<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 March 31, 1997 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 333-7979 (1933 Act)
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Wells Real Estate Fund X, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2250093
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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(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
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Wells Real Estate Fund X,L.P.
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INDEX
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Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1997
and December 31, 1996..................................... 3
Statement of Income for the Three
Months ended March 31, 1997............................... 4
Statement of Partners' Capital
for the Three Months Ended March 31, 1997................. 5
Statement of Cash Flows for the Three Months
Ended March 31, 1997...................................... 6
Condensed Notes to Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................................. 10
PART II. OTHER INFORMATION............................................. 12
2
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WELLS REAL ESTATE FUND X, L.P.
(a Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets March 31, 1997 December 31, 1996
------ -------------- -----------------
<S> <C> <C>
Cash and cash equivalents $5,081,984 $ 600
Investment in joint venture (Note 2) 246,042 0
Deferred project costs (Note 3) 146,353 97,691
Prepaid expenses and other assets 10,000 0
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Total assets $5,484,379 $98,291
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Liabilities and Partners' Capital
---------------------------------
Liabilities:
Sales commissions payable 79,706 0
Due to affiliates (Note 5) 180,087 97,691
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Total liabilities 259,793 97,691
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Partners' capital:
General partners 456 500
Original limited partner 100 100
Limited partners:
Class A-469,009 units outstanding
at March 31, 1997 3,986,572 0
Class B-146,095 units outstanding
at March 31, 1997 1,237,458 0
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Total partners' capital 5,224,586 600
--------- ------
Total liabilities and partners' capital 5,484,379 $ 98,291
--------- ------
</TABLE>
See accompanying condensed notes to financial statements.
3
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WELLS REAL ESTATE FUND X, L.P.
(a Georgia Public Limited Partnership)
STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
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March 31, 1997
------------------
Revenues:
<S> <C>
Interest income $ 10,000
Expenses:
Computer costs 1,292
Printing and notebooks 6,371
Administrative salaries 5,326
Office expense 853
Postage 346
Other 209
------
14,397
------
Net loss $ (4,397)
------
Net loss allocated to General Partners $ (44)
Net income allocated to Class A Limited Partners $ 0
Net loss allocated to Class B Limited Partners $ (4,353)
Net income per Class A weighted average Limited
Partner Unit $ 0
Net loss per weighted average Class B Limited
Partner Unit $ (.05)
Cash distribution per Class A Limited Partner
Unit $ 0
</TABLE>
See accompanying condensed notes to financial statements.
4
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WELLS REAL ESTATE FUND X, L.P.
(a Georgia Public Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 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 - $ - - $ - $500 $ 600
Limited partner contributions - 469,009 4,690,084 146,095 1,460,954 - 6,151,038
Net loss - - - - (4,353) (44) (4,397)
Sales commissions - - (469,008) - (146,095) - (615,103)
Other offering expenses - - (234,504) - (73,048) - (307,552)
---------- --------- ---------- --------- ---------- ---- ----------
BALANCE, March 31, 1997 $100 469,009 $3,986,572 146,095 $1,237,458 $456 $5,224,586
========== ========= ========== ========= ========== ==== ==========
</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 Three Months Ended
---------------------------
March 31, 1997
--------------
<S> <C>
Cash flow from operating activities:
Net loss $ (4,397)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Changes in assets and liabilities:
Increase in prepaid expenses and
other assets (10,000)
Increase in due to affiliates 33,734
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Net cash provided by operating activities 19,337
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Cash flow from investing activities:
Deferred project costs (246,042)
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Cash flows from financing activities:
Limited partners' contributions 6,151,038
Sales commissions (535,397)
Offering costs (307,552)
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Net cash provided by financing
activities 5,308,089
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Net increase in cash and cash equivalents 5,081,384
Cash and cash equivalents, beginning of year 600
----------
Cash and cash equivalents, end of period $5,081,984
----------
</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
March 31, 1997
(1) Summary of Significant Accounting Policies
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(a) General
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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 March 31, 1997, the Partnership had
sold 469,009 Class A status Units, and 146,095 Class B Status Units, held
by a total of 610 and 44 Limited Partners, respectively, for total Limited
Partner capital contributions of $6,151,038. After payment of $246,042 in
Acquisition and Advisory Fees, payment of $922,656 in selling commissions
and organization and offering expenses, the Partnership was holding net
offering proceeds of $4,982,340 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
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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 Wells Real Estate Fund X, L.P. (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 will be paid to the Limited Partners for the quarter ended
March 31, 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
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Fund IX - Fund X Joint Venture
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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, entered into a Joint
Venture Agreement 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. As of March 31, 1997,
Wells Fund IX had contributed land and development costs totalling
$1,544,153 for an approximate 100% equity interest. As of March 31, 1997,
the Partnership had not yet contributed to the Fund IX - Fund X Joint
Venture. The Fund IX - Fund X Joint Venture is developing an office
building in Knoxville, Tennessee.The total cost to complete the property is
anticipated to be approximately $7,800,000. 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
contribute $3,900,000 and Wells Fund IX will contribute $2,355,847 to the
remaining cost of approximately $6,255,847 for an approximately 50% equity
interest each.
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 March 31, 1997, the Wells
Fund IX had contributed an additional $237,760 toward the development of
this project for total contributions of $1,544,153.
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 rate. 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 property,
which is estimated to be approximately $7,800,000, will be contributed
equally by the Partnership and Wells Fund IX.
The Partnership has reserved sufficient funds for this purpose. For
further information regarding the information of the Fund IX - Fund X Joint
Venture and the development of the ABB Property, refer to the Form 8-K of
Wells Real Esate Fund X, L.P. dated March 26, 1997, filed with the
Commission on April 1, 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 March 31, 1997,
amounted to $246,042 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
March 31,1997, the Partnership had reimbursed the Company for $307,552 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
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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 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,
10
<PAGE>
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 March 31, 1997, the Partnership had sold 469,009 Class A
Status Units and 146,095 Class B Status Units, held by a total of 610 and 44
Limited Partners respectively, for total Limited Partner contributions of
$6,151,038. After payment of $246,042 in Acquisition and Advisory Fees, payment
of $922,656 in selling commissions and organization and offering expenses, as of
March 31, 1997, the Partnership was holding net offering proceeds of $4,982,340
available for investment in properties. Approxiamtely $3,900,000 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 $10,000 for the three months ended March
31, 1997, were attributable primarily to interest income earned on funds held by
the Partnership prior to the investment in properties. Expenses of the
Partnership were $14,397 for the three months ended March 31, 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 loss per weighted average unit for Class B Limited Partners was $0.05 for
the three months ended March 31, 1997.
Net increase in cash and cash equivalents is the result of raising $6,151,038 in
Limited Partners' capital contributions before deducting commissions and
offering costs.
No cash distributions were made to Limited Partners during the first quarter of
1997.
11
<PAGE>
PART II - OTHER INFORMATION
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ITEM 6 (b). The Partnership filed a Current Report on Form 8-K dated March
26, 1997, reporting the formation of the Fund IX - Fund X Joint Venture and
the development of the ABB Property.
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: May 13, 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.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,081,984
<SECURITIES> 246,042
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 156,353
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,484,379
<CURRENT-LIABILITIES> 259,793
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,224,586
<TOTAL-LIABILITY-AND-EQUITY> 5,484,379
<SALES> 0
<TOTAL-REVENUES> 10,000
<CGS> 0
<TOTAL-COSTS> 14,397
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,397)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,397)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
