SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended September 30, 2002 |
OR
| o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the transition period from to |
Commission file number 0-25731
WELLS REAL ESTATE FUND XI,
L.P.
(Exact name of registrant as specified in its charter)
| Georgia (State or other jurisdiction of incorporation or organization) |
58-2250094 (I.R.S. Employer Identification Number) |
| 6200 The Corners Pkwy., Norcross, Georgia (Address of principal executive offices) |
30092 (Zip Code) |
| Registrant’s telephone number, including area code |
(770) 449-7800 |
_____________________________________________________________
(Former name, former address, and former fiscal year, if changed since last
report)
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 o
FORM 10-Q
WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
INDEX
| Exhibit Index | 18 |
| Exhibit 99.1 — Certification of Chief Executive Officer | 19 |
| Exhibit 99.2 — Certification of Chief Financial Officer | 20 |
WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
| (unaudited) September 30, 2002 |
December 31, 2001 |
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| ASSETS: | |||||||
| Investments in joint ventures (Note 2) | $ | 12,847,969 | $ | 13,261,778 | |||
| Cash and cash equivalents | 9,085 | 17,542 | |||||
| Due from affiliates | 423,085 | 348,632 | |||||
| Accounts receivable | 4,470 | 1,278 | |||||
| Total assets | $ | 13,284,609 | $ | 13,629,230 | |||
| LIABILITIES AND PARTNERS’ CAPITAL: | |||||||
| Liabilities: | |||||||
| Partnership distributions payable | $ | 325,079 | $ | 328,151 | |||
| Partners’ capital: | |||||||
| Limited partners: | |||||||
| Class A—1,368,756 units and 1,346,256 units outstanding as of September 30, 2002 and December 31, 2001, respectively |
12,143,288 | 12,070,817 | |||||
| Class B—284,524 units and 307,024 units outstanding as of September 30, 2002 and December 31, 2001, respectively |
816,242 | 1,230,262 | |||||
| Total partners’ capital | 12,959,530 | 13,301,079 | |||||
| Total liabilities and partners’ capital | $ | 13,284,609 | $ | 13,629,230 | |||
The accompanying notes are an integral part of these balance sheets.
WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
| (unaudited) | (unaudited) | ||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||
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| September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
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| REVENUES: | |||||||||||||
| Equity in income of joint ventures (Note 2) | $ | 222,525 | $ | 244,260 | $ | 688,778 | $ | 720,266 | |||||
| Interest income | 477 | 0 | 1,105 | 1,045 | |||||||||
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| 223,002 | 244,260 | 689,883 | 721,311 | ||||||||||
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| EXPENSES: | |||||||||||||
| Partnership administration | 14,280 | 16,128 | 47,617 | 45,267 | |||||||||
| Legal and accounting | 680 | 1,440 | 12,302 | 15,300 | |||||||||
| Computer costs | 1,723 | 2,997 | 5,180 | 8,503 | |||||||||
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| 16,683 | 20,565 | 65,099 | 69,070 | ||||||||||
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| NET INCOME | $ | 206,319 | $ | 223,695 | $ | 624,784 | $ | 652,241 | |||||
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| NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS |
$ | 320,339 | $ | 352,822 | $ | 993,866 | $ | 1,026,673 | |||||
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| NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS |
$ | (114,020 | ) | $ | (129,127 | ) | $ | (369,082 | ) | $ | (374,432 | ) | |
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| NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT |
$ | 0.23 | $ | 0.26 | $ | 0.73 | $ | 0.77 | |||||
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| NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER UNIT |
$ | (0.40 | ) | $ | (0.41 | ) | $ | (1.24 | ) | $ | (1.20 | ) | |
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| CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT |
$ | 0.24 | $ | 0.24 | $ | 0.71 | $ | 0.73 | |||||
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The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS’ CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2001
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2002 (UNAUDITED)
| Limited Partners | ||||||||||||||||
| Class A | Class B | |||||||||||||||
| Units | Amounts | Units | Amounts | Total Partners’ Capital |
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| BALANCE, December 31, 2000 | 1,341,356 | $ | 11,993,987 | 311,924 | $ | 1,745,547 | $ | 13,739,534 | ||||||||
| Net income (loss) | 0 | 1,361,828 | 0 | (491,478 | ) | 870,350 | ||||||||||
| Partnership distributions | 0 | (1,308,805 | ) | 0 | 0 | (1,308,805 | ) | |||||||||
| Class A conversions | (1,100 | ) | (9,836 | ) | 1,100 | 9,836 | 0 | |||||||||
| Class B conversions | 6,000 | 33,643 | (6,000 | ) | (33,643 | ) | 0 | |||||||||
| BALANCE, December 31, 2001 | 1,346,256 | 12,070,817 | 307,024 | 1,230,262 | 13,301,079 | |||||||||||
| Net income (loss) | 0 | 993,866 | 0 | (369,082 | ) | 624,784 | ||||||||||
| Partnership distributions | 0 | (966,333 | ) | 0 | 0 | (966,333 | ) | |||||||||
| Class A conversions | (10,000 | ) | (89,662 | ) | 10,000 | 89,662 | 0 | |||||||||
| Class B conversions | 32,500 | 134,600 | (32,500 | ) | (134,600 | ) | 0 | |||||||||
| BALANCE, September 30, 2002 (unaudited) |
1,368,756 | $ | 12,143,288 | 284,524 | $ | 816,242 | $ | 12,959,530 | ||||||||
The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
| (unaudited) | |||||||
| Nine Months Ended | |||||||
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| September 30, 2002 |
September 30, 2001 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net income | $ | 624,784 | $ | 652,241 | |||
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||
| Equity in income of joint ventures | (688,778 | ) | (720,266 | ) | |||
| Changes in assets and liabilities: | |||||||
| Prepaid expenses and other assets | 0 | (6,448 | ) | ||||
| Accounts payable | (3,192 | ) | 12,012 | ||||
| Due to affiliates | 5,000 | (438 | ) | ||||
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| Net cash used in operating activities | (62,186 | ) | (62,899 | ) | |||
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| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Distributions received from joint ventures | 1,023,134 | 1,024,421 | |||||
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| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Distributions paid to partners from accumulated earnings | (969,405 | ) | (980,669 | ) | |||
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| NET DECREASE IN CASH AND CASH EQUIVALENTS | (8,457 | ) | (19,147 | ) | |||
| CASH AND CASH EQUIVALENTS, beginning of year | 17,542 | 77,460 | |||||
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| CASH AND CASH EQUIVALENTS, end of period | $ | 9,085 | $ | 58,313 | |||
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The accompanying notes are an integral part of these statements.
WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Business
| Wells Real Estate Fund XI, L.P. (the “Partnership”) is a Georgia public limited partnership with Leo F. Wells, III and Wells Partners, L.P. (“Wells Partners”), a Georgia nonpublic limited partnership, serving as the General Partners. The Partnership was formed on June 20, 1996 for the purpose of acquiring, developing, owning, operating, improving, leasing, and otherwise managing income producing commercial properties for investment purposes. Limited partners 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) add or 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. |
| On December 31, 1997, the Partnership commenced a public offering of up to $35,000,000 of limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership commenced active operations on March 3, 1998 upon receiving and accepting subscriptions for 125,000 units. The offer terminated on December 30, 1998 at which time approximately 1,302,942 and 350,338 units had been sold to 1,250 and 95 Class A and Class B Limited Partners, respectively, for total limited partner capital contributions of $16,532,802. As of September 30, 2002, the Partnership had paid a total of $578,648 in acquisition and advisory fees and acquisition expenses and $2,066,600 in selling commissions and organization and offering expenses and invested $3,357,436 in Fund IX-X-XI-REIT Associates, $2,398,767 in Fund X-XI Associates, and $8,131,351 in Fund XI-XII-REIT Associates. |
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
| The Partnership owns interests in all of its real estate assets through joint ventures with other Wells Real Estate Funds. As of September 30, 2002, the Partnership owned interests in the following 11 properties through the affiliated joint ventures listed below: |
| Joint Venture | Joint Venture Partners | Properties | |||
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| Fund IX-X-XI-REIT Associates | - Wells Real Estate Fund IX, L.P. - Wells Real Estate Fund X, L.P. - Wells Real Estate Fund XI, L.P. |
1. | Alstom Power-Knoxville Building A three-story office building located in Knoxville, Tennessee | ||
| - Wells Operating Partnership, L.P.* | 2. | 360 Interlocken Building A three-story office building located in Boulder County, Colorado | |||
| 3. | Avaya Building A one-story office building located in Oklahoma City, Oklahoma | ||||
| 4. | Iomega Building A single-story warehouse and office building located in Ogden, Weber County, Utah | ||||
| 5. | Ohmeda Building A two-story office building located in Louisville, Boulder County, Colorado | ||||
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| Fund X-XI Associates - Orange County | - Wells Real Estate Fund X, L.P. - Wells Real Estate Fund XI, L.P. |
6. | Cort Building A one-story office and warehouse building located in Fountain Valley, California | ||
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| Fund X-XI Associates - Freemont | - Wells Real Estate Fund X, L.P. - Wells Real Estate Fund XI, L.P. |
7. | Fairchild Building A two-story warehouse and office building located in Fremont, California | ||
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| Fund XI-XII-REIT Associates | - Wells Real Estate Fund XI, L.P. - Wells Real Estate Fund XII, L.P. - Wells Operating Partnership, L.P.* |
8. | Eybl Cartex Building A two-story manufacturing and office building located in Fountain Inn, South Carolina | ||
| 9. | Sprint Building A three-story office building located in Leadwood, Johnson County, Kansas | ||||
| 10. | Johnson Matthey Building A one-story office building and warehouse located in Tredyffin Township, Chester County, Pennsylvania | ||||
| 11. | Gartner Building A two-story office building located in Ft. Myers, Lee County, Florida | ||||
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| * | Wells Operating Partnership, L.P. (“Wells OP”) is a Delaware limited partnership with Wells Real Estate Investment Trust, Inc. serving as its general partner; Wells REIT is a Maryland corporation that qualifies as a real estate investment trust. |
| Each of the aforementioned properties was acquired on an all cash basis. For further information regarding the foregoing joint ventures and properties, refer to the report filed for the Partnership Form 10-K for the year ended December 31, 2001. |
(b) Basis of Presentation
| The financial statements of the Partnership have been prepared in accordance with the instructions for Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements. The quarterly statements included herein have not been examined by independent accountants. However, in the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly present the results for such periods. Interim results for 2002 are not necessarily indicative of results for the year. For further information, refer to the financial statements and footnotes included in the report filed for the Partnership on Form 10-K for the year ended December 31, 2001. |
(c) Distributions of Net Cash From Operations
| As defined by the partnership agreement, cash available for distributions is distributed quarterly on a cumulative non-compounded basis to the limited partners as follows: |
| • | First, to all Class A limited partners until such limited partners have received distributions equal to a 10% per annum return on their respective adjusted capital contributions, as
defined. |
| • | Second, to the General Partners until each general partner has received distributions equal to 10% of total distributions declared by the Partnership per
annum. |
| • | Third, to the Class A limited partners and the General Partners allocated on a basis of 90% and 10%, respectively. |
| No distributions will be made to the limited partners holding Class B units. |
(d) Impairment of Real Estate Assets
| On January 1, 2002, the Partnership adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Under this accounting standard, management reviews each of the properties in which the partnership holds an interest for impairment as events or changes in circumstances arise, which indicate that the carrying amounts of such assets may not be recoverable and the future undiscounted cash flows expected to be generated by such assets are less than the respective carrying amounts. If such assets are considered to be impaired, the Partnership records impairment losses and reduces the carrying amounts of the impaired assets to amounts that reflect the fair value of the assets at the time impairment is evident. |
| Management also reviews estimated selling prices of assets held for sale and records impairment losses to reduce the carrying amount of assets held for sale when the carrying amounts exceed the estimated selling prices less costs to sell. Material long-lived assets held for sale are separately identified in the balance sheets, and the related net operating income is segregated as income from discontinued operations in the statements of income. Depreciation is not recorded for long-lived assets held for sale. If an asset held for sale reverts to an asset used in operations, the asset will be measured at the lower of |
| the original carrying cost, adjusted for the forgone depreciation, or the fair value at the date of the decision to hold the assets for use in operations. Neither the Partnership nor its joint ventures have recognized impairment losses to date. |
(e) Reclassifications
| Certain prior year amounts have been reclassified to conform with the current period financial statement presentation. |
2. INVESTMENTS IN JOINT VENTURES
(a) Basis of Presentation
| The Partnership owned interests in 11 properties as of September 30, 2002 through its ownership in the joint ventures described in Note 1. The Partnership does not have control over the operations of these joint ventures; however, it does exercise significant influence. Accordingly, investments in joint ventures are recorded using the equity method of accounting. For further information regarding investments in joint ventures, see the report filed for the Partnership on Form 10-K for the year ended December 31, 2001. |
(b) Summary of Operations
| The following information summarizes the operations of the unconsolidated joint ventures in which the Partnership held ownership interests for the three and nine months ended September 30, 2002 and 2001: |
| Total Revenues | Net Income | Partnership’s Share of Net Income |
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| Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||
| September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
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| Fund IX-X-XI-REIT Associates |
$ | 1,086,942 | $ | 1,082,768 | $ | 573,657 | $ | 669,906 | $ | 50,680 | $ | 59,226 | |||||||
| Fund X-XI Associates - Orange County |
199,203 | 203,812 | 134,828 | 149,477 | 31,891 | 35,642 | |||||||||||||
| Fund X-XI Associates - Fremont |
226,188 | 227,050 | 142,438 | 142,087 | 13,453 | 13,421 | |||||||||||||
| Fund XI-XII-REIT Associates |
837,893 | 843,962 | 483,789 | 520,011 | 126,501 | 135,971 | |||||||||||||
| $ | 2,350,226 | $ | 2,357,592 | $ | 1,334,712 | $ | 1,481,481 | $ | 222,525 | $ | 244,260 | ||||||||
| Total Revenues | Net Income | Partnership’s Share of Net Income |
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| Nine Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
September 30, 2002 |
September 30, 2001 |
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| Fund IX-X-XI-REIT Associates |
$ | 3,322,091 | $ | 3,263,864 | $ | 1,747,098 | $ | 2,042,759 | $ | 154,424 | $ | 180,600 | |||||||
| Fund X-XI Associates - Orange County |
598,487 | 602,280 | 404,784 | 414,603 | 95,743 | 98,758 | |||||||||||||
| Fund X-XI Associates - Fremont |
679,413 | 677,406 | 419,329 | 420,689 | 39,606 | 39,736 | |||||||||||||
| Fund XI-XII-REIT Associates |
2,530,767 | 2,533,153 | 1,525,947 | 1,534,247 | 399,005 | 401,172 | |||||||||||||
| $ | 7,130,758 | $ | 7,076,703 | $ | 4,097,158 | $ | 4,412,298 | $ | 688,778 | $ | 720,266 | ||||||||
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION |
| The following discussion and analysis should be read in conjunction with the accompanying financial statements and notes thereto. |
(a) 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 may cause actual results to differ materially from any forward-looking statements made in this report, including 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 flows. |
(b) Results of Operations
| Gross Revenues |
| Gross revenues decreased to $689,883 for the nine months ended September 30, 2002 from $721,311 for the nine months ended September 30, 2001 primarily due to (i) a decrease in operating cost reimbursement billings to tenants at the 360 Interlocken Building, Alstom Power-Knoxville Building, and Iomega Building, (ii) an increase in property insurance expenses for the Cort Building during 2002, (iii) late fees charged to a tenant of the Eybl Cartex Building during the third quarter of 2001, (iv) an increase in sales tax expenses for the Gartner Building resulting from the Florida State sales tax audit conducted in 2001, (v) reduced interest income due to lower average cash balances and a general decline in interest rates during 2002, and (vi) uncollectible receivables due from tenants at the Gartner Building that were written-off during the third quarter of 2002, partially offset by (vii) tenant renewals at the 360 Interlocken Building resulting in higher rental rates in 2002. Tenants are billed for operating cost reimbursements at estimated amounts, which are reconciled as tenants are billed (credited) for the net annual under (over) billings in the following year. |
| Expenses |
| Expenses decreased to $65,099 for the nine months ended September 30, 2002 from $69,070 for the nine months ended September 30, 2001 due to a decrease in accounting fees and computer costs. |
| As a result, net income decreased to $624,784 for the nine months ended September 30, 2002 from $652,241 for the same period in 2001. |
| Distributions |
| Distributions made to the limited partners holding Class A units decreased to $0.73 per unit, with respect to the nine months ended September 30, 2002, from $0.71 for the same period in 2001, primarily as a result of funding leasing costs and tenant improvements for the re-leasing of space at the 360 Interlocken Building in the second quarter of 2002. Such distributions have been made from net cash from operations and distributions received from investments in joint ventures. No distributions have been made to the limited partners holding Class B units or to the General Partners. |
| The General Partners’ guidance with regard to future operating cash distributions to the limited partners holding Class A units is that such distributions are likely to continue at a level comparable with that provided for the nine months ended September 30, 2002. |
(c) Liquidity and Capital Resources
| Net cash used in operating activities remained stable at $62,186 for the nine months ended September 30, 2002 compared to $62,899 for the nine months ended September 30, 2001. Net cash provided by investing activities decreased slightly to $1,023,134 for the nine months ended September 30, 2002 from $1,024,421 for the nine months ended September 30, 2001. Net cash used in financing activities decreased to $969,405 for the nine months ended September 30, 2002 from $980,669 for the nine months ended September 30, 2001 primarily due to the decrease in cash generated from joint ventures in 2002 as compared to the same period in 2001. |
| The Partnership expects to continue to meets its short-term liquidity requirements, generally through the use of net cash from operations and distributions received from investments in joint ventures. The General Partners believe that such sources will continue to provide adequate cash flows for the purposes of meeting the Partnership’ operating requirements. |
(d) 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 the tenant leases executed by the Partnership to protect the Partnership from the impact of inflation. Most leases contain provisions for common area maintenance, real estate tax and insurance reimbursements from tenants either on a per square foot basis, or above a certain allowance per square foot annually. These provisions should reduce the Partnership’s exposure to increases in costs and operating expenses resulting from inflation. There is no assurance, however, that the Partnership would be able to replace existing leases with new leases at higher base rental rates. |
(e) 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 judgments in the application of accounting policies, including making estimates and assumptions. These judgments may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements presented and the reported amounts of revenues and expenses during the respective 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 different presentation of our financial statements. |
| The accounting policies that we consider to be critical, in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain, are discussed below. For further information related to the Partnership’s accounting policies, including the critical accounting policies described below, refer to the report filed for the Partnership on Form 10-K for the year ended December 31, 2001. |
| 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 through its investments in joint ventures on a straight-line basis over the terms of the respective leases. Should tenants encounter financial difficulties in future periods, the amounts recorded as receivables may not be fully realized. |
| Operating Cost Reimbursements |
| The Partnership generally bills tenants for operating cost reimbursements through its investments in joint ventures on a monthly basis at amounts estimated largely based on actual prior period activity and the respective tenant 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 tenant lease terms. Should tenants encounter financial difficulties in future periods, the amounts recorded as receivables may not be fully 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 ownership interests through its 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 underlying assets, estimated at amounts equal to the future undiscounted operating cash flows expected to be generated from tenants over the life of the assets and from their eventual disposition, to the carrying value of the assets. 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 to date. |
| ITEM 4. | CONTROLS AND PROCEDURES |
| Within the 90 days prior to the date of this report, the Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, Inc., the corporate General |
| Partner of the Partnership, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures pursuant to Rule 13a – 14 under the Securities Exchange Act of 1934. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Partnership’s disclosure controls and procedures were effective. |
| There were no significant changes in the Partnership’s internal controls or other factors that could significantly affect such controls subsequent to the date of their evaluation. |
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
| ITEM 6 | EXHIBITS AND REPORTS ON FORM 8-K |
| (a) | The Exhibits to this report are set forth on the Exhibit Index to Third Quarter Form 10-Q attached hereto. | |
| (b) | During the third quarter of 2002, the Registrant filed a Current Report on Form 8-K dated July 3, 2002 disclosing the appointment of Ernst & Young LLP as the principal accountant to audit the financial statements of the Registrant. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| WELLS REAL ESTATE FUND XI, L.P. (Registrant) | |||
| By: | WELLS PARTNERS, LP | ||
| (General Partner) | |||
| By: | WELLS CAPITAL, INC. | ||
| (Corporate General Partner) | |||
November 13, 2002 |
/s/ | LEO F. WELLS, III | |
| Leo F. Wells, III President | |||
November 13, 2002 |
/s/ | DOUGLAS P. WILLIAMS | |
| Douglas P. Williams Principal Financial Officer of Wells Capital, Inc. | |||
CERTIFICATIONS
I, Leo F. Wells, III, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of the Partnership; | ||
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: |
| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared, | ||
| b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and | ||
| c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the board of directors of the corporate general partner of the General Partner: |
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | ||
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
| 6. | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Dated: November 13, 2002 |
By: | /s/ LEO F. WELLS, III | |
| Leo F. Wells, III Principal Executive Officer | |||
CERTIFICATIONS
I, Douglas P. Williams, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of the Partnership; |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; | ||
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: |
| a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared, | ||
| b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and | ||
| c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the board of directors of the corporate general partner of the General Partners: |
| a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and | ||
| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and |
| 6. | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Dated: November 13, 2002 |
By: | /s/ DOUGLAS P. WILLIAMS | |
| Douglas P. Williams Principal Financial Officer | |||
EXHIBIT INDEX
TO
THIRD QUARTER FORM 10-Q
OF
WELLS REAL ESTATE FUND XI, L.P.
| Exhibit No |
Description |
| 99.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 99.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |