WELLS REAL ESTATE FUND XII LP - FORM 10-Q - November 12, 2013

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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, 2013
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______ to _______
Commission file number 000-30287
 _______________________________________
WELLS REAL ESTATE FUND XII, L.P.
(Exact name of registrant as specified in its charter)
_______________________________________ 
Georgia
58-2438242
(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  x    No  o
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  x    No  o
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  o    No  x



 
 
 
 
 


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Form 10-Q of Wells Real Estate Fund XII, L.P. (the "Partnership," "we," "our," "us," 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 (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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 ("SEC"). 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, 2012 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.

Page 2

WELLS REAL ESTATE FUND XII, L.P.
TABLE OF CONTENTS 
 
 
 
 
Page No.
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
 
Item 1.
 
 
 
 
 
 
 
  
 
Item 1A.
 
 
 
 
 
 
 
  
 
Item 2.
 
 
 
 
 
 
 
  
 
Item 3.
 
 
 
 
 
 
 
  
 
Item 4.
 
 
 
 
 
 
 
  
 
Item 5.
 
 
 
 
 
 
 
  
 
Item 6.
 




Page 3

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, all included in both this Quarterly Report on Form 10-Q and in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2012. The Partnership's results of operations for the three months and nine months ended September 30, 2013 are not necessarily indicative of the operating results expected for the full year.


Page 4

WELLS REAL ESTATE FUND XII, L.P.
BALANCE SHEETS

 
(Unaudited)
 
 
 
September 30,
2013
 
December 31,
2012
Assets:
 
 
 
Investment in joint ventures
$
—

 
$
13,713,800

Cash and cash equivalents
16,031,488

 
1,750,838

Due from joint ventures
—

 
378,631

Other assets
35,601

 
16,270

Total assets
$
16,067,089

 
$
15,859,539

 
 
 
 
Liabilities:
 
 
 
Accounts payable and accrued expenses
$
3,551

 
$
10,872

Due to affiliates
4,131

 
8,160

Total liabilities
7,682

 
19,032

 
 
 
 
Commitments and Contingencies

 

 
 
 
 
Partners' Capital
 
 
 
Limited Partners:
 
 
 
Cash Preferred – 3,044,188 units issued and outstanding
15,631,009

 
15,831,458

Tax Preferred – 516,931 units issued and outstanding
421,374

 
—

General Partners
7,024

 
9,049

Total partners' capital
16,059,407

 
15,840,507

Total liabilities and partners' capital
$
16,067,089

 
$
15,859,539

See accompanying notes.


Page 5

WELLS REAL ESTATE FUND XII, L.P.
STATEMENTS OF OPERATIONS 
 
(Unaudited)
 
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
Equity in Income (Loss) of Joint Ventures
$
126,408

 
$
269,678

 
$
(38,346
)
 
$
835,588

 
 
 
 
 
 
 
 
General and Administrative Expenses
40,276

 
77,352

 
166,787

 
193,773

 
 
 
 
 
 
 
 
Interest and Other Income
2,659

 
—

 
2,659

 
—

 
 
 
 
 
 
 
 
Gain on Sale of Interests in Joint Ventures
421,374

 
—

 
421,374

 
—

Net Income
$
510,165

 
$
192,326

 
$
218,900

 
$
641,815

 
 
 
 
 
 
 
 
Net Income (Loss) Allocated to:
 
 
 
 
 
 
 
Cash Preferred Limited Partners
$
87,903

 
$
190,403

 
$
(200,449
)
 
$
635,397

Tax Preferred Limited Partners
$
421,374

 
$
—

 
$
421,374

 
$
—

General Partners
$
888

 
$
1,923

 
$
(2,025
)
 
$
6,418

 
 
 
 
 
 
 
 
Net Income (Loss) per Weighted-Average Limited Partner Unit:
 
 
 
 
 
 
 
Cash Preferred
$
0.03

 
$
0.06

 
$
(0.07
)
 
$
0.21

Tax Preferred
$
0.82

 
$
0.00

 
$
0.82

 
$
0.00

 
 
 
 
 
 
 
 
Weighted-Average Limited Partner Units Outstanding:
 
 
 
 
 
 
 
Cash Preferred
3,044,188

 
3,044,188

 
3,044,188

 
3,044,188

Tax Preferred
516,931

 
516,931

 
516,931

 
516,931

See accompanying notes.


Page 6

WELLS REAL ESTATE FUND XII, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 (UNAUDITED) 
 
Limited Partners
 
General
Partners
 
Total
Partners'
Capital
 
Cash Preferred
 
Tax Preferred
 
 
Units
 
Amount
 
Units
 
Amount
 
BALANCE, December 31, 2011
3,044,188

 
$
15,000,558

 
516,931

 
$
—

 
$
656

 
$
15,001,214

 
 
 
 
 
 
 
 
 
 
 
 
Net income
—

 
830,900

 
—

 
—

 
8,393

 
839,293

BALANCE, December 31, 2012
3,044,188

 
15,831,458

 
516,931

 
—

 
9,049

 
15,840,507

 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
—

 
(200,449
)
 
—

 
421,374

 
(2,025
)
 
218,900

BALANCE, September 30, 2013
3,044,188

 
$
15,631,009

 
516,931

 
$
421,374

 
$
7,024

 
$
16,059,407

See accompanying notes.


Page 7

WELLS REAL ESTATE FUND XII, L.P.
STATEMENTS OF CASH FLOWS 
 
(Unaudited)
 
Nine Months Ended
 
September 30,
 
2013
 
2012
Cash Flows from Operating Activities:
 
 
 
Net income
$
218,900

 
$
641,815

Operating distributions received from joint ventures
1,311,465

 
1,172,809

Adjustments to reconcile net income to net cash provided by operating
activities:
 
 
 
Equity in (income) loss of joint ventures
38,346

 
(835,588
)
Gain on sale of interests in joint ventures
(421,374
)
 
—

Changes in assets and liabilities:
 
 
 
Increase in other assets
(19,331
)
 
(7,500
)
Decrease in accounts payable and accrued expenses
(7,321
)
 
(17,974
)
(Decrease) increase in due to affiliates
(4,029
)
 
1,295

Net cash provided by operating activities
1,116,656

 
954,857

 
 
 
 
Cash Flows from Investing Activities:
 
 
 
Investment in joint ventures
(246,969
)
 
—

       Net sale proceeds received from disposition of joint venture
13,410,963

 
—

                Net cash provided by investing activities
13,163,994

 
—

 
 
 
 
Cash Flows from Financing Activities:
 
 
 
Operating distributions paid to limited partners
—

 
(150,615
)
Net Increase in Cash and Cash Equivalents
14,280,650

 
804,242

 
 
 
 
Cash and Cash Equivalents, beginning of period
1,750,838

 
650,690

Cash and Cash Equivalents, end of period
$
16,031,488

 
$
1,454,932

See accompanying notes.



Page 8

WELLS REAL ESTATE FUND XII, L.P.
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2013 (unaudited)
1.
ORGANIZATION AND BUSINESS
Wells Real Estate Fund XII, L.P. (the "Partnership") is a Georgia public limited partnership with Leo F. Wells, III and Wells Partners, L.P. ("Wells Partners"), a Georgia nonpublic limited partnership, serving as 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. The Partnership was formed on September 15, 1998 for the purpose of acquiring, developing, constructing, owning, operating, improving, leasing and managing income-producing commercial properties for investment purposes. Upon subscription, limited partners elected to have their units treated as Cash Preferred Units or Tax Preferred Units. Limited partners have the right to change their prior elections to have some or all of their units treated as Cash Preferred Units or Tax Preferred Units one time during each quarterly accounting period. Limited partners may vote to, among other things: (a) amend the partnership agreement, subject to certain limitations; (b) change the business purpose or investment objectives of the Partnership; (c) add or remove a general partner; (d) elect a new general partner; (e) dissolve the Partnership; (f) authorize a merger or a consolidation of the Partnership; and (g) approve a sale involving all or substantially all of the Partnership's assets, subject to certain limitations. A majority vote on any of the matters described above will bind the Partnership without the concurrence of the General Partners. Each limited partnership unit has equal voting rights regardless of class.
On September 15, 1998, the Partnership was organized under the laws of the state of Georgia. On March 22, 1999, the Partnership commenced a public offering of up to $70,000,000 of Cash Preferred or Tax Preferred limited partnership units ($10.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act. The offering was terminated on March 21, 2001, at which time the Partnership had sold approximately 2,688,861 Cash Preferred Units and 872,258 Tax Preferred Units for total limited partner capital contributions of $35,611,192.
The Partnership owned 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 has elected to be taxed 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 Wells Fund XI–Fund XII–REIT
  Joint Venture
("Fund XI-XII-REIT Associates")(1)
• Wells Real Estate Fund XI, L.P.
• Wells Real Estate Fund XII, L.P.
• Piedmont Operating Partnership, LP
26.1%
17.1%
56.8%
1. 20/20 Building
A three-story office building
located in Leawood, Kansas
Wells Fund XII-REIT Joint Venture
  Partnership
("Fund XII-REIT Associates")(1)
• Wells Real Estate Fund XII, L.P.
• Piedmont Operating Partnership, LP
45.0%
55.0%
2. 4685 Investment Drive
A three-story office building
located in Troy, Michigan
 
3. Comdata Building
A three-story office building
located in Brentwood,
Tennessee
 
(1)
The Partnership sold its equity interests in these joint ventures on August 12, 2013.

Wells Real Estate Fund XI, L.P. is 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, 2012.
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 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

Page 9

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 these 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, 2012.
Investment in Joint Ventures
The Partnership has evaluated the Joint Ventures and concluded that none were variable interest entities. The Partnership did not have control over the operations of the Joint Ventures; however, it did exercise significant influence. Approval by the Partnership as well as the other joint venture partners was required for any major decision or any action that would materially affect the Joint Ventures or their real property investments. Accordingly, the Partnership accounted for its investments in the Joint Ventures using the equity method of accounting, whereby original investments were 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 were allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, were 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 would have indicated that the carrying amounts of the real estate assets owned through the Partnership's investment in the Joint Ventures may not have been recoverable. When indicators of potential impairment were present which suggested that the carrying amounts of real estate assets may not be 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 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 do 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. During the second quarter of 2013, the Partnership evaluated the recoverability of the carrying values of the 20/20 Building and the Comdata Building pursuant to the accounting policy outlined above and determined that they were not recoverable, as compared to the respective estimated expected fair values, primarily due to management redefining its strategy for the Partnership to dispose of its equity interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates in the second quarter of 2013. Accordingly, Fund XI-XII-REIT Associates and Fund XII-REIT Associates reduced the carrying value of the 20/20 Building and the Comdata Building to their estimated fair value based on direct offers received on the 20/20 Building and the Comdata Building and recognized corresponding impairment losses of $2,411,051 and $605,106, respectively, in the second quarter of 2013, of which $412,024 and $272,225, respectively, was allocated to the Partnership. The fair value measurements used in this evaluation of nonfinancial assets are considered to be Level 1 valuations within the fair value hierarchy outlined below, based on direct offers received on the 20/20 Building and the Comdata Building.
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 may assign 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 different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is 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 consideration of factors specific to the asset or liability.

Page 10

Distribution of Net Cash from Operations
Net cash from operations was generally distributed quarterly to the limited partners as follows:
•
First, to all Cash Preferred limited partners on a per-unit basis until each limited partner has received distributions equal to a 10% per annum return on his respective net capital contributions, as defined;
•
Second, to the General Partners until the General Partners receive distributions equal to 10% of the total cumulative distributions paid by the Partnership; and
•
Third, to the Cash Preferred limited partners 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 were made to limited partners holding Tax Preferred Units.
Distribution of Net Sale Proceeds
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 Cash Preferred 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 Tax Preferred Units with respect to such property;
•
To limited partners holding units which at any time have been treated as Tax Preferred Units until each limited partner has received an amount necessary to equal the net cash available for distribution previously received by the limited partners holding Cash Preferred Units on a per-unit basis;
•
To limited partners on a per-unit basis until each limited partner has received 100% of his net capital contributions, as defined;
•
To all limited partners on a per-unit basis until each limited partner has received a cumulative 10% per annum return on his net capital contributions, as defined;
•
To limited partners on a per-unit basis until each limited partner has received an amount equal to his preferential limited partner return (defined as the sum of a 10% per annum cumulative return on net capital contributions for all periods during which the units were treated as Cash Preferred Units and a 15% per annum cumulative return on net capital contributions for all periods during which the units were treated as Tax Preferred Units);
•
To the General Partners until they have received 100% of their capital contributions, as defined;
•
Then, if limited partners have received any excess limited partner distributions (defined as distributions to limited partners over the life of their investment in the Partnership in excess of their net capital contributions, as defined, plus their preferential limited partner return), to the General Partners until they have received distributions equal to 20% of the sum of any such excess limited partner distributions plus distributions made to the General Partners pursuant to this provision; and
•
Thereafter, 80% to the limited partners on a per-unit basis and 20% to the General Partners.
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, and 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 Cash Preferred 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 Cash Preferred Units 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 Tax Preferred Units and 1% to the General Partners until their capital accounts are reduced to zero; (b) then, to any partner having a positive balance in his capital account in an amount not to exceed such positive balance; and (c) thereafter, to the General Partners.
Gain on the sale or exchange of the Partnership's properties will be allocated generally in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are made, if applicable: (a) allocations made pursuant to the qualified income offset provisions of the partnership agreement; (b) allocations to partners having negative capital accounts until all negative capital accounts have been restored to zero; and (c) allocations to limited partners holding Tax Preferred Units in amounts equal to the deductions for depreciation, amortization, and cost recovery previously allocated to them with respect to

Page 11

the specific 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 Pronouncement

In April 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-07, Presentation of Financial Statements Topic Liquidation Basis of Accounting ("ASU 2013-07"). ASU 2013-07 requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is considered imminent when the likelihood is remote that the organization will return from liquidation and either: (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties; or (b) a plan for liquidation is being imposed by other forces. ASU 2013-07 will be effective for the Partnership beginning on January 1, 2014. The Partnership expects that the adoption of ASU 2013-07 will not have a material impact on its financial statements or disclosures.

3.
INVESTMENT IN JOINT VENTURES
On August 12, 2013, the Partnership sold its equity interest in its remaining joint ventures, Fund XI-XII-REIT Associates and Fund XII-REIT Associates, to Piedmont JV Partnership Interests, LLC ("Piedmont JV"). As a result of the disposition of the Partnership's equity interest in Fund XI-XII-REIT Associates, the Partnership received net sale proceeds of approximately $599,000 and recognized a gain of $13. As a result of the disposition of the Partnership's equity interest in Fund XII-REIT Associates, the Partnership received net sale proceeds of approximately $12,812,000 and recognized a gain of $421,361.
Summary of Financial Information
Condensed financial information for the Joint Ventures for the three months and nine months ended September 30, 2013 and 2012, respectively, is presented below: 
 
Total Revenues
 
Income 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,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Fund XI-XII-REIT Associates
$
—

 
$
—

 
$
—

 
$
—

 
$
13,527

 
$
(23,091
)
 
$
13,527

 
$
(23,091
)
Fund XII-REIT Associates
—

 
—

 
—

 
—

 
275,842

 
608,216

 
275,842

 
608,216

 
$
—

 
$
—

 
$
—

 
$
—

 
$
289,369

 
$
585,125

 
$
289,369

 
$
585,125

 
Total Revenues
 
Income 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,
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Fund XI-XII-REIT Associates
$
—

 
$
—

 
$
—

 
$
—

 
$
(2,521,656
)
 
$
(49,210
)
 
$
(2,521,656
)
 
$
(49,210
)
Fund XII-REIT Associates
—

 
—

 
—

 
—

 
872,630

 
1,876,051

 
872,630

 
1,876,051

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(1,649,026
)
 
$
1,826,841

 
$
(1,649,026
)
 
$
1,826,841


Page 12

The Partnership allocates its share of net income, net loss, and gain on sale generated by Fund XI-XII-REIT Associates and Fund XII-REIT Associates to its Cash Preferred and Tax Preferred 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, 2013
 
September 30, 2012
 
Operating
Income (Loss)
 
Impairment Loss
 
Total
 
Operating
Income (Loss)
 
Impairment Loss
 
Total
Fund XI-XII-REIT Associates
$
(110,605
)
 
$
(2,411,051
)
 
$
(2,521,656
)
 
$
(49,210
)
 
$
—

 
$
(49,210
)
Fund XII-REIT Associates
1,477,736

 
(605,106
)
 
872,630

 
1,876,051

 
—

 
1,876,051

 
$
1,367,131

 
$
(3,016,157
)
 
$
(1,649,026
)
 
$
1,826,841

 
$
—

 
$
1,826,841

Due from Joint Ventures
As presented in the accompanying balance sheets, due from joint ventures as of December 31, 2012 represented operating cash flow generated by Fund XII-REIT Associates for the three months ended December 31, 2012, which was attributable to the Partnership.
4.
RELATED-PARTY TRANSACTIONS
Management and Leasing Fees
In accordance with the property management and leasing agreement, Wells Management Company, Inc. ("Wells Management"), an affiliate of the General Partners, received compensation for the management and leasing of the Partnership's properties owned through the Joint Ventures equal to the lesser of (a) 2.5% for management services and 2% for leasing services of the gross revenues collected monthly, plus a separate competitive 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 leased on a long-term net basis (ten or more years), the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the life of the leases except for a one-time initial leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term. Management and leasing fees were paid by the Joint Ventures and, accordingly, were included in equity in income 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 $3,892 and $9,597 for the three months ended September 30, 2013 and 2012, respectively, and $21,219 and $26,849 for the nine months ended September 30, 2013 and 2012, respectively.
Administrative Reimbursements
Wells Capital, the corporate general partner of Wells Partners, one of the Partnership's General Partners, and Wells Management perform certain administrative services for the Partnership, relating to accounting, property management, 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 payable to Wells Capital and Wells Management of $17,787 and $32,834 for the three months ended September 30, 2013 and 2012, respectively, and $60,522 and $78,439 for the nine months ended September 30, 2013 and 2012, 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, 2013 and December 31, 2012 represents administrative reimbursements and bill-backs due to Wells Capital and/or Wells Management.
Operational 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's operations are dependent upon Wells Capital and Wells Management.
Wells Capital and Wells Management are owned and controlled by WREF. The operations of Wells Capital, Wells Investment Securities, Inc., Wells Management, Wells Core Office Income REIT Advisory Services, LLC, and their affiliates represent

Page 13

substantially all of the business of WREF. Accordingly, we focus 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, we 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 and Wells Management based on, among other things, the management of assets for WREF-sponsored programs and the volume of future 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. As of September 30, 2013, 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. Modifying service agreements between WREF, or its affiliates, and the Partnership, or other WREF-sponsored programs, could impact WREF's future net income and future access to liquidity and capital resources. For example, a large portion of WREF's income is derived under agreements with Columbia Property Trust, Inc. ("Columbia"), formerly known as Wells Real Estate Investment Trust II, Inc. Effective February 28, 2013, Columbia transitioned to self-management and indicated that it does not expect to rely on WREF for the same level of services beyond December 31, 2013. In addition, a smaller portion of WREF’s income is derived under agreements with CatchMark Timber Trust, Inc. (“CatchMark”), formerly known as Wells Timberland REIT, Inc. Effective October 25, 2013, CatchMark also transitioned to self-management and indicated that it does not expect to rely on WREF for the same level of services beyond June 30, 2014. As such, WREF does not expect to receive significant compensation from Columbia or CatchMark beyond December 31, 2013 and June 30, 2014, respectively.
5.
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 the Partnership's 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.
6.
SUBSEQUENT EVENT

Distribution of Net Sale Proceeds
On November 1, 2013, net sale proceeds of approximately $13,425,000 primarily from the disposition of the Partnership's equity interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates were distributed to the limited partners of record as of October 1, 2013, which, under the terms of the partnership agreement, does not include limited partners acquiring units after September 30, 2013. 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 2013.

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 our financial statements, the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations, all provided in our Annual Report on Form 10-K for the year ended December 31, 2012.
Overview
The Partnership typically operates in the following five life cycle phases and, during which, typically focuses on the following key operating objectives. 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;


Page 14

•
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 12, 2013, we sold our equity interests in our remaining joint ventures, Fund XI-XII-REIT Associates and Fund XII-REIT Associates, to Piedmont JV. As a result of the disposition of our equity interest in Fund XI-XII-REIT Associates, we received net sale proceeds of approximately $599,000 and recognized a gain of $13. As a result of the disposition of our equity interest in Fund XII-REIT Associates, we received net sale proceeds of approximately $12,812,000 and recognized a gain of $421,361. In making the determination to dispose of our equity interests in our remaining joint ventures, our General Partners took into account various considerations, including the leasing risk, projected total leasing costs, and portfolio general and administrative expenses.
On November 1, 2013, net sale proceeds of approximately $13,425,000 primarily from the disposition of our equity interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates were distributed to limited partners. 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 2013.
Property Summary
We have now sold all of the real estate assets in which we had owned interests following the sale of our equity interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates on August 12, 2013. We have begun to take the steps necessary to liquidate and dissolve the Partnership.

Information relating to the properties previously owned by the Joint Ventures is provided below:
•
The Johnson Matthey Building was sold on October 5, 2004.
•
The Gartner Building was sold on April 13, 2005.
•
The AT&T Oklahoma Building was sold on April 13, 2005.
•
The 111 Southchase Boulevard property was sold on May 23, 2007.
•
Our interest in the 20/20 Building was sold on August 12, 2013.
•
Our interest in the 4685 Investment Drive Building was sold on August 12, 2013.
•
Our interest in the Comdata Building was sold on August 12, 2013.
Liquidity and Capital Resources
Overview
Our operating strategy has entailed funding expenditures related to the recurring operations of our Joint Ventures' properties and the portfolio with operating cash flows, including current and prior period operating distributions received from the Joint Ventures, and assessing the amount of remaining cash flows that will be required to fund known future re-leasing costs and other capital improvements. Historically, any residual operating cash flows were generally considered available for distribution to the Cash Preferred limited partners and, unless reserved, were generally paid quarterly. The ongoing monitoring of our cash position has been critical to ensuring that adequate liquidity and capital resources were available.




Page 15

Short-Term Liquidity
During the nine months ended September 30, 2013, we generated net cash flows from operating activities, including operating distributions received from the Joint Ventures, of approximately $1,117,000. Operating distributions from the Joint Ventures generally consist of rental revenues and tenant reimbursements, less property operating expenses, management fees, general administrative expenses, and capital expenditures.

During the nine months ended September 30, 2013, we received net sale proceeds from the disposition of our interests in our remaining joint ventures of approximately $13,411,000. During the nine months ended September 30, 2013, we invested approximately $247,000 in Fund XI-XII-REIT Associates to fund our pro rata share of tenant improvements and property operating costs at the 20/20 Building related to leasing activity, prior to the disposition of our interest in Fund XI-XII-REIT Associates.

We believe that the cash on hand and distributions due from the Joint Ventures will be sufficient to cover our working capital needs, including those provided for within our total liabilities of approximately $8,000, as of September 30, 2013.

Long-Term Liquidity
As of August 2013, we have sold all of the real estate assets in which we had owned interests and will not acquire additional properties. As a result of the sale of our equity interests in the remaining assets of Fund XI-XII-REIT Associates and Fund XII-REIT Associates on August 12, 2013, 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.

Capital Resources
As of September 30, 2013, we have received, used, distributed, and held net sale proceeds allocated to the Partnership from the sale of properties and joint ventures as presented below:
Property/Joint
Venture Sold
 
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
 
Undistributed Net
Sale Proceeds
Amount
 
Purpose
 
Johnson Matthey Building
(sold in 2004)
 
$
9,675,000

 
17.10
%
 
$
1,653,361

 
$
—

 
—

 
$
1,653,361

 
$
—

Gartner Building
(sold in 2005)
 
$
12,396,859

 
17.10
%
 
2,118,499

 
—

 
—

 
2,118,499

 
—

AT&T Oklahoma Building
(sold in 2005)
 
$
21,307,577

 
44.99
%
 
9,585,853

 
—

 
—

 
9,585,853

 
—

111 Southchase Boulevard
(sold in 2007)
 
$
7,236,841

 
17.10
%
 
1,236,704

 
—

 
—

 
1,222,287

 
14,417

Fund XI-XII-REIT Associates
(sold in August 2013)
 
 
 
 
 
598,806

 
—

 
—

 
—

 
598,806

Fund XII-REIT Associates
(sold in August 2013)
 
 
 
 
 
12,812,157

 
—

 
—

 
—

 
12,812,157

Total
 
 
 
 
 
$
28,005,380

 
$
—

 
 
 
$
14,580,000

 
$
13,425,380


On November 1, 2013, net sale proceeds of approximately $13,425,000 primarily from the disposition of our equity interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates were distributed to limited partners of record effective October 1, 2013. 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 2013.


Page 16

Results of Operations
Comparison of the three months ended September 30, 2012 versus the three months ended September 30, 2013
Equity in Income of Joint Ventures
Equity in income of Joint Ventures decreased from $269,678 for the three months ended September 30, 2012 to $126,408 for the three months ended September 30, 2013, primarily due to the disposition of our interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates on August 12, 2013.
General and Administrative Expenses
General and administrative expenses decreased from $77,352 for the three months ended September 30, 2012 and $40,276 for the three months ended September 30, 2013, primarily due to a decrease in our Tennessee franchise tax obligation as a result of the disposition of our equity interest in Fund XII-REIT Associates on August 12, 2013, as well as, a decrease in administrative reimbursements and administrative costs related to reporting and regulatory requirements. We anticipate that future general and administrative expenses will vary primarily based on the amount of time necessary to liquidate the partnership.
Gain on Sale of Interests in Joint Ventures

Gain on sale of interests in Joint Ventures increased from $0 for the three months ended September 30, 2012 to $421,374 for the three months ended September 30, 2013, due to the gain recognized on the disposition of our interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates on August 12, 2013.

Comparison of the nine months ended September 30, 2012 versus the nine months ended September 30, 2013

Equity in Income (Loss) of Joint Ventures
Equity in income (loss) of Joint Ventures decreased from income of $835,588 for the nine months ended September 30, 2012 to a loss of $(38,346) for the nine months ended September 30, 2013. The decrease is primarily due to (i) recognizing an impairment loss on the 20/20 Building and the Comdata Building of $2,411,051 and $605,106, respectively, of which $412,024 and $272,225, respectively, was allocated to the Partnership and (ii) the disposition of our interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates on August 12, 2013.
General and Administrative Expenses
General and administrative expenses decreased from $193,773 for the nine months ended September 30, 2012 to $166,787 for the nine months ended September 30, 2013, primarily due to a decrease in our Tennessee franchise tax obligation as a result of the disposition of our equity interest in Fund XII-REIT Associates on August 12, 2013, as well as, a decrease in administrative reimbursements and administrative costs related to reporting and regulatory requirements. We anticipate that future general and administrative expenses will vary primarily based on the amount of time necessary to liquidate the partnership.
Gain on Sale of Interests in Joint Ventures

Gain on sale of interests in Joint Ventures increased from $0 for the nine months ended September 30, 2012 to $421,374 for the nine months ended September 30, 2013, due to the gain recognized on the disposition of our interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates on August 12, 2013.

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.

Page 17

Below is a discussion of the accounting policies used by us 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:
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 would have indicated that the carrying amounts of the real estate assets in which we had an ownership interest through investments in the Joint Ventures may not have been recoverable. When indicators of potential impairment were present which suggested that the carrying amounts of real estate assets may not have been recoverable, we assessed the recoverability of the real estate assets by determining whether the respective carrying values will be recovered through the estimated undiscounted future 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 values, 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. During the second quarter of 2013, we evaluated the recoverability of the carrying values of the 20/20 Building and the Comdata Building pursuant to the accounting policy outlined above and determined that they were not recoverable, as compared to the respective estimated fair values, primarily due to management redefining its strategy for the Partnership to dispose of its equity interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates in the second quarter of 2013. Accordingly, Fund XI-XII-REIT Associates and Fund XII-REIT Associates reduced the carrying value of the 20/20 Building and the Comdata Building to their estimated fair value based on direct offers received on the 20/20 Building and the Comdata Building and recognized corresponding impairment losses of $2,411,051 and $605,106, respectively, in the second quarter of 2013, of which $412,024 and $272,225, respectively, was allocated to the Partnership.
Related-Party Transactions
We have entered into agreements with Wells Capital and Wells Management, 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; and administrative services relating to accounting, property management, and other partnership administration, and we 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

On November 1, 2013, net sale proceeds of approximately $13,425,000 primarily from the disposition of our equity interests in Fund XI-XII-REIT Associates and Fund XII-REIT Associates were distributed to the limited partners of record as of October 1, 2013, which, under the terms of the partnership agreement, does not include limited partners acquiring units after September 30, 2013. 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 2013.


Page 18

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 PROCEEDURES
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 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, 2013 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, 2013, requiring disclosure under Item 103 of Regulation S-K.
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, 2012.
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 during the quarter ended September 30, 2013.
(b)
Not applicable.
(c)
We did not redeem any securities during the quarter ended September 30, 2013.
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, 2013.
(b)
Not applicable.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
(a)
During the quarter ended September 30, 2013, 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.

Page 19

ITEM 6.
EXHIBITS
The Exhibits to this report are set forth on Exhibit Index to Third Quarter Form 10-Q attached hereto.

Page 20

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 XII, L.P.
(Registrant)
 
 
 
By:
 
WELLS PARTNERS, L.P.
(General Partner)
 
 
 
By:
 
WELLS CAPITAL, INC.
(Corporate General Partner)
 
 
 
 
 
November 12, 2013
 
 
 
/s/ DOUGLAS P. WILLIAMS
 
 
 
 
Douglas P. Williams
 
 
 
 
On behalf of the registrant and as Senior Vice President and Principal Financial Officer of Wells Capital, Inc.


Page 21

EXHIBIT INDEX
TO THIRD QUARTER FORM 10-Q
OF
WELLS REAL ESTATE FUND XII, L.P. 
Exhibit
Number
 
 
Description
 
 
 
 
10.1

*
 
Purchase and Sale Agreement for the sale of joint venture interest in Wells Fund XI - Fund XII – REIT Joint Venture, dated as of August 12, 2013 (incorporated by reference to Exhibit 10.2 to Form 10-Q of Wells Real Estate Fund XI, L.P. for the period ended June 30, 2013, Commission File No. 000-25731)
 
 
 
 
10.2

*
 
Purchase and Sale Agreement for the sale of joint venture interest in Wells Fund XII – REIT Joint Venture, dated as of August 12, 2013 (incorporated by reference to Exhibit 10.2 to Form 10-Q of Wells Real Estate Fund XII, L.P. for the period ended June 30, 2013, Commission File No. 000-30287)
 
 
 
 
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 Principal Executive Officer and Principal 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.
*
Previously filed and incorporated herein by reference.




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