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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
[FeeRequired]
For the fiscal year ended December 31, 1996 or
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[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
[No Fee Required]
For the transition period from__________________ to __________________________
Commission file number 0-20103
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Wells Real Estate Fund IV, L. P.
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(Exact name of registrant as specified in its charter)
Georgia 58-1915128
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State or other jurisdiction of I.R.S. Employer Identification Number)
incorporation or organization)
3885 Holcomb Bridge Road Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
Class A Unit
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(Title of Class)
Class B Unit
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
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Aggregate market value of the voting stock held by non-affiliates: Not
---
Applicable
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PART I
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ITEM 1. BUSINESS
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GENERAL
Wells Real Estate Fund IV, L.P. (the "Partnership") is a Georgia public limited
partnership organized on October 25, 1990, under the laws of the state of
Georgia, having Leo F. Wells, III and Wells Partners, L.P., a non-public limited
partnership, as General Partners. The Partnership was formed on July 31, 1988,
for the purpose of acquiring, developing, constructing, owning, operating,
improving, leasing and otherwise managing for investment purposes income-
producing commercial or industrial properties.
On March 4, 1991, the Partnership commenced an offering of up to $25,000,000 of
Class A or Class B limited partnership units ($10.00 per unit) pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933. The
Partnership did not commence active operations until it received and accepted
subscriptions for 125,000 units which occurred on May 13, 1991. The offering was
terminated on February 29, 1992, at which time the partnership had obtained
total contributions of $13,614,652 representing subscriptions from 1,285 Limited
Partners.
As of December 31, 1996, the Partnership owned interests in the following
properties: (i) the Stockbridge Village Shopping Center, a retail shopping
center located in Stockbridge, Georgia, southeast of Atlanta: (ii) The G.E.
Office Building, a two-story office building located in Richmond, Virginia;
(iii) The Medical Center Project, two substantially identical two-story office
buildings located in Clayton County, Georgia; and (iv) The Jacksonville Project,
a four-story office building located in Jacksonville, Florida. All of the
foregoing properties were acquired on an all cash basis and are described in
more detail in Item 2, below
EMPLOYEES
The Partnership has no direct employees. The employees of Wells Capital, Inc., a
General Partner of the Partnership, perform a full range of real estate services
including leasing and property management, accounting, asset management and
investor relations for the Partnership. See Item 11 - "Compensation of General
Partners and Affiliates" for a summary of the fees paid to the General Partners
and their affiliates during the fiscal year ended December 31, 1996.
INSURANCE
Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all the properties
owned directly or indirectly by the Partnership. In the opinion of management of
the registrant, the properties are adequately insured.
2
COMPETITION
The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the General Partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements and other inducements, all of which may
have an adverse impact on results of operations. At the time the Partnership
elects to dispose of its properties, the Partnership will also be in competition
with sellers of similar properties to locate suitable purchasers for its
properties.
ITEM 2. PROPERTIES.
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The Partnership owns interest in four properties through its investment in joint
ventures of which three are office buildings and one is a retail building. The
Partnership does not have control over the operations of the joint ventures;
however, it does exercise significant influence. Accordingly, investment in
joint ventures is recorded on the equity method. As of December 31, 1996, these
properties were 92.89% occupied, down from 93.17% at December 31, 1995, 94.95%
at December 31, 1994, 95.9% at December 31, 1993 and up from 90.39% at December
31, 1992.
The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1996, assuming no exercise of renewal options
or termination rights:
Partnerships
Year of Number of Annualized Share of Percentage of Percentage of
Lease Leases Square Gross Base Annualized Total Square Total Annualized
Expiration Expiring Feet Expiring Rent(1) Gross Base Rent(1) Feet Expiring Base Rent
- ---------------------------------------------------------------------------------------------------------------
1997 10 19,383 269,093 120,818 9.95% 8.96%
1998 6 17,518 220,734 112,172 8.99% 7.35%
1999 5 32,214 657,486 392,917 16.53% 21.89%
2000(2) 2 46,376 582,481 259,202 23.80% 19.39%
2001 0 0 0 0 0.00% 0.00%
2002 2 7,130 151,608 64,711 3.66% 5.05%
2003(3) 2 70,732 1,084,613 671,375 36.29% 36.11%
2004 1 1,532 37,640 23,299 0.79% 1.25%
2005 0 0 0 0 0.00% 0.00%
2006 0 0 0 0 0.00% 0.00%
- ---------------------------------------------------------------------------------------------------------------
28 194,885 3,003,655 1,644,494 100.0% 100.0%
(1) Average monthly gross rent over the life of the lease, annualized.
(2) Expiration of General Electric with 43,000.
(3) Expiration of IBM with 68,100 square feet at the Jacksonville Project.
3
The following describes the properties in which the Partnership owns an interest
as of December 31, 1996:
FUND III - FUND IV JOINT VENTURE
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On March 27, 1991, the Partnership and Wells Real Estate Fund III, L.P. ("Wells
Fund III"), a Georgia public limited partnership having Leo F. Wells, III and
Wells Capital, Inc., a Georgia corporation, as General Partners, formed a joint
venture known as Fund III and Fund IV Associates (the "Fund III-Fund IV Joint
Venture"). The investment objectives of Wells Fund III are substantially
identical to those of the Partnership. The Partnership holds an approximate
42.7% of equity interest in the Fund III-Fund IV Joint Venture which includes a
multi-tenant retail center and an office building. As of December 31, 1996, the
Partnership had contributed $6,131,677 and Wells Fund III had contributed
$8,119,603 for total contributions of $14,251,280 to the Fund III-Fund IV Joint
Venture. The Partnership owns interests in the following two properties through
the Fund III-Fund IV Joint Venture:
The Stockbridge Property / Fund III - Fund IV Joint Venture
- -----------------------------------------------------------
On April 4, 1991, the Fund III-Fund IV Joint Venture purchased 13.62 acres of
real property located in Clayton County, Georgia for the purchase price of
$3,057,729, including acquisition costs, for the purpose of developing,
constructing and operating a shopping center known as the Stockbridge Village
Shopping Center (the "Stockbridge Property"). The Stockbridge Property consists
of a multi-tenant shopping center containing approximately 112,891 square feet
of which approximately 64,097 square feet is occupied by the Kroger Company, a
retail grocery chain. This is the only tenant which occupies more than ten
percent of the rentable square feet. The lease with Kroger Company is for an
initial term of 20 years commencing November 14, 1991, with an option to extend
for four consecutive five year periods at the same rental rate as the original
lease. The annual base rent payable under the Kroger lease during the initial
term is $492,692. The remaining 48,794 square feet is comprised of 12 separate
retail spaces and 3 free-standing retail buildings. As of December 31, 1996, the
Partnership had contributed a total of $5,047,132 and Wells Fund III had
contributed a total of $4,515,042 to fund the total costs of approximately
$9,562,000 to fund the acquisition and development of the Stockbridge Property.
The occupancy rate at the Stockbridge Property was 93% in 1996 and 1995, 97% in
1994 95% in 1993 and 97% in 1992. The average effective annual rental per square
foot at the Stockbridge Property was $9.59 for 1996, $10.16 for 1995, $10.26 for
1994, $9.13 for 1993, and $7.34 for 1992.
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
- -------------------------------------------------------------
The G.E. Building is a two-story office building containing approximately 43,000
square feet located in Richmond, Virginia which was acquired by the Fund III-
Fund IV Joint Venture on July 1, 1992, for a purchase price of $4,687,600. As of
December 31, 1996, a total of $4,689,106 had been incurred for the acquisition
of the G.E. Building. Of this amount, the Partnership
4
contributed $1,084,545 and Wells Fund III contributed $3,604,561 to the Fund
III-Fund IV Joint Venture.
The entire G.E. Building is currently under a net lease to General Electric
("G.E."), a corporate office for the lighting division. The annual base rent
payable is currently $530,742 with annual base increases of 2%. The G.E. lease
expires March 31, 2000, with an option to extend the lease for one additional
five-year period at the same rental rate as the original lease.
The occupancy rate at the G.E. Building was 100% for the years ended December
31, 1996, 1995 1994, 1993 and 1992. The average effective annual rental per
square foot at the G.E. Building is $12.27 for 1996, 1995, 1994, 1993, and 1992.
FUND IV - FUND V JOINT VENTURE
- ------------------------------
On April 14, 1992, the Partnership and Wells Real Estate Fund V, L.P. ("Wells
Fund V"), a Georgia public limited partnership affiliated with the Partnership
through common general partners, entered into a joint venture agreement known as
Fund IV and Fund V Associates (the "Fund IV - Fund V Joint Venture"). The
investment objectives of Wells Fund IV are substantially identical to those of
the Partnership. As of December 31, 1996, the Partnership had contributed
approximately $4,736,173 to the Fund IV - V Joint Venture and Fund V had
contributed approximately $7,719,249. It is anticipated that Fund V will fund an
additional $90,000 toward the completion of the Medical Center Project, at which
time, the Fund V Partnership will hold an approximate 62% equity interest in the
Fund IV - Fund V Joint Venture. The Partnership owns interests in the following
two properties through the Fund IV -Fund V Joint Venture:
The Jacksonville Project
- ------------------------
On June 8, 1992, the Fund IV-Fund V Joint Venture acquired 5.676 acres of real
property located in Jacksonville, Florida at a purchase price of $1,360,000 for
the purpose of developing, constructing, and operating a four-story office
building containing approximately 87,600 square feet (the "Jacksonville
Project"). As of December 31, 1996, the Partnership contributed $4,961,709 and
Wells Fund IV contributed $3,439,947 to the Fund IV-Fund V Joint Venture to fund
the acquisition and development of the Jacksonville Project. The Partnership
holds an approximate 38% equity interest in the Fund IV - Fund V Joint Venure,
and Fund V hold approximately 62% equity interest in the Fund IV - Fund V Joint
Venture.
The Jacksonville Project is leased primarily by International Business Machines
Corporation ("IBM"), a computer sales and service corporation and Customized
Transportation, Inc. ("CTI"), a division of CSX Railroad, a transportation
corporation.
The initial term of the IBM lease containing 68,100 square feet is 9 years and
11 months and commenced upon completion of the building in June 1993, with an
option to extend the initial lease for two consecutive five-year periods. The
annual base rent payable under the IBM lease
5
during the initial term is $1,122,478 payable in equal monthly installments of
$93,540. IBM is also required to pay additional rent equal to its share of
operating expenses during the lease term.
The term of the CTI lease containing 11,780 square feet is 5 years and commenced
in March, 1994. The annual base rent payable under the CTI lease is $325,965.
The occupancy rates at the Jacksonville Project were 100% in 1996, 1995 and
1994, and 85% in 1993, the first year of occupancy. The average effective annual
rental per square foot at the Jacksonville Project was $16.71 for 1996 and 1995,
$16.39 for 1994 and $14.19 for 1993.
The Medical Center Project
- --------------------------
On September 14, 1992, the Fund IV-Fund V Joint Venture acquired 2.655 acres of
real property in Stockbridge, Georgia for $440,000 for the purpose of
constructing two substantially identical two-story office buildings containing
approximately 17,847 rentable square feet each (the "Medical Center Project").
It is anticipated that a total of approximately $4,200,000 will be required to
be contributed to the Fund IV - Fund V Joint Venture for the acquisition and
development of the Medical Center Project. As of December 31, 1996, the
Partnership had contributed $1,296,266 and Wells Fund V had contributed
$2,757,540 to the Fund IV - Fund V Joint Venture for the acquisition and
development of the Medical Center Project. It is currently anticipated that an
additional approximately $146,000 will be required for the completion of the
Medical Center Project. The Partnership has $90,000 for this purpose, with any
excess costs required to be funded out of operating cash flow. The Partnership
holds an approximately 38% equity interest, and Wells Fund IV holds an
approximately 62% equity interest in the Fund IV - Fund V Joint Venture.
Construction on the first building at the Medical Center Project was completed
in March, 1993 and the building shell of the second building was completed in
April, 1994. Georgia Baptist, a medical health care and urgent care facility,
leased approximately 14,669 square feet in the first building for a term of six
years and has the option to extend the initial term of the lease for one five-
year period. The base rent payable per square foot ranges from $16.00 per month
during the first year to $18.50 during the sixth year. In addition, Georgia
Baptist has leased approximately 3,376 square feet in the second building for a
term of five years at an annual rental rate of $55,704, increasing to $57,392 in
the fourth year and $59,080 in the fifth year.
The occupancy rate at the Medical Center Project was 67% in 1996 and 1995, 58%
in 1994 and 69% in 1993, the first year of occupancy. The average effective
annual rental per square foot at the Medical Center Project was $11.83 for 1996,
$10.43 for 1995, $7.59 for 1994 and $11.25 for 1993.
ITEM 3. LEGAL PROCEEDINGS.
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There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 1996.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted to a vote of the Limited Partners during the fourth
quarter of 1996.
7
PART II
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ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
- ----------------------------------------------------------------------------
As of February 28, 1997, the Partnership had 1,322,909 outstanding Class A Units
held by a total of 1,272 Limited Partners and 38,551 outstanding Class B Units
held by a total of 21 Limited Partners. The capital contribution per unit is
$10.00. There is no established public trading market 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.
Cash available for distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners select to have their cash distributions
paid monthly. Under the Partnership Agreement, distributions are allocated first
to the Limited Partners holding Class A Units until they have received cash
distributions in each fiscal year of the Partnership equal to 10% of their
adjusted capital contribution. After this preference is satisfied, the General
Partners will receive an amount of Net Cash from Operations equal to one-tenth
of the total amount of Net Cash from Operations distributed. After, the Limited
Partners holding Class A Units will receive 90% of Net Cash from Operations, and
the General Partners will receive 10%. No Net Cash from Operations will be
distributed to Limited Partners holding Class B Units. Cash distributions made
to the Limited Partners holding Class A Units for the two most recent fiscal
years were as follows:
Per Class A Per Class A Per Class B
Unit Unit Unit
Distributions For Total Cash Investment Return of Return of General
Quarter Ended Distribution Income Capital Capital Partner
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March 31, 1995 $227,380 $0.12 $0.05 $0.00 $0.00
June 30, 1995 $235,569 $0.15 $0.03 $0.00 $0.00
Sept. 30, 1995 $250,703 $0.13 $0.06 $0.00 $0.00
Dec. 31, 1995 $223,000 $0.07 $0.10 $0.00 $0.00
March 31, 1996 $220,611 $0.09 $0.08 $0.00 $0.00
June 30, 1996 $210,623 $0.09 $0.07 $0.00 $0.00
Sept. 30, 1996 $237,217 $0.10 $0.08 $0.00 $0.00
Dec. 31, 1996 $230,969 $0.09 $0.08 $0.00 $0.00
The fourth quarter distribution was accrued for accounting purposes in 1996, and
was not actually paid to the limited partners holding Class A units until
February 1997. Even though there is no guarantee, the General Partners
anticipate that cash distributions to Limited Partners holding Class A units
will continue in 1997 at a level at least comparable with 1996 cash
distributions on an annual basis.
8
ITEM 6. SELECTED FINANCIAL DATA.
- ---------------------------------
The following sets forth a summary of the selected financial data for the fiscal
years ended December 31, 1992, 1993, 1994, 1995 and 1996.
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total assets $11,003,435 $11,408,024 $11,709,854 $11,893,677 $11,870,439
Total revenues 555,955 694,521 678,591 570,709 421,532
Net income 482,495 623,867 605,011 496,911 200,942
Net (loss) allocated
to General Partners - - - - (393)
Net income allocated to
Class A Limited Partners 482,495 623,867 615,309 713,069 302,347
Net loss allocated to
Class B Limited Partners 0 0 (10,298) (216,158) (101,012)
Net income per weighted
average (1) Class A
Limited Partner Unit .36 .47 .47 .54 .23
Net loss per weighted
average (1) Class B
Limited Partner Unit 0 0 (.27) (5.61) (2.63)
Cash Distributions per
weighted average (1)
Class A Limited Partner
Unit:
Investment Income .36 .47 .62 .38 .25
Return of Capital .32 .24 .01 .00 .02
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATION.
- ---------------------
The following discussion and analysis should be read in conjunction with the
selected financial data and the accompanying financial statements of the
Partnership and notes thereto. This Report contains forward-looking statements,
within the meaning of Section 27A of the Securities Act of 1933 and 21E of the
Securities Exchange Act of 1934, including discussion and analysis of the
financial condition of the Partnership, anticipated capital expenditures
required to complete certain projects, amounts of cash distributions anticipated
to be distributed to Limited Partners in the future and certain other matters.
Readers of this Report should be aware that there are various factors that could
cause actual results to differ materially from any forward-looking statement
made in this Report, which include construction costs which may exceed
estimates, construction delays, lease-up risks, inability to obtain new tenants
upon the expiration of existing leases, and the potential need to fund tenant
improvements or other capital expenditures out of operating cash flow.
9
RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL CONDITIONS
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GENERAL
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Gross revenues of the Partnerships were $555,955 for the year ended December 31,
1996, as compared to $694,521 for the year ended December 31, 1995 and $678,591
for the year ended December 31, 1994. The decrease in 1996 as compared to 1995
was due primarily to decreased equity in income of the joint ventures. Such
decreased equity in income of the joint ventures was primarily the result of
increased depreciation expenses.
Expenses of the Partnership have remained relatively stable for the fiscal years
ending December 31, 1995 and 1994, while increasing for the fiscal year ended
1996. This increase was due to elevated accounting and legal fees offset by
lower administration and computer costs.
Depreciation expense increased for the joint ventures from 1995 to 1996 due to a
change in the estimated useful lives of buildings and improvements from 40 years
to 25 years which became effective October 1, 1995. For further discussion of
depreciation expense, please refer to the notes to the accompanying financial
statements.
Net income of the Partnership was $482,495 for the fiscal year ended December
31, 1996, as compared to $623,867 for the fiscal year ended December 31, 1995,
and $605,011 for the fiscal year ended December 31, 1994. Net income was
relatively stable for 1995 and 1994. Net income for 1996 reflects a decrease
over 1995 due to decreased equity in income in joint ventures as discussed
above.
The Partnership made cash distributions to the Limited Partners holding Class A
Units of $.68 per Class A Unit for the year ended December 31, 1996, $.71 per
Class A Unit for the year ended December 31, 1995 and $.63 for the year ended
December 31, 1994. No cash distributions were made to the Limited Partners
holding Class B Units or to the General Partners for the fiscal years ended
December 31, 1996, 1995, and 1994. Distributions accrued for the fourth quarter
of 1996 were paid in February, 1997.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of", which is
effective for fiscal years beginning after December 15, 1995. SFAS No. 1121
establishes standards for determining when impairment losses on long-lived
assets have occurred and how impairment losses should be measured. The joint
ventures adopted SFAS No. 121, effective January 1, 1995. The impact of adopting
SFAS No. 121 was not material to the financial statements of the joint ventures.
10
PROPERTY OPERATIONS
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As of December 31, 1996, the Partnership's ownership interest in Fund III - Fund
IV was 42.7% and in Fund IV - Fund V was 38%.
As of December 31, 1996, the Partnership owned interests through interests in
joint ventures in the following operational properties:
The Stockbridge Village Shopping Center / Fund III - Fund IV Joint Venture
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For the Year Ended December 31
-------------------------------------
1996 1995 1994
----------- ----------- -----------
Revenues:
Rental income $1,082,428 $1,148,600 $1,158,963
Interest income 13,024 15,482 9,678
---------- ---------- ----------
1,095,452 1,164,082 1,168,641
Expenses
Depreciation 338,989 249,689 218,742
Management & leasing expenses 98,442 105,251 124,458
Other operating expenses 90,187 101,047 84,646
---------- ---------- ----------
527,618 455,987 427,846
---------- ---------- ----------
Net income $ 567,834 $ 708,095 $ 740,795
========== ========== ==========
Occupied % 93% 93% 97%
Partnership's Ownership % in the
42.7% 42.7% 42.7%
Fund IV-Fund V Joint Venture
Cash distribution to the
Partnership $ 407,070 $ 450,613 $ 398,303
Net income allocated to the
Partnership $ 242,371 $ 302,239 $ 315,018
Rental income has decreased to $1,082,428 for 1996 as compared to $1,148,600 in
1995 and $1,158,963 in 1994 due to decreased occupancy resulting from the early
termination of a lease for 8,025 square feet in the fourth quarter of 1995.
Expenses of the property increased from $427,846 in 1994 to $455,987 in 1995 and
$527,618 in 1996 due primarily to the increase in depreciation expense during
the fourth quarter of 1995 as a result of the change in the estimated useful
lives of buildings and improvements, which became effective in the fourth
quarter of 1995, as previously discussed under the "General" section of "Results
of Operations and Changes in Financial Conditions". Net income of the property
decreased to $567,834 for 1996 as
11
compared to $708,095 for 1995 and $740,795 for 1994 due primarily to increased
depreciation expense amd decreased rental income as discussed above.
Real estate taxes were $104,795 for 1996, $120,899 for 1995 and $130,364 for
1994.
The Partnership's ownership percentage in the Fund III - Fund IV Joint Venture
remained constant at 42.7% for 1996, 1995 and 1994.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, Page 2. For additional information on tenants,
etc. refer to Item 2, Properties, Page 3.
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
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For the Year Ended December 31
---------------------------------
1996 1995 1994
---- ---- ----
Revenues:
Rental income $527,425 $527,425 $527,425
Expenses
Depreciation 196,220 132,727 112,639
Management & leasing expenses 39,860 23,696 26,572
Other operating expenses 8,731 25,438 63,144
-------- -------- --------
244,811 181,861 202,355
-------- -------- --------
Net income $282,614 $345,564 $325,070
======== ======== ========
Occupied % 100% 100% 100%
Partnership's Ownership % in
the Fund IV-Fund V Joint Venture 42.7% 42.7% 42.7%
Cash distribution to the Partnership $204,978 $189,038 $179,653
Net income allocated to the Partnership $120,629 $147,498 $138,304
Rental income remained constant for 1996, 1995 and 1994. Total expenses
decreased to $181,861 in 1995 from $202,355 in 1994 but increased to $244,811 in
1996. During 1995, the increase in depreciation expense due to the change in
the estimated useful lives of buildings and improvements, which became effective
in the fourth quarter of 1995, as previously discussed under the "General"
section of "Results of Operations and Changes in Financial Conditions," was
offset by a decrease in other operating expenses as compared to 1994, which was
primarily the result of decreased legal fees following the settlement of the
Thalhimer suit described below.
12
On May 10, 1993, the leasing agent, Morton G. Thalhimer, Inc. filed suit in the
U.S. District Court for the Eastern District of Virginia, Richmond, Virginia,
against the Partnership, Wells Fund III and the General Partners for leasing
commissions due over the original term of the lease (excluding renewals)
estimated to be approximately $163,500. G.E. and the seller of the property
were names as third party defendants in the suit alleging that they were the
parties which should be financially responsible for these leasing commissions.
Pursuant to the Settlement Agreement entered into with Thalhimer, commencing in
January, 1994, and during each month thereafter, Thalhimer is only entitled to
three percent (3%) of the monthly rent (exclusive of operating costs
reimbursements, real estate tax and insurance pass-throughs and similar items)
received by the landlord under the G.E. Lease (including any renewals or
extensions of the lease or taking of additional space), and except as set forth
in the Settlement Agreement, the landlord (the Fund III-Fund IV Joint Venture)
has no further obligation to Thalhimer or its successors or assigns under the
lease. G.E. has assumed 1 1/2% of the 3% and the Fund III-Fund IV Joint Venture
has assumed the remaining 1 1/2% of the total 3%.
Due to increased expenses in 1996 as compared to 1995 and decreased expenses in
1995 as compared to 1994, net income decreased to $282,614 in 1996, increased to
$345,564 for 1995, as compared to $325,070 in 1994.
The Partnership's ownership percentage in the Fund III - Fund IV Joint Venture
remained constant at 42.7% for 1996, 1995 and 1994.
Under the terms of the lease, G.E. pays the real estate taxes directly.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, Page 2. For additional information on tenants,
etc. refer to Item 2, Properties, Page 3.
13
The Jacksonville Project/Fund IV-Fund V Joint Venture
- -----------------------------------------------------
For the Year Ended December 31
-------------------------------------
1996 1995 1994
---- ---- ----
Revenues:
Rental income $1,463,969 $1,463,821 $1,436,139
Expenses
Depreciation 317,252 220,705 185,601
Management & leasing expenses 183,652 175,888 170,879
Other operating expenses 480,339 517,916 504,097
---------- ---------- ----------
981,243 914,509 860,577
---------- ---------- ----------
Net income $ 482,726 $ 549,312 $ 575,562
========== ========== ==========
Occupied % 100% 100% 100%
Partnership's Ownership % in
the Fund IV-Fund V Joint Venture 38.1% 38.1% 38.8%
Cash Distribution to the Partnership $ 283,229 $ 290,990 $ 293,286
Net Income Allocated to the Partnership $ 184,076 $ 210,272 $ 227,410
Rental income has stabilized for 1996 as compared to 1995 but was lower in 1994
due primarily to full occupancy for the entire years in 1996 and 1995, while
full occupancy for 1994 was achieved in August, 1994. Expenses increased due
primarily to depreciation increases in 1996 over 1995 and 1994 due to the change
in the estimated useful lives of buildings and improvements, which became
effective in the fourth quarter of 1995, as previously discussed under the
"General" section of "Results of Operations and Changes in Financial
Conditions". Cash distributions decreased slightly in 1996 compared to 1995 and
1994 due primarily to a decrease in the Partnership's ownership interest in the
project. Cash fundings to the Joint Venture for construction were contributed
by Wells Fund V which increased Wells Fund V's ownership interest and decreased
the Partnership's ownership interest in the Fund IV-Fund V Joint Venture
accordingly. Net income decreased in 1996 and 1995 from 1994 levels due
primarily to the change in depreciation method as discussed above.
The Jacksonville Project incurred property taxes of $172,732 for 1996, $149,856
for 1995, and $128,090 for 1994.
Management and leasing fees were increased in 1996 as compared to 1995 and 1994
due to the dramatic increase of CAM billings received.
14
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, Page 2. For additional information on tenants,
etc. refer to Item 2, Properties, Page 3.
The Medical Center Project/Fund IV-Fund V Joint Venture
- -------------------------------------------------------
For the Year Ended December 31
---------------------------------
1996 1995 1994
---- ---- ----
Revenues: $419,387 $369,741 $269,162
Rental income 12,884 12,974 7,191
-------- -------- --------
Interest income 432,271 382,715 276,353
-------- -------- --------
Expenses
Depreciation 159,523 114,645 79,116
Management & leasing expenses 54,242 49,638 33,558
Other operating expenses 219,120 155,878 195,945
-------- -------- --------
432,885 320,161 308,619
-------- -------- --------
Net income (loss) $ (614) $ 62,554 $(32,266)
======== ======== ========
Occupied % 67% 68% 58%
Partnership's Ownership % in
the Fund IV-Fund V Joint Venture 38.1% 38.1% 38.8%
Cash Distribution to the Partnership $ 67,447 $ 59,829 $ 20,844
Net Income (loss) Allocated to the Partnership $ (235) $ 23,925 $(12,655)
The 1994 net loss generated by the Medical Center Project related to the fact
that the second building, which opened in April, 1994, did not begin generating
rental revenues until November, 1994, while expenses of Building II such as
property taxes, building operating expenses, administrative costs and
depreciation commenced in April 1994. The net income of Building I was not
enough to offset the net loss of Building II in 1994.
Rental income increased in 1996 and 1995 over 1994 levels due to increased lease
up at the Medical Center Project. Occupancy increased to 68% (on both
buildings) in 1995 and remained the same in 1996 as compared to 58% in 1994.
Expenses have increased in 1996 and 1995 over 1994 levels due primarily to the
lease up of the buildings and a bad debt write off in 1996. Depreciation
increased in 1996 due to the change in the estimated useful lives of building
and improvements, which became effective in the fourth wuarter of 1995, as
previously discussed under the "General" section of "Results of Operations and
Changes in Financial Conditions."
15
Cash distributions allocated to the Partnership have increased over prior year
levels due primarily to the lease up of the project. Cash fundings to the Joint
Venture for construction were contributed by Wells Fund V which increased its
ownership interest resulting in a reduction in the Partnership's ownership
interest in the Fund IV - Fund V Joint Venture.
The Medical Center Project incurred property taxes of $37,898 for 1996 and
$43,303 for 1995.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, Page 2. For additions information on tenants,
etc. refer to Item 2, Properties, Page 3.
LIQUIDITY AND CAPITAL RESERVES
- ------------------------------
During its offering, which terminated on February 29, 1992, the Partnership
raised a total $13,614,652 in capital through the sale of 1,361,465 units. No
additional units will be sold by the Partnership. From the original funds
raised, the Partnership had invested a total of $10,962,464 in properties, paid
$748,805 in acquisition and advisory fees, $1,767,236 in selling commission and
organization and offering expenses, and is maintaining a working capital reserve
of $136,147.
Since the Partnership is an investment partnership formed for the purpose of
acquiring, owning and operating income-producing real property and has invested
all of its funds available for investment, it is highly unlikely that the
Partnership will acquire interests in any additional properties, and the
Partnership's capital resources are anticipated to remain relatively stable over
the holding period of its investments.
The Partnership is required to maintain working capital reserves in an amount
equal to the cash operating expenses estimated to be required to operate the
Partnership for a six month period, not to exceed 3% or be reduced below 1% of
offering proceeds available for investment in properties. The General Partners
believe such working capital reserves will be adequate.
The Partnership's net cash provided by operating activities increased in 1996 to
$424,607 from $309,172 in 1995 and $62,065 in 1994. This increase was due
primarily to the fact that fewer partnership distribution dollars are being
allocated to operating activities while a greater amount of partnership
distribution dollars is being allocated to financing activities.
Net cash used in investing activities decreased in to $0.00 in 1996, from
$13,541 in 1995 and $289,608 in 1994. These decreases were due to a decrease in
investment in joint ventures each year.
Cash and cash equivalents remained stable for years ending 1996, 1995, and 1994.
The Partnership distributes cash available less reserves, and as a result, the
level of cash remains stable.
16
The Partnership's distributions paid and payable through the fourth quarter of
1996 have been paid from net cash from operations and from distributions
received from its equity investment in joint ventures, and the Partnership
anticipates that distributions will continue to be paid on a quarterly basis
from such sources. The Partnership excepts to meet liquidity requirements and
budget demands through cash flow from operations.
The Partnership is unaware of any known demands, commitments, events or capital
expenditures other than that which is required for the normal operations of its
properties that will result in the Partnership's liquidity increasing or
decreasing in any material way. The Partnership expects to meet liquidity
requirements and budget demands through cash flow from operations.
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 executed by the Partnership to protect the
Partnership from the impact of inflation, most leases contain common area
maintenance charges, real estate tax and insurance reimbursements on a per
square foot basis, or in some cases, annual reimbursement of operating expenses
above a certain per square foot allowance. These provisions reduce the
Partnership's exposure to increases in costs and operating expenses resulting
from inflation. In addition, a number of the Partnership's leases are for terms
of less than five years which may permit the Partnership to replace existing
leases with new leases at higher base rental rates if the existing leases are
below market rate. There is no assurance, however, that the Partnership would
be able to replace existing leases with new leases at higher base rentals.
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.
- ---------------------
The Partnership's change in accountants during 1995 was previously reported in
the Partnership's Form 8-K dated September 11, 1995. There were no
disagreements with the Partnership's accountants or other reportable events
during 1996.
17
PART III
--------
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP.
- ---------------------------------------------
WELLS PARTNERS, L.P. Wells Partners, L.P. is a private Georgia limited
--------------------
partnership formed on October 25, 1990. The sole General Partner of Wells
Partners, L.P. is Wells Capital, Inc., a Georgia corporation. The executive
offices of Wells Capital, Inc. are located at 3885 Holcomb Bridge Road,
Norcross, Georgia 30092.
LEO F. WELLS, III. Mr. Wells is a resident of Atlanta, Georgia, is 53
-----------------
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
Capital. Mr. Wells is the President of Wells & Associates, Inc., a real estate
brokerage and investment company formed in 1976 and incorporated in 1978, for
which he serves as principal broker. Mr. Wells is also currently the sole
Director and President of Wells Management Company, Inc., a property management
company he founded in 1983. In addition, Mr. Wells is the President and
Chairman of the Board of Wells Investment Securities, Inc., Wells & Associates,
Inc., and Wells Management Company, Inc. which are affiliates of the General
Partners. From 1980 to February 1985, Mr. Wells served as Vice-President of
Hill-Johnson, Inc., a Georgia corporation engaged in the construction business.
From 1973 to 1976, he was associated with Sax Gaskin Real Estate Company and
from 1970 to 1973, he was a real estate salesman and property manager for Roy D.
Warren & Company, an Atlanta real estate company.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.
- ----------------------------------------------------------
The following table summarizes the compensation and fees paid to the General
Partners and their affiliates during the year ended December 31, 1996.
CASH COMPENSATION TABLE
(A) (B) (C)
Name of individual or Capacities in which served
number in group -Form of Compensation Cash Compensation
- ---------------------- --------------------------- -----------------
Wells Management Property Manager- $137,811 (1)
Company, Inc. Management and Leasing
Fees
18
(1) The majority of these fees are not paid directly by the Partnership but are
paid by the joint venture entities which own properties for which the
property management and leasing services relate and include management and
leasing fees which were accrued for accounting purposes in 1996 but not
actually paid until January, 1997.
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, 1997.
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Nature Percent of Class
- -------------- Beneficial Owner of Beneficial ----------------
------------------- Ownership
---------
Class A Units Leo F. Wells, III 114.68 units (IRA, less than 1%
401(k) Plan)
No arrangements exist which would, upon implementation, 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 SALE PROCEEDS. The General Partners
- -------------------------------------------------------
will receive a subordinated participation in net cash flow from operations equal
to 10% of net cash flow after the Limited Partners holding Class A Units have
received preferential distributions equal to 10% of their adjusted capital
contribution. The General Partners will also receive a subordinated
participation in net sale proceeds and net financing proceeds equal to 20% of
residual proceeds available for distribution after the Limited Partners holding
Class A Units have received a return of their adjusted capital contribution plus
a 10% cumulative return on their adjusted capital contributions and Limited
Parteners holding Class B Units have received a return of their adjusted capital
contribution plus a 15% cumulative return on their adjusted capital
contribution; provided, however, that in no event shall the General Partners
receive in the aggregate in excess of 15% of net sale 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
have received no distribution from cash flow or net sales proceeds in 1996.
19
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)(i) 3% of
gross revenues for management and 3% of the gross revenues for leasing
(aggregate maximum of 6%) plus a separate one-time fee for initial rent-up or
leasing-up of newly constructed properties in an amount not to exceed the fee
customarily charged in arm's length transactions by others rendering similar
services in the same geographic area for similar properties; and (ii) in the
case of industrial and commercial properties which are leased on a long-term
basis (ten or more years), 1% of the gross revenues except for initial leasing
fees equal to 3% of the gross revenues over the first five years of the lease
term; or (B) the amounts charged by unaffiliated persons rendering comparable
services in the same geographic area. Wells Management Company, Inc. received
$137,811 in cash compensation for the year ended December 31, 1996.
REAL ESTATE COMMISSIONS. In connection with the sale of Partnership properties,
- -----------------------
the General Partners or their affiliates may receive commissions not exceeding
the lesser of (A) 50% of the commissions customarily charged by other brokers in
arm's-length transactions involving comparable properties in the same geographic
area or (B) 3% of the gross sales price of the property, and provided that
payments of such commissions will be made only after Limited Partners have
received prior distributions totaling 100% of their capital contributions plus a
6% cumulative return on their adjusted capital contributions. During 1996, no
real estate commissions were paid to the General Partners or their affiliates.
20
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a)1. Financial Statements
Information with respect to this item is contained on Pages F-2 to F-
17 of this Annual Report on Form 10-K.
(a)2. Financial Statement Schedule III
Information with respect to this item begins on Page S-1 of this
Annual Report on Form 10-K.
(a)3. The Exhibits filed in response to Item 601 of Regulation S-K are
listed on the Exhibit Index attached hereto.
(b) No reports on Form 8-K were filed with the Commission during the
fourth quarter of 1996.
(c) The Exhibits filed in response to Item 601 of Regulation S-K are
listed on the Exhibit Index attached hereto.
(d) See (a) 2.
21
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 17th day of March,
1997
WELLS REAL ESTATE FUND V, L.P.
(Registrant)
By: /s/ Leo F. Wells, III
----------------------------------
LEO F. WELLS, III
Leo F. Wells, III Individual General Partner
and as President of Wells Capital, Inc., the
General Partner of Wells Partners, L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacity as and on the date indicated.
Signature Title
- --------- -----
/s/ Leo F. Wells, III Individual General Partner, March 17, 1997
- -------------------------- President and Sole Director
LEO F. WELLS, III of Wells Capital, Inc.
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.
22
EXHIBIT INDEX
-------------
(Wells Real Estate Fund IV, 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 SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
*4(a) Agreement of Limited Partnership of Wells N/A
Real Estate Fund IV, L.P. (Exhibit to Form
10-K of Wells Real Estate Fund IV, L.P.
for the fiscal year ended December 31,
1991, File No. 0-20103)
*4(b) Certificate of Limited Partnership of Wells N/A
Real Estate Fund IV, L.P. (Exhibit 4(b) to
Registration Statement of Wells Real Estate
Fund IV, L.P. and Wells Real Estate Fund V,
L.P., File No. 33-37830)
*10(a) Management Agreement between Wells Real N/A
Estate Fund IV, L.P. and Wells Management
Company, Inc. (Exhibit to Form 10-K of
Wells Real Estate Fund IV, L.P. for the
fiscal year ended December 31, 1991,
File No. 0-20103)
*10(b) Leasing and Tenant Coordinating Agreement N/A
between Wells Real Estate Fund IV, L.P. and
Wells Management Company, Inc. (Exhibit to
Form 10-K of Wells Real Estate Fund IV, L.P.
for the fiscal year ended December 31, 1991,
File No. 0-20103)
*10(c) Custodial Agency Agreement between Wells N/A
Real Estate Fund IV, L.P. and Citizens and
Southern Trust Company (Georgia) National
Association (Exhibit 10(f) to Amendment
No. 3 to Registration Statement of Wells
Real Estate Fund IV, L.P. and Wells Real
Estate Fund V, L.P., File No. 33-37830)
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
*10(d) Fund III and Fund IV Associates Joint Venture N/A
Agreement dated March 27, 1991 (Exhibit
10(g) to Post-Effective Amendment No. 1 to
Registration Statement of Wells Real Estate
Fund IV, L.P. and Wells Real Estate Fund V,
L.P., File No. 33-37830)
*10(e) Agreement of Purchase and Sale dated N/A
October 31, 1990 between 675 Industrial
Park, Ltd. and The Vlass-Fotos Group, Inc.
(Exhibit 10(h) to Post-Effective Amendment
No. 1 to Registration Statement of Wells
Real Estate Fund IV, L.P. and Wells Real
Estate Fund V, L.P., File No. 33-37830)
*10(f) Lease dated January 31, 1991 between The N/A
Vlass-Fotos Group, Inc. and The Kroger Co.
(Exhibit 10(i) to Post-Effective Amendment
No. 1 to Registration Statement of Wells
Real Estate Fund IV, L.P. and Wells Real
Estate Fund V, L.P., File No. 33-37830)
*10(g) Lease Agreement dated January 31, 1991 between N/A
The Vlass-Fotos Group, Inc. and The Kroger Co.
(Exhibit 10(j) to Post-Effective Amendment
No. 1 to Registration Statement of Wells Real
Estate Fund IV, L.P. and Wells Real Estate
Fund V, L.P., File No. 33-37830)
*10(h) First Amendment to Lease dated April 3, N/A
1991 between The Vlass-Fotos Group, Inc.
and The Kroger Co. (Exhibit 10(k) to Post-
Effective Amendment No. 1 to Registration
Statement of Wells Real Estate Fund IV,
L.P. and Wells Real Estate Fund V, L.P.,
File No. 33-37830)
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
*10(i) First Amendment to Lease Agreement dated N/A
April 3, 1991 between The Vlass-Fotos Group,
Inc. and The Kroger Co. (Exhibit 10(l) to
Post-Effective Amendment No. 1 to Registration
Statement of Wells Real Estate Fund IV, L.P.
and Wells Real Estate Fund V, L.P., File
No. 33-37830)
*10(j) Development Agreement dated April 4, 1991 N/A
between Fund III and Fund IV Associates and
The Vlass-Fotos Group, Inc. (Exhibit 10(m)
to Post-Effective Amendment No. 1 to
Registration Statement of Wells Real Estate
Fund IV, L.P. and Wells Real Estate Fund V,
L.P., File No. 33-37830)
*10(k) Fund IV and Fund V Associates Joint Venture N/A
Agreement dated April 14, 1992 (Exhibit 10(n)
to Post-Effective Amendment No. 7 to
Registration Statement of Wells Real Estate
Fund IV, L.P. and Wells Real Estate Fund V,
L.P., File No. 33-37830)
*10(l) Agreement for the Purchase and Sale of Real N/A
Property with GL National, Inc. (Exhibit 10(o)
to Post-Effective Amendment No. 7 to
Registration Statement of Wells Real Estate
Fund IV, L.P. and Wells Real Estate Fund V,
L.P., File No. 33-37830)
*10(m) Lease with International Business Machines N/A
Corporation ( Exhibit 10(p) to Post-Effective
Amendment No. 7 to Registration Statement of
Wells Real Estate Fund IV, L.P. and Wells
Real Estate Fund V, L.P., File No. 33-37830)
*10(n) Lease with ROLM Company (Exhibit 10(q) to N/A
Post-Effective Amendment No. 7 to Registration
Statement of Wells Real Estate Fund IV, L.P.
and Wells Real Estate Fund V, L.P., File
No. 33-37830)
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
*10(o) Construction Agreement with McDevitt & Street N/A
Company (Exhibit 10(r) to Post-Effective
Amendment No. 7 to Registration Statement of
Wells Real Estate Fund IV, L.P. and Wells
Real Estate Fund V, L.P., File No. 33-37830)
*10(p) Development Agreement with ADEVCO Corporation N/A
(Exhibit 10(s) to Post-Effective Amendment
No. 7 to Registration Statement of Wells
Real Estate Fund IV, L.P. and Wells Real Estate
Fund V, L.P., File No. 33-37830)
*10(q) Guaranty of Development Agreement by David M. N/A
Kraxberger (Exhibit 10(t) to Post-Effective
Amendment No. 7 to Registration Statement of
Wells Real Estate Fund IV, L.P. and Wells
Real Estate Fund V, L.P., File No. 33-37830)
*10(r) Architect Agreement with Mayes, Sudderth & N/A
Etheredge, Inc. (Exhibit 10(u) to Post-
Effective Amendment No. 7 to Registration
Statement of Wells Real Estate Fund IV, L.P.
and Wells Real Estate Fund V, L.P., File
No. 33-37830)
*10(s) Architect Agreement with Peter C. Sutton, N/A
A.I.A. (Exhibit 10(v) to Post-Effective
Amendment No. 7 to Registration Statement
of Wells Real Estate Fund IV, L.P. and
Wells Real Estate Fund V, L.P., File
No. 33-37830)
*10(t) First Amendment to Joint Venture Agreement N/A
of Fund III and IV Associates dated July 1,
1992 (Exhibit 10(v) to Form 10-K of Wells
Real Estate Fund III, L.P. for the fiscal
year ended December 31, 1992, File No. 0-18407)
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
*10(u) Agreement for the Purchase and Sale of N/A
Property between Rowe Properties-Markel, L.P.
and Fund III and Fund IV Associates and
Addendum to Agreement for the Purchase and
Sale of Property (Exhibit 10(w) to Form 10-K
of Wells Real Estate Fund III, L.P. for the
fiscal year ended December 31, 1992, File
No. 0-18407)
*10(v) Office Lease with G.E. Lighting, Rider No. 1 N/A
to Lease, Addendum of Lease, Second Addendum
of Lease, Third Amendment of Lease and Fourth
Amendment to Office Lease (Exhibit 10(x) to
Form 10-K of Wells Real Estate Fund III, L.P.
for the fiscal year ended December 31, 1992,
File No. 0-18407)
*10(w) First Amendment to Joint Venture Agreement N/A
of Fund IV and V Associates dated September 9,
1992 (Exhibit 10(w) to Post-Effective
Amendment No. 8 to Registration Statement of
Wells Real Estate Fund IV, L.P. and Wells
Real Estate Fund V, L.P., File No. 33-37830)
*10(x) Option Agreement for the Purchase and Sale of N/A
Real Property (Exhibit 10(x) to Post-Effective
Amendment No. 8 to Registration Statement of
Wells Real Estate Fund IV, L.P. and Wells Real
Estate Fund V, L.P., File No. 33-37830)
*10(y) First Amendment to Option Agreement for the N/A
Purchase and Sale of Real Property (Exhibit
10(y) to Post-Effective Amendment No. 8 to
Registration Statement of Wells Real Estate
Fund IV, L.P. and Wells Real Estate Fund V,
L.P., File No. 33-37830)
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
*10(z) Partial Assignment and Assumption of Option N/A
Agreement for the Purchase and Sale of Real
Property (Exhibit 10(z) to Post-Effective
Amendment No. 8 to Registration Statement of
Wells Real Estate Fund IV, L.P. and Wells
Real Estate Fund V, L.P., File No. 33-37830)
*10(aa) Lease Agreement with the Executive Committee N/A
of the Baptist Convention of the State of
Georgia, d/b/a Georgia Baptist Health Care
System (Exhibit 10(aa) to Post-Effective
Amendment No. 8 to Registration Statement of
Wells Real Estate Fund IV, L.P. and Wells
Real Estate Fund V, L.P., File No. 33-37830)
*10(bb) Construction Contract with Cecil N. Brown N/A
Co., Inc. (Exhibit 10(bb) to Post-Effective
Amendment No. 8 to Registration Statement of
Wells Real Estate Fund IV, L.P. and Wells
Real Estate Fund V, L.P., File No. 33-37830)
*10(cc) Amended and Restated Custodial Agency Agreement N/A
between Wells Real Estate Fund IV, L.P. and
NationsBank of Georgia, N.A. dated April 1,
1994 (Exhibit to Form 10-K of Wells Real
Estate Fund IV, L.P. for the fiscal year
ended December 31, 1994, File No. 0-20103)
INDEX TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS PAGE
- -------------------- ----
Independent Auditors' Reports F2-F3
Balance Sheets as of December 31, 1996, 1995 and 1994 F-4
Statements of Income for the Years Ended December
31, 1996, 1995 and 1994 F-5
Statements of Partners' Capital for the Years Ended
December 31, 1996, 1995 and 1994 F-6
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995, 1994 F-7
Notes to Financial Statements for December 31, 1996
1995 and 1994 F-8
F-1
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Wells Real Estate Fund IV, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND IV,
L.P. (a Georgia public limited partnership) as of December 31, 1996 and 1995 and
the related statements of income, partners' capital, and cash flows for the
years then ended. These financial statements and the schedule referred to below
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule 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 IV, L.P.
as of December 31, 1996 and 1995 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
January 10, 1997
F-2
[LETTERHEAD OF PEAT MARWICK LLP APPEARS HERE]
INDEPENDENT AUDITORS'S REPORT
The Partners
Wells Real Estate Fund IV, L.P.:
We have audited the balance sheet (which is not presented separately herein) of
Wells Real Estate Fund IV, L.P. (a limited partnership) as of December,31, 1994,
and the related statements of income, partners' capital, and cash flows for the
year then ended. In connection with our audit of the financial statements, we
have also audited the information for the year ended December 31, 1994 included
in the December 31, 1996 financial statement Schedule III - Real Estate and
Accumulated Depreciation. These financial statements and information included
in the financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and information included in the financial statement schedule based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund IV, L.P.
as of December 31, 1994, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles. Also in our opinion, the related information for 1994 included in
the financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
January 13, 1995
Atlanta, Georgia
F-3
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
----------- -----------
INVESTMENT IN JOINT VENTURES $10,631,324 $11,047,207
CASH AND CASH EQUIVALENTS 156,177 148,494
DUE FROM AFFILIATES 215,934 211,281
OTHER ASSETS 0 1,042
----------- -----------
Total assets $11,003,435 $11,408,024
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 4,500 $ 0
Partnership distributions payable 230,967 223,131
----------- -----------
Total liabilities 235,467 223,131
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
PARTNERS' CAPITAL:
Limited partners:
Class A 10,767,968 11,184,893
Class B 0 0
----------- -----------
Total partners' capital 10,767,968 11,184,893
----------- -----------
Total liabilities and partners' capital $11,003,435 $11,408,024
=========== ===========
The accompanying notes are an integral part of these balance sheets.
F-4
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994
-------- -------- ---------
REVENUES:
Equity in income of joint ventures $546,841 $683,934 $668,076
Interest income 9,114 10,587 10,515
-------- -------- --------
555,955 694,521 678,591
-------- -------- --------
EXPENSES:
Partnership administration 42,470 47,222 43,672
Legal and accounting 26,441 11,204 17,919
Computer costs 3,507 5,978 5,739
Amortization of organization costs 1,042 6,250 6,250
-------- -------- --------
73,460 70,654 73,580
-------- -------- --------
NET INCOME $482,495 $623,867 $605,011
======== ======== ========
NET INCOME ALLOCATED TO CLASS A LIMITED
PARTNERS $482,495 $623,867 $615,309
======== ======== ========
NET LOSS ALLOCATED TO CLASS B LIMITED
PARTNERS $ 0 $ 0 $(10,298)
======== ======== =========
NET INCOME PER CLASS A LIMITED PARTNER
UNIT $ 0.36 $ 0.47 $ 0.47
======== ======== ========
NET LOSS PER CLASS B LIMITED PARTNER
UNIT $ 0.00 $ 0.00 $ (0.27)
======== ======== =========
CASH DISTRIBUTION PER CLASS A LIMITED
PARTNER UNIT $ 0.68 $ 0.71 $ 0.63
======== ======== ========
The accompanying notes are an integral part of these statements.
F-5
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
LIMITED PARTNERS TOTAL
---------------------------------------------------
CLASS A CLASS B PARTNERS'
------------------------------- -----------------
UNITS AMOUNT UNITS AMOUNT CAPITAL
------------------ ----------- ------ --------- ------------
BALANCE, DECEMBER 31, 1993 1,322,909 $11,717,639 38,551 $ 10,298 $11,727,937
Net income (loss) 0 615,309 0 (10,298) 605,011
Partnership distributions 0 (835,270) 0 0 (835,270)
------------------ ------------ ------ --------- -------------
BALANCE, DECEMBER 31, 1994 1,322,909 11,497,678 38,551 0 11,497,678
Net income 0 623,867 0 0 623,867
Partnership distributions 0 (936,652) 0 0 (936,652)
------------------ ------------ ------ -------- ------------
BALANCE, DECEMBER 31, 1995 1,322,909 11,184,893 38,551 0 11,184,893
Net income 0 482,495 0 0 482,495
Partnership distributions 0 (899,420) 0 0 (899,420)
------------------ ------------ ------ -------- ------------
BALANCE, DECEMBER 31, 1996 1,322,909 $10,767,968 38,551 $ 0 $10,767,968
================== =========== ====== ======== ============
The accompanying notes are an integral part of these statements.
F-6
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 482,495 $ 623,867 $ 605,011
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in income of joint ventures (546,841) (683,934) (668,076)
Distributions received from joint ventures 958,071 975,911 864,771
Distributions to partners from accumulated earnings (474,660) (609,922) (744,096)
Amortization of organization costs 1,042 6,250 6,250
Changes in assets and liabilities:
Accounts payable and accrued expenses 4,500 (3,000) (1,795)
---------- --------- ---------
Total adjustments (57,888) (314,695) (542,946)
---------- --------- ---------
Net cash provided by operating activities 424,607 309,172 62,065
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in joint ventures 0 (13,541) (289,608)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners in excess of accumulated earnings (416,924) (312,785) (42,933)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,683 (17,154) (270,476)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 148,494 165,648 436,124
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 156,177 $ 148,494 $ 165,648
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Deferred project costs applied to joint venture properties $ 0 $ 1,068 $ 19,988
========= ========= =========
The accompanying notes are an integral part of these statements.
F-7
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Wells Real Estate Fund IV , L.P. (the "Partnership") is a public limited
partnership organized on October 25, 1990 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners,
L.P., a Georgia nonpublic limited partnership. The Partnership has two
classes of limited partnership interests, Class A and Class B units.
Limited partners may vote to, among other things, (a) amend the partnership
agreement, subject to certain limitations, (b) change the business purpose
or investment objectives of the Partnership, and (c) remove a general
partner. A majority vote on any of the described matters will bind the
Partnership without the concurrence of the general partners. Each limited
partnership unit has equal voting rights, regardless of class.
The Partnership was formed to acquire and operate commercial real
properties, including properties which are either to be developed,
currently under development or construction, newly constructed or have
operating histories. The Partnership owns an interest in several properties
through joint ventures between the Partnership and other Wells Real Estate
funds, as follows: (i) the Stockbridge Village Shopping Center, a retail
shopping center located in Stockbridge, Georgia, southeast of Atlanta,
Georgia, (ii) the G.E. Lighting National Customer Center, a two-story
office building located in Richmond, Virginia, (iii) the Medical Center
Project, two substantially identical two-story office buildings located in
Clayton County, Georgia, and (iv) the Jacksonville IBM Building, a four-
story office building located in Jacksonville, Florida (Note 3).
USE OF ESTIMATES AND FACTORS AFFECTING THE PARTNERSHIP
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The carrying values of the real estate assets are based on management's
current intent to hold the real estate assets as long-term investments. The
success of the Partnership's future operations and the ability to realize
the investment in its assets will be dependent upon the Partnership's
ability to maintain rental rates, occupancy and an appropriate level
F-8
of operating expenses in future years. Management believes that the steps
it is taking will enable the Partnership to realize its investment in its
assets.
INCOME TAXES
The Partnership is not subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying financial
statements. The partners are required to include their respective shares of
profits and losses in their individual income tax returns.
DISTRIBUTIONS OF NET CASH FROM OPERATIONS
Cash available for distribution, as defined by the partnership agreement,
is distributed on a cumulative noncompounded basis to the limited partners
on a quarterly basis. In accordance with the partnership agreement,
distributions first are paid to limited partners holding Class A units
until they have received a 10% return on their adjusted capital
contributions, as defined. Cash available for distribution is then paid to
the general partners until they have received an amount equal to 10% of
distributions. Any remaining cash available for distribution is split
between the limited partners holding Class A units and the general partners
on a basis of 90% and 10%, respectively. No distributions will be made to
the limited partners holding Class B units.
DISTRIBUTION OF SALES PROCEEDS
Upon sales of properties, the net sales proceeds are distributed in the
following order:
. To limited partners on a per unit basis until each limited
partner has received 100% of their adjusted capital contribution,
as defined
. To limited partners holding Class B units on a per unit basis
until they receive an amount equal to the net cash available for
distribution received by the limited partners holding Class A
units
. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their adjusted capital
contribution, as defined
. To limited partners holding Class B units on a per unit basis
until they receive a cumulative 15% per annum return on their
adjusted capital contribution, as defined
. To all limited partners until they receive an amount equal to
their respective cumulative distributions
. To the general partners until they have received 100% of their
capital contributions
. Thereafter, 80% to the limited partners and 20% to the general
partners
F-9
ALLOCATION OF NET INCOME, NET LOSS, AND GAIN ON SALE
Net income is defined as net income recognized by the Partnership,
excluding deductions for depreciation, amortization, and cost recovery. Net
income, as defined, of the Partnership will be allocated each year in the
same proportions that net cash from operations is distributed to the
partners. To the extent the Partnership's net income in any year exceeds
net cash from operations, it will be allocated 99% to the limited partners
and 1% to the general partners.
Net loss, depreciation, amortization, and cost recovery deductions for each
fiscal year will be allocated as follows: (a) 99% to the limited partners
holding Class B units and 1% to the general partners until their capital
accounts are reduced to zero, (b) then to any partner having a positive
balance in his capital account in an amount not to exceed such positive
balance, and (c) thereafter to the general partners.
Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (a) allocations made pursuant to a qualified income offset
provision in 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 Class B limited partners in
amounts equal to deductions for depreciation, amortization, and cost
recovery previously allocated to them with respect to the specific
Partnership property sold, but not in excess of the amount of gain on sale
recognized by the Partnership with respect to the sale of such property.
INVESTMENT IN JOINT VENTURES
BASIS OF PRESENTATION. The Partnership does not have control over the
operations of the joint ventures; however, it does exercise significant
influence. Accordingly, investment in joint ventures is recorded using the
equity method of accounting.
REAL ESTATE ASSETS. Real estate assets held by the joint ventures are
stated at cost less accumulated depreciation. Major improvements and
betterments are capitalized when they extend the useful life of the related
asset. All ordinary repairs and maintenance are expensed as incurred.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of," which is effective for fiscal years beginning after December 15, 1995.
SFAS No. 121 establishes standards for determining when impairment losses
on long-lived assets have occurred and how impairment losses should be
measured. The joint ventures adopted SFAS No. 121, effective January 1,
1995. The impact of adopting SFAS No. 121 was not material to the financial
statements of the joint ventures.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amount of real estate assets may not be
recoverable, management assesses the recoverability of real estate
F-10
assets under SFAS No. 121 by determining whether the carrying value of such
real estate assets will be recovered through the future cash flows expected
from the use of the asset and its eventual disposition. Management has
determined that there has been no impairment in the carrying value of real
estate assets held by the joint ventures as of December 31, 1996.
Depreciation for buildings and improvements is calculated using the
straight-line method over the useful lives of the real estate assets.
Effective October 1, 1995, the joint ventures revised their estimate of the
useful lives of buildings and improvements from 40 to 25 years. This change
was made to better reflect the estimated periods during which such assets
will remain in service. The change had the effect on the Partnership,
through its ownership interest in joint ventures, of increasing
depreciation expense approximately $37,688 in the fourth quarter of 1995
and $155,723 in the year ended December 31, 1996.
REVENUE RECOGNITION. All leases on real estate assets held by the joint
ventures are classified as operating leases, and the related rental income
is recognized on a straight-line basis over the terms of the respective
leases.
PARTNERS' DISTRIBUTIONS AND ALLOCATIONS OF PROFIT AND LOSS. Cash available
for distribution and allocations of profit and loss to the Partnership by
the joint ventures are made in accordance with the terms of the individual
joint venture agreements. Generally, these items are allocated in
proportion to the partners' respective ownership interests. Cash is paid
from the joint ventures to the Partnership quarterly.
DEFERRED LEASE ACQUISITION COSTS. Costs incurred to procure operating
leases are capitalized and amortized on a straight-line basis over the
terms of the related leases.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, the Partnership considers
all highly liquid instruments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market
accounts.
PER UNIT DATA
Net income (loss) per unit with respect to the Partnership for the years
ended December 31, 1996, 1995 and 1994 is computed based on the weighted
average number of units outstanding during the period.
RECLASSIFICATIONS
Certain 1995 and 1994 items have been reclassified to conform with the 1996
financial statement presentation.
F-11
2. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1996 and 1995 represents the
Partnership's share of cash to be distributed for the fourth quarters of
1996 and 1995 as follows:
1996 1995
-------- --------
Fund III and IV Associates $158,336 $146,789
Fund IV and V Associates 57,598 64,492
-------- --------
$215,934 $211,281
======== ========
The Partnership entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for supervising the management of the
Partnership's properties, the Partnership will generally pay Wells
Management management and leasing fees equal to (a) 3% of the gross
revenues for management and 3% of the gross revenues for leasing (aggregate
maximum of 6%), plus a separate fee for the one-time initial lease-up of
newly constructed properties in an amount not to exceed the fee customarily
charged in arm's-length transactions by others rendering similar services
in the same geographic area for similar properties or (b) in the case of
commercial properties, which are leased on a long-term net basis (ten or
more years), 1% of the gross revenues except for initial leasing fees equal
to 3% of the gross revenues over the first five years of the lease term.
The Partnership incurred management and leasing fees and lease acquisition
costs at the joint venture level of $137,811, $141,017, and $132,200 for
the years ended December 31, 1996, 1995, and 1994, respectively, which were
paid to Wells Management.
The Company performs certain administrative services for the Partnership,
such as accounting and other partnership administration, and incurs the
related expenses. Such expenses are allocated among the various Wells Real
Estate funds based on time spent on each fund by individual administrative
personnel. In the opinion of management, such allocation is a reasonable
estimation of such expenses.
The general partners are also general partners of other Wells Real Estate
funds. As such, there may exist conflicts of interest where the general
partners, while serving in the capacity as general partners of other Wells
Real Estate funds, may be in competition with the Partnership for tenants
in similar geographic markets.
F-12
3. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at
December 31, 1996 and 1995 are summarized as follows:
1996 1995
----------------------- ----------------------
AMOUNT PERCENT Amount Percent
------------ --------- ------------ --------
Fund III and IV Associates $ 5,883,048 43% $ 6,132,096 43%
Fund IV and V Associates 4,748,276 38 4,915,111 38
----------- -----------
$10,631,324 $11,047,207
=========== ===========
The following is a roll forward of the Partnership's investment in the
joint ventures for the years ended December 31, 1996 and 1995:
1996 1995
----------- -----------
Investment in joint ventures, beginning of
period $11,047,207 $11,339,134
Equity in income of joint ventures 546,841 683,934
Contributions to joint ventures 0 14,609
Distributions from joint ventures (962,724) (990,470)
----------- -----------
Investment in joint ventures, end of period $10,631,324 $11,047,207
=========== ===========
FUND III AND IV ASSOCIATES
On March 27, 1991, the Partnership entered into a joint venture agreement
with Wells Real Estate Fund III, L.P. The joint venture, Fund III and IV
Associates, was formed for the purpose of developing, constructing, and
operating the Stockbridge Village Shopping Center in Stockbridge, Georgia.
In addition, in July 1992, Fund III and IV Associates purchased the G.E.
Lighting National Customer Center in Richmond, Virginia.
F-13
The following are the financial statements for Fund III and IV Associates:
FUND III AND IV ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
Assets
1996 1995
----------- -----------
Real estate assets, at cost:
Land $ 3,331,775 $ 3,331,775
Building and improvements, less accumulated
depreciation of $1,793,055 in 1996 and
$1,257,846 in 1995 10,286,205 10,819,438
----------- -----------
Total real estate assets 13,617,980 14,151,213
Cash and cash equivalents 297,901 250,903
Accounts receivable 247,567 294,278
Prepaid expenses and other assets 36,231 54,342
----------- -----------
Total assets $14,199,679 $14,750,736
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 39,722 $ 33,221
Partnership distributions payable 370,953 343,902
Due to affiliates 6,018 7,151
----------- -----------
Total liabilities 416,693 384,274
----------- -----------
Partners' capital:
Wells Real Estate Fund III 7,899,938 8,234,366
Wells Real Estate Fund IV 5,883,048 6,132,096
----------- -----------
Total partners' capital 13,782,986 14,366,462
----------- -----------
Total liabilities and partners' capital $14,199,679 $14,750,736
=========== ===========
F-14
FUND III AND IV ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994
---------- ---------- ----------
Revenues:
Rental income $1,609,853 $1,676,025 $1,686,388
Interest income 13,024 15,482 9,678
1,622,877 1,691,507 1,696,066
---------- ---------- ----------
Expenses:
Depreciation 535,209 382,416 331,381
Management and leasing fees 87,401 93,024 96,042
Operating costs, net of reimbursements 60,043 40,195 5,785
Lease acquisition costs 50,901 78,766 54,988
Property administration 23,054 26,364 44,781
Legal and accounting 11,191 10,928 93,193
Computer costs 4,569 5,790 3,666
Amortization of organization costs 61 366 366
---------- ---------- ----------
772,429 637,849 630,202
---------- ---------- ----------
Net income $ 850,448 $1,053,658 $1,065,864
========== ========== ==========
Net income allocated to Wells Real Estate Fund III $ 487,448 $ 603,921 $ 612,543
========== ========== ==========
Net income allocated to Wells Real Estate Fund IV $ 363,000 $ 449,737 $ 453,321
========== ========== ==========
F-15
FUND III AND IV ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE PARTNERS'
FUND III FUND IV CAPITAL
---------- ---------- -----------
Balance, December 31, 1993 $8,657,921 $6,136,991 $14,794,912
Net income 612,543 453,321 1,065,864
Partnership contributions 0 309,595 309,595
Partnership distributions (781,075) (577,956) (1,359,031)
---------- ---------- -----------
Balance, December 31, 1994 8,489,389 6,321,951 14,811,340
Net income 603,921 449,737 1,053,658
Partnership contributions 0 59 59
Partnership distributions (858,944) (639,651) (1,498,595)
--------- ---------- -----------
Balance, December 31, 1995 8,234,366 6,132,096 14,366,462
Net income 487,448 363,000 850,448
Partnership distributions (821,876) (612,048) (1,433,924)
---------- ---------- -----------
Balance, December 31, 1996 $7,899,938 $5,883,048 $13,782,986
---------- ---------- -----------
F-16
FUND III AND IV ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994
----------- ----------- -----------
Cash flows from operating activities:
Net income $ 850,448 $ 1,053,658 $ 1,065,864
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 535,209 382,416 331,381
Changes in assets and liabilities:
Accounts receivable 46,711 73,382 (87,950)
Prepaid expenses and other assets 18,111 54,265 9,599
Accounts payable 6,501 (2,728) (140,979)
Due to affiliates (1,133) (8,261) (33,820)
----------- ----------- -----------
Total adjustments 605,399 499,074 78,231
----------- ----------- -----------
Net cash provided by operating
activities 1,455,847 1,552,732 1,144,095
----------- ----------- -----------
Cash flows from investing activities:
Investment in real estate (1,976) (29,209) (221,528)
----------- ----------- -----------
Cash flows from financing activities:
Contributions from joint venture partners 0 59 309,602
----------- ----------- -----------
Distributions to joint venture partners (1,406,873) (1,508,718) (1,276,883)
----------- ----------- -----------
Net cash used in financing activities (1,406,873) (1,508,659) (967,281)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents
46,998 14,864 (44,714)
----------- ----------- -----------
Cash and cash equivalents, beginning of year 250,903 236,039 280,753
----------- ----------- -----------
Cash and cash equivalents, end of year $ 297,901 $ 250,903 $ 236,039
=========== =========== ===========
Supplemental disclosure of noncash investing
activities:
Deferred project costs applied by partners $ 0 $ 0 $ 19,988
=========== =========== ===========
FUND IV AND V ASSOCIATES
On April 14, 1992, the Partnership entered into a joint venture agreement
with Wells Real Estate Fund V, L.P. The joint venture, Fund IV and V
Associates, was formed for the purpose of investing in commercial real
properties. During 1992, Fund IV and V Associates purchased a parcel of
land on which the Medical Center Project was developed. During 1992, the
joint venture also purchased a second parcel of land in Jacksonville,
Florida, on which the Jacksonville IBM Building was developed.
F-17
Following are the financial statements of Fund IV and V Associates:
FUND IV AND V ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
Assets
1996 1995
------------- -------------
Real estate assets, at cost:
Land $ 2,011,534 $ 2,011,534
Building and improvements, less accumulated depreciation of
$1,202,831 in 1996 and $726,056 in 1995 10,043,021 10,500,117
Construction in progress 7,301 5,379
------------- -------------
Total real estate assets 12,061,856 12,517,030
Cash and cash equivalents 229,828 225,346
Accounts receivable 297,475 235,510
Prepaid expenses and other assets 127,576 165,605
------------- -------------
Total assets $12,716,735 $13,143,491
============= =============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 40,012 $ 32,216
Partnership distributions payable 191,653 193,499
Due to affiliates 30,500 25,829
------------- -------------
Total liabilities 262,165 251,544
------------- -------------
Partners' capital:
Wells Real Estate Fund IV 4,748,276 4,915,111
Wells Real Estate Fund V 7,706,294 7,976,836
------------- -------------
Total partners' capital 12,454,570 12,891,947
------------- -------------
Total liabilities and partners' capital $12,716,735 $13,143,491
============= =============
F-18
FUND IV AND V ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994
----------- ---------- ----------
Revenues:
Rental income $1,883,356 $1,833,562 $1,705,301
Interest income 12,884 12,974 7,191
Other income 98 360 0
----------- ---------- ----------
1,896,338 1,846,896 1,712,492
----------- ---------- ----------
Expenses:
Operating costs 650,174 613,968 629,885
Depreciation 476,775 335,350 264,717
Management and leasing fees 121,694 115,029 102,211
Lease acquisition costs 116,200 114,112 102,226
Property administration 39,894 46,662 61,588
Legal and accounting 9,391 9,909 8,569
----------- ---------- ----------
1,414,128 1,235,030 1,169,196
----------- ---------- ----------
Net income $ 482,210 $ 611,866 $ 543,296
=========== ========== ==========
Net income allocated to Wells Real Estate Fund IV $ 183,841 $ 234,197 $ 214,755
=========== ========== ==========
Net income allocated to Wells Real Estate Fund V $ 298,369 $ 377,669 $ 328,541
=========== ========== ==========
F-19
FUND IV AND V ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
WELLS REAL WELLS REAL TOTAL
ESTATE ESTATE PARTNERS'
FUND IV FUND V CAPITAL
----------- ------------ -------------
Balance, December 31, 1993 $5,116,557 $6,964,811 $12,081,368
Net income 214,755 328,541 543,296
Partnership contributions 0 1,102,587 1,102,587
Partnership distributions (314,129) (480,233) (794,362)
----------- ------------ -------------
Balance, December 31, 1994 5,017,183 7,915,706 12,932,889
Net income 234,197 377,669 611,866
Partnership contributions 14,550 249,454 264,004
Partnership distributions (350,819) (565,993) (916,812)
----------- ------------ -------------
Balance, December 31, 1995 4,915,111 7,976,836 12,891,947
Net income 183,841 298,369 482,210
Partnership contributions 0 225 225
Partnership distributions (350,676) (569,136) (919,812)
----------- ------------ -------------
Balance, December 31, 1996 $4,748,276 $7,706,294 $12,454,570
=========== ============ =============
F-20
FUND IV AND V ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1996 1995 1994
----------- ---------- -------------
Cash flows from operating activities:
Net income $ 482,210 $ 611,866 $ 543,296
----------- ---------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 476,775 335,350 264,717
Changes in assets and liabilities:
Accounts receivable (61,965) (31,817) (7,336)
Prepaid expenses and other assets 38,029 3,956 10,009
Accounts payable 7,796 (34,531) 30,201
Due to affiliates 4,671 5,967 2,878
----------- ---------- -------------
Total adjustments 465,306 278,925 300,469
----------- ---------- -------------
Net cash provided by operating activities
947,516 890,791 843,765
----------- ---------- -------------
Cash flows from investing activities:
Decrease in construction payables 0 (28,582) (71,418)
Investment in real estate (21,601) (206,403) (1,056,116)
----------- ---------- -------------
Net cash used in investing activities (21,601) (234,985) (1,127,534)
----------- ---------- -------------
Cash flows from financing activities:
Contributions from joint venture partners 225 246,982 1,102,587
Distributions to joint venture partners (921,658) (883,227) (761,899)
----------- ---------- -------------
Net cash (used in) provided by financing activities (921,433) (636,245) 340,688
----------- ---------- -------------
Net increase in cash and cash equivalents 4,482 19,561 56,919
Cash and cash equivalents, beginning of year 225,346 205,785 148,866
----------- ---------- -------------
Cash and cash equivalents, end of year $ 229,828 $ 225,346 $ 205,785
=========== ========== =============
Supplemental disclosure of noncash investing activities:
Deferred project costs applied by partners $ 0 $ 17,022 $ 84,211
=========== ========== =============
F-21
4. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December
31, 1996, 1995, and 1994 are calculated as follows:
1996 1995 1994
----------- ----------- ------------
Financial statement net income $482,495 $623,867 $605,011
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 155,723 37,688 0
Expenses added (deductible) when paid for income tax purposes,
accrued for financial reporting purposes 445 3,455 (13,365)
Rental income accrued for financial reporting purposes in
excess of amounts for income tax purposes (9,225) (9,536) (49,707)
----------- ----------- ------------
Income tax basis net income $629,438 $655,474 $541,939
=========== =========== ============
The Partnership's income tax basis partners' capital at December 31, 1996,
1995, and 1994 is computed as follows:
1996 1995 1994
------------ ------------- -------------
Financial statement partners' capital $10,767,968 $11,184,893 $11,497,678
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 193,411 37,688 0
Capitalization of organization costs for income tax
purposes, which are accounted for as cost of capital
for financial reporting purposes 1,735,988 1,735,988 1,735,988
Accumulated rental income accrued for financial reporting
purposes in excess of amounts for income tax purposes (189,405) (180,174) (170,639)
Accumulated expenses deductible when paid for income tax
purposes, accrued for financial reporting purposes 16,997 16,545 13,090
Partnership's distributions payable 230,967 223,131 209,186
------------ ------------- -------------
Income tax basis partners' capital $12,755,926 $13,018,071 $13,285,303
============ ============= =============
F-22
5. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interests in joint ventures under noncancelable operating leases at
December 31, 1996 is as follows:
Year ending December 31:
1997 $1,347,308
1998 1,217,181
1999 1,041,917
2000 808,092
2001 725,836
Thereafter 3,108,451
------------
$8,248,785
============
Three significant tenants contributed 22%, 20%, and 19% of rental income,
which is included in equity in income of joint ventures, for the year ended
December 31, 1996. In addition, two significant tenants will contribute 43%
and 31% of future minimum rental income.
The future minimum rental income due Fund III and IV Associates under
noncancelable operating leases at December 31, 1996 is as follows:
Year ending December 31:
1997 $ 1,534,820
1998 1,312,213
1999 1,259,368
2000 797,802
2001 657,172
Thereafter 5,928,922
------------
$11,490,297
============
Two significant tenants contributed approximately 31% and 33% of rental
income for the year ended December 31, 1996. In addition, two significant
tenants will contribute approximately 72% and 16% of future minimum rental
income.
The future minimum rental income due Fund IV and V Associates under
noncancelable operating leases at December 31, 1996 is as follows:
Year ending December 31:
1997 $1,815,491
1998 1,723,389
1999 1,322,891
2000 1,226,304
2001 1,167,992
Thereafter 1,515,832
------------
$8,771,899
============
F-23
Three significant tenants contributed approximately 55%, 17%, and 14% of
rental income for the year ended December 31, 1996. In addition, one
significant tenant will contribute approximately 78% of future minimum rental
income.
6. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial information
for the years ended December 31, 1996 and 1995:
1996 QUARTERS ENDED
---------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
============= ============ =============== ==============
Revenues $136,014 $150,454 $136,508 $132,979
Net income 115,648 118,987 127,128 120,732
Net income allocated to Class A limited partners 115,648 118,987 127,128 120,732
Net income per Class A limited partner unit (a) $ 0.09 $ 0.09 $ 0.10 $ 0.09
Cash distribution per Class A limited partner unit 0.17 0.16 0.18 0.17
1995 QUARTERS ENDED
---------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
============ ============ ================ ==============
Revenues $185,783 $213,396 $183,505 $111,837
Net income 162,940 198,246 167,080 95,601
Net income allocated to Class A limited
partners 162,940 198,246 167,080 95,601
Net income per Class A limited partner unit $ 0.12 $ 0.15 $ 0.13 $ 0.07
Cash distribution per Class A limited partner unit 0.17 0.18 0.19 0.17
(a) The total of the four quarterly amounts for net income per Class
A limited partner unit for the year ended December 31, 1996 does
not equal the total for the year. The difference results from
rounding differences.
7. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Company. In the normal course of
business, the Company may become subject to such litigation or claims.
F-24
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
INITIAL COST COSTS OF GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1996
------------------------- ---------------------------------------------------
BUILDINGS AND CAPITALIZED BUILDINGS AND CONSTRUCTION
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS IN PROGRESS TOTAL
- ------------------------ -------------- ---------- ------------- -------------- ----------- -------------- ----------- ---------
STOCKBRIDGE VILLAGE (A) None $2,551,645 $ 0 $ 7,749,117 $2,758,193 $ 7,542,569 $ 0 $10,300,762
G.E. LIGHTING NATIONAL
CUSTOMER CENTER (B) None 529,546 4,158,223 422,504 573,582 4,536,691 0 5,110,273
MEDICAL CENTER PROJECT (C) None 479,386 0 3,785,584 512,344 3,745,325 7,301 4,264,970
JACKSONVILLE IBM BUILDING (D) None 1,384,751 0 7,614,967 1,499,190 7,500,527 0 8,999,717
----------- ----------- ------------- ------------ -------------- -------- -----------
Total $4,945,328 $4,158,223 $19,572,172 $5,343,309 $23,325,112 $7,301 $28,675,722
=========== =========== ============= ============ ============== ========= ===========
LIFE ON WHICH
ACCUMULATED DATE OF DATE DEPRECIATION
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED(E)
- ------------------------- --------------- ---------------- ------------ -----------------
STOCKBRIDGE VILLAGE (A) $1,187,204 1991 03/27/91 20 to 40 years
G.E. LIGHTING NATIONAL
CUSTOMER CENTER (B) 605,851 1991 07/01/92 20 to 40 years
MEDICAL CENTER PROJECT (C) 387,119 1992 09/14/92 20 to 40 years
JACKSONVILLE IBM BUILDING (D) 815,712 1992 06/08/92 20 to 40 years
=============
Total $2,995,886
=============
(a) Stockbridge Village is a 13.62-acre retail shopping center located in
Stockbridge, Georgia. It is owned by Fund III and IV Associates. The
Partnership owned a 43% interest in Fund III and IV Associates at December
31, 1996.
(b) The G.E. Lighting National Customer Center is a 43,000-square-foot office
building located in Richmond, Virginia. It is owned by Fund III and IV
Associates. The Partnership owned a 43% interest in Fund III and IV
Associates at December 31, 1996.
(c) The Medical Center Project consists of a 17,847-square-foot medical
building completed in March 1993 and a nearly identical medical office
building completed in April 1994. It is owned by Fund IV and V Associates.
The Partnership owned a 38% interest in Fund IV and V Associates at
December 31, 1996.
(d) The Jacksonville IBM Building is a four-story, 88,600-square-foot office
building located in Jacksonville, Florida. It is owned by Fund IV and V
Associates. The Partnership owned a 38% interest in Fund IV and V
Associates at December 31, 1996.
(e) Depreciation lives used for buildings are 40 years through September 1995,
changed to 25 years thereafter. Depreciation lives used for land
improvements are 20 years.
S-1
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
ACCUMULATED
COST DEPRECIATION
------------- ------------
BALANCE AT DECEMBER 31, 1994 $28,399,511 $1,266,136
1995 additions 252,634 717,766
-------------- ------------
BALANCE AT DECEMBER 31, 1995 28,652,145 1,983,902
1996 additions 23,577 1,011,984
-------------- ------------
BALANCE AT DECEMBER 31, 1996 $28,675,722 $2,995,886
============== ============
S-2