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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, 2001
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[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
[No Fee Required]
For the transition period from _______________________ to _____________________
Commission file number 0-49633
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WELLS REAL ESTATE FUND XIII L.P.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2438244
- ---------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6200 The Corners Parkway, Suite
- -------------------------------
250, Norcross, Georgia 30092
- ---------------------------------- --------------------------------------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, (770) 449-7800
including area code Securities --------------------------------------
registered pursuant to Section 12
(b) of the Act:
Title of each class Name of exchange on which registered
- ---------------------------------- ---------------------------------------
NONE NONE
- ---------------------------------- ---------------------------------------
Securities registered pursuant to
Section 12 (g) of the Act:
CASH PREFERRED UNITS
- -------------------------------------------------------------------------------
(Title of Class)
TAX PREFERRED UNITS
- -------------------------------------------------------------------------------
(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 ____
-----
Aggregate market value of the voting stock held by non-affiliates:
Not Applicable
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PART I
ITEM 1. BUSINESS
General
Wells Real Estate Fund XIII, L.P. (the "Partnership") is a Georgia public
limited partnership with Leo F. Wells, III and Wells Capital, Inc. (the
"Company"), a Georgia corporation, serving as General Partners. The Partnership
was formed on September 15, 1998, for the purpose of acquiring, developing,
owning, operating, improving, leasing, and otherwise managing income producing
commercial properties for investment purposes. The Partnership has two classes
of limited partnership units. Upon subscription for units, the Limited Partners
must elect whether to have their units treated as Cash Preferred Status Units or
Tax Preferred Status Units. Thereafter, Limited Partners have the right to
change their prior elections to have some or all of their units treated as Cash
Preferred Status Units or Tax Preferred Status Units one time during each
quarterly accounting period. Limited Partners may vote to, among other things:
(a) amend the partnership agreement, subject to certain limitations, (b) change
the business purpose or investment objectives of the Partnership, (c) remove a
General Partner, (d) elect a new General Partner, (e) dissolve the Partnership,
and (f) approve a sale involving all or substantially all of the Partnership's
assets, subject to certain limitations. The majority vote on any of the
described matters will bind the Partnership, without the concurrence of the
General Partners. Each limited partnership unit has equal voting rights,
regardless of which class of unit is selected.
On March 29, 2001, the Partnership commenced a public offering of up to
$45,000,000 of limited partnership units ($10.00 per unit) pursuant to a
Registration Statement filed on Form S-11 under the Securities Act of 1933. The
Partnership commenced active operations on June 14, 2001, upon receiving and
accepting subscriptions for 125,000 units. As of December 31, 2001, the
Partnership had sold 880,001 Cash Preferred Units and 191,522 Tax Preferred
Units held by a total of 715 and 39 Limited Partners, respectively, for total
Limited Partner capital contributions of $10,715,232. After payment of $377,903
in acquisition and advisory fees and acquisition expenses, payment of $1,339,404
in selling commissions and organization and offering expenses, and the
investment of $8,151,426 in the Fund XIII-REIT Joint Venture, as of December 31,
2001, the Partnership was holding net offering proceeds of $846,499 available
for investment in properties.
Employees
The Partnership has no direct employees. The employees of Wells Capital, Inc.
and Wells Management Company, Inc. 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 compensation and fees paid to the
General Partners and their affiliates during the year ended December 31, 2001.
Insurance
Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all of the
properties by the Partnership through its interests in joint ventures. In the
opinion of management, all such 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
2
provide free rent, reduced charges for tenant improvements and other
inducements, all of which may have an adverse impact on results of operations.
At the time the Partnership elects to dispose of its properties, the Partnership
will also be in competition with sellers of similar properties to locate
suitable purchasers for its properties.
ITEM 2. PROPERTIES
The Partnership owns interests in properties through Fund XIII-REIT Associates
(the "Fund XIII-REIT Joint Venture"), a joint venture between the Partnership
and Wells Operating Partnership, L.P. ("Wells OP"), a Delaware limited
partnership having Wells Real Estate Investment Trust, Inc. (the "Wells REIT")
as its General Partner.
As of December 31, 2001, the Partnership owned interests in the following
properties through its ownership in the foregoing joint venture: (i) a two-story
office building located in Clay County, Florida (the "AmeriCredit Building") and
(ii) two connected one-story office and assembly buildings located in Douglas,
County, Colorado (the "ADIC Buildings").
The Partnership does not have control over the operations of the joint ventures;
however, it does exercise significant influence. Accordingly, the investment in
joint venture is recorded using the equity method of accounting. As of December
31, 2001, the Partnership was holding approximately $849,369 to invest in
properties.
The following table shows lease expirations during each of the next ten years
for leases at all properties owned by the joint venture described above, as of
December 31, 2001, assuming no exercise of renewal options or termination
rights:
Partnerships
Share of Percentage of
Number of Annualized Annualized Percentage of Total
Year of Lease Leases Square Feet Gross Base Gross Base Total Square Annualized
Expiration Expiring Expiring Rent(1) Rent(1) Feet Expiring Base Rent
- ------------- --------- ----------- ---------- ------------ -------------- --------------
2011(2) 2 233,200 $2,798,934 $890,061 100.0% 100.0%
(1) Average monthly gross rent over the life of the lease, annualized
(2) Expiration of Americredit lease (85,000 square feet) and ADIC
lease (148,200) square feet
Fund XIII-REIT Joint Venture
On June 27, 2001, the Partnership and Wells OP entered into a joint venture
partnership agreement for the purpose of acquiring, owning, leasing, operating,
and, managing real properties. The joint venture partnership is known as the
Fund XIII-REIT Joint Venture. All income, loss, net cash flow, resale gain and
sale proceeds of the Fund XIII-REIT Joint Venture are allocated and distributed
between the Partnership and Wells OP based upon their respective capital
contributions to the joint venture.
As of December 31, 2001, Wells OP had contributed approximately $18,285,078 for
an approximate 68% equity interest in the Fund XIII-REIT Joint Venture. The
Partnership had made capital
3
contributions of approximately $8,491,068 for an approximate 32% equity interest
in the Fund XIII-REIT Joint Venture.
Additional information about the properties in which the Partnership owns an
interest as of December 31, 2001 is described below:
AmeriCredit Building
On July 16, 2001, the Fund XIII-REIT Joint Venture acquired the AmeriCredit
Building, a two-story office building containing approximately 85,000 rentable
square feet located in Orange Park, Clay County, Florida. The purchase price of
the AmeriCredit Building was $12,500,000, plus closing costs of approximately
$41,500. The purchase price was funded by capital contributions of $1,651,426 by
the Partnership and $10,890,040 by Wells OP.
The entire AmeriCredit Building is currently under a net lease agreement that
expires in May 2011 with AmeriCredit, a wholly owned subsidiary of Americredit
Corp., a Texas corporation whose common stock is publicly traded on the New York
Stock Exchange. AmeriCredit Corp. is the guarantor of the lease. AmeriCredit has
the right to extend the lease for two additional five-year periods of time by
giving written notice to the landlord at least 12 months prior to the expiration
date of the then current lease term. The base rent payable for each extended
term of the lease will be equal to 95% of the then current market rate.
The annual base rent payable for the current term of the AmeriCredit lease is as
follows:
---------------------------------------- ---------------------------------
Lease Year Annual Rent
---------------------------------------- ---------------------------------
1 $ 1,201,050
---------------------------------------- ---------------------------------
2 $ 1,231,501
---------------------------------------- ---------------------------------
3 $ 1,262,714
---------------------------------------- ---------------------------------
4 $ 1,294,707
---------------------------------------- ---------------------------------
5 $ 1,327,499
---------------------------------------- --------------------------------
6 $ 1,361,112
---------------------------------------- ---------------------------------
7 $ 1,395,565
---------------------------------------- ---------------------------------
8 $ 1,430,879
---------------------------------------- ---------------------------------
9 $ 1,467,076
---------------------------------------- ---------------------------------
10 $ 1,504,178
---------------------------------------- ---------------------------------
Under the lease, AmeriCredit is required to pay all operating expenses, routine
maintenance and repairs to the AmeriCredit Building. The Fund XIII-REIT Joint
Venture, as landlord, is responsible for the repair and maintenance of the roof,
structural systems, and parking lot, as well as payment of a monthly 7% sales
tax on rental income for the AmeriCredit Building. AmeriCredit is also required
to reimburse the Fund XIII-REIT Joint Venture for sales tax costs through
increased rental income. The rental figures above are net of the sales tax
reimbursements.
The AmeriCredit lease contains a termination option which may be exercised by
AmeriCredit effective as of the end of the seventh lease year by providing 12
months notice to the Fund XIII-REIT Joint Venture. If AmeriCredit exercises its
termination option, it will be required to pay the joint venture a termination
payment estimated at $1.9 million, or approximately 16 months of rent.
4
AmeriCredit also has an expansion option for an additional 15,000 square feet of
office space and 120 parking spaces that can be exercised at any time during the
first seven lease years. The rights and obligations of each party under the
expansion option are subject to the parties reaching agreement relating to the
expansion space and additional parking and the leasing of such space by
AmeriCredit within 45 days of receipt by the Fund XIII-REIT Joint Venture of
written notice of the expansion option.
The average effective annual rental rate per square foot at the AmeriCredit
Building was $17.03 for 2001, the first year of ownership. At December 31, 2001,
the building was 100% leased.
ADIC Buildings
On December 21, 2001, the Fund XIII-REIT Joint Venture acquired the ADIC
Buildings, two one-story office buildings connected to a light assembly building
containing approximately 148,200 rentable square feet located in Parker, Douglas
County, Colorado. Additionally, the Fund XIII-REIT Joint Venture purchased an
undeveloped 3.43 acre tract of land immediately adjacent to the ADIC Buildings
("ADIC Land"). The purchase price of the ADIC Buildings and ADIC Land was
$12,954,213, plus closing costs of approximately $215,600. The purchase price
was funded by capital contributions of $6,500,000 by the Partnership and
$6,669,834 by Wells OP.
The ADIC Buildings are currently under a net lease agreement with ADIC that
expires in December 2011. ADIC has the right to extend the lease for two
additional five-year periods of time by giving written notice to the landlord at
least 9 months prior to the expiration date of the then current lease term. The
base rent payable for each extended term of the lease will be the then current
market rate.
The annual base rent payable for the current term of the ADIC lease is as
follows:
--------------------------------- ----------------------------------------
Lease Year Annual Rent
--------------------------------- ----------------------------------------
1 $ 1,222,683
--------------------------------- ----------------------------------------
2 $ 1,247,137
--------------------------------- ----------------------------------------
3 $ 1,272,079
--------------------------------- ----------------------------------------
4 $ 1,297,521
--------------------------------- ----------------------------------------
5 $ 1,323,471
--------------------------------- ----------------------------------------
6 $ 1,349,941
--------------------------------- ----------------------------------------
7 $ 1,376,940
--------------------------------- ----------------------------------------
8 $ 1,404,478
--------------------------------- ----------------------------------------
9 $ 1,432,568
--------------------------------- ----------------------------------------
10 $ 1,461,219
--------------------------------- ----------------------------------------
At December 31, 2001, the ADIC Buildings were 100% leased.
5
ITEM 3. LEGAL PROCEEDINGS
There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 2001.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Limited Partners during 2001.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
6
PART II
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
As of February 28, 2002, the Partnership had 880,001 outstanding Cash Preferred
Units held by a total of 715 Limited Partners and 191,522 outstanding Tax
Preferred Units held by a total of 39 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.
Pursuant to Section 15.2 of the Partnership Agreement, for the first three
fiscal years following the termination of the offering of units in the
Partnership, the per unit value shall be deemed to be $10.00 per unit. After the
expiration of this three year period, the General Partners are required to
determine a per unit value by estimating the amount a holder of Partnership
units would receive if the Partnership's properties were sold as of the close of
the Partnership's fiscal year at their estimated fair market values and the
proceeds from such sales (without reduction for selling expenses), together with
any other funds of the Partnership, were distributed in a liquidation of the
Partnership.
Cash Preferred Status Limited Partners are entitled to a distribution from Net
Cash From Operations, as defined in the Partnership Agreement to mean cash flow,
less adequate cash reserves for other obligations of the Partnership for which
there is no provision, on a per unit basis until they have received
distributions in each fiscal year of the Partnership equal to 10% of their
adjusted capital contributions. After this preference is satisfied, the General
Partners will receive an amount of Net Cash From Operations equal to 10% of the
total amount of Net Cash From Operations distributed. Thereafter, the Limited
Partners holding Cash Preferred Status Units will receive 90% of Net Cash From
Operations and the General Partners will receive 10%. No Net Cash From
Operations will be distributed to Limited Partners holding Tax Preferred Status
Units. Holders of Cash Preferred Status Units will, except in limited
circumstances, be allocated none of the Partnership's net loss, depreciation and
amortization deductions. These deductions will be allocated to the Tax Preferred
Status Units, until their capital account balances have been reduced to zero. No
distributions have been made to Limited Partners holding Tax Preferred Status
Units or to the General Partners as of December 31, 2001.
Cash available for distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners select to have their cash distributed
monthly. Cash distributions made to Cash Preferred Status Limited Partners
during 2001 were as follows:
Per Cash Preferred Status Unit
------------------------------
Distribution for Total Cash Investment Return of General
Quarter Ended Distributed Income Capital Partner
- ------------------- ----------- ---------- --------- -------
June 30, 2001 $ 0 $ 0.00 $ 0.00 $ 0.00
September 30, 2001 0 0.00 0.00 0.00
December 31, 2001 70,000 0.16 0.00 0.00
The fourth quarter distribution was accrued for accounting purposes in 2001 and
paid in February, 2002.
7
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth a summary of the selected financial data for the seven
months ended December 31, 2001.
Total assets $ 10,607,290
Total revenues 96,685
Net income 34,868
Net loss allocated
to General Partners (500)
Net income allocated to
Cash Preferred Limited Partners 84,293
Net loss allocated to
Tax Preferred Limited Partners (48,925)
Net income per weighted
average (1) Cash Preferred
Limited Partner Unit 0.20
Net loss per weighted
average (1) Tax Preferred
Limited Partner Unit (0.55)
Cash Distributions per
weighted average (1)
Cash Preferred Limited Partner
Unit:
Investment Income 0.16
Return of Capital 0.00
(1) The weighted average unit is calculated by averaging units over the
period they are outstanding during the time units are still being
purchased by Limited Partners in the Partnership.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATION
The following discussion and analysis should be read in conjunction with the
Selected Financial Data and the accompanying financial statements of the
Partnership and notes thereto.
Forward-Looking Statements
This Report contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of
1934, including discussion and analysis of the financial condition of the
Partnership, anticipated capital expenditures required to complete certain
projects, amounts of cash distributions anticipated to be distributed to Limited
Partners in the future and certain other matters. Readers of this Report should
be aware that there are various factors that could cause actual
results to differ materially from any forward-looking statement made in the
Report, which include construction costs which may exceed estimates,
construction delays, lease-up risks, inability to
8
obtain new tenants upon the expiration of existing leases, and the potential
need to fund tenant improvements or other capital expenditures out of operating
cash flow.
Results of Operations and Changes in Financial Conditions
The Partnership recognized gross revenues for the period from June 14, 2001
(inception) through December 31, 2001 of $96,685, consisting of equity in income
of joint venture for the interest in the AmeriCredit Building and ADIC Buildings
and interest income. Expenses of the Partnership were $61,817 for the same
period and consisted primarily of administrative salaries, legal, accounting,
computer, and printing expenses. Since the Partnership did not commence active
operations until it received and accepted subscriptions for a minimum of 125,000
units on June 14, 2001, there is no comparative financial data for the prior
fiscal year.
Liquidity and Capital Resources
Net income per weighted average unit for Cash Preferred Limited Partners was
$0.20 for the period from June 14, 2001 (inception) through December 31, 2001.
Net increase in cash and cash equivalents is primarily the result of raising
$10,715,232 in Limited Partners' capital contributions before deducting payments
for commissions and offering costs. The increase is offset by the investment in
joint venture for the purchases of the AmeriCredit Building in the amount of
$1,651,426 and ADIC Buildings in the amount of $6,500,000.
The Partnership expects to continue to meet its short-term liquidity
requirements generally through net cash provided by operations which the
Partnership believes will continue to be adequate to meet both operating
requirements and distributions to limited partners. Although there is no
assurance, the General Partners anticipate that cash distributions to Limited
Partners holding Cash Preferred Status Units will continue in 2002 at a level at
least comparable with 2001 cash distributions on an annual basis.
Inflation
The real estate market has not been affected significantly by inflation in the
past three years due to the relatively low inflation rate. There are provisions
in the majority of tenant leases to protect the Partnership from the impact of
inflation. Most leases contain common area maintenance charges (CAM charges),
real estate tax and insurance reimbursements on a per square foot bases, or in
some cases, annual reimbursement of operating expenses above a certain per
square foot allowance. These provisions should reduce the Partnership's exposure
to increases in costs and operating expenses resulting from inflation.
Critical Accounting Policies
The Partnership's accounting policies have been established and conformed to in
accordance with accounting principles generally accepted in the United States
("GAAP"). The preparation of financial statements in conformity with GAAP
requires management to use judgment in the application of accounting policies,
including making estimates and assumptions. These judgments affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. If our judgment or
interpretation of the facts and circumstances relating to various transactions
had been different, it is possible that different accounting policies would have
been applied; thus, resulting in a
9
different presentation of our financial statements. Below is a discussion of the
accounting policies that we consider to be critical in that they may require
complex judgment in their application or require estimates about matters, which
are inherently uncertain. Additional discussion of accounting policies that we
consider to be significant, including further discussion of the critical
accounting policies described below, is presented in the notes to the
Partnership's financial statements in Item 14(a).
Straight-Lined Rental Revenues
The Partnership recognizes rental income generated from all leases on real
estate assets in which the Partnership has an ownership interest, either
directly or through investments in joint ventures, on a straight-line basis over
the terms of the respective leases. If a tenant was to encounter financial
difficulties in future periods, the amount recorded as receivable may not be
realized.
Operating Cost Reimbursements
The Partnership generally bills tenants for operating cost reimbursements,
either directly or through investments in joint ventures, on a monthly basis at
amounts estimated largely based on actual prior period activity and the
respective lease terms. Such billings are generally adjusted on an annual basis
to reflect reimbursements owed to the landlord based on the actual costs
incurred during the period and the respective lease terms. Financial
difficulties encountered by tenants may result in receivables not being
realized.
Real Estate
Management continually monitors events and changes in circumstances indicating
that the carrying amounts of the real estate assets in which the Partnership has
an ownership interest, either directly or through investments in joint ventures,
may not be recoverable. When such events or changes in circumstances are
present, management assesses the potential impairment by comparing the fair
market value of the asset, estimated at an amount equal to the future
undiscounted operating cash flows expected to be generated from tenants over the
life of asset and from its eventual disposition, to the carrying value of the
asset. In the event that the carrying amount exceeds the estimated fair market
value, the Partnership would recognize an impairment loss in the amount required
to adjust the carrying amount of the asset to its estimated fair market value.
Neither the Partnership nor its joint ventures have recognized impairment losses
on real estate assets in 2001.
Deferred Project Costs
Wells Capital, Inc. expects to continue to fund 100% of the acquisition and
advisory fees and acquisition expenses and recognize related expenses, to the
extent that such costs exceed 3.5% of cumulative capital raised (subject to
certain overall limitations described in the prospectus), on behalf of the
Partnership. The Partnership records acquisition and advisory fees and
acquisition expenses by capitalizing deferred project costs and reimbursing
Wells Capital, Inc. at an amount equal to 3.5% of cumulative capital raised to
date. As the Partnership invests its capital proceeds, deferred project costs
are applied to real estate assets, either directly or through contributions to
joint ventures, at an amount equal to 3.5% of each investment and depreciated
over the useful lives of the respective real estate assets.
Deferred Offering Costs
Wells Capital, Inc. expects to continue to fund 100% of the organization and
offering costs and recognize related expenses, to the extent that such costs
exceed 3% of cumulative capital raised, on behalf of the
10
Partnership. Organization and offering costs include items such as legal and
accounting fees, marketing and promotional costs, and printing costs, and
specifically exclude sales costs and underwriting commissions. The Partnership
records offering costs by accruing deferred offering costs, with an offsetting
liability included in due to affiliates, at an amount equal to the lesser of 3%
of cumulative capital raised to date or actual costs incurred from third-parties
less reimbursements paid to Wells Capital, Inc. As the actual equity is raised,
the Partnership reverses the deferred offering costs accrual and recognizes a
charge to partners' capital upon reimbursing Wells Capital, Inc.
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 2001.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
11
PART III
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP
Wells Capital, Inc. - The executive offices of Wells Capital, Inc., a Georgia
corporation, are located at 6200 The Corners Parkway Suite 250, Norcross,
Georgia 30092.
Leo F. Wells, III - Mr. Wells is a resident of Atlanta, Georgia, is 58 years of
age and holds a Bachelor of Business Administration Degree in Economics from the
University of Georgia. Mr. Wells is the President and sole Director of Wells
Capital, Inc. Mr. Wells is the President of Wells & Associates, Inc., a real
estate brokerage and investment company formed in 1976 and incorporated in 1978,
for which he serves as principal broker. He is also the President, sole Director
and sole shareholder of Wells Real Estate Investment Funds, Inc., the parent
corporation of Wells Capital, Inc. Mr. Wells is also currently the sole Director
and President of Wells Management Company, Inc., a property management company
he founded in 1983. In addition, Mr. Wells is the President and Chairman of the
Board of Wells Investment Securities, Inc., Wells & Associates, Inc., and Wells
Management Company, Inc. which are affiliates of the General Partners. From 1980
to February 1985, Mr. Wells served as vice-president of Hill-Johnson, Inc., a
Georgia corporation engaged in the construction business. From 1973 to 1976, he
was associated with Sax Gaskin Real Estate Company and from 1970 to 1973, he was
a real estate salesman and property manager for Roy D. Warren & Company, an
Atlanta real estate company.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES
The following table summarizes the compensation and fees (including
reimbursement of expenses) paid to the General Partners and their affiliates
during the year ended December 31, 2001.
Name of Individual Capacities in Which Served Cash
or Number in Group Form of Compensation Compensation
- -----------------------------------------------------------------------------------------------------------------
Wells Capital, Inc Acquisition and Advisory Fees and Acquisition
Expenses $ 375,033
Wells Capital, Inc General Partner of Wells Partners, L.P.
Reimbursement of Organization and Offering $ 323,917
Expenses
Leo F. Wells, III General Partner -0-
Wells Investment Securities, Inc. Dealer Manager - Selling Commissions $1,017,947(1)
Wells Management Company, Inc Property Manager - Management and $ 3,558(2)
Leasing Fees
(1) This amount includes all selling commissions paid or payable to Wells
Investment Securities, Inc., a substantial portion of which were
reallocated to other broker-dealers.
(2) These fees are not paid directly by the Partnership but are paid by the
joint venture entities, which owns the properties for which the
property management and leasing services relate and include management
and leasing fees which were accrued for accounting purposes in 2001,
but not actually paid until January 2002.
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.
Set forth below is the security ownership of management as of February 28, 2002.
Name of Beneficial Amount and Nature of
Title of Class Owner Beneficial Ownership Percent of Class
- ------------------------ ----------------------- ------------------------- -------------------
Cash Preferred Leo F. Wells, III 777.588 Units (IRA, Less than 1%
Status Units 401(k) and Profit
Sharing)
No arrangements exist which would, upon operation, result in a change in control
of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The compensation and fees paid or to be paid by the Partnership to the General
Partners and their affiliates in connection with the operation of the
Partnership are as follows:
Interest in Partnership Cash Flow and Net Sales Proceeds
The General Partners will receive a subordinated participation in net cash flow
from operations equal to 10% of net cash flow after the Limited Partners holding
Cash Preferred Status Units have received preferential distributions equal to
10% of their adjusted capital accounts in each fiscal year. The General Partners
will also receive a subordinated participation in net sales proceeds and net
financing proceeds equal to 20% of residual proceeds available for distribution
after Limited Partners holding Cash Preferred Status Units have received a
return of their adjusted capital contributions plus a 10% cumulative return on
their adjusted capital contributions and Limited Partners holding Tax Preferred
Units have received a return of their adjusted capital contributions plus a 15%
cumulative return on their adjusted capital contributions; provided, however,
that in no event shall the General Partners receive in the aggregate in excess
of 15% of net sales proceeds and net financing proceeds remaining after payments
to Limited Partners from such proceeds of amounts equal to the sum of their
adjusted capital contributions plus a 6% cumulative return on their adjusted
capital contributions. The General Partners did not receive any distributions
from net cash flow from operations or net sales proceeds for the year ended
December 31, 2001.
Property Management and Leasing Fees
Wells Management Company, Inc., an affiliate of the General Partners, will
receive compensation for supervising the management of the Partnership
properties equal to the lesser of (a) fees that would be paid to a comparable
outside firm or (b) 4.5% of the gross revenues generally paid over the life of
the lease plus a separate competitive fee for the one-time initial lease-up of
newly constructed properties generally paid in conjunction with the receipt of
the first month's rent. In the case of commercial properties which are leased on
a long-term (ten or more years) net basis, the maximum property management fee
from such leases shall be 1% of
13
the gross revenues generally paid over the life of the leases except for a
one-time initial leasing fee of 3% of the gross revenues on each lease payable
over the first five full years of the original lease term.
Management and leasing fees are not paid directly by the Partnership but by the
joint venture entity, which owns the properties. The Partnership's share of
these fees was $3,558 for the year ended December 31, 2001.
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, 2001.
Deferred Project Costs
The Partnership pays Acquisition and Advisory Fees and Acquisition Expenses to
Wells Capital, Inc. for acquisition and advisory services as a reimbursement for
acquisition expenses. These payments, as provided by the Partnership Agreement,
may not exceed 3.5% of the Limited Partners' capital contributions. Acquisition
and Advisory Fees and Acquisition Expenses paid as of December 31, 2001,
amounted to $375,033 and represented approximately 3.5% of the Limited Partners'
capital contributions. These fees are allocated to specific properties as they
are purchased.
Deferred Offering Costs
Wells Capital, Inc. (the "Company") pays all the organization and offering
expenses for the Partnership. The Company may be reimbursed by the Partnership
to the extent that such organization and offering expenses do not exceed 3% of
total Limited Partners' capital contributions. As of December 31, 2001, the
Partnership had reimbursed the Company for $321,457 in organization and offering
expenses, which amounted to approximately 3% of Limited Partners' capital
contributions.
14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The Financial Statements are contained on pages F-2 through F-16 of this
Annual Report on Form 10-K, and the list of the Financial Statements
contained herein is set forth on page F-1, which is hereby incorporated
by reference.
(a) 2. The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(b) The Partnership filed a Current Report on Form 8-K dated December 21,
2001 and an Amendment No. 1 to Current Report on Form 8-K dated December
21, 2001 reporting the acquisition of an interest in the ADIC Buildings.
(c) The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibits Index attached hereto.
(d) See (a)2 above.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
15
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 22nd day of March
2002.
Wells Real Estate Fund XIII, 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.,
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, and March 22, 2002
President and Sole Director of
Wells Capital, Inc., 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.
16
INDEX TO FINANCIAL STATEMENTS
Financial Statements Page
- -------------------------------------------------------------------------------- --------------------
Independent Auditors' Report F-2
Balance Sheets as of December 31, 2001 and 2000 F-3
Statements of Income for the Year Ended December 31, 2001 F-4
Statements of Partners' Capital for the Years Ended December 31, 2001 and 2000 F-5
Statements of Cash Flows for the Year Ended December 31, 2001 F-6
Notes to Financial Statements for December 31, 2001 F-7
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund XIII, L.P.:
We have audited the accompanying balance sheets of Wells Real Estate Fund XIII,
L.P. (a Georgia public limited partnership) as of December 31, 2001 and 2000,
the related statement of income for the year ended December 31, 2001, the
statements of partners' capital for the years ended December 31, 2001 and 2000,
and the statement of cash flows for the year ended December 31, 2001. 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 XIII,
L.P. as of December 31, 2001 and 2000, the results of its operations for the
year ended December 31, 2001, its partners' capital for the years ended December
31, 2001 and 2000, and its cash flows for the year ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 25, 2002
F-2
WELLS REAL ESTATE FUND XIII, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
ASSETS
2001 2000
----------- --------
CASH $ 961,837 $ 600
INVESTMENT IN JOINT VENTURE 8,453,438 0
DUE FROM AFFILIATES 65,076 0
DEFERRED OFFERING COSTS 1,088,679 127,506
DEFERRED PROJECTS COSTS 38,260 0
----------- --------
Total assets $10,607,290 $128,106
============= ========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable $ 105,447 $ 0
Due to affiliate 1,100,897 127,506
Partnership distribution payable 70,000 0
----------- --------
1,276,344 127,506
----------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
PARTNERS' CAPITAL:
General partners 0 500
Limited partner:
Original 0 100
Cash preferred--880,001 and 0 units as of December 31, 2001 and 2000,
respectively 7,704,052 0
Tax preferred--191,522 and 0 units as of December 31, 2001 and 2000,
respectively 1,626,894 0
----------- --------
Total partners' capital 9,330,946 600
----------- --------
Total liabilities and partners' capital $10,607,290 $128,106
=========== ========
The accompanying notes are an integral part of these balance sheets.
F-3
WELLS REAL ESTATE FUND XIII, L.P.
(A Georgia Public Limited Partnership)
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2001
REVENUES:
Equity in income of Joint Ventures $ 58,610
Interest income 38,075
---------
96,685
---------
EXPENSES:
Legal and accounting 16,630
Partnership administration 41,142
Computer costs 4,045
---------
61,817
---------
NET INCOME $ 34,868
=========
NET LOSS ALLOCATED TO GENERAL PARTNERS $ (500)
=========
NET INCOME ALLOCATED TO CASH PREFERRED LIMITED PARTNERS $ 84,293
=========
NET LOSS ALLOCATED TO TAX PREFERRED LIMITED PARTNERS $(48,925)
=========
NET INCOME PER WEIGHTED AVERAGE CASH PREFERRED LIMITED PARTNER UNIT $ 0.20
=========
NET LOSS PER WEIGHTED AVERAGE TAX PREFERRED LIMITED PARTNER UNIT $ (0.55)
-========
DISTRIBUTION PER WEIGHTED AVERAGE CASH PREFERRED LIMITED PARTNER UNIT $ 0.16
=========
The accompanying notes are an integral part of this statement.
F-4
WELLS REAL ESTATE FUND XIII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Limited Partners
----------------------------------------------------------------
Total
Cash Preferred Tax Preferred General Partners'
----------------------- ------------------------
Original Units Amount Units Amount Partners Capital
-------- ----- ------ ----- ------ -------- -------
BALANCE, December 31, 1999 $ 100 0 $ 0 0 $ 0 $ 500 $ 600
Net income (loss) 0 0 0 0 0 0 0
Partnership distributions 0 0 0 0 0 0 0
Limited partner contributions 0 0 0 0 0 0 0
Sales commissions and discounts 0 0 0 0 0 0 0
Other offering expenses 0 0 0 0 0 0 0
Tax preferred conversion elections 0 0 0 0 0 0 0
------- ------- ------------ ------- ----------- ------ -----------
BALANCE, December 31, 2000 100 0 0 0 0 500 600
Net income (loss) 0 0 84,293 0 (48,925) (500) 34,868
Partnership distributions 0 0 (70,000) 0 0 0 (70,000)
Limited partner contributions 0 880,001 8,800,012 191,522 1,915,220 0 10,715,232
Sales commissions and discounts 0 0 (843,793) 0 (181,944) 0 (1,025,737)
Other offering expenses 0 0 (266,460) 0 (57,457) 0 (323,917)
Return of capital (100) 0 0 0 0 0 (100)
------- ------- ------------ ------- ----------- ------ -----------
BALANCE, December 31, 2001 $ 0 880,001 $ 7,704,052 191,522 $ 1,626,894 $ 0 $ 9,330,946
======= ======= ============ ======= =========== ====== ============
The accompanying notes are an integral part of these statements.
F-5
WELLS REAL ESTATE FUND XIII, L.P.
(A Georgia Public Limited Partnership)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,868
------------
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of Joint Venture (58,610)
Changes in assets and liabilities:
Accounts payable 105,447
------------
Total adjustments 46,837
------------
Net cash provided by operating activities 81,705
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from Joint Venture 31,165
Investment in Joint Venture (8,151,426)
Deferred project costs paid (371,324)
------------
Net cash used in investing activities (8,491,585)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Limited partners' contributions 10,715,232
Sales commissions and discounts paid (1,025,737)
Offering costs paid (318,278)
Return of capital paid to original limited partner (100)
------------
Net cash provided by financing activities 9,371,117
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 961,237
CASH AND CASH EQUIVALENTS, beginning of year 600
------------
CASH AND CASH EQUIVALENTS, end of year $ 961,837
============
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Deferred project costs contributed to Joint Venture $ 339,643
============
Deferred project costs due to affiliate $ 6,579
============
Deferred offering costs due to affiliate $ 1,094,318
============
The accompanying notes are an integral part of this statement.
F-6
WELLS REAL ESTATE FUND XIII, L.P.
(A Georgia Public Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund XIII, L.P. (the "Partnership") is a public limited
partnership organized on September 15, 1998 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Capital, Inc.
(the "Company"). The Partnership has two classes of limited partnership
units. Upon subscription for units, each limited partner must elect whether
to have his/her units treated as cash preferred units or tax preferred
units. Thereafter, limited partners shall have the right to change their
prior elections to have some or all of their units treated as cash
preferred units or tax preferred units one time during each quarterly
accounting period. Limited partners may vote to, among other things: (a)
amend the partnership agreement, subject to certain limitations, (b) change
the business purpose or investment objectives of the Partnership, (c)
remove a general partner, (d) elect a new general partner, (e) dissolve the
Partnership, and (f) approve a sale of all or substantially all of the
Partnership's assets, subject to certain limitations. Each limited
partnership unit has equal voting rights, regardless of class. The
Partnership had no operations as of December 31, 2000.
The Partnership was formed to acquire and operate commercial real estate
properties, including properties which are either to be developed, are
currently under development or construction, are newly constructed, or have
operating histories. The Partnership owns an interest in the following
properties through a joint venture with Wells Operating Partnership, L.P.
(the "Operating Partnership"), a Delaware limited partnership having Wells
Real Estate Investment Trust, Inc., a Maryland corporation, as its general
partner, which is referred to as the Fund XIII and REIT Joint Venture (the
"Joint Venture"): (i) a one-story office building in Orange Park, Florida
(the "AmeriCredit Building") and (ii) two connected one-story office and
assembly buildings in Parker, Colorado (the "ADIC Buildings").
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Income Taxes
The Partnership is not subject to federal or state income taxes; therefore,
none have been provided for in the accompanying financial statements. The
partners are required to include their respective shares of profits and
losses in their individual income tax returns.
Distributions of Net Cash From Operations
Cash available for distribution, as defined by the partnership agreement,
will be distributed to the limited partners on a quarterly basis. In
accordance with the partnership agreement, distributions are paid first to
F-7
limited partners holding cash preferred units until they have received a
10% per annum return on their net capital contributions, as defined. Then,
such distributions are paid to the general partners until they have
received 10% of the total amount distributed thus far. Any remaining cash
available for distribution is split 90% to the limited partners holding
cash preferred units and 10% to the general partners. No such distributions
will be made to the limited partners holding tax-preferred units.
Distribution of Sale Proceeds
Upon the sale of properties, the net sale proceeds will be distributed in
the following order:
. To limited partners holding units which at any time have been
treated as tax preferred units until they receive an amount
necessary to equal the net cash available for distribution
received by the limited partners holding cash preferred units
. To limited partners on a per unit basis until each limited
partner has received 100% of his/her net capital contributions,
as defined
. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their net capital
contributions, as defined
. To limited partners on a per unit basis until they receive an
amount equal to their preferential limited partner return
(defined as the sum of a 10% per annum cumulative return on net
capital contributions for all periods during which the units were
treated as cash preferred units and a 15% per annum cumulative
return on net capital contributions for all periods during which
the units were treated as tax preferred units)
. To the general partners until they have received 100% of their
capital contributions, as defined
. Then, if limited partners have received any excess limited
partner distributions (defined as distributions to limited
partners over the life of their investment in the Partnership in
excess of their net capital contributions, as defined, plus their
preferential limited partner return), to the general partners
until they have received distributions equal to 20% of the sum of
any such excess limited partner distributions plus distributions
made to the general partners pursuant to this provision
. Thereafter, 80% to the limited partners on a per unit basis and
20% to the general partners
Allocation of Net Income, Net Loss, and Gain on Sale
Net income is defined as net income recognized by the Partnership,
excluding deductions for depreciation and amortization. Net income, as
defined, of the Partnership will be allocated each year in the same
proportion that net cash from operations is distributed to the partners. To
the extent the Partnership's net income in any year exceeds net cash from
operations, it will be allocated 99% to the limited partners holding cash
preferred 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 tax
preferred units and 1% to the general partners until their capital accounts
are reduced to zero, (b) then to any partner having a positive balance in
his/her capital account in an amount not to exceed such positive balance,
and (c) thereafter to the general partners.
Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (a) allocations made pursuant to the qualified income offset
provisions of the partnership agreement, (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero, and (c) allocations to limited partners holding tax
preferred
F-8
units in amounts equal to the deductions for depreciation and amortization
previously allocated to them with respect to the specific partnership
property sold, but not in excess of the amount of gain on sale recognized
by the Partnership with respect to the sale of such property.
Investment in Joint Venture
Basis of Presentation
The Partnership does not have control over the operations of the Joint
Venture; however, it does exercise significant influence. Accordingly,
the Partnership's investment in the Joint Venture is recorded using
the equity method of accounting.
Real Estate Assets
Real estate assets held by the Joint Venture are stated at cost less
accumulated depreciation. Major improvements and betterments are
capitalized when they extend the useful life of the related asset. All
ordinary repairs and maintenance expenditures 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 Venture as of December 31, 2001
or 2000.
Depreciation for buildings and improvements is calculated using the
straight-line method over 25 years. Tenant improvements are amortized
over the life of the related lease or the life of the asset, whichever
is shorter.
Revenue Recognition
All leases on real estate assets held by the Joint Venture are
classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective
leases.
Partner's Distributions and Allocations of Profit and Loss
Cash available for distribution and allocations of profit and loss to
the Partnership by the Joint Venture are made in accordance with the
terms of the joint venture agreements. Generally, these items are
allocated in proportion to the partners' respective ownership
interests. Cash is paid from the Joint Venture 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 statement of cash flows, the Partnership considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market
accounts.
F-9
Per Unit Data
Net income (loss) per unit with respect to the Partnership for the year
ended December 31, 2001 is computed based on the weighted average number of
units outstanding during the period.
2. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner contributions to the
Company for acquisition and advisory services. These payments, as
stipulated by the partnership agreement, can be up to 3.5% of the limited
partner contributions, subject to certain overall limitations contained in
the partnership agreement. Aggregate fees paid through December 31, 2001
were $377,903 and amounted to 3.5% of the limited partners' contributions
received. These fees are allocated to specific properties as they are
purchased or developed and are included in the capitalized assets of the
Joint Venture. Deferred project costs at December 31, 2001 represent fees
not yet applied to properties.
3. DEFERRED OFFERING COSTS
Offering expenses, to the extent they exceed 3% of gross offering proceeds,
will be paid by the Company and not by the Partnership. Offering expenses
include such costs as legal and accounting fees, printing costs, and other
offering expenses, but do not include sales or underwriting commissions.
As of December 31, 2001, the Company paid offering expenses on behalf of
the Partnership in the aggregate amount of $1,285,070, of which the
Partnership reimbursed the Company for $323,917, approximately 3% of
aggregate gross offering proceeds. The unpaid portion of deferred offering
costs is $12,218 and is included in due to affiliate in the accompanying
balance sheets.
4. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 2001 represents the Partnership's share
of the cash to be distributed from its investment in the Fund XIII and REIT
Joint Venture for the fourth quarter of 2001.
The Partnership entered into a property management and leasing agreement
with Wells Management Company, Inc. ("Wells Management"), an affiliate of
the general partners. In consideration for supervising the management and
leasing of the Partnership's properties, the Partnership will pay Wells
Management management and leasing fees equal to the lesser of (a) fees that
would be paid to a comparable outside firm or (b) 4.5% of the gross
revenues generally paid over the life of the lease plus a separate
competitive fee for the one-time initial lease-up of newly constructed
properties generally paid in conjunction with the receipt of the first
month's rent. In the case of commercial properties which are leased on a
long-term net basis (ten or more years), the maximum property management
fee from such leases shall be 1% of the gross revenues generally paid over
the life of the leases except for a one-time initial leasing fee of 3% of
the gross revenues on each lease payable over the first five full years of
the original lease term.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $3,558 for the year ended December
31, 2001, which were paid to Wells Management.
The Company performs certain administrative services for the Partnership,
such as accounting and other partnership administration, and incurs the
related expenses. Such expenses are allocated among the various Wells Real
Estate Funds based on time spent on each fund by individual administrative
personnel. In the opinion of management, such allocation is a reasonable
estimation of such expenses.
The general partners are also general partners in other Wells Real Estate
Funds. As such, there may exist conflicts of interest where the general
partners in the capacity as general partners for other Wells Real Estate
Funds may be in competition with the Partnership for tenants in similar
geographic markets.
F-10
5. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in the Joint Venture
at December 31, 2001 is summarized as follows:
Amount Percent
---------- -----------
Fund XIII and REIT Joint Venture $8,453,438 32%
The following is a roll forward of the Partnership's investment in the
Joint Venture for the year ended December 31, 2001:
Investment in Joint Venture, beginning of year $ 0
Equity in income of Joint Venture 58,610
Contributions to Joint Venture 8,491,069
Distributions from Joint Venture (96,241)
----------
Investment in Joint Venture, end of year $8,453,438
==========
Fund XIII and REIT Joint Venture
On June 27, 2001, the Partnership entered into a joint venture with the
Operating Partnership to form the Fund XIII and REIT Joint Venture. On July
16, 2001, the Fund XIII and REIT Joint Venture purchased an 85,000-square
foot, two-story office building known as the AmeriCredit Building in Clay
County, Florida. On December 21, 2001, the Fund XIII and REIT Joint Venture
purchased two connected one-story office and assembly buildings, consisting
of 148,200 square feet, known as the ADIC Buildings in Douglas County,
Colorado.
F-11
Following are the financial statements for the Fund XIII and REIT Joint Venture:
The Fund XIII and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheet
December 31, 2001
Assets
Real estate assets, at cost:
Land $ 3,724,819
Building and improvements, less accumulated depreciation of $266,605 in 2001 22,783,948
-----------
Total real estate assets 26,508,767
Cash and cash equivalents 460,380
Accounts receivable 71,236
Prepaid assets and other expenses 773
-----------
Total assets $27,041,156
===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 145,331
Partnership distributions payable 315,049
-----------
Total liabilities 460,380
-----------
Partners' capital:
Wells Real Estate Fund XIII 8,453,438
Wells Operating Partnership, L.P. 18,127,338
-----------
Total partners' capital 26,580,776
-----------
Total liabilities and partners' capital $27,041,156
===========
F-12
The Fund XIII and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Income
for the Period From June 27, 2001 (Inception) Through
December 31, 2001
Revenues:
Rental income $ 706,373
-----------
Expenses:
Depreciation 266,605
Management and leasing fees 26,954
Operating costs, net of reimbursements 53,659
Legal and accounting 2,800
-----------
350,018
-----------
Net income $ 356,355
===========
Net income allocated to Wells Real Estate Fund XIII $ 58,610
===========
Net income allocated to Wells Operating Partnership, L.P. $ 297,745
===========
The Fund XIII and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Partners' Capital
for the Period From June 27, 2001 (Inception) Through
December 31, 2001
Wells
Wells Real Operating Total
Estate Partnership, Partners'
Fund XIII L.P. Capital
---------- ------------ -----------
Balance, June 27, 2001 (inception) $ 0 $ 0 $ 0
Net income 58,610 297,745 356,355
Partnership contributions 8,491,069 18,285,076 26,776,145
Partnership distributions (96,241) (455,483) (551,724)
---------- ----------- -----------
Balance, December 31, 2001 $8,453,438 $18,127,338 $26,580,776
========== =========== ===========
F-13
The Fund XIII and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Cash Flows
for the Period From June 27, 2001 (Inception) Through
December 31, 2001
Cash flows from operating activities:
Net income $ 356,355
-------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 266,605
Changes in assets and liabilities:
Accounts receivable (71,236)
Prepaid expenses and other assets (773)
Accounts payable 145,331
-------------
Total adjustments 339,927
-------------
Net cash provided by operating activities 696,282
-------------
Cash flows from investing activities:
Investment in real estate (25,779,337)
-------------
Cash flows from financing activities:
Contributions from joint venture partners 25,780,110
Distributions to joint venture partners (236,675)
-------------
Net cash provided by financing activities 25,543,435
-------------
Net increase in cash and cash equivalents 460,380
Cash and cash equivalents, beginning of period 0
-------------
Cash and cash equivalents, end of year $ 460,380
=============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to Joint Venture $ 996,035
=============
6. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the year ended December 31,
2001 is recalculated as follows:
Financial statement net income $34,868
Increase in net income resulting from:
Depreciation expense for financial reporting purposes in excess of amounts
for income tax purposes 20,390
Rental income accrued for financial reporting purposes in excess of amounts
for income tax purposes 6,144
-------
Income tax basis net income $61,402
=======
F-14
The Partnership's income tax basis partners' capital at December 31, 2001 is
computed as follows:
Financial statement partners' capital $ 9,330,946
Increase in partners' capital resulting from:
Depreciation expense for financial reporting purposes in excess of
amounts for income tax purposes 20,390
Capitalization of syndication costs for income tax purposes, which are
accounted for as cost of capital for financial reporting purposes 1,349,653
Accumulated rental income accrued for financial reporting purposes in
excess of amounts for income tax purposes 6,144
Partnership's distributions payable 70,000
------------
Income tax basis partners' capital $ 10,777,133
============
7. Rental Income
The future minimum rental income due from the Partnership's respective ownership
interest in the Joint Venture under noncancelable operating leases at December
31, 2001 is as follows:
Year ended December 31:
2002 $ 814,412
2003 832,845
2004 851,593
2005 870,754
2006 890,546
Thereafter 4,453,067
-----------
$ 8,713,217
===========
One tenant contributed 62% of rental income. In addition, two tenants will
contribute 78% and 22% of future minimum rental income.
The future minimum rental income due to the Fund XIII and REIT Joint Venture
under noncancelable operating leases at December 31, 2001 is as follows:
Year ended December 31:
2002 $ 2,545,038
2003 2,602,641
2004 2,661,228
2005 2,721,105
2006 2,782,957
Thereafter 13,915,835
------------
$ 27,228,804
============
One tenant contributed approximately 95% of rental income for the year ended
December 31, 2001. In addition, two tenants will contribute approximately 51%
and 49% of future minimum rental income.
F-15
8. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the year ended December 31, 2001:
2001 Quarters Ended
------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -------------
Revenues $ 0 $ 2,238 $ 32,565 $ 61,882
Net (loss) income 0 (1,251) 4,409 31,710
Net loss allocated to general partners 0 (13) (137) (350)
Net income allocated to cash preferred limited
partners 0 0 18,151 66,142
Net loss allocated to tax preferred limited
partners 0 (1,238) (13,605) (34,082)
Net income per weighted average cash preferred
limited partner unit outstanding (a) $ 0.00 $ 0.00 $ 0.07 $ 0.16
Net loss per weighted average tax preferred
limited partner unit outstanding (a) 0.00 (0.07) (0.23) (0.21)
Distribution per weighted average cash
preferred limited partner unit outstanding 0.00 0.00 0.00 0.16
(a) The totals of the four quarterly amounts for the year ended
December 31, 2001 do not equal the totals for the year. This
difference results from the use of a weighted average to
compute the number of units outstanding for each quarter and
the year.
9. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-16
EXHIBIT INDEX
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(Wells Real Estate Fund XIII, 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) Agreement of Limited Partnership of Wells Real Estate Fund XIII, L.P.
(Exhibit 3.1 to Form S-11 Registration Statement of Wells Real Estate
Fund XIII, L.P., as amended to date, Commission File No. 333-48984)
*3(b) Certificate of Limited Partnership of Wells Real Estate Fund XIII, L.P.
dated September 15, 1998 (Exhibit 3.2 to Form S-11 Registration
Statement of Wells Real Estate Fund XIII, L.P., as amended to date,
Commission File No. 333-48984)
*3(c) Certificate of Amendment to the Certificate of Limited Partnership of
Wells Real Estate Fund XIII, L.P. dated October 20, 2000 (Exhibit 3.2
(a) to Form S-11 Registration Statement of Wells Real Estate Fund
XIII, L.P., as amended to date, Commission File No. 333-48984)
*10(a) Management and Leasing Agreement with Wells Management Company, Inc.
(Exhibit 10.2 to Form S-11 Registration Statement of Wells Real Estate
Fund XIII, L.P., as amended to date, Commission File No. 333-48984)
*10(b) Joint Venture Partnership Agreement of Wells Fund XIII-REIT Joint
Venture Partnership (Exhibit 10.85 to Form S-11 Registration Statement
of Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-44900)
*10(c) Agreement for the Purchase and Sale of Property for the AmeriCredit
Building (Exhibit 10.86 to Form S-11 Registration Statement of Wells
Real Estate Investment Trust, Inc., Commission File No. 333-44900)
*10(d) Lease Agreement for the AmeriCredit Building (Exhibit 10.87 to Form
S-11 Registration Statement of Wells Real Estate Investment Trust,
Inc., as amended to date, Commission File No. 333-44900)
*10(e) Purchase Agreement for the ADIC Buildings (Exhibit 10.6 to Form S-11
Registration Statement of Wells Real Estate Fund XIII, L.P., as
amended to date, Commission File No. 333-48984)
*10(f) Purchase Agreement for the land immediately adjacent to the ADIC
Buildings (Exhibit 10.7 to Form S-11 Registration Statement of Wells
Real Estate Fund XIII, L.P., as amended to date, Commission File No.
333-48984)
*10(g) Lease Agreement for the ADIC Buildings (Exhibit 10.8 to Form S-11
Registration Statement of Wells Real Estate Fund XIII, L.P., as
amended to date, Commission File No. 333-48984)