County, Wisconsin for a total cost of $859,255 including
closing costs. Construction has been completed on a four-story
office building containing approximately 101,727 rentable
square feet (the "US Cellular Building").
In June 1997, US Cellular, a subsidiary of BellSouth
Corporation, occupied its leased space of 76,276 rentable
square feet comprising approximately 75% of the building. The
initial term of the lease is 9 years and 11 months beginning
in June 1997, with the option to extend the initial term of
the lease for two consecutive five year periods. The annual
base rent payable during the initial term is $902,418 payable
in equal monthly installments of $75,201 during the first five
years and $1,016,822 payable in equal monthly installments of
$84,735 during the last 4 years and 11 months of the initial
term. The annual base rent for each extended term will be at
market rental rate. US Cellular is required to pay additional
rent equal to its share of operating expenses during the lease
term.
The land purchase and construction costs have been funded by
capital contributions of $6,573,342 by the Partnership and
$3,912,444 by Wells Fund IX for a total cost of approximately
$10,500,000.
The average effective annual rental per square foot at the US
Cellular Building was $12.60 for 2000, 1999, and 1998 and
$8.87 for 1997, the first year of occupancy. The occupancy
rate at year end was 100% in 2000, 1999, and 1998.
The TCI Building
On October 10, 1996, the Fund VIII-Fund IX Joint Venture
purchased a one-story office building containing approximately
40,000 rentable square feet, located on approximately 4.864
acres of land in Farmer's Branch, Dallas County, Texas for a
purchase price of $4,450,000 excluding acquisition costs (the
"TCI Building").
The funds used by the Fund VIII-Fund IX Joint Venture to
acquire the TCI Building were derived from capital
contributions made by the Partnership and Wells Fund IX
totaling $2,238,170 and $2,236,530, respectively, for total
contributions to the Fund VIII-Fund IX Joint Venture of
$4,474,700, including acquisition costs. The Partnership
currently owns an approximate 55% equity interest in the Fund
VIII-Fund IX Joint Venture.
-7-
The TCI Building is leased to TCI Valwood Limited Partnership
I for a period of fifteen years, with options to extend the
lease for three consecutive five-year periods. The annual base
rent is $430,001 during the first five years, $454,001 during
the next five years and $482,001 during the last five years.
The TCI lease commenced on July 19, 1996 and was assigned by
the seller to the Fund VIII--Fund IX Joint Venture on October
10, 1996. The lease agreement is a net lease in that the
tenant is responsible for the operating expenses including
real estate taxes.
The occupancy rate at the TCI Building at year end was 100%
for 2000, 1999, and 1998. The average effective rental per
square foot in the TCI Building is $11.38 for 2000, 1999,
1998, 1997, and 1996.
The Cirrus Logic Building
On February 20, 1997, the Fund VIII-Fund IX Joint Venture
acquired a 4.26 acre tract of real property in Broomfield,
Colorado, located in Boulder County in the Denver/Boulder
metropolitan area (the "Denver Property"). A two-story office
building containing approximately 49,460 rentable square feet
has been constructed on the Denver Property (the "Cirrus Logic
Building"). The Denver Property is part of the Interlocken
Business Park, a 963-acre business development for advanced
technology and research/development oriented companies.
The purchase price paid for the Cirrus Logic Building was
$7,029,000 excluding acquisition costs. Construction of the
Cirrus Logic Building was substantially completed in March
1997 with Cirrus Logic, Inc. occupying the entire building.
The lease, as well as Cirrus Logic's obligation to pay rent,
commenced on the date upon which Cirrus Logic took occupancy
of the building. The lease with Cirrus Logic provides for a
term of 15 years from the commencement date. Cirrus Logic has
the option to renew the lease for two additional terms of five
years each. The base rental payable during any such extended
term would be 95% of the then current market rental rate for
comparable office buildings in the Boulder County area. The
annual initial base rent payable by Cirrus Logic under its
lease is $677,755. The base annual rent will be increased by
10% beginning with the sixth year of the lease and will be
increased another 10% beginning with the eleventh year of the
lease.
Under its lease, Cirrus Logic is responsible for all
utilities, cleaning taxes and other operating expenses and for
maintaining property and liability insurance on the Cirrus
Logic Building. The Fund VIII-Fund IX Joint Venture shall
maintain for its own benefit liability insurance for the
Cirrus Logic Building as well as insurance for fire, vandalism
and malicious mischief.
The funds used by the Fund VIII-Fund IX Joint Venture to
acquire the Cirrus Logic Building were derived entirely from
capital contributions made to the Fund VIII-Fund IX Joint
Venture by the Partnership and Wells Fund IX. The Partnership
and Wells Fund IX each made capital contributions of
approximately $3,555,495 and $3,532,275, respectively, to Fund
the purchase of the property, for total capital contributions
to the Fund VIII-Fund IX Joint Venture with respect to the
Cirrus Logic Building of approximately $7,087,770.
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The average effective rental rate per square foot at the
Cirrus Logic Building was $14.92 for 2000, 1999, and 1998 and
$13.25 for 1997, the first year of occupancy. The occupancy
rate at year end was 100% for 2000, 1999 ,and 1998.
Fund VIII-Fund IX-REIT Joint Venture
On January 10, 1997, the Fund VIII-Fund IX Joint Venture acquired a
two-story office building containing approximately 65,006 rentable
square feet on a 4.4 acre tract of land located at 15253 Bake Parkway,
in the Irvine Spectrum planned business community in metropolitan
Orange County, California (the "Quest Building"), formerly the Bake
Parkway Building. The total consideration paid for the building was
$7,193,000 excluding acquisition expenses.
The funds used by the Fund VIII-Fund IX Joint Venture to acquire the
Quest Building were derived entirely from capital contributions made to
the Fund VIII-Fund IX Joint Venture by the Partnership and Wells Fund
IX. The Partnership and Wells Fund IX made capital contributions of
approximately $3,620,316 and $3,608,109, respectively, to fund the
purchase of the building, for total capital contributions to the Fund
VIII-Fund IX Joint Venture with respect to the Quest Building of
approximately $7,228,425.
On February 18, 1999, Wells OP entered into a Rental Income Guaranty
Agreement with Fund VIII and Fund IX Associates, a Georgia joint
venture partnership between Wells Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P. ("VIII-IX Joint Venture"), whereby Wells OP
guaranteed the VIII-IX Joint Venture that it would receive rental
income on the Quest Building previously leased to Matsushita Avionics
at least equal to the rental and building expenses that the VIII-IX
Joint Venture would have received over the remaining term of its
original lease with Matsushita Avionics. Wells OP had paid
approximately $543,000 in rental income guaranty payments to the
VIII-IX Joint Venture through December 31, 2000, but has since ceased
making such payments since the Bake Parkway Building is now fully
leased to Quest.
On June 15, 2000, the Fund VIII-IX-REIT Joint Venture was formed
between Wells OP and Fund VIII and Fund IX Associates. On July 1, 2000,
the Fund VIII-IX Joint Venture contributed its interest in the Bake
Parkway Property to the Fund VIII-IX-REIT Joint Venture. At December
31, 2000, the Partnership held an equity interest in the VIII-IX Joint
Venture of 46.2%.
A 42-month lease for the entire Bake Parkway Building has been signed
by Quest Software Inc. Occupancy occurred on August 1, 2000. Quest is a
publicly traded corporation that provides software database management
and disaster recovery services for its clients.
Construction of tenant improvements required under the Quest lease cost
approximately $1,231,000 and loans funded by Wells OP.
The average effective rental per square foot at the Quest Building is
$13.72 for 2000, $10.11 for 1999, and $10.32 for 1998. The occupancy
rate at year end was 100% in 2000, 1999, 1998, and 1997.
-9-
ITEM 3. LEGAL PROCEEDINGS
There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Limited Partners for the year of
2000.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
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PART II
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
As of February 28, 2001, the Partnership had 2,764,087 outstanding Class A Units
held by a total of 2,020 Limited Partners and 439,182 outstanding Class B Units
held by a total of 243 Limited Partners. The capital contribution per unit is
$10.00. There is no established public trading for the Partnership's limited
partnership units, and it is not anticipated that a public trading market for
the units will develop. Under the Partnership Agreement, the General Partners
have the right to prohibit transfers of units.
The General Partners have estimated the investment value of properties held by
the Partnership, as of December 31, 2000, to be $11.15 per Class A Unit and
$14.88 per Class B Units based on market conditions existing in early December
2000. The methodology used for this valuation was to estimate the amount a
holder of Partnership Units would receive if the Partnership's properties were
all sold in the ordinary course of business as of December 31, 2000, and the
proceeds from such sales (without reduction for selling expenses), together with
Partnership funds held as of such date, were distributed in a liquidation of the
Partnership. The value was confirmed as reasonable by an independent MAI
appraiser, David L. Beal Company, although no actual MAI appraisal was performed
due to the inordinate expense involved with such an undertaking. The valuation
does not include any fractional interest valuation.
Class A Status Limited Partners are entitled to a distribution from Net Cash
from Operations, as defined in the Partnership Agreement to mean cash flow, less
adequate cash reserves for other obligations of the Partnership for which there
is no provision, on a per Unit basis until they have received distributions in
each fiscal year of the Partnership equal to 10% of their adjusted capital
contributions. After this preference is satisfied, the General Partners will
receive an amount of Net Cash From Operations equal to 10% of the total amount
of Net Cash From Operations distributed. Thereafter, the Limited Partners
holding Class A Units will receive 90% of Net Cash From Operations and the
General Partners will receive 10%. No Net Cash from Operations will be
distributed to Limited Partners holding Class B Units. Holders of Class A Units
will, except in limited circumstances, be allocated none of the Partnership's
net loss, depreciation, amortization and cost recovery deductions. These
deductions will be allocated to the Class B Units, until their capital account
balances have been reduced to zero. No distributions have been made to the
General Partner as of December 31, 2000.
Cash distributions made to Class A Limited Partners during the two most recent
fiscal years were as follows:
Distribution Total
for Quarter Cash Investment Return of
Ended Distributed Income Capital
-------------------------- ----------------- ---------------- ---------------
March 31, 1999 $580,710 $0.22 $0.00
June 30, 1999 597,963 0.22 0.00
September 30, 1999 609,288 0.23 0.00
December 31, 1999 613,584 0.21 0.00
March 31, 2000 623,907 0.23 0.00
June 30, 2000 631,987 0.23 0.00
September 30, 2000 618,292 0.12 0.11
December 31, 2000 579,650 0.10 0.10
-11-
The fourth quarter distribution was accrued for accounting purposes in 2000, and
was not actually paid to Limited Partners until February 2001. Although there is
no assurance, the General Partners anticipate that cash distributions to Limited
Partners holding Class A Units will continue in 2001 at a level at least
comparable with 2000 cash distributions on an annual basis.
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of the selected financial data for the fiscal
years ended December 31, 2000, 1999, 1998, 1997, and 1996:
2000 1999 1998 1997 1996
-------------- -------------- -------------- -------------- --------------
Total assets $23,769,069 $24,960,196 $26,072,465 $27,021,694 $27,506,234
Total revenues 1,373,795 1,360,497 1,362,513 1,204,018 1,057,694
Net income 1,288,063 1,266,946 1,269,171 1,102,567 936,590
Net loss allocated to General
Partners 0 0 0 0 (297)
Net income allocated to Class A
limited partners 2,294,288 2,481,559 2,431,246 1,947,536 1,207,540
Net loss allocated to Class B
limited partners (1,006,225) (1,214,613) (1,162,075) (844,969) (270,653)
Net income per weighted average (1)
Class A Limited Partner
Unit $ 0.84 $ 0.91 $ 0.86 $ 0.73 $ 0.46
Net loss per weighted average (1)
Class B Limited Partner
Unit (2.19) (2.47) (2.12) (1.50) (0.47)
Cash distributions per weighted
average (1)
Class A Limited Partner Unit:
Investment income 0.68 0.88 0.86 0.62 0.44
Return of capital 0.21 0.00 0.00 0.00 0.00
(1) The weighted average unit is calculated by averaging units over the
period they are outstanding during the time units are still being
purchased or converted by Limited Partners in the Partnership.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONs
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 this Report, which include construction costs which may exceed
estimates, construction delays, lease-up risks, inability to obtain new tenants
upon the expiration of existing leases, and the potential need to fund tenant
improvements or other capital expenditures out of operating cash flow.
-12-
Results of Operations and Changes in Financial Conditions
General
Gross revenues of the Partnership were $1,373,795 for the year ended December
31, 2000, as compared to $1,360,497 for the year ended December 31, 1999 and
$1,362,513 for the year ended December 31, 1998. This increase was attributable
primarily to increased interest income earned on funds held by the Partnership.
Expenses of the Partnership were $85,732 for 2000, as compared to $93,551 in
1999 and $93,342 in 1998. These changes were due primarily to a decrease in
partnership administrative costs and legal and accounting fees. As a result, net
income of the Partnership increased to $1,288,063 for the year ended December
31, 2000, as compared to $1,266,946 for the year ended December 31, 1999 and
$1,269,171 for the year ended December 31, 1998.
The Partnership made cash distributions of investment income to Limited Partners
holding Class A units of $0.89 per Class A unit for the year ended December 31,
2000, $0.88 per Class A unit for the year ended December 31, 1999, and $0.86 per
Class A unit for the year ended December 31, 1998. The General Partners
anticipate distributions per unit will continue to increase for limited partners
holding Class A units in 2001. Distributions accrued for the fourth quarter of
2000 to the Limited Partners holding Class A units were paid in February 2001.
No cash distributions were made to Limited Partners holding Class B units.
Property Operations
The Partnership's ownership interest in the Fund VII-Fund VIII Joint Venture is
63%, in the Fund VI-VII-VIII Joint Venture is 32%, in the Fund VIII-Fund IX
Joint Venture is 55%, and in the Fund VIII-IX-REIT Joint Venture is 46%.
-13-
As of December 31, 2000, the Partnership owned equity through interests in Joint
Ventures in the following operational properties:
CH2M Hill at Gainesville/Fund VII-Fund VIII Joint Venture
For the Year Ended December 31
--------------------------------------------
2000 1999 1998
----------- ----------- -----------
Revenues:
Rental income $576,139 $576,139 $564,683
----------- ----------- -----------
Expenses:
Depreciation 263,963 263,243 251,783
Management and leasing expenses 97,086 103,551 82,031
Other operating expenses (45,517) (5,810) 49,250
----------- ----------- -----------
315,532 360,984 383,064
----------- ----------- -----------
Net income $260,607 $215,155 $181,619
=========== =========== ===========
Occupied percentage 100% 100% 100%
=========== =========== ===========
Partnership ownership percentage 63.3% 63.3% 63.3%
=========== =========== ===========
Cash distribution to the Partnership $329,964 $305,270 $276,044
=========== =========== ===========
Net income allocated to the Partnership $165,095 $136,301 $114,514
=========== =========== ===========
Rental income remained relatively stable in 2000, as compared to 1999 and 1998.
Management and leasing expenses were higher in 1999 due to a change in estimates
of leasing fees. Other operating expenses decreased in 2000 due primarily to an
increase of 2000 monthly common area maintenance billing to tenants. Tenants are
billed an estimated amount for the current year common area maintenance which is
then reconciled the following year and the difference billed to the tenant.
Management and leasing fee reimbursement were included in other operating
expenses.
The CH2M Hill Property incurred property taxes of $81,509 for 2000, $81,703 for
1999, and $79,407 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, Page 3.
-14-
The Hannover Center/Fund VII-Fund VIII Joint Venture
For the Year Ended December 31
--------------------------------------------
2000 1999 1998
----------- ----------- -----------
Revenues:
Rental income $ 110,502 $ 192,913 $ 121,056
----------- ----------- -----------
Expenses:
Depreciation 111,612 84,403 43,925
Management and leasing expenses 17,248 20,489 11,487
Other operating expenses 85,977 20,290 20,482
----------- ----------- -----------
214,837 125,182 75,894
----------- ----------- -----------
Net income $(104,335) $ 67,731 $ 45,162
=========== =========== ===========
Occupied percentage 100% 100% 100%
=========== =========== ===========
Partnership ownership percentage 63.3% 63.3% 63.3%
=========== =========== ===========
Cash distribution to the Partnership $ 0 $ 92,003 $ 11,561
=========== =========== ===========
Net income generated to the Partnership $ (66,096) $ 42,904 $ 28,554
=========== =========== ===========
Rental income decreased in 2000, as compared to 1999 and 1998, due to a partial
year occupancy in 2000. Net income and cash distributions to the Partnership
decreased in 2000, as compared to 1999 and 1998, due to one tenant defaulting on
the lease and moving out at the end of 1999. The management team is currently
taking legal action against that tenant. Depreciation increased in 2000 due to a
write-off of tenant improvement on the defaulted tenant. Other operating
expenses increased in 2000 due primarily to an uncollectable accounts receivable
recorded in this year.
Cash distribution to the Partnership was lower in 1998, as compared to 1999, due
to a $44,000 in construction being funded by operating cash in 1998.
The Hannover Property incurred property taxes of $12,967 for 2000, $12,995 for
1999, and $12,668 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc. refer to Item 2, Properties, page 3.
-15-
BellSouth Property / Fund VI-VII-VIII Joint Venture
For the Year Ended December 31
--------------------------------------------------
2000 1999 1998
-------------- -------------- --------------
Revenues:
Rental income $ 1,521,109 $ 1,521,109 $ 1,521,109
Interest income 1,997 4,763 7,806
Other income 360 360 9,373
-------------- -------------- --------------
1,523,466 1,526,232 1,538,288
-------------- -------------- --------------
Expenses:
Depreciation 446,430 446,429 444,448
Management and leasing expenses 193,474 192,716 190,025
Other operating expenses 430,664 415,562 436,403
-------------- -------------- --------------
1,070,568 1,054,707 1,070,876
-------------- -------------- --------------
Net income $ 452,898 $ 471,525 $ 467,412
============== ============== ==============
Occupied percentage 100% 100% 100%
============== ============== ==============
Partnership ownership percentage 32.3% 32.3% 32.3%
============== ============== ==============
Cash distribution to the Partnership $ 301,727 $ 307,919 $ 305,826
============== ============== ==============
Net income allocated to the Partnership $ 146,555 $ 152,560 $ 151,229
============== ============== ==============
Rental income, depreciation, and management and leasing expenses have remained
relatively stable in 2000, 1999 and 1998, while other operating expenses
increased, as compared to 1999, due primarily to increased janitorial expenses
and expenses for an application of water repellent on the building. As a result,
net income and cash distribution to the Partnership decreased in 2000.
The BellSouth Property incurred property taxes of $168,751 for 2000, $166,706
for 1999, and $171,629 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc. refer to Item 2, Properties, page 3.
-16-
Tanglewood Commons/Fund VI-VII-VIII Joint Venture
For the Year Ended December 31
-----------------------------------------------
2000 1999 1998
-------------- -------------- --------------
Revenues:
Rental income $843,761 $772,907 $737,862
Interest income 1,988 10,174 17,610
-------------- -------------- --------------
845,749 783,081 755,472
-------------- -------------- --------------
Expenses:
Depreciation 268,972 255,456 244,311
Management and leasing expenses 80,158 66,637 61,562
Operating costs, net of reimbursements (19,909) 67,726 49,338
-------------- -------------- --------------
329,221 389,819 355,211
-------------- -------------- --------------
Net income $516,528 $393,262 $400,261
============== ============== ==============
Occupied percentage 100% 91% 91%
============== ============== ==============
Partnership ownership percentage 32.3% 32.3% 32.3%
============== ============== ==============
Cash distributions to Partnership $256,512 $211,576 $206,319
============== ============== ==============
Net income allocated to the Partnership $167,097 $127,238 $129,503
============== ============== ==============
Rental income, depreciation, and management and leasing expenses increased in
2000, as compared to 1999 and 1998, due to increased occupancy at the property.
Other operating expenses decreased due to monthly common area maintenance
billings to the tenants were increased in 2000 to offset 1999 under billing.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the following year and the difference
billed to the tenant. As a result, net income and cash distribution to the
Partnership increased.
The Tanglewood Commons Property incurred property taxes of $54,005 for 2000,
$53,259 for 1999, and $52,229 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on the
property, tenants, etc., refer to Item 2, Properties, page 3.
-17-
The TCI Building--Fund VIII-Fund IX Joint Venture
For the Year Ended December 31
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues:
Rental income $455,177 $455,178 $455,177
Interest income 34,740 25,995 32,194
------------ ------------ ------------
489,917 481,173 487,371
------------ ------------ ------------
Expenses:
Depreciation 166,596 166,593 166,594
Management and leasing expenses 17,487 17,370 17,199
Other operating expenses 11,299 10,044 9,236
------------ ------------ ------------
195,382 194,007 193,029
------------ ------------ ------------
Net income $294,535 $287,166 $294,342
============ ============ ============
Occupied percentage 100% 100% 100%
============ ============ ============
Partnership ownership percentage 54.8% 54.8% 54.8%
============ ============ ============
Cash distribution to the Partnership $238,889 $234,849 $235,051
============ ============ ============
Net income allocated to the Partnership $161,395 $157,358 $158,794
============ ============ ============
Rental income and expenses remained constant. Total revenue and net income
increased in 2000, due to fluctuations in interest rates.
Real estate taxes and primarily all operational expenses for the building are
the responsibility of the tenant.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
-18-
The Quest Building (formerly the Bake Parkway Building)/
Fund VIII-IX-REIT Joint Venture
For the Year Ended December 31
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues:
Rental income $891,807 $657,513 $670,792
------------ ------------ ------------
Expenses:
Depreciation 295,726 215,670 215,669
Management and leasing expenses 52,123 24,902 26,050
Other operating expenses 93,312 9,388 16,180
------------ ------------ ------------
441,161 249,960 257,899
------------ ------------ ------------
Net income $450,646 $407,553 $412,893
============ ============ ============
Occupied percentage 100% 100% 100%
============ ============ ============
Partnership ownership percentage 46.2% 54.8% 54.8%
============ ============ ============
Cash distributed to the Partnership $379,933 $377,513 $358,857
============ ============ ============
Net income allocated to the Partnership $233,302 $223,326 $222,754
============ ============ ============
On June 15, 2000, the Fund VIII-IX-REIT Joint Venture was formed between Wells
OP and Fund VIII and Fund IX Associates, a Georgia joint venture partnership
between Wells Real Estate Fund VIII,L.P. and Wells Real Estate Fund IX, L.P.
(the "Fund VIII-IX Joint Venture"). On July 1, 2000, the Fund VIII-IX Joint
Venture contributed its interest in the Bake Parkway Property to the Fund
VIII-IX-REIT Joint Venture. The Bake Parkway Building is a two-story office
building containing approximately 65,006 rentable square feet on a 4.4-acre
tract of land in Irvine, California.
A 42-month lease for the entire Bake Parkway Building has been signed by Quest
Software, Inc. Occupancy occurred on August 1, 2000. Quest is a publicly traded
corporation that provides software database management and disaster recovery
services for its clients.
Construction of tenant improvements required under the Quest lease cost
approximately $1,231,000 and was funded by Wells OP.
Rental income and management and leasing fees have increased in 2000, as
compared to 1999 and 1998, due to the increased rental rate on the Quest lease.
Depreciation has increased due to the tenant improvement placed in service in
2000. Other operating expenses increased in 2000 due primarily to a write-off of
prior year straight-line rent related to a prior tenant.
-19-
The Cirrus Logic Building/Fund VIII-Fund IX Joint Venture
For the Year Ended December 31
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues:
Rental income $738,156 $738,156 $738,156
------------ ------------ ------------
Expenses:
Depreciation 291,063 291,063 291,064
Management and leasing expenses 48,513 44,329 39,149
Operating costs, net of reimbursements 5,833 (81,061) 62,038
------------ ------------ ------------
345,409 254,331 392,251
------------ ------------ ------------
Net income $392,747 $483,825 $345,905
============ ============ ============
Occupied percentage 100% 100% 100%
============ ============ ============
Partnership ownership percentage 54.8% 54.8% 54.8%
============ ============ ============
Cash distributions to Partnership $340,476 $390,372 $309,040
============ ============ ============
Net income allocated to the Partnership $215,212 $265,120 $185,782
============ ============ ============
Rental income, depreciation, and management and leasing fees remained relatively
stable while other operating expenses increased for the year ended December 31,
2000, as compared to the same period in 1999, due primarily to an adjustment for
common area maintenance billing to the tenants. Tenants are billed an estimated
amount for the current year common area maintenance which is then reconciled in
the following year and the difference billed to the tenants. The decrease in
other operating expenses from 1998 to 1999 was due to an adjustment for property
taxes billed to tenants. Management fees reimbursed by the tenant are also
included in other operating expenses.
The building incurred property taxes of $231,696 for 2000, $215,174 for 1999,
and $101,229 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
-20-
The US Cellular Building/Fund VIII-Fund IX Joint Venture
For the Year Ended December 31
--------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues:
Rental income $1,282,076 $1,282,078 $1,282,076
---------- ---------- ----------
Expense:
Depreciation 601,651 601,652 601,509
Management and leasing expenses 139,719 129,474 139,396
Operating costs, net of reimbursements (80,889) 84,345 (118,009)
---------- ---------- ----------
660,460 815,471 622,896
---------- ---------- ----------
Net income $ 621,596 $ 466,607 $ 659,180
=========== =========== ===========
Occupied percentage 100% 100% 100%
=========== =========== ===========
Partnership ownership percentage 54.8% 54.8% 54.8%
=========== =========== ===========
Cash distributions to Partnership $ 666,930 $ 569,345 $ 647,955
=========== =========== ===========
Net income allocated to the Partnership $ 340,614 $ 255,685 $ 355,237
=========== =========== ===========
Net income increased for the year ended December 31, 2000, as compared to 1999,
due to an increase in common area maintenance reimbursements billed to tenants
due to a large credit for 1998 that was applied to the tenants in 1999 but not
in 2000. Net income decreased for the year ended December 31, 1999, as compared
to 1998, due to a decrease in common area maintenance reimbursements billed to
tenants in 1999, due to overbilling of property tax in 1998. The credit for 1998
was approximately $100,000 and was credited to the tenants in 1999. Tenants are
billed an estimated amount for the current year common area maintenance which is
then reconciled in the following year and the difference billed to the tenant.
Management fee reimbursement is also included in operating costs. The building
incurred property taxes of $47,654 for 2000, $49,173 for 1999, and $50,825 for
1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
-21-
Liquidity and Capital Resources
During its offering, which terminated on January 5, 1996 the Partnership raised
a total of $32,042,689 in capital through the sale of 3,204,269 Units. No
additional units will be sold by the Partnership. As of December 31, 2000, the
Partnership incurred $6,087,744 in acquisition and advisory fees, selling
commissions and organizational and offering expenses, a repurchase of $8,000
limited partnership units, and investment by the Partnership of $25,954,945 in
Joint Ventures.
The Partnership's net cash used in operating activities decreased to $68,968, in
2000, as compared to $87,298 in 1999, due primarily to increased net income and
an increase in accounts payable. Net cash provided by investing activities of
$2,474,151 in 2000 is primarily the result of distributions received from the
joint ventures. Net cash used in financing activities has increased due
primarily to increased Partnership distributions.
The Partnership's distributions paid and payable through the fourth quarter of
2000 have been paid from net cash from operations and a return of capital. The
Partnership anticipates that distributions will continue to be paid on a
quarterly basis from such sources. No cash distributions were paid to Class B
unitholders for 2000. The Partnership expects to meet liquidity requirements and
budget demands through cash flow from operations.
Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
Inflation
Real estate has not been affected significantly by inflation in the past three
years due to the relatively low inflation rate. There are provisions in the
majority of tenant leases executed by the Partnership to protect the Partnership
from the impact of inflation. Most leases contain common area maintenance
charges ("CAM charges"), real estate tax and insurance reimbursements on a per
square foot bases, or in some cases, annual reimbursement of operating expenses
above a certain per square foot allowance. These provisions should reduce the
Partnership's exposure to increases in costs and operating expenses resulting
from inflation.
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.
-22-
PART III
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP
Wells Partners, L.P.
Wells Partners, L.P. is a private Georgia limited partnership formed on October
25, 1990. The sole General Partner of Wells Partners, L.P. is Wells Capital,
Inc., a Georgia Corporation. The executive offices of Wells Capital, Inc. are
located at 6200 The Corners Parkway, Norcross, Georgia 30092.
Leo F. Wells, III.
Mr. Wells is a resident of Atlanta, Georgia, is 57 years of age and holds a
Bachelor of Business Administration Degree in Economics from the University of
Georgia. Mr. Wells is the President and sole Director of Wells Capital. Mr.
Wells is the President of Wells & Associates, Inc., a real estate brokerage and
investment company formed in 1976 and incorporated in 1978, for which he serves
as principal broker. Mr. Wells is also currently the sole Director and President
of Wells Management Company, Inc., a property management company he founded in
1983. In addition, Mr. Wells is the President and Chairman of the Board of Wells
Investment Securities, Inc., Wells & Associates, Inc., and Wells Management
Company, Inc. which are affiliates of the General Partners. From 1980 to
February 1985, Mr. Wells served as Vice-President of Hill-Johnson, Inc., a
Georgia corporation engaged in the construction business. From 1973 to 1976, he
was associated with Sax Gaskin Real Estate Company and from 1970 to 1973, he was
a real estate salesman and property manager for Roy D. Warren & Company, an
Atlanta real estate company.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES
The following table summarizes the compensation and fees paid to the General
Partners and their affiliates during the year ended December 31, 2000:
(C)
--------------------
(A) (B) Cash
Name of Individual Capacities in Which Served --------------------
or Number in Group Form of Compensation Compensation
- ------------------------------------------- ------------------------------------------- --------------------
Property Manager-Management
Wells Management Company, Inc. and Leasing Fees $246,937(1)
(1) The majority of these fees are not paid directly by the
Partnership but are paid by the joint venture entities which own
properties to which the property management and leasing services
relate and include management and leasing fees.
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.
-23-
Set forth below is the security ownership of management as of December 31, 2000.
(1) (2) (3) (4)
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
- ----------------------------- ------------------------------ --------------------------- ---------------------------
140.88 units (IRA, 401(k)
Class A units Leo F. Wells, III Plan) Less than 1%
No arrangements exist which would, upon implementation, result in a change in
control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following are compensation and fees paid or to be paid by the Partnership to
the General Partners and their affiliates in connection with the operation of
the Partnership.
Interest in Partnership Cash Flow and Net Sale Proceeds
The General Partners will receive a subordinated participation in net cash flow
from operations equal to 10% of net cash flow after the Limited Partners holding
Class A Status Units have received preferential distributions equal to 10% of
their adjusted capital accounts in each fiscal year. The General Partners will
also receive a subordinated participation in net sales proceeds and net
financing proceeds equal to 20% of residual proceeds available for distribution
after Limited Partners holding Class A Status Units have received a return of
their adjusted capital contributions plus a 10% cumulative return on their
adjusted capital contributions and Limited Partners holding Class B Units have
received a return of their adjusted capital contributions plus a 15% cumulative
return on their adjusted capital contributions; provided, however, that in no
event shall the General Partners receive in the aggregate in excess of 15% of
net sales proceeds and net financing proceeds remaining after payments to
Limited Partners from such proceeds of amounts equal to the sum of their
adjusted capital contributions plus a 6% cumulative return on their adjusted
capital contributions. The General Partners did not receive any distributions
from net cash flow from operations or net sales proceeds for the year ended
December 31, 2000.
Property Management and Leasing Fees
Wells Management Company, Inc., an affiliate of the General Partners, will
receive compensation for supervising the management of the Partnership
properties equal to the lessor of (A) (i) 3% of the gross revenues for
management and 3% of the gross revenues for leasing (aggregate maximum of 6%)
plus a separate one-time fee for initial rent-up or leasing-up of newly
constructed properties in an amount not to exceed the fee customarily charged in
arm's-length transactions by others rendering similar services in the same
geographic area for similar properties; and (ii) in the case of industrial and
commercial properties which are leased on a long-term basis (ten or more years),
1% of the gross revenues except for initial leasing fees equal to 3% of the
gross revenues over the first five years of the lease term; or (B) the amounts
charged by unaffiliated persons rendering comparable services in the same
geographic area. Wells Management Company, Inc. received $246,937 in cash
compensation for the year ended December 31, 2000.
-24-
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.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
-25-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. The financial statements are contained on pages F-2 through F-26 of this
Annual Report on Form 10-K, and the list of the financial statements
contained herein is set forth on page F-1, which is hereby incorporated
by reference.
(a)2. The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(b) No reports on Form 8-K were filed with the commission for the year of
2000.
(c) The exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(d) See (a) 2 above.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
-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 27th day of March
2001.
Wells Real Estate Fund VIII, L.P.
(Registrant)
By: /s/ Leo F. Wells, III
----------------------------------
Leo F. Wells, III
Individual General Partner and as
President and Chief Financial Officer
of Wells Capital, Inc., the Corporate
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.
Signature TITLE Date
- ----------------------------- ----------------------------------- ---------------------------
/s/ Leo F. Wells, III
- -----------------------------
Leo F. Wells, III Individual General Partner, March 27, 2001
President and Sole Director of
Wells Capital, Inc., the Corporate
General Partner
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.
-27-
INDEX TO FINANCIAL STATEMENTS
Financial Statements Page
- ----------------------------------------------------------------------------------------------------- ------------
Independent Auditors' Report F2
Balance Sheets as of December 31, 2000 and 1999 F3
Statements of Income for the Years ended December 31, 2000, 1999, and 1998 F4
Statements of Partners' Capital for the Years Ended December 31, 2000, 1999, and 1998 F5
Statements of Cash Flows for the Years Ended December 31, 2000, 1999, and 1998 F6
Notes to Financial Statements for December 31, 2000, 1999, and 1998 F7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund VIII, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND VIII,
L.P. (a Georgia public limited partnership) as of December 31, 2000 and 1999 and
the related statements of income, partners' capital, and cash flows for each of
the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund VIII,
L.P. as of December 31, 2000 and 1999 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 30, 2001
F-2
WELLS REAL ESTATE FUND VIII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
2000 1999
-------------- --------------
INVESTMENT IN JOINT VENTURES $23,179,647 $24,323,418
CASH AND CASH EQUIVALENTS 18,722 100,902
DUE FROM AFFILIATES 568,670 535,876
PREPAIDS AND OTHER ASSETS 2,030 0
-------------- --------------
Total assets $23,769,069 $24,960,196
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Partnership distributions payable $ 580,749 $ 614,277
Accounts payable 8,173 0
-------------- --------------
588,922 614,277
-------------- --------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Class A--2,764,087 units and 2,728,425 units as of December 31, 2000
and 1999, respectively 23,180,147 23,341,878
Class B--439,182 units and 474,844 units as of December 31, 2000 and
1999, respectively 0 1,004,041
-------------- --------------
Total partners' capital 23,180,147 24,345,919
-------------- --------------
Total liabilities and partners' capital $23,769,069 $24,960,196
============== ==============
The accompanying notes are an integral part of these balance sheets.
F-3
WELLS REAL ESTATE FUND VIII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
2000 1999 1998
---------------- ---------------- ----------------
REVENUES:
Equity in income of joint ventures $ 1,363,174 $ 1,360,494 $ 1,346,367
Interest income 10,621 3 16,146
---------------- ---------------- ----------------
1,373,795 1,360,497 1,362,513
---------------- ---------------- ----------------
EXPENSES:
Partnership administration 51,445 53,499 59,470
Legal and accounting 21,214 23,016 15,355
Amortization of organization costs 0 6,250 6,250
Other 13,073 10,786 12,267
---------------- ---------------- ----------------
85,732 93,551 93,342
---------------- ---------------- ----------------
NET INCOME $ 1,288,063 $ 1,266,946 $ 1,269,171
================ ================ ================
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 2,294,288 $ 2,481,559 $ 2,431,246
================ ================ ================
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ (1,006,225) $ (1,214,613) $ (1,162,075)
================ ================ ================
NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT $ 0.84 $ 0.91 $ 0.86
================ ================ ================
NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER UNIT $ (2.19) $ (2.47) $ (2.12)
================ ================ ================
CASH DISTRIBUTION PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER
UNIT $ 0.89 $ 0.88 $ 0.86
================ ================ ================
The accompanying notes are an integral part of these statements.
F-4
WELLS REAL ESTATE FUND VIII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
Limited Partners Total
------------------------------------------------------------
Class A Class B Partners'
----------------------------- -----------------------------
Units Amount Units Amount Capital
------------ -------------- ------------ -------------- --------------
BALANCE, December 31, 1997 2,643,680 $ 22,828,363 559,589 $ 3,662,617 $ 26,490,980
Net income (loss) 0 2,431,246 0 (1,162,075) 1,269,171
Partnership distributions 0 (2,279,634) 0 0 (2,279,634)
Class B conversion elections 30,904 133,071 (30,904) (133,071) 0
------------ -------------- ------------ -------------- --------------
BALANCE, December 31, 1998 2,674,584 23,113,046 528,685 2,367,471 25,480,517
Net income (loss) 0 2,481,559 0 (1,214,613) 1,266,946
Partnership distributions 0 (2,401,544) 0 0 (2,401,544)
Class B conversion elections 53,841 148,817 (53,841) (148,817) 0
------------ -------------- ------------ -------------- --------------
BALANCE, December 31, 1999 2,728,425 23,341,878 474,844 1,004,041 24,345,919
Net income (loss) 0 2,294,288 0 (1,006,225) 1,288,063
Partnership distributions 0 (2,453,835) 0 0 (2,453,835)
Class B conversion elections 35,662 (2,184) (35,662) 2,184 0
------------ -------------- ------------ -------------- --------------
BALANCE, December 31, 2000 2,764,087 $ 23,180,147 439,182 $ 0 $ 23,180,147
============ ============== ============ ============== ==============
The accompanying notes are an integral part of these statements.
F-5
WELLS REAL ESTATE FUND VIII, 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 $ 1,288,063 $ 1,266,946 $ 1,269,171
-------------- -------------- --------------
Adjustments to reconcile net income to net cash used in
operating activities:
Equity in income of joint ventures (1,363,174) (1,360,494) (1,346,367)
Amortization of organization costs 0 6,250 6,250
Changes in assets and liabilities:
Prepaid expenses and other assets (2,030) 0 7,000
Accounts payable and accrued expenses 8,173 0 0
-------------- -------------- --------------
Total adjustments (1,357,031) (1,354,244) (1,333,117)
-------------- -------------- --------------
Net cash used in operating activities (68,968) (87,298) (63,946)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint ventures 0 0 (694,758)
Purchase of joint venture interest 0 0 (1,156,101)
Distributions received from joint ventures 2,474,151 2,558,623 2,293,504
-------------- -------------- --------------
Net cash provided by investing activities 2,474,151 2,558,623 442,645
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners in excess of accumulated earnings (914,092) 0 0
Distributions to partners from accumulated earnings (1,573,271) (2,379,215) (2,218,400)
-------------- -------------- --------------
Net cash used in financing activities (2,487,363) (2,379,215) (2,218,400)
-------------- -------------- --------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (82,180) 92,110 (1,839,701)
CASH AND CASH EQUIVALENTS, beginning of year 100,902 8,792 1,848,493
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of year $ 18,722 $ 100,902 $ 8,792
============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Deferred project costs contributed to joint ventures $ 0 $ 0 $ 103,318
============== ============== ==============
The accompanying notes are an integral part of these statements.
F-6
WELLS REAL ESTATE FUND VIII, 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 VIII, L.P. (the "Partnership") is a public limited
partnership organized on August 15, 1994 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners L.P.
("Wells Partners"), a Georgia nonpublic limited partnership. The
Partnership has two classes of limited partnership interests, Class A and
Class B units. Limited partners shall have the right to change their prior
elections to have some or all of their units treated as Class A units or
Class B units one time during each quarterly accounting period. Limited
partners may vote to, among other things, (a) amend the partnership
agreement, subject to certain limitations, (b) change the business purpose
or investment objectives of the Partnership, and (c) remove a general
partner. A majority vote on any of the above described matters will bind
the Partnership, without the concurrence of the general partners. Each
limited partnership unit has equal voting rights, regardless of class.
The Partnership was formed to acquire and operate commercial real
properties, including properties which are either to be developed,
currently under development or construction, newly constructed, or have
operating histories. The Partnership owns an interest in the following
properties through joint ventures between the Partnership and other Wells
Real Estate Funds: (i) an office building in Jacksonville, Florida (the
"BellSouth property"); (ii) a retail shopping center in Clemmons, Forsyth
County, North Carolina; (iii) an office building in Gainesville, Florida;
(iv) a retail office building located in Stockbridge, Georgia; (v) an
office building in Madison, Wisconsin (the "U.S. Cellular Building"); (vi)
an office building in Farmers Branch, Texas (the "Dallas property"); (vii)
a two-story office building in Boulder County, Colorado (the "Cirrus Logic
Building"); (viii) a two-story office building in Orange County, California
(the "Quest Building," formerly the "Matsushita Building").
Use of Estimates and Factors Affecting the Partnership
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The carrying values of real estate are based on management's current intent
to hold the real estate assets as long-term investments. The success of the
Partnership's future operations and the ability to realize the investment
in its assets will be dependent on the Partnership's ability to maintain
rental rates, occupancy, and an appropriate level of operating expenses in
future years. Management believes that the steps it is taking will enable
the Partnership to realize its investment in its assets.
Income Taxes
The Partnership is not subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying financial
statements. The partners are required to include their respective shares of
profits and losses in their individual income tax returns.
F-7
Distributions of Net Cash From Operations
Cash available for distribution, as defined by the partnership agreement,
is distributed to the limited partners quarterly. In accordance with the
partnership agreement, such distributions are paid first to limited
partners holding Class A units until they have received a 10% per annum
return on their net capital contributions, as defined. Then, such
distributions are paid to the general partners until they have received 10%
of the total amount distributed thus far. Any remaining cash available for
distribution is split between the limited partners holding Class A units
and the general partners on a basis of 90% and 10%, respectively. No
distributions will be made to the limited partners holding Class B units.
Distribution of Sales Proceeds
Upon sales of properties, the net sales proceeds are distributed in the
following order:
. To limited partners holding units, which at any time have been
treated as Class B units, until they receive an amount necessary
to equal the net cash available for distribution received by the
limited partners holding Class A units
. To limited partners on a per unit basis until each limited partner
has received 100% of their net capital contributions, as defined
. To 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 partners return
(defined as the sum of a 10% per annum cumulative return on net
capital contributions for all periods during which the units were
treated as Class A units and a 15% per annum cumulative return on
net capital contributions for all periods during which the units
were treated as Class B units)
. To the general partners until they have received 100% of their
capital contributions; in the event that limited partners have
received aggregate cash distributions from the Partnership over
the life of their investment in excess of a return of their net
capital contributions plus their preferential partner return, then
the general partners shall receive an additional sum equal to 25%
of such excess
. Thereafter, 80% to the limited partners on a per unit basis and
20% to the general partners
Allocation of Net Income, Net Loss, and Gain on Sale
Net income is defined as net income recognized by the Partnership,
excluding deductions for depreciation and amortization. Net income, as
defined, of the Partnership will be allocated each year in the same
proportions that net cash from operations is distributed to the partners.
To the extent the Partnership's net income in any year exceeds net cash
from operations, it will be allocated 99% to the limited partners holding
Class A units and 1% to the general partners.
Net loss, depreciation, and amortization deductions for each fiscal year
will be allocated as follows: (a) 99% to the limited partners holding Class
B units and 1% to the general partners until their capital accounts are
reduced to zero, (b) then to any partner having a positive balance in his
capital account in an amount not to exceed such positive balance, and (c)
thereafter to the general partners.
Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (a) allocations made pursuant to the qualified income offset
provisions of the partnership agreement, (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero, and (c) allocations to limited partners holding Class B
units
F-8
in amounts equal to the deductions for depreciation and amortization
previously allocated to them with respect to the specific partnership
property sold, but not in excess of the amount of gain on sale recognized
by the Partnership with respect to the sale of such property.
Investment in Joint Ventures
Basis of Presentation
The Partnership does not have control over the operations of the joint
ventures; however, it does exercise significant influence. Accordingly,
investments in joint ventures are recorded using the equity method of
accounting.
Real Estate Assets
Real estate assets held by the joint ventures are stated at cost less
accumulated depreciation. Major improvements and betterments are
capitalized when they extend the useful life of the related asset. All
repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances
which could indicate that carrying amounts of real estate assets may
not be recoverable. When events or changes in circumstances are present
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 ventures are
classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective
leases.
Partners' Distributions and Allocations of Profit and Loss
Cash available for distribution and allocations of profit and loss to
the Partnership by the joint ventures are made in accordance with the
terms of the individual joint venture agreements. Generally, these
items are allocated in proportion to the partners' respective ownership
interests. Cash is paid from the joint ventures to the Partnership
quarterly.
Deferred Lease Acquisition Costs
Costs incurred to procure operating leases are capitalized and
amortized on a straight-line basis over the terms of the related
leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Partnership considers
all highly liquid instruments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market
accounts.
F-9
Per Unit Data
Net income (loss) per unit with respect to the Partnership for the years
ended December 31, 2000, 1999, and 1998 is computed based on the weighted
average number of units outstanding during the period.
Reclassifications
Certain prior year items have been reclassified to conform with the current
year financial statement presentation.
2. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 2000 and 1999 represents the
Partnership's share of cash distributed from its joint venture investments
for the fourth quarters of 2000 and 1999:
2000 1999
-------------- --------------
Fund VI, VII, and VIII Associates $126,660 $ 82,364
Fund VII and VIII Associates 55,581 84,460
Fund VIII and IX Associates 386,429 369,052
-------------- --------------
$568,670 $535,876
============== ==============
The Partnership entered into a property management agreement with Wells
Management, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for supervising the management of the
Partnership's properties, the Partnership will generally pay Wells
Management management and leasing fees equal to (a) 3% of the gross
revenues for management and 3% of the gross revenues for leasing (aggregate
maximum of 6%) plus a separate fee for the one-time initial lease-up of
newly constructed properties in an amount not to exceed the fee customarily
charged in arm's-length transactions by others rendering similar services
in the same geographic area for similar properties or (b) in the case of
commercial properties, which are leased on a long-term net basis (ten or
more years), 1% of the gross revenues except for initial leasing fees equal
to 3% of the gross revenues over the first five years of the lease term.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $246,937, $238,682, and $200,145 for
the years ended December 31, 2000, 1999, and 1998, respectively, which were
paid to Wells Management.
Wells Capital, Inc. (the "Company") performs certain administrative
services for the Partnership, such as accounting and other partnership
administration, and incurs the related expenses. Such expenses are
allocated among the various Wells Real Estate Funds based on time spent on
each fund by individual administrative personnel. In the opinion of
management, such allocation is a reasonable estimation of such expenses.
The general partners are also general partners of other Wells Real Estate
Funds. As such, there may exist conflicts of interest where the general
partners in the capacity as general partners of other Wells Real Estate
Funds may be in competition with the Partnership for tenants in similar
geographic markets.
F-10
3. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at
December 31, 2000 and 1999 are summarized as follows:
2000 1999
------------------------------ ------------------------------
Amount Percent Amount Percent
---------------- ------------- ---------------- -------------
Fund VI, VII, and VIII Associates $ 5,006,987 32% $ 5,251,652 33%
Fund VII and VIII Associates 3,566,648 63 3,790,050 63
Fund VIII and IX Associates 14,606,012 55 15,281,716 55
---------------- ----------------
$23,179,647 $24,323,418
================ ================
The following is a rollforward of the Partnership's investment in the joint
ventures for the years ended December 31, 2000 and 1999:
2000 1999
-------------- --------------
Investment in joint ventures, beginning of year $24,323,418 $25,451,768
Equity in income of joint ventures 1,363,174 1,360,494
Distributions from joint ventures (2,506,945) (2,488,844)
-------------- --------------
Investment in joint ventures, end of year $23,179,647 $24,323,418
============== ==============
Fund VI, VII, and VIII Associates
On April 17, 1995, the Partnership entered into a joint venture with Wells
Real Estate Fund VI, L.P. ("Fund VI") and Wells Real Estate Fund VII, L.P.
("Fund VII"). The joint venture, Fund VI, VII, and VIII Associates, was
formed to acquire, develop, operate, and sell real properties. On April 25,
1995, the joint venture purchased a 5.55-acre parcel of land in
Jacksonville, Florida. A 92,964-square-foot office building, known as the
BellSouth property, was completed and commenced operations in 1996. On May
31, 1995, the joint venture purchased a 14.683-acre parcel of land located
in Clemmons, Forsyth County, North Carolina. A retail shopping center was
developed and was substantially complete at December 31, 1997.
During 1996, Fund VI and Fund VII each withdrew $500,000 from the joint
venture in order to contribute needed funds to Fund II, III, VI, and VII
Associates. In addition, deferred project costs related to Fund VI and Fund
VII of $23,160 and $21,739, respectively, were unapplied when the
contributions were withdrawn. During 1996, the Partnership made an
additional contribution of $2,815,965, which included $115,965 of deferred
project costs that were applied. Ownership percentages were recomputed
accordingly.
F-11
Following are the financial statements for Fund VI, VII, and VIII
Associates:
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
--------------- ---------------
Real estate assets, at cost:
Land $ 4,461,819 $ 4,461,819
Building and improvements, less accumulated depreciation of $3,031,152
in 2000 and $2,315,750 in 1999 10,074,417 10,657,052
Construction in progress 3,797 0
--------------- ---------------
Total real estate assets 14,540,033 15,118,871
Cash and cash equivalents 606,802 736,202
Accounts receivable 330,031 255,221
Prepaid expenses and other assets 487,645 545,816
--------------- ---------------
Total assets $15,964,511 $16,656,110
=============== ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 65,442 $ 84,159
Partnership distributions payable 408,291 324,100
Due to affiliates 15,407 16,281
--------------- ---------------
Total liabilities 489,140 424,540
--------------- ---------------
Partners' capital:
Wells Real Estate Fund VI 5,300,368 5,559,369
Wells Real Estate Fund VII 5,168,016 5,420,549
Wells Real Estate Fund VIII 5,006,987 5,251,652
--------------- ---------------
Total partners' capital 15,475,371 16,231,570
--------------- ---------------
Total liabilities and partners' capital $15,964,511 $16,656,110
=============== ===============
F-12
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
-------------- -------------- --------------
Revenues:
Rental income $2,364,871 $2,294,016 $2,258,971
Interest income 3,985 14,937 25,416
Other income 360 360 9,373
-------------- -------------- --------------
2,369,216 2,309,313 2,293,760
-------------- -------------- --------------
Expenses:
Depreciation 715,402 701,885 688,759
Operating costs, net of reimbursements 371,191 444,156 451,299
Management and leasing fees 273,632 259,352 251,587
Legal and accounting 7,650 10,286 9,205
Partnership administration 30,330 27,804 25,109
Computer costs 1,585 1,043 128
-------------- -------------- --------------
1,399,790 1,444,526 1,426,087
-------------- -------------- --------------
Net income $ 969,426 $ 864,787 $ 867,673
============== ============== ==============
Net income allocated to Wells Real Estate Fund VI $ 332,032 $ 296,193 $ 297,181
============== ============== ==============
Net income allocated to Wells Real Estate Fund VII $ 323,741 $ 288,796 $ 289,760
============== ============== ==============
Net income allocated to Wells Real Estate Fund VIII $ 313,653 $ 279,798 $ 280,732
============== ============== ==============
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells Real Wells Real Wells Real Total
Estate Estate Estate Partners'
Fund VI Fund VII Fund VIII Capital
----------------- ----------------- ----------------- -----------------
Balance, December 31, 1997 $6,058,082 $5,906,810 $5,722,761 $17,687,653
Net income 297,181 289,760 280,732 867,673
Partnership distributions (542,153) (528,615) (512,146) (1,582,914)
----------------- ----------------- ----------------- -----------------
Balance, December 31, 1998 5,813,110 5,667,955 5,491,347 16,972,412
Net income 296,193 288,796 279,798 864,787
Partnership distributions (549,934) (536,202) (519,493) (1,605,629)
----------------- ----------------- ----------------- -----------------
Balance, December 31, 1999 5,559,369 5,420,549 5,251,652 16,231,570
Net income 332,032 323,741 313,653 969,426
Partnership distributions (591,033) (576,274) (558,318) (1,725,625)
----------------- ----------------- ----------------- -----------------
Balance, December 31, 2000 $5,300,368 $5,168,016 $5,006,987 $15,475,371
================= ================= ================= =================
F-13
Fund VI, VII, and VIII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
-------------- -------------- --------------
Cash flows from operating activities:
Net income $ 969,426 $ 864,787 $ 867,673
-------------- -------------- --------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 715,402 701,885 688,759
Changes in assets and liabilities:
Accounts receivable (74,810) (71,269) (79,931)
Prepaid expenses and other assets 58,171 87,773 79,225
Accounts payable (18,717) 32,133 6,234
Due to affiliates (874) 6,546 4,558
-------------- -------------- --------------
Total adjustments 679,172 757,068 698,845
-------------- -------------- --------------
Net cash provided by operating activities 1,648,598 1,621,855 1,566,518
-------------- -------------- --------------
Cash flows from investing activities:
Decrease in construction payables 0 0 (55,000)
Investment in real estate (136,564) (64,749) (140,590)
-------------- -------------- --------------
Net cash used in investing activities (136,564) (64,749) (195,590)
-------------- -------------- --------------
Cash flows from financing activities:
Distributions to joint venture partners (1,641,434) (1,621,225) (1,629,608)
-------------- -------------- --------------
Net decrease in cash and cash equivalents (129,400) (64,119) (258,680)
Cash and cash equivalents, beginning of year 736,202 800,321 1,059,001
-------------- -------------- --------------
Cash and cash equivalents, end of year $ 606,802 $ 736,202 $ 800,321
============== ============== ==============
Fund VII and VIII Associates
On February 10, 1995, the Partnership entered into a joint venture agreement
with Fund VII. The joint venture, Fund VII and VIII Associates, was formed to
acquire, develop, operate, and sell real properties. During 1995, the joint
venture purchased a five acre parcel of land in Gainesville, Alachua County,
Florida. A 62,975-square-foot office building was constructed and began
operations during 1995. In April 1996, Fund VII contributed 1.01 acres of land
located in Stockbridge, Georgia, and improvements thereon to the joint venture
for the development of a 12,000-square-foot, single-story combination
retail/office building. The building was completed and commenced operations in
1996.
F-14
The following are the financial statements for Fund VII and VIII Associates:
Fund VII and VIII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
-------------- --------------
Real estate assets, at cost:
Land $ 822,320 $ 822,320
Building and improvements, less accumulated depreciation of $1,396,480 in
2000 and $1,056,143 in 1999 4,545,871 4,864,790
Personal property, less accumulated depreciation of $151,423 in 2000 and
$116,185 in 1999 146,460 181,212
-------------- --------------
Total real estate assets 5,514,651 5,868,322
Cash and cash equivalents 76,565 68,008
Accounts receivable 70,209 111,285
Prepaid expenses and other assets 70,969 90,350
-------------- --------------
Total assets $ 5,732,394 $ 6,137,965
============== ==============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 13,160 $ 20,761
Due to affiliates 2,497 2,227
Partnership distributions payable 87,738 133,324
-------------- --------------
Total liabilities 103,395 156,312
-------------- --------------
Partners' capital:
Wells Real Estate Fund VII 2,062,351 2,191,603
Wells Real Estate Fund VIII 3,566,648 3,790,050
-------------- --------------
Total partners' capital 5,628,999 5,981,653
-------------- --------------
Total liabilities and partners' capital $ 5,732,394 $ 6,137,965
============== ==============
F-15
Fund VII and VIII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
------------ ------------ ------------
Revenues:
Rental income $686,642 $769,052 $685,637
Other income 360 300 0
------------ ------------ ------------
687,002 769,352 685,637
------------ ------------ ------------
Expenses:
Depreciation 375,575 347,646 295,708
Management and leasing fees 114,334 124,040 93,519
Legal and accounting 20,113 13,952 9,450
Partnership administration 26,162 29,182 26,095
Bad debt expense 42,564 0 0
Operating costs, net of reimbursements 48,019 (28,354) 34,084
------------ ------------ ------------
530,731 486,466 458,856
------------ ------------ ------------
Net income $156,271 $282,886 $226,781
============ ============ ============
Net income allocated to Wells Real Estate Fund VII $ 57,275 $103,681 $ 83,713
============ ============ ============
Net income allocated to Wells Real Estate Fund VIII $ 98,996 $179,205 $143,068
============ ============ ============
Fund VII And VIII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells Real Wells Real Total
Estate Estate Partners'
Fund VII Fund VIII Capital
-------------- -------------- --------------
Balance, December 31, 1997 $2,376,818 $3,873,022 $6,249,840
Net income 83,713 143,068 226,781
Partnership contributions 25,800 279,626 305,426
Partnership distributions (168,570) (287,602) (456,172)
-------------- -------------- --------------
Balance, December 31, 1998 2,317,761 4,008,114 6,325,875
Net income 103,681 179,205 282,886
Partnership distributions (229,839) (397,269) (627,108)
-------------- -------------- --------------
Balance, December 31, 1999 2,191,603 3,790,050 5,981,653
Net income 57,275 98,996 156,271
Partnership distributions (186,527) (322,398) (508,925)
-------------- -------------- --------------
Balance, December 31, 2000 $2,062,351 $3,566,648 $5,628,999
============== ============== ==============
F-16
Fund VII and VIII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
------------- ------------- -------------
Cash flows from operating activities:
Net income $ 156,271 $ 282,886 $ 226,781
------------- ------------- -------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 375,575 347,646 295,708
Changes in assets and liabilities:
Accounts receivable 41,076 (62,704) (34,183)
Prepaid expenses and other assets 19,381 13,919 (26,375)
Accounts payable (7,601) (3,707) (2,485)
Due to affiliates 270 727 656
------------- ------------- -------------
Total adjustments 428,701 295,881 233,321
------------- ------------- -------------
Net cash provided by operating activities 584,972 578,767 460,102
------------- ------------- -------------
Cash flows from investing activities:
Investment in real estate (21,904) (5,294) (406,380)
------------- ------------- -------------
Cash flows from financing activities:
Contributions from partners 0 0 293,511
Distributions to joint venture partners (554,511) (630,161) (460,759)
------------- ------------- -------------
Net cash used in financing activities (554,511) (630,161) (167,248)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 8,557 (56,688) (113,526)
Cash and cash equivalents, beginning of year 68,008 124,696 238,222
------------- ------------- -------------
Cash and cash equivalents, end of year $ 76,565 $ 68,008 $ 124,696
============= ============= =============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 0 $ 11,915
============= ============= =============
Fund VIII and IX Associates
On June 10, 1996, the Partnership entered into a joint venture with Wells Real
Estate Fund IX, L.P ("Wells Fund IX"). The joint venture, Fund VIII and IX
Associates, was formed to acquire, develop, operate, and sell real properties.
On June 19, 1996, the joint venture purchased a 7.09-acre parcel of land in
Madison, Wisconsin. The parcel was developed and commenced operations as the
U.S. Cellular Building in 1997. On October 10, 1996, the joint venture purchased
a 40,000-square-foot, one-story office building, known as the Dallas property,
in Farmers Branch, Texas. On January 10, 1997, the joint venture purchased a
63,417-square-foot, two-story office building, known as the Matsushita Building,
in Orange County, California. On February 20, 1997, the joint venture purchased
a two-story partially completed office building, known as the Cirrus Logic
Building, in Boulder County, Colorado. Construction of the 49,460-square-foot
building was completed and commenced operations in 1997.
During 1998, the Partnership purchased a portion of Wells Fund IX's joint
venture interest for $1,100,000. In addition, the related deferred project costs
of $56,101 were transferred from Wells Fund IX to the Partnership. In addition,
the Partnership contributed $518,450 in 1998 to Fund VIII and IX Associates,
which included $32,352 of deferred project costs that were applied. Ownership
percentage interests were recomputed accordingly.
On June 15, 2000, Fund VIII and IX Associated entered into a joint venture with
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. The joint venture, Fund
VIII, IX, and REIT Joint Venture, was formed to acquire, develop, operate, and
sell real properties. On July 1, 2000, Fund VIII and IX contributed, at cost,
the Quest building (formerly the Matsushita
F-17
Building) to the joint venture. The
Quest Building is a two-story office building containing approximately 65,006
rentable square feet on a 4.4 acre tract of land in Irvine, California.
Following are the financial statements for Fund VIII and IX Associates:
Fund VIII and IX Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 2000 and 1999
Assets
2000 1999
--------------- ---------------
Real estate assets, at cost:
Land $ 2,503,586 $ 4,724,579
Building and improvements, less accumulated depreciation of $3,907,439
in 2000 and $3,495,138 in 1999 16,611,991 22,416,032
--------------- ---------------
Total real estate assets 19,115,577 27,140,611
Cash and cash equivalents 826,248 866,510
Accounts receivable 613,445 691,752
Due from affiliates 149,060 0
Investment in limited partnerships 6,835,000 0
Prepaid expenses and other assets 138,558 176,723
--------------- ---------------
Total assets $ 27,677,888 $ 28,875,596
=============== ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 288,369 $ 283,548
Due to affiliates 29,418 30,547
Partnership distributions payable 705,204 673,493
--------------- ---------------
Total liabilities 1,022,991 987,588
--------------- ---------------
Partners' capital:
Wells Real Estate Fund VIII 14,606,012 15,281,716
Wells Real Estate Fund IX 12,048,885 12,606,292
--------------- ---------------
Total partners' capital 26,654,897 27,888,008
--------------- ---------------
Total liabilities and partners' capital $ 27,677,888 $ 28,875,596
=============== ===============
F-18
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
------------- ------------- -------------
Revenues:
Rental income $2,804,167 $3,132,925 $3,146,201
Equity in income of joint venture 285,006 0 0
Interest income 34,741 25,995 32,194
Other income 13,074 0 0
------------- ------------- -------------
3,136,988 3,158,920 3,178,395
------------- ------------- -------------
Expenses:
Depreciation 1,167,145 1,274,978 1,274,836
Management and leasing fees 203,445 216,075 221,794
Property administration expenses 35,378 30,249 29,299
Legal and accounting 17,461 15,632 22,806
Operating costs, net of reimbursements (21,078) (23,165) (82,660)
------------- ------------- -------------
1,402,351 1,513,769 1,466,075
------------- ------------- -------------
Net income $1,734,637 $1,645,151 $1,712,320
============= ============= =============
Net income allocated to Wells Real Estate Fund VIII $ 950,525 $ 901,489 $ 922,567
============= ============= =============
Net income allocated to Wells Real Estate Fund IX $ 784,112 $ 743,662 $ 789,753
============= ============= =============
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 2000, 1999, and 1998
Wells Real Wells Real Total
Estate Estate Partners'
Fund VIII Fund IX Capital
--------------- --------------- ---------------
Balance, December 31, 1997 $14,906,093 $14,849,125 $29,755,218
Net income 922,567 789,753 1,712,320
Transfer of joint venture interest 1,156,101 (1,156,101) 0
Partnership contributions 518,450 0 518,450
Partnership distributions (1,550,904) (1,323,298) (2,874,202)
--------------- --------------- ---------------
Balance, December 31, 1998 15,952,307 13,159,479 29,111,786
Net income 901,489 743,662 1,645,151
Partnership distributions (1,572,080) (1,296,849) (2,868,929)
--------------- --------------- ---------------
Balance, December 31, 1999 15,281,716 12,606,292 27,888,008
Net income 950,525 784,112 1,734,637
Partnership distributions (1,626,229) (1,341,519) (2,967,748)
--------------- --------------- ---------------
Balance, December 31, 2000 $14,606,012 $12,048,885 $26,654,897
=============== =============== ===============
F-19
Fund VIII and IX Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 2000, 1999, and 1998
2000 1999 1998
------------- ------------- -------------
Cash flows from operating activities:
Net income $ 1,734,637 $ 1,645,151 $ 1,712,320
------------- ------------- -------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in income of joint venture (285,006) 0 0
Depreciation 1,167,145 1,274,978 1,274,836
Changes in assets and liabilities:
Accounts receivable 78,307 (187,144) (115,261)
Prepaid expenses and other assets 38,165 32,606 28,381
Accounts payable 4,821 94,407 49,288
Due to affiliates (1,129) 3,920 6,228
------------- ------------- -------------
Total adjustments 1,002,303 1,218,767 1,243,472
------------- ------------- -------------
Net cash provided by operating activities 2,736,940 2,863,918 2,955,792
------------- ------------- -------------
Cash flows from investing activities:
Decrease in construction payables 0 0 (248,870)
Investment in real estate 0 (3,500) (534,944)
Distributions received from joint venture 158,835 0 0
------------- ------------- -------------
Net cash provided by (used in) investing
activities 158,835 (3,500) (783,814)
------------- ------------- -------------
Cash flows from financing activities:
Contributions from joint venture partners 0 0 486,098
Distributions to joint venture partners (2,936,037) (2,901,686) (2,838,736)
------------- ------------- -------------
Net cash used in financing activities (2,936,037) (2,901,686) (2,352,638)
------------- ------------- -------------
Net decrease in cash and cash equivalents (40,262) (41,268) (180,660)
Cash and cash equivalents, beginning of year 866,510 907,778 1,088,438
------------- ------------- -------------
Cash and cash equivalents, end of year $ 826,248 $ 866,510 $ 907,778
============= ============= =============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 0 $ 32,352
============= ============= =============
Real estate contributed to joint venture $ 6,857,889 $ 0 $ 0
============= ============= =============
Fund VIII, IX, and REIT Joint Venture
On June 15, 2000, Fund VIII and IX Associates entered into a joint venture with
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. The joint venture, Fund
VIII, IX, and REIT Joint Venture, was formed to acquire, develop, operate, and
sell real properties.
On July 1, 2000, Fund VIII and IX contributed the Quest Building (formerly the
Matsushita Building) to the joint venture. Fund VIII, IX, and REIT Joint Venture
recorded the net assets of the Quest Building at an amount equal to the
respective historical net book values. Wells REIT contributed $1,282,111 to the
Fund VIII, IX, and REIT Joint Venture during 2000. The Quest Building is a
two-story office building containing approximately 65,006 rentable square feet
on a 4.4 acre trace of land in Irvine, California.
F-20
Following are the financial statements for Fund VIII, IX, and REIT Joint
Venture:
Fund VIII, IX, and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheet
December 31, 2000
Assets
Real estate assets, at cost:
Land $2,220,993
Building and improvements, less accumulated depreciation of $187,891 5,408,892
--------------
Total real estate assets 7,629,885
Cash and cash equivalents 170,664
Accounts receivable 197,802
Prepaid expenses and other assets 283,864
--------------
Total assets $8,282,215
==============
Liabilities and Partners' Capital
Liabilities:
Partnership distributions payable $ 170,664
--------------
Partners' capital:
Fund VIII and IX Associates 6,835,000
Wells Operating Partnership, L.P. 1,276,551
--------------
Total partners' capital 8,111,551
--------------
Total liabilities and partners' capital $8,282,215
==============
F-21
Fund VIII, IX, and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Income
for the Six Months Ended December 31, 2000
Revenues:
Rental income $ 563,049
-------------
Expenses:
Depreciation 187,891
Management and leasing fees 54,395
Property administration expenses 5,692
Operating costs, net of reimbursements 5,178
-------------
253,156
-------------
Net income $ 309,893
=============
Net income allocated to Fund VIII and IX Associates $ 285,006
=============
Net income allocated to Wells Operating Partnership, L.P. $ 24,887
=============
Fund VIII, IX, and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Partners' Capital
for the Six Months Ended December 31, 2000
Fund VIII Wells Total
and IX Operating Partners'
Associates Partnership, L.P. Capital
-------------- -------------------- --------------
Balance, July 1, 2000 $ 0 $ 0 $ 0
Net income 285,006 24,887 309,893
Partnership contributions 6,857,889 1,282,111 8,140,000
Partnership distributions (307,895) (30,447) (338,342)
-------------- -------------------- --------------
Balance, December 31, 2000 $ 6,835,000 $ 1,276,551 $ 8,111,551
============== ==================== ==============
F-22
Fund VIII, IX, and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Cash Flows
for the Six Months Ended December 31, 2000
Cash flows from operating activities:
Net income $ 309,893
---------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 187,891
Changes in assets and liabilities:
Accounts receivable (197,802)
Prepaid expenses and other assets (283,864)
---------------
Total adjustments (293,775)
---------------
Net cash provided by operating activities 16,118
---------------
Cash flows from investing activities:
Investment in real estate (959,887)
---------------
Cash flows from financing activities:
Contributions from joint venture partners 1,282,111
Distributions to joint venture partners (167,678)
---------------
Net cash provided by financing activities 1,114,433
---------------
Net increase in cash and cash equivalents 170,664
Cash and cash equivalents, beginning of period 0
---------------
Cash and cash equivalents, end of year $ 170,664
===============
Supplemental disclosure of noncash activities:
Real estate contribution received from joint venture partner $ 6,857,889
===============
4. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December
31, 2000, 1999, and 1998 is calculated as follows:
2000 1999 1998
-------------- -------------- --------------
Financial statement net income $1,288,063 $1,266,946 $1,269,171
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes in
excess of amounts for income tax purposes 561,059 494,088 486,066
Expenses deductible when paid for income tax purposes,
accrued for financial reporting purposes (847) 4,682 5,249
Rental income accrued for financial reporting purposes
in excess of amounts for income tax purposes (123,273) (75,301) (59,723)
Other (17,571) (17,571) (17,571)
-------------- -------------- --------------
Income tax basis net income $1,707,431 $1,672,844 $1,683,192
============== ============== ==============
F-23
The Partnership's income tax basis partners' capital at December 31, 2000,
1999, and 1998 is computed as follows:
2000 1999 1998
-------------- -------------- --------------
Financial statement partners' capital $23,180,147 $24,345,919 $25,480,517
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting
purposes in excess of amounts for income tax
purposes 1,976,272 1,415,213 921,125
Capitalization of syndication costs for income
tax purposes, which are accounted for as cost
of capital for financial reporting purposes 4,774,787 4,774,787 4,774,787
Accumulated expenses deductible when paid for
income tax purposes, accrued for financial
reporting purposes 110,094 110,941 106,259
Accumulated rental income accrued for financial
reporting purposes in excess of amounts for
income tax purposes (481,497) (358,224) (282,923)
Partnership's distributions payable 580,750 614,277 591,948
Other (132,574) (115,003) (97,433)
-------------- -------------- --------------
Income tax basis partners' capital $30,007,979 $30,787,910 $31,494,280
============== ============== ==============
5. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interests in joint ventures under noncancelable operating leases
at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 7,113,213
2002 5,957,025
2003 5,037,100
2004 4,327,310
2005 4,125,627
Thereafter 8,467,199
----------------
$ 35,027,474
================
Four tenants contributed approximately 19%, 15%, 14%, and 11% of rental
income. In addition, two tenants will contribute approximately 13% and 10%
of future minimum rental income.
The future minimum rental income due Fund VI, VII, and VIII Associates
under noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 2,145,470
2002 1,971,001
2003 1,890,449
2004 1,754,853
2005 1,688,144
Thereafter 6,379,813
----------------
$ 15,829,730
================
F-24
Three tenants contributed approximately 46%, 23%, and 16% of rental income
for the year ended December 31, 2000. In addition, two tenants will
contribute approximately 55% and 40% of future minimum rental income.
The future minimum rental income due Fund VII and VIII Associates under
noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 7,218,650
2002 5,328,605
2003 4,141,250
2004 3,950,473
2005 3,744,288
Thereafter 2,195,735
----------------
$ 26,579,001
================
One tenant contributed approximately 10% of rental income for the year
ended December 31, 2000. In addition, two tenants will contribute
approximately 77% and 11% of future minimum rental income.
The future minimum rental income due Fund VIII and IX Associates under
noncancelable operating leases as of December 31, 2000 is as follows:
Year ending December 31:
2001 $ 2,332,892
2002 2,464,900
2003 2,205,354
2004 2,205,354
2005 2,205,354
Thereafter 9,142,772
----------------
$ 20,556,626
================
Five tenants contributed approximately 32%, 26%, 24%, 15%, and 12% of
rental income for the year ended December 31, 2000. In addition, three
tenants will contribute approximately 42%, 31%, and 24% of future minimum
rental income.
Future minimum rental income due from Fund VIII, IX, and REIT Joint Venture
under noncancelable operating leases at December 31, 2000 is as follows:
Year ending December 31:
2001 $ 1,234,309
2002 1,287,119
2003 1,287,119
2004 107,260
----------------
$ 3,915,807
================
Two tenants contributed 52% and 48% of rental income for the year ended
December 31, 2000. In addition, one tenant will contribute 100% of future
minimum rental income.
F-25
6. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the years ended December 31, 2000 and 1999:
2000 Quarters Ended
--------------------------------------------------------------
March 31 June 30 September 30 December 31
------------ ----------- ---------------- --------------
Revenues $370,937 $363,608 $323,856 $315,394
Net income 344,658 335,224 311,819 296,362
Net income allocated to Class A limited
partners 616,806 639,561 618,091 419,830
Net loss allocated to Class B limited
partners (271,428) (304,337) (306,272) (124,188)
Net income per weighted average Class A
limited partner unit outstanding (a) $0.22 $0.23 $0.23 $0.15
Net loss per weighted average Class B
limited partner unit outstanding (0.59) (0.66) (0.67) (0.27)
Cash distribution per weighted average
Class A limited partner unit outstanding 0.23 0.23 0.23 0.20
(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 $ 331,087 $ 414,858 $ 331,740 $ 282,812
Net income 298,240 388,525 316,224 263,957
Net income allocated to Class A limited
partners 597,680 688,038 614,272 581,569
Net loss allocated to Class B limited
partners (299,440) (299,513) (298,048) (317,612)
Net income per weighted average Class A
limited partner unit $ 0.22 $ 0.25 $ 0.23 $ 0.21
Net loss per weighted average Class B
limited partner unit (a) (0.60) (0.62) (0.60) (0.67)
Cash distribution per weighted average
Class A limited partner unit 0.22 0.22 0.23 0.21
(a) The totals of the four quarterly amounts for the year ended
December 31, 1999 do not equal the totals for the year. This
difference results from the use of a weighted average to
compute the number of units outstanding for each quarter and
the year.
7. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-26
EXHIBIT INDEX
-------------
(Wells Real Estate Fund VIII, 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 VIII, L.P. dated January 6, 1995 (Exhibit to
Form 10-K of Wells Real Estate Fund VIII, L.P. for the fiscal
year ended December 31, 1995, File No. 0-27888)
*3(b) Certificate of Limited Partnership of Wells Real Estate Fund
VIII, L.P. (Exhibit 3(b) to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund VIII, L.P., File No. 33-83852)
*10(a) Management Agreement dated January 6, 1995, between Wells Real
Estate Fund VIII, L.P. and Wells Management Company, Inc.
(Exhibit to Form 10-K of Wells Real Estate Fund VIII, L.P. for
the fiscal year ended December 31, 1995, File No. 0-27888)
*10(b) Leasing and Tenant Coordinating Agreement dated January 6,
1995, between Wells Real Estate Fund VIII, L.P. and Wells
Management Company, Inc. (Exhibit to Form 10-K of Wells Real
Estate Fund VIII, L.P. for the fiscal year ended December 31,
1995, File No. 0-27888)
*10(c) Custodial Agency Agreement dated November 15, 1994, between
Wells Real Estate Fund VIII, L.P. and NationsBank of Georgia,
N.A. (Exhibit to Form 10-K of Wells Real Estate Fund VIII,
L.P. for the fiscal year ended December 31, 1995, File No. 0-
27888)
*10(d) Fund VII and Fund VIII Associates Joint Venture Agreement
dated February 10, 1995 (Exhibit 10(g) to Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of Wells
Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(e) Agreement for the Purchase and Sale of Real Property dated
March 31, 1994 (Exhibit 10(h) to Post-Effective Amendment No.
1 to Form S-11 Registration Statement of Wells Real Estate
Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(f) Letter Agreement amending Agreement for the Purchase and Sale
of Real Property dated July 27, 1994 (Exhibit 10(i) to Post-
Effective Amendment No. 1 to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(g) Letter Agreement amending Agreement for the Purchase and Sale
of Real Property dated October 27, 1994 (Exhibit 10(j) to
Post-Effective Amendment No. 1 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
*10(h) Letter Agreement between NationsBank of Georgia, N.A., as
Agent for Wells Real Estate Fund VII, L.P., as Landlord, and
CH2M Hill, Inc., as Tenant (Exhibit 10(k) to Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of Wells
Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(i) First Amendment to Lease Agreement between NationsBank of
Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P.,
as Landlord, and CH2M Hill, Inc., as Tenant (Exhibit 10(l) to
Post-Effective Amendment No. 1 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
*10(j) Second Amendment to Lease Agreement between NationsBank of
Georgia, N.A., as Agent for Wells Real Estate Fund VII, L.P.,
as Landlord, and CH2M Hill, Inc, as Tenant (Exhibit 10(m) to
Post-Effective Amendment No. 1 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
*10(k) Development Agreement between Wells Real Estate Fund VII, L.P.
and ADEVCO Corporation (Exhibit 10(n) to Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of Wells
Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(l) Owner-Contractor Agreement between Wells Real Estate Fund VII,
L.P., as Owner, and Integra Construction, Inc., as Contractor
(Exhibit 10(o) to Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(m) Architect's Agreement between Wells Real Estate Fund VII,
L.P., as Owner, and Smallwood, Reynolds, Stewart, Stewart &
Associates, Inc., as Architect (Exhibit 10(p) to Post-
Effective Amendment No. 1 to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(n) Joint Venture Agreement of Fund VI, Fund VII and Fund VIII
Associates dated April 17, 1995 (Exhibit 10(q) to Post-
Effective Amendment No. 3 to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(o) Agreement for the Purchase and Sale of Real Property dated
February 13, 1995, between G.L. National, Inc. and Wells
Capital, Inc. (Exhibit 10(r) to Post-Effective Amendment No. 3
to Form S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-
83852)
*10(p) Agreement to Lease dated February 15, 1995, between
NationsBank of Georgia, N.A., as Agent for Wells Real Estate
Fund VII, L.P., and BellSouth Advertising & Publishing
Corporation (Exhibit 10(s) to Post-Effective Amendment No. 3
to Form S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-
83852)
*10(q) Development Agreement dated April 25, 1995, between Fund VI,
Fund VII and Fund VIII Associates and ADEVCO Corporation
(Exhibit 10(t) to Post-Effective Amendment No. 3 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(r) Owner-Contractor Agreement dated April 24, 1995, between Fund
VI, Fund VII and Fund VIII Associates, as Owner, and McDevitt
Street Bovis, Inc., as Contractor (Exhibit 10(u) to Post-
Effective Amendment No. 3 to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(s) Architect's Agreement dated February 15, 1995, between Wells
Real Estate Fund VII, L.P., as Owner, and Mayes, Suddereth &
Etheredge, Inc., as Architect (Exhibit 10(v) to Post-Effective
Amendment No. 3 to Form S-11 Registration Statement of Wells
Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(t) First Amendment to Joint Venture Agreement of Fund VI, Fund
VII and Fund VIII Associates dated May 30, 1995 (Exhibit 10(w)
to Post-Effective Amendment No. 4 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
*10(u) Real Estate Purchase Agreement dated April 13, 1995 (Exhibit
10(x) to Post-Effective Amendment No. 4 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(v) Lease Agreement dated February 27, 1995, between NationsBank
of Georgia, N.A., as Agent for Wells Real Estate Fund VII,
L.P., and Harris Teeter, Inc. (Exhibit 10(y) to Post-Effective
Amendment No. 4 to Form S-11 Registration Statement of Wells
Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(w) Development Agreement dated May 31, 1995, between Fund VI,
Fund VII and Fund VIII Associates and Norcom Development, Inc.
(Exhibit 10(z) to Post-Effective Amendment No. 4 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(x) First Amendment to Joint Venture Agreement of Fund VII and
Fund VIII Associates dated April 1, 1996 (Exhibit 10(nn) to
Form 10-K of Wells Real Estate Fund VII, L.P. for the fiscal
year ended December 31, 1996, File No. 0-25606)
*10(y) Lease Agreement with Moovies, Inc. dated May 20, 1996 (Exhibit
10(oo) to Form 10-K of Wells Real Estate Fund VII, L.P. for
the fiscal year ended December 31, 1996, File No. 0-25606)
*10(z) Joint Venture Agreement of Fund VIII and Fund IX Associates
dated June 10, 1996 (Exhibit 10(aa) to Post-Effective
Amendment No. 11 to Form S-11 Registration Statement of Wells
Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX,
L.P., File No. 33-83852)
*10(aa) Agreement for the Purchase and Sale of Real Property dated
April 23, 1996, between American Family Mutual Insurance
Company and Wells Capital, Inc. (Exhibit 10(bb) to Post-
Effective Amendment No. 11 to Form S-11 Registration Statement
of Wells Real Estate Fund VIII, L.P. and Wells Real Estate
Fund IX, L.P., File No. 33-83852)
*10(bb) Agreement to Lease dated June 18, 1996, between Fund VIII and
IX Associates and Westel-Milwaukee, Inc., d/b/a Cellular One
(Exhibit 10(cc) to Post-Effective Amendment No. 11 to Form S-
11 Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(cc) Development Agreement dated June 18, 1996, between Fund VIII
and Fund IX Associates and ADEVCO Corporation (Exhibit 10(dd)
to Post-Effective Amendment No. 11 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
*10(dd) Owner-Contractor Agreement dated June 18, 1996, with Kraemer
Brothers, Inc. (Exhibit 10(ee) to Post-Effective Amendment No.
11 to Form S-11 Registration Statement of Wells Real Estate
Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., File No.
33-83852)
*10(ee) First Amendment to Joint Venture Agreement of Fund VIII and
Fund IX Associates dated October 10, 1996 (Exhibit 10(ii) to
Post-Effective Amendment No. 12 to Form S-11 Registration
Statement of Wells Real Estate Fund VIII, L.P. and Wells Real
Estate Fund IX, L.P., File No. 33-83852)
*10(ff) Agreement for the Purchase and Sale of Property dated October
10, 1996, between
TCI Valwood Limited Partnership I and Fund VIII and Fund IX
Associates (Exhibit 10(ff) to Post-Effective Amendment No. 12
to Form S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-
83852)
*10(gg) Build to Suite Industrial Lease Agreement dated November 1,
1995, between Industrial Developments International, Inc. and
TCI Central, Inc., as amended July 16, 1996 and August 29,
1996 (Exhibit 10(gg) to Post-Effective Amendment No. 12 to
Form S-11 Registration Statement of Wells Real Estate Fund
VIII, L.P. and Wells Real Estate Fund IX, L.P., File No. 33-
83852)
*10(hh) Assignment and Assumption of Lease dated October 10, 1996,
between TCI Valwood Limited Partnership I and The Bank of New
York, as Agent for Fund VIII and Fund IX Associates (Exhibit
10(hh) to Post-Effective Amendment No. 12 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P.
and Wells Real Estate Fund IX, L.P., File No. 33-83852)
*10(ii) Second Amendment to Joint Venture Agreement of Fund VIII and
Fund IX Associates dated January 7, 1997 (Exhibit 10 (ii) to
Form 10-K of Wells Real Estate Fund VIII, L.P. for the fiscal
year ended December 31, 1997, File No. 0-27888)
*10(jj) Agreement for the Purchase and Sale of Property with Magellan
Bake Parkway Limited Partnership dated December, 1996 (Exhibit
10 (jj) to Form 10-K of Wells Real Estate Fund VIII, L.P. for
the fiscal year ended December 31, 1997, File No. 0-27888)
*10(kk) Office Lease with Matsushita Avionics Systems Corporation
dated April 29, 1996 (Exhibit 10 (kk) to Form 10-K of Wells
Real Estate Fund VIII, L.P. for the fiscal year ended December
31, 1997, File No. 0-27888)
*10(ll) Third Amendment to Joint Venture Agreement of Fund VIII and
Fund IX Associates dated February 18, 1997 (Exhibit 10 (ll) to
Form 10-K of Wells Real Estate Fund VIII, L.P. for the fiscal
year ended December 31, 1997, File No. 0-27888)
*10(mm) Agreement for the Purchase and Sale of Property with Orix
Prime West Bloomfield II Venture dated February 5, 1997
(Exhibit 10 (mm) to Form 10-K of Wells Real Estate Fund VIII,
L.P. for the fiscal year ended December 31, 1997, File No.
0-27888)
*10(nn) Lease with Cirrus Logic, Inc. dated July 5, 1995 (Exhibit 10
(nn) to Form 10-K of Wells Real Estate Fund VIII, L.P. for the
fiscal year ended December 31, 1997, File No. 0-27888)
*10(oo) Rental Income Guaranty Agreement relating to the Bake Parkway
Building dated February 18, 1999, between Wells Operating
Partnership, L.P. and Fund VIII
and Fund IX Associates (Exhibit 10.53 to Form S-11
Registration Statement of Wells Real Estate Investment Trust,
Inc., as amended to date, Commission File No. 333-32099)
*10(pp) Joint Venture Partnership Agreement of Fund VIII-IX-REIT Joint
Venture (Exhibit 10.47 to Form S-11 Registration Statement of
Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-44900)
*10(qq) Lease Agreement for the Quest Building (formerly the Bake
Parkway Building) (Exhibit 10.51 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-44900)