WELLS REAL ESTATE FUND X L P - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - WELLS REAL ESTATE FUND X L P	Financial_Report.xls
EX-31.1 - SECTION 302 PEO CERTIFICATION - WELLS REAL ESTATE FUND X L P	fund10q32011ex311.htm
EX-32.1 - SECTION 906 PEO & PFO CERTIFICATION - WELLS REAL ESTATE FUND X L P	fund10q32011ex321.htm
EX-31.2 - SECTION 302 PFO CERTIFICATION - WELLS REAL ESTATE FUND X L P	fund10q32011ex312.htm
EX-10.1 - KATO ROAD PSA - WELLS REAL ESTATE FUND X L P	exh101katoroadpsafinal.htm
EX-10.4 - KATO ROAD PSA - 3RD AMENDMENT - WELLS REAL ESTATE FUND X L P	exh104katoroad-thirdamendm.htm
EX-10.5 - KATO ROAD PSA - 4TH AMENDMENT - WELLS REAL ESTATE FUND X L P	exh105katoroad-fourthamend.htm
EX-10.3 - KATO ROAD PSA - 2ND AMENDMENT - WELLS REAL ESTATE FUND X L P	exh103katoroad-secondamend.htm
EX-10.2 - KATO ROAD PSA - 1ST AMENDMENT - WELLS REAL ESTATE FUND X L P	exh102katoroad-firstamendm.htm
EX-10.7 - KATO ROAD PSA - 6TH AMENDMENT - WELLS REAL ESTATE FUND X L P	exh107katoroad-sixthamendm.htm
EX-10.6 - KATO ROAD PSA - 5TH AMENDMENT - WELLS REAL ESTATE FUND X L P	exh106katoroad-fifthamendm.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________

FORM 10-Q

_______________________________________



(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2011



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______

Commission file number 0-23719

_______________________________________

WELLS REAL ESTATE FUND X, L.P.

(Exact name of registrant as specified in its charter)

_______________________________________



Georgia		58-2250093
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)



6200 The Corners Pkwy., Norcross, Georgia		30092-3365
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code		(770) 449-7800

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes T No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes T No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No T

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-Q of Wells Real Estate Fund X, L.P. (the “Partnership” or the “Registrant”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Specifically, we consider, among others, statements concerning future operating results and cash flows, our ability to meet future obligations, and the amount and timing of any future distributions to limited partners to be forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the Securities and Exchange Commission. We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Any such forward-looking statements are subject to unknown risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide distributions to partners, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A. in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010 for a discussion of some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in our forward-looking statements.

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WELLS REAL ESTATE FUND X, L.P.

TABLE OF CONTENTS



			Page No.
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Balance Sheets – September 30, 2011 (unaudited) and December 31, 2010	5

		Statements of Operations for the Three Months and Nine Months Ended September 30, 2011 (unaudited) and 2010 (unaudited)	6

		Statements of Partners’ Capital for the Year Ended December 31, 2010 and the Nine Months Ended September 30, 2011 (unaudited)	7

		Statements of Cash Flows for the Nine Months Ended September 30, 2011 (unaudited) and 2010 (unaudited)	8

		Condensed Notes to Financial Statements (unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20

	Item 4.	Controls and Procedures	20

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	20

	Item 1A.	Risk Factors	20

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

	Item 3.	Defaults Upon Senior Securities	20

	Item 4.	REMOVED AND RESERVED	20

	Item 5.	Other Information	20

	Item 6.	Exhibits	21

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PART I.	FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

The information presented in the Partnership’s accompanying balance sheets and statements of operations, partners’ capital, and cash flows reflects all adjustments that are, in management’s opinion, necessary for a fair and consistent presentation of the aforementioned financial statements.

The accompanying financial statements should be read in conjunction with the notes to the Partnership’s financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included both in this report on Form 10-Q and in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010. The Partnership’s results of operations for the three months and nine months ended September 30, 2011 are not necessarily indicative of the operating results expected for the full year.

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WELLS REAL ESTATE FUND X, L.P.

BALANCE SHEETS



	(Unaudited)
	September 30, 2011		December 31, 2010
Assets:
Investment in joint ventures	$	12,409	$	3,715,608
Cash and cash equivalents	6,421,972		2,208,905
Other assets	2,444		—
Total assets	$	6,436,825	$	5,924,513

Liabilities:
Accounts payable and accrued expenses	$	4,612	$	10,065
Due to affiliates	6,716		7,922
Total liabilities	11,328		17,987

Commitments and Contingencies

Partners' Capital:
Limited partners:
Class A – 2,428,694 units issued and outstanding	5,680,194		5,659,587
Class B – 284,197 units issued and outstanding	745,303		246,939
General partners	—		—
Total partners’ capital	6,425,497		5,906,526
Total liabilities and partners’ capital	$	6,436,825	$	5,924,513

See accompanying notes.

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WELLS REAL ESTATE FUND X, L.P.

STATEMENTS OF OPERATIONS



	(Unaudited)						(Unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011		2010
Equity in Income (Loss) of Joint Ventures	$	7,091		$	(20,935	)	$	634,972	$	(706,764	)

Interest and Other Income	3,818			384			6,752		1,156

General and Administrative Expenses	33,950			37,494			122,753		135,776
Net Income (Loss)	$	(23,041	)	$	(58,045	)	$	518,971	$	(841,384	)

Net Income (Loss) Allocated to Limited Partners:
Class A	$	—		$	(43,467	)	$	20,607	$	(826,806	)
Class B	$	(23,041	)	$	(14,578	)	$	498,364	$	(14,578	)

Net Income (Loss) Per Weighted-Average Limited Partner Unit:
Class A	$	0.00		$	(0.02	)	$	0.01	$	(0.34	)
Class B	$	(0.08	)	$	(0.05	)	$	1.75	$	(0.05	)

Weighted-Average Limited Partner Units Outstanding:
Class A	2,428,694			2,428,694			2,428,694		2,432,822
Class B	284,197			284,197			284,197		280,069

See accompanying notes.

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WELLS REAL ESTATE FUND X, L.P.

STATEMENTS OF PARTNERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2010

AND THE NINE MONTHS ENDED SEPTEMBER 30, 2011 (UNAUDITED)



	Limited Partners								General Partners		Total Partners’ Capital
	Class A					Class B
	Units		Amount			Units	Amount
BALANCE, December 31, 2009	2,434,885		$	6,516,223		278,006	$	—	$	—	$	6,516,223

Class A conversion elections	(6,191	)	(14,578		)	6,191	14,578		—		—
Net income (loss)	—		(842,058		)	—	232,361		—		(609,697		)
BALANCE, December 31, 2010	2,428,694		5,659,587			284,197	246,939		—		5,906,526

Net income	—		20,607			—	498,364		—		518,971
BALANCE, September 30, 2011	2,428,694		$	5,680,194		284,197	$	745,303	$	—	$	6,425,497

See accompanying notes.

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WELLS REAL ESTATE FUND X, L.P.

STATEMENTS OF CASH FLOWS



	(Unaudited)
	Nine Months Ended
	September 30,
	2011			2010
Cash Flows from Operating Activities:
Net income (loss)	$	518,971		$	(841,384	)
Operating distributions received from joint ventures	7,138			40,141
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Equity in (income) loss of joint ventures	(634,972		)	706,764
Changes in assets and liabilities:
Increase in other assets	(2,444		)	—
Decrease in accounts payable and accrued expenses	(5,453		)	(3,108		)
Decrease in due to affiliates	(1,206		)	(1,982		)
Net cash used in operating activities	(117,966		)	(99,569		)

Cash Flows from Investing Activities:
Net sale proceeds received from joint ventures	4,668,804			—
Investment in joint ventures	(337,771		)	(105,906		)
Net cash provided by (used in) investing activities	4,331,033			(105,906		)
Net Increase (Decrease) in Cash and Cash Equivalents	4,213,067			(205,475		)

Cash and Cash Equivalents, beginning of period	2,208,905			825,948
Cash and Cash Equivalents, end of period	$	6,421,972		$	620,473

See accompanying notes.

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WELLS REAL ESTATE FUND X, L.P.

CONDENSED NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2011 (unaudited)


1.	ORGANIZATION AND BUSINESS

Wells Real Estate Fund X, L.P. (the “Partnership”) is a public limited partnership organized on June 20, 1996 under the laws of the state of Georgia with Leo F. Wells, III and Wells Partners, L.P. (“Wells Partners”), a Georgia nonpublic limited partnership, serving as its general partners (collectively, the “General Partners”). Wells Capital, Inc. (“Wells Capital”) serves as the corporate general partner of Wells Partners. Wells Capital is a wholly owned subsidiary of Wells Real Estate Funds, Inc. (“WREF”). Leo F. Wells, III is the president and sole director of Wells Capital and the president, sole director, and sole owner of WREF. Upon subscription for units, the limited partners elected to have their units treated as Class A Units or Class B Units. Thereafter, limited partners have the right to change their prior election to have some or all of their units treated as Class A Units or Class B Units one time during each quarterly accounting period. Limited partners may vote to, among other things: (a) amend the partnership agreement, subject to certain limitations; (b) change the business purpose or investment objectives of the Partnership; (c) add or remove a general partner; (d) dissolve the Partnership; and (e) approve a sale of all or substantially all of the Partnership’s assets, subject to certain limitations. A majority vote on any of the above-described matters will bind the Partnership without the concurrence of the General Partners. Each limited partnership unit has equal voting rights regardless of class.

On December 31, 1996, the Partnership commenced an offering of up to $35,000,000 of Class A or Class B limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933, as amended. The offering was terminated on December 30, 1997, at which time the Partnership had sold approximately 2,116,099 Class A Units and 596,792 Class B Units representing total limited partner capital contributions of $27,128,912.

The Partnership owns interests in all of its real estate assets through joint ventures with other entities affiliated with the General Partners and Piedmont Operating Partnership, LP (“Piedmont OP”), formerly known as Wells Operating Partnership, L.P. Piedmont OP is a Delaware limited partnership with Piedmont Office Realty Trust, Inc. (“Piedmont REIT”), formerly known as Wells Real Estate Investment Trust, Inc., serving as its general partner. Piedmont REIT is a Maryland corporation that qualifies as a real estate investment trust. During the periods presented, the Partnership owned interests in the following joint ventures (the “Joint Ventures”) and properties:



Joint Venture	Joint Venture Partners	Ownership %	Properties
The Fund IX, Fund X, Fund XI and REIT Joint Venture (“Fund IX-X-XI-REIT Associates”)	• Wells Real Estate Fund IX, L.P. • Wells Real Estate Fund X, L.P. • Wells Real Estate Fund XI, L.P. • Piedmont Operating Partnership, LP	39.0% 48.5% 8.8% 3.7%	1. 360 Interlocken Building⁽¹⁾ A three-story office building located in Broomfield, Colorado 2. Avaya Building⁽²⁾ A one-story office building located in Oklahoma City, Oklahoma
Fund X and Fund XI Associates (“Fund X-XI Associates”)	• Wells Real Estate Fund X, L.P. • Wells Real Estate Fund XI, L.P.	58.0% 42.0%	This joint venture only owns an interest in another joint venture, Wells/Fremont Associates, and does not own any properties directly.
Wells/Fremont Associates (“Fund X-XI-REIT Associates – Fremont”)	• Fund X-XI Associates • Piedmont Operating Partnership, LP	22.5% 77.5%	3. 47300 Kato Road ⁽³⁾ A two-story warehouse and office building located in Fremont, California


⁽¹⁾	This property was sold in June 2011.


⁽²⁾	This property was sold in October 2010.


⁽³⁾	This property was sold in August 2011.

Wells Real Estate Fund IX, L.P. and Wells Real Estate Fund XI, L.P. are affiliated with the Partnership through common general partners. Each of the properties described above was acquired on an all-cash basis. For further information regarding the Joint Ventures and foregoing properties, refer to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010.

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”), including the instructions to Form 10-Q and Article 10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly and consistently present the results for such periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and footnotes included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010.

The Partnership's policy is to adopt the liquidation basis of accounting once the liquidation of the Partnership is imminent, which the Partnership has defined as beginning on the first day of the quarter following the completion of the sale of all of its real estate assets. On August 25, 2011, the Partnership, through its investment in the Joint Ventures, sold the remaining property in its portfolio, 47300 Kato Road. Accordingly, the Partnership is planning to adopt the liquidation basis of accounting effective October 1, 2011. Under the liquidation basis of accounting, assets and liabilities will be stated at their estimated net realizable values and net settlement amounts, respectively, and statements of operations and statements of cash flows will no longer be presented.

Investment in Joint Ventures

The Partnership has evaluated the Joint Ventures and concluded that none are variable interest entities. The Partnership does not have control over the operations of the Joint Ventures; however, it does exercise significant influence. Approval by the Partnership as well as the other joint venture partners is required for any major decision or any action that would materially affect the Joint Ventures, or their real property investments. Accordingly, the Partnership accounts for its investments in the Joint Ventures using the equity method of accounting, whereby original investments are recorded at cost and subsequently adjusted for contributions, distributions, and net income (loss) attributable to the Partnership. Pursuant to the terms of the joint venture agreements, all income (loss) and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, are generally distributed to the joint venture partners on a quarterly basis.

Evaluating the Recoverability of Real Estate Assets

The Partnership continually monitored events and changes in circumstances that could have indicated that the carrying amounts of the real estate assets owned through the Partnership’s investment in the Joint Ventures were not recoverable. When indicators of potential impairment were present, which suggested that the carrying amounts of real estate asset were not recoverable, management assessed the recoverability of the real estate assets by determining whether the respective carrying values would have been recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use, or the estimated fair value, less costs to sell, for assets held for sale did not exceed the respective asset carrying value, management adjusted the real estate assets to their respective estimated fair values, pursuant to the provisions of the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognized an impairment loss. Estimated fair values were determined based on the following information, dependent upon availability: (i) recently quoted market price(s) for the subject property, or highly comparable properties, under sufficiently active and normal market conditions, or (ii) the present value of future cash flows, including estimated residual value.

While various techniques and assumptions can be used to estimate fair value depending on the nature of the asset or liability, the accounting standard for fair value measurements and disclosures describes three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as little, if any, related market activity or information is available. Examples of Level 3 inputs include estimated holding periods, discount rates, market capitalization rates, expected lease rental rates, timing of new leases, and sales prices; additionally, the Partnership could have assigned an estimated probability-weighting to more than one fair value estimate based on the Partnership’s assessment of the likelihood of the respective underlying assumptions occurring as of the evaluation date. In instances where the determination of the fair value measurement is based on inputs from

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different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls was based on the lowest level input that is significant to the fair value measurement in its entirety. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considered factors specific to the asset or liability.

Distributions of Net Cash from Operations

Net cash from operations, if available and unless reserved, is generally distributed quarterly to the limited partners as follows:


•	First, to all limited partners holding Class A Units on a per-unit basis until such limited partners have received distributions equal to a 10% per annum return on their respective net capital contributions, as defined.


•	Second, to the General Partners until the General Partners have received distributions equal to 10% of the total cumulative distributions paid by the Partnership.


•	Third, to the limited partners holding Class A Units on a per-unit basis and the General Partners allocated on a basis of 90% and 10%, respectively.

No distributions of net cash from operations will be made to limited partners holding Class B Units.

Distribution of Net Sale Proceeds

Upon the sale of properties, unless reserved, net sale proceeds will be distributed in the following order:

•

In the event that the particular property sold is sold for a price that is less than the original property purchase price, to the limited partners holding Class A Units until they have received an amount equal to the excess of the original property purchase price over the price for which the property was sold, limited to the amount of depreciation, amortization, and cost recovery deductions taken by the limited partners holding Class B Units with respect to such property;


•	To limited partners holding units which at any time have been treated as Class B Units until such limited partners have received an amount necessary to equal the net cash available for distribution previously received by the limited partners holding Class A Units on a per-unit basis;


•	To all limited partners on a per-unit basis until the limited partners have received 100% of their respective net capital contributions, as defined;


•	To all limited partners on a per-unit basis until the limited partners have received a cumulative 10% per annum return on their respective net capital contributions, as defined;

•

To limited partners on a per-unit basis until the limited partners have received an amount equal to their respective preferential limited partner return (defined as the sum of a 10% per annum cumulative return on net capital contributions for all periods during which the units were treated as Class A Units and a 15% per annum cumulative return on net capital contributions for all periods during which the units were treated as Class B Units);


•	To the General Partners until they have received 100% of their respective capital contributions, as defined;

•

Then, if limited partners have received any excess limited partner distributions (defined as distributions to limited partners over the life of their investment in the Partnership in excess of their net capital contributions, as defined, plus their preferential limited partner return), to the General Partners until they have received distributions equal to 20% of the sum of any such excess limited partner distributions plus distributions made to the General Partners pursuant to this provision; and


•	Thereafter, 80% to the limited partners on a per-unit basis and 20% to the General Partners.

Liquidating Distributions

Pursuant to the partnership agreement, after satisfying all debts and liabilities and establishing reserves deemed reasonably necessary in the sole discretion of the General Partners, liquidating distributions will be allocated to the partners in accordance with their respective positive tax capital balances, as adjusted for allocations of gain or loss on the sale of the Partnership's properties.

Allocations of Net Income, Net Loss, and Gain on Sale

For the purpose of determining allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for depreciation, amortization, cost recovery, and the gain on the sale of assets. Net income, as defined, of the Partnership will be allocated each year in the same proportion that net cash from operations is distributed to the partners holding Class A Units and the General Partners. To the extent the Partnership’s net income in any year exceeds net cash from operations, such excess net income will be allocated 99% to the limited partners holding Class A Units and 1% to the General Partners.

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Net loss, depreciation, and amortization deductions for each fiscal year will be allocated as follows: (a) 99% to the limited partners holding Class B Units and 1% to the General Partners until their capital accounts are reduced to zero, (b) then, to any partner having a positive balance in his capital account in an amount not to exceed such positive balance, and (c) thereafter, to the General Partners.

Gain on the sale or exchange of the Partnership’s properties will be allocated generally in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are made, if applicable: (a) allocations made pursuant to the qualified income offset provisions of the partnership agreement; (b) allocations to partners having negative capital accounts until all negative capital accounts have been restored to zero; and (c) allocations to limited partners holding Class B Units in amounts equal to the deductions for depreciation and amortization previously allocated to them with respect to the specific partnership property sold, but not in excess of the amount of gain on sale recognized by the Partnership with respect to the sale of such property.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (the “FASB”) clarified previously issued GAAP and issued new requirements related to Accounting Standards Codification Topic Fair Value Measurements and Disclosures (“ASU 2010-6”). The clarification component includes disclosures about inputs and valuation techniques used in determining fair value, and providing fair value measurement information for each class of assets and liabilities. The new requirements relate to disclosures of transfers between the levels in the fair value hierarchy, as well as the individual components in the rollforward of the lowest level (Level 3) in the fair value hierarchy. This change in GAAP became effective for the Partnership beginning January 1, 2010, except for the provision concerning the rollforward of activity of the Level 3 fair value measurement, which became effective for the Partnership on January 1, 2011. The adoption of ASU 2010-6 has not had a material impact on the Partnership's financial statements or disclosures.

In May 2011, the FASB issued Accounting Standards Update 2011-04, Fair Value Measurement Topic Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”). ASU 2011-04 converges the GAAP and International Financial Reporting Standards definition of “fair value,” the requirements for measuring amounts at fair value, and disclosures about these measurements. The update does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting. The adoption of ASU 2011-04 will be effective for the Partnership on December 15, 2011. The Partnership does not expect that the adoption of ASU 2011-04 will have a material impact on its financial statements or disclosures.


3.	INVESTMENT IN JOINT VENTURES

Summary of Financial Information

Condensed financial information for the joint ventures in which the Partnership held direct interests for the three months and nine months ended September 30, 2011 and 2010, respectively, is presented below:



	Total Revenues				Income (Loss) From Continuing Operations						Income (Loss) From Discontinued Operations					Net Income (Loss)
	Three Months Ended				Three Months Ended						Three Months Ended					Three Months Ended
	September 30,				September 30,						September 30,					September 30,
	2011		2010		2011			2010			2011		2010			2011			2010
Fund IX-X-XI-REIT Associates	$	—	$	—	$	(4,042	)	$	(2,431	)	$	3,397	$	(15,902	)	$	(645	)	$	(18,333	)
Fund X-XI Associates	—		—		12,761			(20,763		)	—		—			12,761			(20,763		)
	$	—	$	—	$	8,719		$	(23,194	)	$	3,397	$	(15,902	)	$	12,116		$	(39,096	)

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	Total Revenues				Income (Loss) From Continuing Operations						Income (Loss) From Discontinued Operations					Net Income (Loss)
	Nine Months Ended				Nine Months Ended						Nine Months Ended					Nine Months Ended
	September 30,				September 30,						September 30,					September 30,
	2011		2010		2011			2010			2011		2010			2011			2010
Fund IX-X-XI-REIT Associates	$	—	$	—	$	(24,668	)	$	(15,561	)	$	1,354,512	$	(1,474,622	)	$	1,329,844		$	(1,490,183	)
Fund X-XI Associates	—		—		(17,044		)	27,313			—		—			(17,044		)	27,313
	$	—	$	—	$	(41,712	)	$	11,752		$	1,354,512	$	(1,474,622	)	$	1,312,800		$	(1,462,870	)

Condensed financial information for the joint venture in which the Partnership held an interest through its equity interest in Fund X-XI Associates for the three months and nine months ended September 30, 2011 and 2010, respectively, is presented below:



	Total Revenues				Income (Loss) From Continuing Operations						Income (Loss) From Discontinued Operations					Net Income (Loss)
	Three Months Ended				Three Months Ended						Three Months Ended					Three Months Ended
	September 30,				September 30,						September 30,					September 30,
	2011		2010		2011			2010			2011		2010			2011		2010
Fund X-XI-REIT Associates – Fremont	$	—	$	—	$	(2,855	)	$	(2,432	)	$	59,582	$	(89,864	)	$	56,727	$	(92,296	)



	Total Revenues				Income (Loss) From Continuing Operations						Income (Loss) From Discontinued Operations					Net Income (Loss)
	Nine Months Ended				Nine Months Ended						Nine Months Ended					Nine Months Ended
	September 30,				September 30,						September 30,					September 30,
	2011		2010		2011			2010			2011			2010		2011			2010
Fund X-XI-REIT Associates – Fremont	$	—	$	—	$	(14,269	)	$	(13,322	)	$	(61,494	)	$	134,735	$	(75,763	)	$	121,413

The Partnership allocates its share of net income, net loss, and gain on sale generated by the properties owned by the Joint Ventures to its Class A and Class B limited partners pursuant to the partnership agreement provisions outlined in Note 2. The components of income (loss) from discontinued operations recognized by the Joint Ventures are provided below:



	Nine Months Ended								Nine Months Ended
	September 30, 2011								September 30, 2010
	Operating Income (Loss)			Gain on Sale		Total			Operating Income (Loss)			Impairment Loss			Gain on Sale		Total
Fund IX-X-XI-REIT Associates	$	127,569		$	1,226,943	$	1,354,512		$	(26,405	)	$	(1,448,217	)	$	—	$	(1,474,622	)
Fund X-XI-REIT Associates - Fremont	(152,699		)	91,205		(61,494		)	134,735			—			—		134,735
	$	(25,130	)	$	1,318,148	$	1,293,018		$	108,330		$	(1,448,217	)	$	—	$	(1,339,887	)


4.	RELATED-PARTY TRANSACTIONS

Management and Leasing Fees

The Partnership entered into a property management and leasing agreement with Wells Management Company, Inc. (“Wells Management”), an affiliate of the General Partners. In accordance with the property management and leasing agreement, Wells Management receives compensation for the management and leasing of the Partnership’s properties owned through the Joint Ventures, equal to (a) 3% for management services and 3% for leasing services of the gross revenues collected monthly (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, which is assessed periodically based on market studies, 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. Management and leasing fees are paid by the Joint Ventures and,

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accordingly, are included in equity in income (loss) of joint ventures in the accompanying statements of operations. The Partnership’s share of management and leasing fees and lease acquisition costs incurred through the Joint Ventures and payable to Wells Management is $16 and $5,187 for the three months ended September 30, 2011 and 2010, respectively, and $2,940 and $10,732 for the nine months ended September 30, 2011 and 2010, respectively.

Administrative Reimbursements

Wells Capital, the corporate general partner of Wells Partners, one of our general partners, and Wells Management perform certain administrative services for the Partnership, relating to accounting and other partnership administration, and incur the related expenses. Such expenses are allocated among other entities affiliated with the General Partners based on estimates of the amount of time dedicated to each fund by individual administrative personnel. In the opinion of the General Partners, this allocation is a reasonable estimation of such expenses. The Partnership incurred administrative expenses of $18,828 and $23,071 payable to Wells Capital and Wells Management for the three months ended September 30, 2011 and 2010, respectively, and $55,250 and $72,111 for the nine months ended September 30, 2011 and 2010, respectively. In addition, Wells Capital and Wells Management pay for certain operating expenses of the Partnership (“bill-backs”) directly and invoice the Partnership for the reimbursement thereof on a quarterly basis. As presented in the accompanying balance sheets, due to affiliates as of September 30, 2011 and December 31, 2010 represents administrative reimbursements and bill-backs due to Wells Capital and/or Wells Management.

Assertion of Legal Action Against Related-Parties

On March 12, 2007, a stockholder of Piedmont REIT filed a putative class action and derivative complaint, presently styled In re Wells Real Estate Investment Trust, Inc. Securities Litigation, in the United States District Court for the District of Maryland against, among others, Piedmont REIT; Leo F. Wells, III, one of the Partnership’s General Partners; Wells Capital, the corporate general partner of Wells Partners, the Partnership’s other General Partner; Wells Management, the Partnership’s property manager; certain affiliates of WREF; the directors of Piedmont REIT; and certain individuals who formerly served as officers or directors of Piedmont REIT prior to the closing of the internalization transaction on April 16, 2007.

The complaint alleged, among other things, violations of the federal proxy rules and breaches of fiduciary duty arising from the Piedmont REIT internalization transaction and the related proxy statement filed with the SEC on February 26, 2007, as amended. The complaint sought, among other things, unspecified monetary damages and nullification of the Piedmont REIT internalization transaction.

On June 27, 2007, the plaintiff filed an amended complaint, which attempted to assert class action claims on behalf of those persons who received and were entitled to vote on the Piedmont REIT proxy statement filed with the SEC on February 26, 2007, and derivative claims on behalf of Piedmont REIT.

On March 31, 2008, the Court granted in part the defendants’ motion to dismiss the amended complaint. The Court dismissed five of the seven counts of the amended complaint in their entirety. The Court dismissed the remaining two counts with the exception of allegations regarding the failure to disclose in the Piedmont REIT proxy statement details of certain expressions of interest in acquiring Piedmont REIT. On April 21, 2008, the plaintiff filed a second amended complaint, which alleges violations of the federal proxy rules based upon allegations that the proxy statement to obtain approval for the Piedmont REIT internalization transaction omitted details of certain expressions of interest in acquiring Piedmont REIT. The second amended complaint seeks, among other things, unspecified monetary damages, to nullify and rescind the internalization transaction, and to cancel and rescind any stock issued to the defendants as consideration for the internalization transaction. On May 12, 2008, the defendants answered and raised certain defenses to the second amended complaint.

On June 23, 2008, the plaintiff filed a motion for class certification. On September 16, 2009, the Court granted the plaintiff’s motion for class certification. On September 20, 2009, the defendants filed a petition for permission to appeal immediately the Court’s order granting the motion for class certification with the Eleventh Circuit Court of Appeals. The petition for permission to appeal was denied on October 30, 2009. On April 13, 2009, the plaintiff moved for leave to amend the second amended complaint to add additional defendants. The Court denied the plaintiff’s motion for leave to amend on June 23, 2009.

On December 4, 2009, the parties filed motions for summary judgment. On August 2, 2010, the Court entered an order denying the defendants’ motion for summary judgment and granting, in part, the plaintiff’s motion for partial summary judgment. The Court ruled that the question of whether certain expressions of interest in acquiring Piedmont REIT constituted “material” information required to be disclosed in the proxy statement to obtain approval for the Piedmont REIT internalization transaction raises questions of fact that must be determined at trial. A trial date has not been set.

Mr. Wells, Wells Capital, and Wells Management believe that the allegations contained in the complaint are without merit and intend to vigorously defend this action. Any financial loss incurred by Wells Capital, Wells Management, or their affiliates could hinder their ability to successfully manage the Partnership’s operations and portfolio of investments.

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5. ECONOMIC DEPENDENCY

The Partnership has engaged Wells Capital and Wells Management to provide certain essential services, including supervision of the management and leasing of its properties, asset acquisition and disposition services, as well as other administrative responsibilities, including accounting services and investor communications and relations. These agreements are terminable by either party upon 60 days’ written notice. As a result of these relationships, the Partnership is dependent upon Wells Capital and Wells Management.

Wells Capital, Wells Management, and Wells Investment Securities, Inc. ("WIS") are owned and controlled by WREF. The operations of Wells Capital, Wells Management, and WIS represent substantially all of the business of WREF. Accordingly, the Partnership focuses on the financial condition of WREF when assessing the financial condition of Wells Capital and Wells Management. In the event that WREF were to become unable to meet its obligations as they become due, the Partnership might be required to find alternative service providers.

Future net income generated by WREF will be largely dependent upon the amount of fees earned by Wells Capital, Wells Management, and WIS based on, among other things, the level of investor proceeds raised from the sale of common stock for certain WREF-sponsored programs and the volume of future acquisitions and dispositions of real estate assets by WREF-sponsored programs, as well as distribution income earned from its holdings of common stock of Piedmont REIT, which was acquired in connection with the Piedmont REIT internalization transaction (see “Assertion of Legal Action Against Related-Parties” above). As of September 30, 2011, the Partnership has no reason to believe that WREF does not have access to adequate liquidity and capital resources, including cash flow generated from operations, cash on hand, other investments, and borrowing capacity, necessary to meet its current and future obligations as they become due.

6. COMMITMENTS AND CONTINGENCIES

From time to time, the Partnership and its General Partners are parties to legal proceedings which arise in the ordinary course of our business. The Partnership is not currently involved in any litigation for which the outcome would, in the judgment of the General Partners based on information currently available, have a materially adverse impact on the results of operations or financial condition of the Partnership, nor is management aware of any such litigation threatened against us.

7. SUBSEQUENT EVENT

The sales of the the Avaya Building and the 360 Interlocken Building generated total net sale proceeds to the Partnership of approximately $6.7 million, of which approximately $750,000 has been utilized to fund re-leasing costs at the 360 Interlocken Building and Partnership operating expenses. On November 1, 2011, the Partnership distributed $5.8 million to the limited partners of record effective as of October 1, 2011. The General Partners have determined that the residual net sale proceeds will be held in reserve to fund dissolution expenses and obligations of the Partnership. The General Partners anticipate making a final liquidating distribution of unused reserves to the limited partners and dissolving the Partnership in December 2011.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the accompanying financial statements and notes thereto. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I, as well as the notes to our financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations provided in our Annual Report on Form 10-K for the year ended December 31, 2010.

Overview

Management believes that the Partnership typically operates through the following five key life cycle phases. The duration of each phase is dependent upon various economic, industry, market, and other internal/external factors. Some overlap naturally exists in the transition from one phase to the next.


•	Fundraising phase

The period during which the Partnership is raising capital through the sale and issuance of limited partner units to the public;


•	Investing phase

The period during which the Partnership invests the capital raised during the fundraising phase, less upfront fees, into the acquisition of real estate assets;

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•	Holding phase

The period during which the Partnership owns and operates its real estate assets during the initial lease terms of the tenants;


•	Positioning-for-sale phase

The period during which the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the holding phase, the Partnership continues to own and operate the real estate assets, evaluate various options for disposition, and market the real estate assets for sale; and


•	Disposition-and-liquidation phase

The period during which the Partnership sells its real estate investments, distributes net sale proceeds to the partners, liquidates, and terminates the Partnership.

Portfolio Overview

We have transitioned into the disposition-and-liquidation phase of our life cycle. On August 25, 2011, Wells/Fremont Associates sold the 47300 Kato Road property to an unrelated third party for a gross sale price of $3,824,553. As a result of the sale, the Partnership received net sale proceeds of approximately $457,000 and was allocated a gain of approximately $12,000, which may be adjusted as additional information becomes available in subsequent periods. With the completion of the sale of the 47300 Kato Road property, we have sold all of the real estate assets in which we had owned interests. We have begun to take the steps necessary to liquidate and dissolve the Partnership.

In November 2011, General Partners distributed net sale proceeds of approximately $5.8 million from the sales of the Avaya Building and the 360 Interlocken Building. The General Partners have determined that the residual net sale proceeds will be held in reserve to fund dissolution expenses and obligations of the Partnership. The General Partners anticipate making a final liquidating distribution of unused reserves to the limited partners and dissolving the Partnership in December 2011.

Property Summary

We have now sold all of the real estate assets in which we had owned interests following the sale of the 47300 Kato Road property in August 2011. We have begun to take the steps necessary to liquidate and dissolve the Partnership, which is expected to occur in the fourth quarter of 2011.

Information relating to the properties owned, or previously owned, by the joint ventures is provided below:


•	The Cort Building sold on September 11, 2003.


•	The Alstom Power – Knoxville Building sold on March 15, 2005.


•	The 1315 West Century Drive property sold on December 22, 2006.


•	The Iomega Building sold on January 31, 2007.


•	The Avaya Building sold on October 15, 2010.


•	The 360 Interlocken Building sold on June 2, 2011.


•	The 47300 Kato Road property sold on August 25, 2011.

Liquidity and Capital Resources

Overview

Our operating strategy has entailed funding expenditures related to the recurring operations of the remaining property in our portfolio, including current and prior period operating distributions received from the Joint Ventures, and assessing the amount of remaining cash flows that would have been required to fund known future re-leasing costs and other capital improvements. Any residual operating cash flows were generally considered available for distribution to the Class A limited partners and, unless reserved, were generally paid quarterly. As a result, the ongoing monitoring of our cash position has been critical to ensuring that adequate liquidity and capital resources were available.

Short-Term Liquidity

For the nine months ended September 30, 2011, net operating cash outflows were approximately $118,000, primarily due to (i) the vacancy at the 47300 Kato Road property, prior to its disposition and (ii) Fund IX-X-XI-REIT Associates retaining some of its operating cash flow to fund the remaining re-leasing costs at the the 360 Interlocken Building, prior to its disposition. We expect

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future operating distributions from the Joint Ventures to cease as a result of selling our last remaining property, the 47300 Kato Road property.

During the nine months ended September 30, 2011, we invested (i) approximately $315,000 in Fund IX-X-XI-REIT Associates to fund our pro rata share of the remaining re-leasing costs at the 360 Interlocken Building incurred in connection with the lease agreement with AVNET, Inc. and (ii) approximately $23,000 in Fund X-XI-REIT Associates-Fremont to fund our pro rata share of property operating costs at 47300 Kato Road, which was vacant prior to disposition. During the nine months ended September 30, 2011, we received net sale proceeds of approximately $4,670,000 from the sale of the 360 Interlocken Building and the 47300 Kato Road property. We believe that the cash on hand, including net proceeds from the sale of properties, will be sufficient to cover our working capital needs as we begin to wrap-up the Partnership's affairs and prepare for dissolution.

Long-Term Liquidity

We have sold all of the real estate assets in which we had owned interests and do not anticipate acquiring additional properties. As a result of the sale of the last remaining real estate asset in which we held an interest in August 2011, we have begun to take the steps necessary to liquidate and dissolve the Partnership. We are in the process of evaluating the amount of cash reserves needed to settle estimated liabilities of the Partnership at dissolution and intend to distribute the cash balances remaining at that time to the limited partners pursuant to applicable provisions of the partnership agreement in December 2011.

Capital Resources

As of September 30, 2011, we have received, used, distributed, and held net sale proceeds allocated to the Partnership from the sale of properties as presented below:



	Net Sale Proceeds		Partnership’s Approximate Ownership %		Net Sale Proceeds Allocated to the Partnership		Use of Net Sale Proceeds			Net Sale Proceeds Distributed to Partners as of September 30, 2011		Undistributed Net Sale Proceeds as of September 30, 2011
Property Sold	Net Sale Proceeds		Partnership’s Approximate Ownership %		Net Sale Proceeds Allocated to the Partnership		Amount		Purpose			Undistributed Net Sale Proceeds as of September 30, 2011
Cort Building (sold in 2003)	$	5,563,403	32.7	%	$	1,818,114	$	—	—	$	1,818,114	$	—
Alstom Power – Knoxville Building (sold in 2005)	$	11,646,089	48.5	%	5,647,340		—		—	5,647,340		—
1315 West Century Drive (sold in 2006)	$	8,059,625	48.5	%	3,908,217		—		—	3,908,217		—
Iomega Building (sold in 2007)	$	4,685,151	48.5	%	2,271,890		660,560		•Partnership operating expenses (2010) •Re-leasing the 360 Interlocken Building (2010)	1,611,330		—
Avaya Building (sold in 2010)	$	5,107,662	48.5	%	2,476,772		750,440		•Partnership operating expenses (2011) •Re-leasing the 360 Interlocken Building (2010-2011)	—		1,726,332
360 Interlocken Building (sold in 2011)	$	8,685,166	48.5	%	4,211,550		—			—		4,211,550
47300 Kato Road (sold in 2011)	$	3,503,755	13.1	%	457,254		—			—		457,254
Total					$	20,791,137	$	1,411,000		$	12,985,001	$	6,395,136

On November 1, 2011, net sale proceeds of approximately $5.8 million from the sales of the Avaya Building and the 360 Interlocken Building were distributed to the limited partners of record effective October 1, 2011. The General Partners have determined that the residual net sale proceeds will be held in reserve to fund dissolution expenses and obligations of the Partnership. The General Partners anticipate making a final liquidating distribution of unused reserves to the limited partners and dissolving the Partnership in December 2011.

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Results of Operations

Equity in Income (Loss) of Joint Ventures

Equity in income (loss) of Joint Ventures increased from $(20,935) for the three months ended September 30, 2010 to $7,091 for the three months ended September 30, 2011 primarily due to the gain recognized on the sale of the 47300 Kato Road property in August 2011, of which approximately $12,000 was allocated to the Partnership during the third quarter of 2011.

Equity in income (loss) of Joint Ventures increased from $(706,764) for the nine months ended September 30, 2010 to $634,972 for the nine months ended September 30, 2011. The increase in equity in income of joint ventures for the nine months ended September 30, 2011 is primarily attributable to (i) the gain recognized on the sale of the 360 Interlocken Building in June 2011, of which approximately $596,000 was allocated to the Partnership, (ii) the gain recognized on the sale of the 47300 Kato Road property in August 2011, of which approximately $12,000 was allocated to the Partnership, and (iii) the impairment loss recognized by Fund IX-X-XI-REIT Associates related to the 360 Interlocken Building in the second quarter of 2010, of which approximately $702,000 was allocated to the Partnership.

We anticipate future equity in loss of the Joint Venture to be reflective of the Partnership's share of costs associated with wrapping up the affairs of the Joint Venture in the fourth quarter of 2011.

Interest and Other Income

Interest and other income increased from $384 for the three months ended September 30, 2010 to $3,818 for the three months ended September 30, 2011, and from $1,156 for the nine months ended September 30, 2010 to $6,752 for the nine months ended September 30, 2011. The increases for the three months and nine months ended September 30, 2011 are primarily attributable to the increases in the average outstanding cash balance following the receipt of net sale proceeds from the dispositions of the Avaya Building in October 2010, the 360 Interlocken Building in June 2011, and the 47300 Kato Road property in August 2011.

Future levels of interest income will be largely dependent upon the amount of time necessary to liquidate the partnership.

General and Administrative Expenses

General and administrative expenses decreased from $37,494 for the three months ended September 30, 2010 to $33,950 for the three months ended September 30, 2011, and from $135,776 for the nine months ended September 30, 2010 to $122,753 for the nine months ended September 30, 2011. The decreases for the three months and nine months ended September 30, 2011 are primarily attributable to a decrease in the overhead administrative costs allocated to the Partnership during 2011.

We anticipate that future general and administrative expenses will vary primarily based on the amount of time necessary to liquidate the Partnership and changes in our reporting and regulatory requirements.

Application of Critical Accounting Policies

Summary

Our accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.

Below is a discussion of the accounting policies used by the Partnership and the Joint Ventures, which are considered to be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

Investment in Real Estate Assets

We were required to make subjective assessments as to the useful lives of our depreciable assets. We considered the period of future benefit of the assets to determine the appropriate useful lives. These assessments had a direct impact on net income. The estimated useful lives of the Joint Ventures’ assets were depreciated using the straight-line method over the following useful lives:

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Buildings	40 years
Building improvements	5-25 years
Land improvements	20 years
Tenant improvements	Shorter of lease term or economic life

In the event that the Joint Ventures utilized inappropriate useful lives or methods of depreciation, our net income would have been misstated.

Evaluating the Recoverability of Real Estate Assets

We continually monitored events and changes in circumstances that could have indicated that the carrying amounts of the real estate assets in which we had an ownership interest through investments in the Joint Ventures were not recoverable. When indicators of potential impairment were present which suggested that the carrying amounts of real estate assets were not recoverable, we assessed the recoverability of the real estate assets by determining whether the respective carrying values would have been recovered through the estimated undiscounted future operating cash flows expected from the use of the assets and their eventual disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that such expected undiscounted future cash flows for assets held for use, or the estimated fair value, less costs to sell, for assets held for sale, did not exceed the respective assets’ carrying values, we adjusted the real estate assets to their respective estimated fair values, pursuant to the provisions of the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognized an impairment loss. Estimated fair values were determined based on the following information, dependent upon availability: (i) recently quoted market price(s) for the subject property, or highly comparable properties, under sufficiently active and normal market conditions, or (ii) the present value of future cash flows, including estimated residual value.

In the second quarter of 2010, Fund IX-X-XI-REIT Associates recorded an impairment loss on the 360 Interlocken Building of approximately $1,448,000 (approximately $702,000 of which was allocated to the Partnership) to reduce the carrying value of the property to its estimated fair value based on the present value of future cash flows primarily due to refining our disposition strategy for the Partnership and, consequently, shortening the estimated holding period of this asset in second quarter of 2010.

In the third quarter of 2009, Fund X-XI-REIT Associates - Fremont recorded an impairment loss on 47300 Kato Road of approximately $3,316,000 (approximately $433,000 of which was allocated to the Partnership) to reduce the carrying value of the property to its estimated fair value based on the present value of future cash flows, primarily as a result of shortening the estimated holding period of such asset in third quarter of 2009 and significant downward pressure on long-term rental rates for speculative leasing.

Projections of expected future cash flows required that we estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. The subjectivity of assumptions used in the future cash flow analysis, including discount rates, could have resulted in an incorrect assessment of the property’s future cash flows and fair value, and could have resulted in the misstatement of the carrying value of real estate assets held by the Joint Ventures and net income of the Partnership.

Related-Party Transactions

We have entered into agreements with Wells Capital and Wells Management, affiliates of our General Partners, or their affiliates, whereby we pay certain fees and expense reimbursements to Wells Capital, Wells Management, or their affiliates for asset management, the management and leasing of our properties; administrative services relating to accounting, property management, and other partnership administration, and incur the related expenses. See Note 4 to our financial statements included in this report for a description of these fees and expense reimbursements we have incurred.

Subsequent Event

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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Since we do not borrow any money, make any foreign investments, or invest in any market risk-sensitive instruments, we are not subject to risks relating to interest rates, foreign currency exchange rate fluctuations, or the other market risks contemplated by Item 305 of Regulation S-K.


ITEM 4.	CONTROLS AND PROCEDURES

Management's Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management of Wells Capital, the corporate general partner of Wells Partners, including the Principal Executive Officer and the Principal Financial Officer of Wells Capital, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the quarterly period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer of Wells Capital concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report in providing a reasonable level of assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including the Principal Executive Officer and the Principal Financial Officer of Wells Capital, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

We are from time to time a party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any litigation the outcome of which would, in management’s judgment based on information currently available, have a material adverse effect on our results of operations or financial condition, nor is management aware of any such litigation threatened against us during the quarter ended September 30, 2011, requiring disclosure under Item 103 of Regulation S-K. For a description of pending litigation involving certain related parties, see “Assertion of Legal Action Against Related-Parties” in Note 4 to our financial statements included in this report.


ITEM 1A.	RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


(a)	We did not sell any equity securities that were not registered under the Securities Act of 1933, as amended, during the quarter ended September 30, 2011.


(b)	Not applicable.


(c)	We did not redeem any securities during the quarter ended September 30, 2011.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES


(a)	We were not subject to any indebtedness and, therefore, did not default with respect to any indebtedness during the quarter ended September 30, 2011.


(b)	Not applicable.


ITEM 4.	REMOVED AND RESERVED


ITEM 5.	OTHER INFORMATION


(a)	During the quarter ended September 30, 2011, there was no information required to be disclosed in a report on Form 8-K which was not disclosed in a report on Form 8-K.


(b)	Not applicable.

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ITEM 6.	EXHIBITS

The Exhibits to this report are set forth on Exhibit Index to Third Quarter Form 10-Q attached hereto.

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SIGNATURES

Pursuant to the requirements 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.



	WELLS REAL ESTATE FUND X, L.P. (Registrant)

	By:	WELLS PARTNERS, L.P. (General Partner)

	By:	WELLS CAPITAL, INC. (Corporate General Partner)

November 10, 2011		/s/ DOUGLAS P. WILLIAMS
		Douglas P. Williams
		Principal Financial Officer of Wells Capital, Inc.

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EXHIBIT INDEX

TO THIRD QUARTER FORM 10-Q

WELLS REAL ESTATE FUND X, L.P.



Exhibit Number		Description of Document

10.1		Purchase and Sale Agreement for the sale of 47300 Kato Road

10.2		First Amendment to Purchase and Sale Agreement

10.3		Second Amendment to Purchase and Sale Agreement

10.4		Third Amendment to Purchase and Sale Agreement

10.5		Fourth Amendment to Purchase and Sale Agreement

10.6		Fifth Amendment to Purchase and Sale Agreement

10.7		Sixth Amendment to Purchase and Sale Agreement

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	*	XBRL Instance Document.

101.SCH	*	XBRL Taxonomy Extension Schema.

101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase.

101.DEF	*	XBRL Taxonomy Extension Definition Linkbase.

101.LAB	*	XBRL Taxonomy Extension Label Linkbase.

101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase.

* Furnished with this Form 10-Q, but not filed under the Securities Exchange Act of 1934

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WELLS REAL ESTATE FUND X L P - FORM 10-Q - November 10, 2011

Attached files

WELLS REAL ESTATE FUND X L P Reports