<PAGE>
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, 1997 or
-------------------------------------
[_] 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 333-7979 (1933 Act)
----------------------------------------------------------
Wells Real Estate Fund X, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2250093
------------------------------- ------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
---------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
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Form 10-Q
---------
Wells Real Estate Fund X,L.P.
-----------------------------
INDEX
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<TABLE>
<CAPTION>
Page No.
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PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Balance Sheets - September 30, 1997
and December 31, 1996 ..............................................3
Statement of Income for the Three Months and Nine
Months ended September 30, 1997.....................................4
Statement of Partners' Capital
for the Nine Months Ended September 30, 1997........................5
Statement of Cash Flows for the Nine Months
Ended September 30, 1997............................................6
Condensed Notes to Financial Statements..............................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations..........................................................11
PART II. OTHER INFORMATION.....................................................13
</TABLE>
2
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WELLS REAL ESTATE FUND X, L.P.
(a Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets September 30, 1997 December 31, 1996
------ ------------------- -----------------
<S> <C> <C>
Cash and cash equivalents $13,505,458 $ 600
Investment in joint venture (Note 2) 2,224,074 0
Deferred project costs (Note 3) 684,179 0
Deferred offering costs (Note 4) 348,979 97,691
Prepaid expenses and other assets 40,392 0
----------- -------
Total assets $16,803,082 $98,291
=========== =======
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 18 $ 0
Sales commissions payable 106,960 0
Due to affiliates (Note 5) 437,511 97,691
----------- -------
Total liabilities 544,489 97,691
----------- -------
Partners' capital:
General partners 500 500
Original limited partner 0 100
Limited partners:
Class A-1,542,079 units outstanding
at September 30, 1997 13,252,889 0
Class B-353,553 units outstanding
at September 30, 1997 3,005,204 0
----------- -------
Total partners' capital 16,258,593 600
----------- -------
Total liabilities and partners' capital $16,803,082 $98,291
=========== =======
</TABLE>
See accompanying condensed notes to financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(a Georgia Public Limited Partnership)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Nine Months
------------ -----------
Ended Ended
----- -----
Sept 30, 1997 Sept 30, 1997
------------- -------------
<S> <C> <C>
Revenues:
Interest income $ 120,514 $208,976
Expenses:
Computer costs 3,053 5,785
Printing and notebooks 5,496 18,651
Administrative salaries 9,769 24,080
Office expense 2,870 5,292
Postage (152) 382
Other 2,005 9,573
--------- --------
23,041 63,763
--------- --------
Net income $ 97,473 $145,213
========= ========
Net income allocated to General Partners $ 0 $ 0
Net income allocated to Class A Limited Partners $ 97,473 $145,213
Net income allocated to Class B Limited Partners $ 0 $ 0
Net income per Class A weighted average Limited
Partner Unit $ .09 $ .18
Net loss per weighted average Class B Limited
Partner Unit $ 0 $ 0
Cash distribution per Class A Limited Partner
Unit $ 0 $ 0
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(a Georgia Public Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Limited Partners
--------------------------------------------------------
Class A Class B Total
------------------ ---------------- General Partners'
Original Units Amount Units Amount Partners Capital
-------- ----- ------ ----- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 $ 100 0 $ 0 0 $ 0 $500 $ 600
Limited partner contributions 0 1,542,079 15,420,795 353,553 3,535,534 0 18,956,329
Net earnings 0 0 145,213 0 0 0 145,213
Sales commissions 0 0 (1,542,079) 0 (353,553) 0 (1,895,632)
Other offering expenses 0 0 (771,040) 0 (176,777) 0 (947,817)
Return of original LP
contribution (100) 0 0 0 0 0 (100)
------- --------- ----------- ------- ---------- ---- -----------
BALANCE, September 30, 1997 $ 0 1,542,079 $13,252,889 353,553 $3,005,204 $500 $16,258,593
======= ========= =========== ======= ========== ==== ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(a Georgia Public Limited Partnership)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------
September 30, 1997
------------------
<S> <C>
Cash flow from operating activities:
Net income $ 145,213
Adjustments to reconcile net income to net
cash provided by operating activities: -
Changes in assets and liabilities:
Increase in prepaid expenses and
other assets (40,392)
Increase in accounts payable 18
Increase in due to affiliates 88,532
------------
Net cash provided by operating activities 193,371
------------
Cash flow from investing activities:
Deferred project costs (758,253)
Investment in joint venture (2,150,000)
------------
Net cash used in investing activities (2,908,253)
------------
Cash flows from financing activities:
Limited partners' contributions 18,956,329
Sales commissions (1,788,672)
Offering costs (947,817)
Return of original limited partner
contribution (100)
------------
Net cash provided by financing
activities 16,219,740
------------
Net increase in cash and cash equivalents 13,504,858
Cash and cash equivalents, beginning of year 600
------------
Cash and cash equivalents, end of period $ 13,505,458
============
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
September 30, 1997
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
-----------
Wells Real Estate Fund X, L.P. (the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Partners, L.P., as
General Partners. The Partnership was formed on June 20, 1996, for the
purpose of acquiring, developing, owning, operating, improving, leasing,
and otherwise managing for investment purposes, income producing commercial
properties.
On December 31, 1996, the Partnership commenced a public offering of up to
$35,000,000 of limited partnership units ($10.00 per unit) pursuant to a
Registration Statement on Form S-11 filed under the Securities Act of 1933.
The Partnership commenced active operations on February 4, 1997, when it
received and accepted subscriptions for 125,000 units. An aggregate
requirement of $2,500,000 of offering proceeds was reached on February 25,
1997, thus allowing for the admission of New York and Pennsylvania
investors in the Partnership. As of September 30, 1997, the Partnership had
sold 1,542,079 Class A Status Units, and 353,553 Class B Status Units, held
by a total of 1,281 and 146 Class A and Class B Limited Partners,
respectively, for total Limited Partner capital contributions of
$18,956,329. After payment of $758,253 in acquisition and advisory fees,
payment of $2,843,449 in selling commissions and organization and offering
expenses, and investment of $2,150,000 in the Fund IX - Fund X Joint
Venture, the Partnership was holding net offering proceeds of $13,204,627
available for investment in properties.
(b) Employees
-------------
The Partnership has no direct employees. The employees of Wells Capital,
Inc., the sole general partner of Wells Partners, L.P., a General Partner
of the Partnership, perform a full range of real estate services including
leasing and property management, accounting, asset management and investor
relations for the Partnership.
(c) Insurance
-------------
Wells Management Company, Inc., an affiliate of the General Partners,
carries comprehensive liability and extended coverage with respect to all
the properties owned directly or indirectly by the Partnership. In the
opinion of management of the registrant, the properties are adequately
insured.
7
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(d) Competition
---------------
The Partnership will experience competition for tenants from owners and
managers of competing projects which may include the General Partners and
their affiliates. As a result, the Partnership may be required to provide
free rent, reduced charges for tenant improvements and other inducements,
all of which may have an adverse impact on results of operations. At the
time the Partnership elects to dispose of its properties, the Partnership
will also be in competition with sellers of similar properties to locate
suitable purchasers for its properties.
(e) Basis of Presentation
-------------------------
The financial statements of the Partnership have been prepared in
accordance with instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These quarterly statements
have not been examined by independent accountants, but in the opinion of
the General Partners, the statements for the unaudited interim periods
presented include all adjustments, which are of a normal and recurring
nature, necessary to present a fair presentation of the results for such
periods.
(f) Partnership Distributions
-----------------------------
Net Cash From Operations, as defined in the Partnership Agreement, will be
distributed first to Limited Partners holding Class A Status Units on a per
Unit basis until they have received a 10% annual return on their Net
Capital Contributions, as defined in the Partnership Agreement. Further
distributions of Net Cash From Operations will be made to the General
Partners until they receive distributions equal to 10% of the total amount
of Net Cash From Operations distributed. Thereafter, the Limited Partners
holding Class A Status Units will receive 90% of Net Cash From Operations
and the General Partners will receive 10%. No Net Cash From Operations will
be distributed to Limited Partners holding Class B Status Units. No
distributions were paid to the Limited Partners for the quarter ended
September 30, 1997.
(g) Income Taxes
----------------
The Partnership has not requested a ruling from the Internal Revenue
Service to the effect that it will be treated as a partnership and not an
association taxable as a corporation for Federal income tax purposes. The
Partnership requested an opinion of counsel as to its tax status, but such
opinion is not binding upon the Internal Revenue Service.
(h) Statement of Cash Flows
---------------------------
For the purpose of the statement of cash flows, the Partnership considers
all highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents. Cash equivalents include cash
and short-term investments.
8
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(2) Investment in Joint Venture
---------------------------
Fund IX - Fund X Joint Venture
------------------------------
On March 20, 1997, the Partnership and Wells Real Estate Fund IX, L.P.
("Wells Fund IX"), a Georgia public limited partnership affiliated with the
Partnership through common general partners, formed a joint venture known
as Fund IX and Fund X Associates (the "Fund IX - Fund X Joint Venture").
The investment objectives of Wells Fund IX are substantially identical to
those of the Partnership. Although the ultimate percentages of ownership in
the Fund IX - Fund X Joint Venture have not yet been finally determined, it
is anticipated that the Partnership will hold an approximately 50% equity
interest in the two properties described below. The total cost to complete
both properties is anticipated to be approximately $13,000,000. As of
September 30, 1997, the Partnership had contributed $2,150,000 and Wells
Fund IX had contributed $3,691,765 for total contributions of $5,841,765 to
the Fund IX - Fund X Joint Venture for the acquisition and development of
the two properties. At this time, the Partnership's equity interest in the
Fund IX - Fund X Joint Venture is approximately 36.8%, and Wells Fund IX's
equity interest in the Fund IX - Fund X Joint Venture is approximately
63.2%. The Partnership has reserved sufficient funds to complete these
projects.
The ABB Property
----------------
On March 20, 1997, Wells Fund IX contributed a 5.62 acre tract of real
property in Knoxville, Knox County, Tennessee and improvements thereon (the
"ABB Property"), valued at $1,306,393. As of September 30, 1997, the
Partnership had contributed $1,500,000 and Wells Fund IX had contributed
$3,041,765 toward the development of this project for total contributions
of $4,541,765.
A three-story office building containing approximately 83,885 rentable
square feet is under construction on the site. An agreement was signed with
ADEVCO Corporation to supervise, manage and coordinate the planning,
design, construction and completion of the property. Integra Construction,
Inc. is acting as the general contractor and Smallwood, Reynolds, Stewart,
Stewart Associates, Inc. as the architect.
ABB Environmental Systems, a subsidiary of ABB, Inc., has executed a lease
for 55,000 rentable square feet comprising approximately 66% of the
building. The initial term of the lease will be 9 years and 11 months
commencing on substantial completion of the project which is currently
anticipated to be January 1, 1998. ABB has the option to extend the initial
term of the lease for two consecutive five year periods. The annual base
rent payable during the initial term is $646,250 payable in equal monthly
installments of $53,854 during the first five years and $728,750 payable in
equal monthly installments of $60,729 during the last four years and 11
months of the initial term. The annual base rent for each extended term
will be at market rental rates. In addition to the base rent, ABB is
required to pay additional rent equal to its share of operating expenses
during the lease term.
9
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It is currently anticipated that the total cost to complete the project
will be approximately $7,800,000. Although the ultimate percentages of
ownership in the Fund IX -Fund X Joint Venture have not been finally
determined, it is anticipated that the Partnership will contribute
$2,400,000 and Wells Fund IX will contribute $858,235 to the remaining cost
of approximately $3,258,235 for an approximate 50% equity interest each.
The Partnership has reserved sufficient funds for this purpose. For further
information regarding the formation of the Fund IX - Fund X Joint Venture
and the development of the ABB Property, refer to the Form 8-K of Wells
Real Estate Fund X, L.P. dated March 26, 1997, filed with the Commission on
April 1, 1997 (Commission File No. 333-7979).
Oklahoma City Project
---------------------
On May 30, 1997, the Fund IX -Fund X Joint Venture entered into an
agreement for the purchase and sale of real property with Wells Development
Corporation ("Wells Development"), an affiliate of the General Partners,
for the acquisition of a one-story building to be developed on property
located in Oklahoma City, Oklahoma (the "Oklahoma City Project"). The Fund
IX - Fund X Joint Venture will purchase the Oklahoma City Project for a
purchase price which is currently anticipated to be approximately
$5,200,000. Under the terms of its contract with Wells Development, the
Fund IX - Fund X Joint Venture was required to make an earnest money
deposit to Wells Development in the amount of $1,300,000. The earnest money
deposit was used to fund the purchase of the land upon which the Oklahoma
City Property will be developed and will also be used to fund the initial
costs of construction and development of the project. The Partnership and
Wells Fund IX made capital contributions of $650,000 each to the Fund IX -
Fund X Joint Venture to provide the Joint Venture with sufficient funds
with which to make the required earnest money deposit to Wells Development.
The site of the Oklahoma City Project consists of approximately 5.3 acres,
and when completed, the Oklahoma City Project will be a one-story office
building containing 57,186 net rentable square feet. An agreement with
ADEVCO Corporation to supervise, manage and coordinate the planning,
design, construction and completion of the property has been signed.
Lucent Technologies, a world-wide leader in telecommunications technology
producing a variety of communication products, has executed a lease
agreement with Wells Development to lease the entire Oklahoma City Project
upon completion. The initial term of the lease will be ten years commencing
on substantial completion of the project which is currently anticipated to
be January 1, 1998. Lucent Technologies has the option to extend the
initial term of the lease for two additional five year periods. The annual
base rent payable during the initial term is $508,383 payable in equal
monthly installments of $42,365 during the first five years and $594,152
payable in equal monthly installments of $49,513 during the second five
years of the lease term. The annual base rent for each extendable term will
be at market rental rates. In addition to the base rent, Lucent
10
<PAGE>
Technologies will be required to pay additional rent equal to its share of
operating expenses during the lease term.
It is currently anticipated that the total cost to complete the property,
which is estimated to be approximately $5,200,000, will be contributed
equally by the Partnership and Wells Fund IX for an ultimate percentage
ownership of approximately 50% for each partnership. For further
information regarding the contract entered into between the Fund IX Fund X
Joint Venture and Wells Development and the development of the Oklahoma
City Project, refer to Supplement No. 2 dated June 17, 1997, to the
Prospectus of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI,
L.P. dated December 31, 1996, contained in Post-Effective Amendment No. 2
to the Registration Statement of Wells Real Estate Fund X, L.P. and Wells
Real Estate Fund XI, L.P. which was filed with the Commission on June 17,
1997 (Commission File No. 333-7979).
(3) Deferred Project Costs
----------------------
The Partnership pays acquisition and advisory fees to the General Partners
for acquisition and advisory services. These payments, as provided by the
Partnership Agreement, may not exceed 5% of the Limited Partners' capital
contributions. Acquisition and advisory fees paid as of September 30, 1997,
amounted to $758,253 and represented approximately 4% of the Limited
Partners' capital contributions received. These fees are allocated to
specific properties as they are purchased.
(4) Deferred Offering Costs
-----------------------
Wells Capital, Inc. (the "Company"), the general partner of Wells Partners,
L.P., pays all the offering expenses for the Partnership. The Company may
be reimbursed by the Partnership to the extent that such offering expenses
do not exceed 5% of total Limited Partners' capital contributions. As of
September 30, 1997, the Partnership had reimbursed the Company for $947,816
in offering expenses, which amounted to approximately 5% of Limited
Partners' capital contributions.
(5) Due To Affiliates
-----------------
Due to Affiliates consists of acquisition and advisory fees, deferred
offering costs, and other operating expenses paid by the Company on behalf
of the Partnership.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATION.
- -------------
The following discussion and analysis should be read in conjunction with the
accompanying financial statements of the Partnership and notes thereto. This
Report contains forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934,
including discussion and analysis of the financial condition of the Partnership,
anticipated capital expenditures required to complete certain projects, amounts
of
11
<PAGE>
cash distributions anticipated to be distributed to Limited Partners in the
future and certain other matters. Readers of this Report should be aware that
there are various factors that could cause actual results to differ materially
form any forward-looking statement made in this Report, which include
construction costs which may exceed estimates, construction delays, lease-up
risks, inability to obtain new tenants upon expiration of existing leases, and
the potential need to fund tenant improvements or other capital expenditures out
of operating cash flow.
The Partnership commenced active operations on February 4, 1997, when it
received and accepted subscriptions for 125,000 units. An aggregate requirement
of $2,500,000 of offering proceeds was reached on February 25, 1997, thus
allowing for the admission of New York and Pennsylvania investors into the
Partnership. As of September 30, 1997, the Partnership had sold 1,542,079 Class
A Status Units and 353,553 Class B Status Units, held by a total of 1,281 and
146 Class A and Class B Limited Partners, respectively, for total Limited
Partner contributions of $18,956,329. After payment of $758,253 in acquisition
and advisory fees, payment of $2,843,449 in selling commissions and organization
and offering expenses, and investment of $2,150,000 in the Fund IX - Fund X
Joint Venture, as of September 30, 1997, the Partnership was holding net
offering proceeds of $13,204,627 available for investment in properties.
Approximately $2,400,000 of such proceeds are being reserved for investment in
the Fund IX - Fund X Joint Venture for the completion of the ABB Property.
Gross revenues of the Partnership of $208,976 for the nine months ended
September 30, 1997, and $120,514 for the three months ended September 30, 1997,
consisted of primarily interest income earned on funds held by the Partnership
prior to the investment in properties. Expenses of the Partnership were $63,763
for the nine months ended September 30, 1997, and $23,041 for the three months
ended September 30, 1997, and consisted primarily of printing, computer,
administrative salaries, office and partnership administrative costs. Since the
Partnership did not commence active operations until it received and accepted
subscriptions for a minimum of 125,000 units on February 4, 1997, there is no
comparative financial data available from the prior fiscal year.
Net earnings per weighted average unit for Class A Limited Partners was $0.18
for the nine months ended September 30, 1997.
Net increase in cash and cash equivalents is the result of raising $18,956,329
in Limited Partners' capital contributions before deducting commissions and
offering costs.
No cash distributions were made to Limited Partners during the third quarter of
1997.
12
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PART II - OTHER INFORMATION
- ---------------------------
ITEM 6 (b). No reports on Form 8-K were filed during the third
quarter of 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
WELLS REAL ESTATE FUND X, L.P.
(Registrant)
Dated: November 10, 1997 By: /s/ Leo F. Wells, III
---------------------
Leo F. Wells, III, as Individual
General Partner and as President,
Sole Director and Chief Financial
Officer of Wells Capital, Inc., the
General Partner of Wells Partners,
L.P.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,505,458
<SECURITIES> 2,224,074
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,392
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,803,082
<CURRENT-LIABILITIES> 544,489
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,258,593
<TOTAL-LIABILITY-AND-EQUITY> 16,803,082
<SALES> 0
<TOTAL-REVENUES> 208,976
<CGS> 0
<TOTAL-COSTS> 63,763
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 145,213
<INCOME-TAX> 145,213
<INCOME-CONTINUING> 145,213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145,213
<EPS-PRIMARY> .18
<EPS-DILUTED> 0
</TABLE>
