<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 26, 1997
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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
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(State or other jurisdiction of incorporation)
333-7979 58-2250093
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(Commission File Number) (IRS Employer 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 or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OF ASSETS.
On March 20, 1997, Wells Real Estate Fund X, L.P. (the "Registrant") formed
a joint venture with Wells Real Estate Fund IX, L.P. known as Fund IX and Fund X
Associates (the "Fund IX/X Joint Venture") for the purpose of the acquisition,
ownership, development, leasing, operation, sale and management of real
properties. On March 26, 1997, Wells Fund IX contributed a 5.622 acre tract of
real property located in Knox County, metropolitan Knoxville, Tennessee (the
"Knoxville Property") to the Fund IX/X Joint Venture as its initial capital
contribution. Descriptions of the Fund IX/X Joint Venture, the Knoxville
Property and the 3-story office building currently being developed thereon (the
"Project") are described in Supplement No. 1 dated March 27, 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. 1 to the Form
S-11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real
Estate Fund XI, L.P. (Commission File No. 333-7979), filed with the Securities
and Exchange Commission on April 1, 1997, which is incorporated herein by
reference and hereby made a part hereof.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Since there are no prior operations and the Registrant will not operate
the Project until construction is completed, no historical financial information
relating to the Project is available, and accordingly, no financial statements
relating to the Project are provided.
(b) See paragraph (a) above.
<PAGE>
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 hereunto duly authorized.
WELLS REAL ESTATE FUND X, L.P.
Registrant
By: /s/ Leo F. Wells, III
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Leo F. Wells, III, as General Partner
and as President and sole Director of
Wells Capital, Inc., the General
Partner of Wells Partners, L.P.,
General Partner
Date: March 27, 1997
<PAGE>
EXHIBIT INDEX
The following document is incorporated by reference in this report and
accordingly is filed as an exhibit to this report:
Sequential
Description of Document Page No.
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Supplement No. 1 dated March 27, 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. 1 to Form S-11 Registration Statement of Wells
Real Estate Fund X, L.P. and Wells Real Estate Fund XI,
L.P. filed with the Commission on April 1, 1997 (Commission
File No. 333-7979)
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
AND WELLS REAL ESTATE FUND XI, L.P.
SUPPLEMENT NO. 1 DATED MARCH 27, 1997 TO THE PROSPECTUS
DATED DECEMBER 31, 1996
This document supplements, and should be read in conjunction with, the
Prospectus of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P.
dated December 31, 1996 (the "Prospectus"). Unless otherwise defined herein,
capitalized terms used in this Supplement shall have the same meanings as in the
Prospectus.
The purpose of this Supplement is to describe the following:
(i) The status of the offering of units of limited partnership interest
(the "Units") in Wells Real Estate Fund X, L.P. ("Wells Fund X");
(ii) Revisions to the Financial Statements contained in Appendix I to
the Prospectus and the Prior Performance Tables included as Exhibit A to the
Prospectus;
(iii) The Joint Venture Agreement entered into between Wells Fund X and
Wells Real Estate Fund IX, L.P. ("Wells Fund IX") and the acquisition by the
Joint Venture of real property located in Knox County, Tennessee (the
"Knoxville Property");
(iv) A recent reorganization of certain corporations affiliated with the
General Partners and corresponding revisions to the "CONFLICTS OF INTEREST" and
"MANAGEMENT" sections of the Prospectus; and
(v) Revisions to the "RISK FACTORS," "INVESTMENT OBJECTIVES AND
CRITERIA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" and "EXPERTS" sections of the Prospectus.
STATUS OF THE OFFERING
Pursuant to the Prospectus, the offering of Units in Wells Fund X
commenced December 31, 1996. Wells Fund X commenced operations on February 4,
1997, upon the acceptance of subscriptions for the minimum offering of
$1,250,000 (125,000 Units). As of March 10, 1997, Wells Fund X had raised a
total of $4,577,541 in offering proceeds (455,754 Units), comprised
of $3,563,313 raised from the sale of Class A Status Units (356,331
Class A Status Units) and $994,228 raised from the sale of Class B Status
Units (99,423 Class B Status Units).
FINANCIAL STATEMENTS AND PRIOR PERFORMANCE TABLES
Financial statements of Wells Fund X, Wells Real Estate Fund XI, L.P.,
Wells Partners, L.P. and Wells Capital, Inc., as of December 31, 1996 and 1995,
and for each of the years in the two-year period ended December 31, 1996, are
included as Appendix I to this Supplement.
Prior Performance Tables dated as of December 31, 1996 are included as
Exhibit A to this Supplement.
JOINT VENTURE AGREEMENT
Wells Fund X formed a joint venture on March 20, 1997 with Wells Fund
IX, a Georgia limited partnership having Leo F. Wells, III and Wells Partners,
L.P. as general partners, known as Fund IX and Fund X Associates (the "Joint
Venture"). The investment objectives of Wells Fund IX are substantially
identical to those of Wells Fund X.
<PAGE>
The Joint Venture was formed for the purpose of acquiring a 5.622 acre
tract of real property located in Knox County, near Knoxville, Tennessee (the
"Property") and constructing thereon a three-story office building containing
approximately 83,885 rentable square feet (the "Project"). ABB Flakt, Inc.
("ABB") has agreed to lease approximately 55,000 rentable square feet of the
Project pursuant to the Lease hereinafter described.
All income, profit, loss, cash flow, resale gain, resale loss and sale
proceeds of the Joint Venture will be allocated and distributed between Wells
Fund IX and Wells Fund X based on their respective capital contributions to the
Joint Venture.
On March 26, 1997, Wells Fund IX contributed its interest in the
Property along with its rights under the Lease, the Development Agreement
(hereinafter described), the Construction Contract (hereinafter described) and
the Architect's Agreement (hereinafter described), as its capital contribution
to the Joint Venture, and was credited with capital contributions valued at
$1,306,393, which equals to purchase price and all acquisition and development
costs expended by Wells Fund IX to date with respect to the Knoxville Property.
Wells Fund X has not yet made any capital contributions to the Joint Venture. It
is currently contemplated that additional capital contributions to the Joint
Venture will initially be funded by Wells Fund X and that the ultimate
percentage ownership interests in the Joint Venture will be approximately 50% by
each partnership.
Wells Fund IX will act as the initial Administrative Venturer of the
Joint Venture and, as such, will be responsible for establishing policies and
operating procedures with respect to the business and affairs of the Joint
Venture. However, approval of each of Wells Fund IX and Wells Fund X is
required for any major decision or any action which materially affects the Joint
Venture or the Property.
No payment will be made by the Joint Venture to any of Wells Fund IX,
Wells Fund X or any Affiliate, or partners or employees of any of Wells Fund IX
or Wells Fund X for the services of any such party, other than under management
agreements and leasing and tenant coordinating agreements with Wells Management
Company, Inc., an Affiliate of the General Partners, as manager and agent, which
agreements concern the management and leasing of the Project to be owned and
operated by the Joint Venture. Wells Fund X will pay fees and expenses to the
General Partners and their Affiliates as described in the section of the
Prospectus entitled "COMPENSATION OF THE GENERAL PARTNERS AND AFFILIATES."
THE KNOXVILLE PROPERTY
Purchase of the Knoxville Property. Wells Fund IX entered into a Real
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Estate Option Agreement dated December 9, 1996 (the "Option Agreement") with The
Development Corporation of Knox County, a Tennessee nonprofit corporation (the
"Seller"), for the option to purchase a 5.622 acre tract of real property
located in Knox County, near Knoxville, Tennessee (the "Knoxville Property") for
a purchase price of $583,800. The Seller is not affiliated with Wells Fund IX,
Wells Fund X or their General Partners. Wells Fund IX exercised the option
pursuant to the Option Agreement and acquired the Knoxville Property on December
13, 1996. Wells Fund IX entered into a Development Agreement (as hereinafter
described) for the construction of a three-story office building containing
approximately 83,885 rentable square feet to be erected on the Knoxville
Property (the "Project"). Wells Fund IX entered into a Lease Agreement (the
Lease") with ABB Flakt, Inc. ("ABB") pursuant to which ABB agreed to lease
55,000 rentable square feet of the Project upon its completion. In accordance
with the terms of the Amended and Restated Custodial Agency Agreement dated
November 30, 1995, between Wells Fund IX and The Bank of New York (the "Agent")
and the Custodial Agency Agreement dated June 28, 1996, between Wells Fund X and
the Agent, legal title to the Knoxville Property is being held by the Agent as
agent for the Joint Venture. Wells Fund IX contributed its interest in the
Knoxville Property and the Lease to the Joint Venture on March 26, 1997.
An independent appraisal of the Knoxville Property was prepared by The
David L. Beal Company, Real Estate Appraisers and Consultants, as of October 31,
1996, pursuant to which the market value of the land and the leased fee interest
in the Knoxville Property subject to the Lease (described below) was estimated
to be $8,300,000, in cash or terms equivalent to cash. This value estimate was
based upon a number of assumptions, including that the Project is finished in
accordance with plans and specifications provided and that the building is
operating following completion at a stabilized level with ABB occupying 55,000
<PAGE>
rentable square feet and 94% of the remaining rentable area occupied by other
tenants. Wells Fund IX also obtained an environmental report prior to closing
evidencing that the environmental condition of the Knoxville Property was
satisfactory.
In connection with the closing of the acquisition of the Knoxville
Property, Wells Fund IX incurred attorneys fees and expenses of approximately
$40,800, title insurance premiums of $15,040 and costs for recording taxes, deed
recording and settlement fees of $2,273. At the closing, the Seller paid real
estate commissions of $29,190 and $145 in other miscellaneous closing costs.
Location of the Knoxville Property. The Knoxville Property is located
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in an office park known as Centerpoint Business Park, on Pellissippi Parkway
just north of the intersection of Interstates 40 and 75, in Knox County,
Tennessee outside the city limits of Knoxville and approximately 10 miles west
of the Knoxville central business district. The Pellissippi Parkway and the
commercial area along the Interstate 40/75 corridor has evolved recently from a
residential suburb into one of the area's fastest growing commercial and retail
districts. The area has become competitive with the metropolitan Knoxville area
office market due to its growth in office space.
Knoxville, the county seat of Knox County, Tennessee, is the third
largest city in the State of Tennessee, after Memphis and Nashville, and the
largest city in eastern Tennessee. Knoxville is located at the intersection of
two major interstate highways, I-40 which extends east to west, and I-75 which
extends north to south. The Knoxville economy is largely oriented to trade and
manufacturing, due to its location as the geographic center of the eastern
portion of the United States and the wide range of available transportation
resources. Knoxville's central location and transportation access has also
caused it to emerge as a convention center. The Knoxville metropolitan
statistical area population in 1990 was 604,812, compared to the 1980 census of
565,970. Unemployment for Knox County in 1995 was 3.4%, lower than the overall
rate for the State of Tennessee of 5.2% and the national rate of 5.6%.
The western portion of Knox County, in which the Knoxville Property is
located, has experienced the most growth and development in the Knoxville
metropolitan area during the past 10 years due primarily to available land and
services. It is anticipated that the Knoxville metropolitan area will continue
to grow as a major regional center of trade and tourism due to its location at
the intersection of Interstates 40 and 75 and the recent extension of the
Pellissippi Parkway to the Knoxville airport.
Access to the Knoxville Property is provided by Pellissippi Parkway, a
limited access thoroughfare traversing southeast to the Knoxville airport, with
an interchange at Interstate 40/75 south of the Knoxville Property. Nearby
Kingston Pike also provides east and west traffic flow for the Centerpoint
Business Park, and serves as the major commercial center in the immediate area
with a number of large strip shopping centers, a regional mall, gas stations,
convenience stores, office buildings, restaurants and other various
retail/commercial uses. The Project will be highly visible from both
Centerpoint Parkway and Pellissippi Parkway, since the building elevation will
be at or above road grade.
The Joint Venture will experience competition for tenants from owners
and managers of various other office buildings located in the immediate area of
the Project which would adversely effect the Joint Venture's ability to attract
and retain tenants.
Development Agreement. On December 10, 1996, Wells Fund IX entered into
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a Development Agreement (the "Development Agreement") with ADEVCO Corporation, a
Georgia corporation (the "Developer"), as the exclusive development manager to
supervise, manage and coordinate the planning, design, construction and
completion of the Project. Wells Fund IX assigned its interest in the
Development Agreement to the Joint Venture on March 26, 1997.
The Developer is an Atlanta based real estate development and management
company formed in 1990 which specializes in the development of office buildings.
The Developer has previously developed or is developing a total of five office
buildings for Affiliates of the General Partners. In this regard, the Developer
entered into (i) a development agreement with Wells Real Estate Fund III, L.P.
("Wells Fund III"), a public real estate program previously sponsored by the
General Partners and their Affiliates, for the development of a two-story office
building containing approximately 34,300 rentable square feet located in
<PAGE>
Greenville, North Carolina (the "Greenville Project"), (ii) a development
agreement with Fund IV and Fund V Associates, a joint venture between Wells Fund
III and Wells Real Estate Fund IV, L.P., a public real estate program previously
sponsored by the General Partners and their Affiliates, for the development of a
four-story office building located in Jacksonville, Florida containing
approximately 87,600 rentable square feet (the "Jacksonville IBM Project"),
(iii) a development agreement with the Fund VII-VIII Joint Venture, a joint
venture between Wells Real Estate Fund VII, L.P.("Wells Fund VII"), a public
real estate program previously sponsored by the General Partners and their
Affiliates, and Wells Real Estate Fund VIII, L.P. ("Wells Fund VIII"), each a
public real estate program previously sponsored by the General Partners and
their Affiliates, for the development of a two-story office building containing
approximately 62,000 rentable square feet located in Alachua County, near
Gainesville, Florida (the "Gainesville Project"), (iv) a development agreement
with Fund VI, Fund VII and Fund VIII Associates, a joint venture among Wells
Real Estate Fund VI, L.P., a public real estate program previously sponsored by
the General Partners and their Affiliates, Wells Fund VII and Wells Fund VIII,
for the development of a four-story office building containing approximately
92,964 rentable square feet located in Jacksonville, Florida (the "BellSouth
Project"), and (v) a development agreement with Fund VIII and Fund IX
Associates, a joint venture between Wells Fund VIII and Wells Fund IX, for the
development of a four-story office building containing approximately 96,750
rentable square feet located in Madison, Wisconsin (the "Madison Project"). The
Greenville Project was completed on schedule, and International Business
Machines Corporation ("IBM"), which leased approximately 23,312 rentable square
feet of the building, took possession under its lease on April 16, 1991. The
Jacksonville IBM Project was also completed on schedule, and IBM, which leased
approximately 68,100 rentable square feet of the building, took possession under
its lease on June 1, 1993. The Gainesville Project was completed in advance of
schedule, and CH2M Hill, Inc., which leased approximately 50,000 rentable square
feet of the building, took possession under its lease on December 18, 1995. The
BellSouth Project was also completed in advance of schedule, and BellSouth,
which leased approximately 64,558 rentable square feet of the building, took
possession under its lease on May 20, 1996. Construction of the Madison Project
is currently on schedule, with an anticipated completion date on or before June
15, 1997. Westel-Milwaukee Company, Inc. d/b/a Cellular One agreed to lease
approximately 75,000 rentable square feet of the Madison Project, comprising
approximately 78% of the Madison Project, within 10 business days of the
completion of the construction.
The President of the Developer is David M. Kraxberger. Mr. Kraxberger
has been in the real estate business for over 17 years. Since 1984, and prior
to becoming President of the Developer, Mr. Kraxberger served as Senior Vice
President of office development for The Oxford Group, Inc., an Atlanta based
real estate company with operations in seven southeastern states. Mr.
Kraxberger holds a Masters Degree in Business Administration from Pepperdine
University in Los Angeles, California, and is a member of the Urban Land
Institute and the National Association of Industrial Office Parks. Mr.
Kraxberger also holds a Georgia real estate license. Pursuant to the terms of a
Guaranty Agreement, Mr. Kraxberger has personally guaranteed the performance of
the Developer under the Development Agreement. Mr. Kraxberger has also
personally guaranteed the performance of the contractor, Integra Construction,
Inc., under the Construction Contract (as hereinafter described) pursuant to the
terms of a separate Guaranty Agreement. Neither the Developer nor Mr.
Kraxberger are affiliated with Wells Fund IX, Wells Fund X or their General
Partners.
The primary responsibilities of the Developer under the Development
Agreement include (i) the supervision, coordination, administration and
management of the work, activities and performance of the architect under the
Architect's Agreement (as described below) and the contractor under the
Construction Contract (as described below); (ii) the implementation of a
development budget (the "Development Budget") setting forth an estimate of all
expenses and costs to be incurred with respect to the planning, design,
development and construction of the Project; (iii) the review of all
applications for disbursement made by or on behalf of the Joint Venture under
the Architect's Agreement and the Construction Contract; (iv) the supervision
and management of tenant build-out at the Project; and (v) the negotiation of
contracts with, supervision of the performance of, and review and verification
of applications for payment of the fees, charges and expenses of such design and
engineering professionals, consultants and suppliers as the Developer deems
necessary for the design and construction of the Project in accordance with the
Development Budget.
The Developer is also performing other services typical of development
managers including, but not limited to, arranging for preliminary site plans,
surveys and engineering plans and drawings, overseeing the selection by the
Contractor of major subcontractors and reviewing all applicable building codes,
<PAGE>
environmental, zoning and land use laws and other applicable local, state and
federal laws, regulations and ordinances concerning the development, use and
operation of the Project or any portion thereof. The Developer is required to
advise the Joint Venture on a weekly basis as to the status of the Project and
submit to the Joint Venture monthly reports with respect to the progress of
construction, including a breakdown of all costs and expenses under the
Development Budget. The Developer is required to obtain prior written approval
from the Joint Venture before incurring and paying any costs which will result
in aggregate expenditures under any one category or line item in the Development
Budget exceeding the amount budgeted therefor. If the Developer determines at
any time that the Development Budget is not compatible with the then prevailing
status of the Project and will not adequately provide for the completion of the
Project, the Developer will prepare and submit to the Joint Venture for approval
an appropriate revision of the Development Budget.
In discharging its duties and responsibilities under the Development
Agreement, the Developer has full and complete authority and discretion to act
for and on behalf of the Joint Venture. The Developer has agreed to indemnify
the Joint Venture from any and all claims, demands, losses, liabilities,
actions, lawsuits, and other proceedings, judgments and awards, and any costs
and expenses arising out of the negligence, fraud or any willful act or omission
by the Developer. The Joint Venture has agreed to indemnify the Developer from
and against any and all claims, demands, losses, liabilities, actions, lawsuits
and other proceedings, judgments and awards, and any costs and expenses arising
out of (i) any actions taken by the Developer within the scope of its duties or
authority, excluding negligence, fraud or willful acts of the Developer, and
(ii) the negligence, fraud or any willful act or omission on the part of the
Joint Venture.
It is anticipated that the funds to be expended by the Joint Venture for
the development and construction of the Project will be paid out of
contributions to the Joint Venture by Wells Fund IX and Wells Fund X from their
respective investor capital contributions, which are currently being held by the
Agent pursuant to the Custodial Agency Agreement of each of Wells Fund IX and
Wells Fund X, with payments to be made after the Joint Venture has approved
appropriate draw requests and submitted such requests to the Agent for payment.
However, the Joint Venture may elect to provide funds to the Developer so that
the Developer can pay the Joint Venture's obligations with respect to the
construction and development of the Project directly. All such funds of the
Joint Venture which may be received by the Developer with respect to the
development or construction of the Project will be deposited in a bank account
approved by the Joint Venture. If at any time there are in the bank account
funds of the Joint Venture temporarily exceeding the immediate cash needs of the
Project, the Developer may invest such excess funds in savings accounts,
certificates of deposit, United States Treasury obligations and commercial paper
as the Developer deems appropriate or as the Joint Venture may direct, provided
that the form of any such investment is consistent with the Developer's need to
be able to liquidate any such investment to meet the cash needs of the Project.
The Developer will not be required to advance any of its own funds for the
payment of any costs or expenses incurred by or on behalf of the Joint Venture
in connection with the development of the Project. The Developer shall be
reimbursed for all advances, costs and expenses paid for and on behalf of the
Joint Venture. The Developer will not be reimbursed, however, for its own
administrative costs or for costs relating to travel and lodging incurred by its
employees and agents.
As compensation for the services to be rendered by the Developer under
the Development Agreement, the Joint Venture will pay a development fee of
$175,000. The fee will be due and payable ratably (on the basis of the
percentage of construction completed) as the construction and development of the
Project is completed. The Joint Venture will also pay the Developer an "ABB
Work Fee" of $125,000. The ABB Work Fee is for services rendered by the
Developer with respect to the supervision and management of tenant build-out of
the premises leased by ABB pursuant to the Lease. The fee is due and payable in
one lump sum upon the completion of the construction of the Project and the
tenant improvements under the Lease.
The Developer may also receive additional fees in the event the
Developer serves as the construction manager with respect to the supervision and
management of tenant build-out relating to any rentable area of the Project
which is not initially leased by ABB. Such fee shall be an amount equal to
$2.30 multiplied by the number of square feet of rentable space built out, and
shall be payable in a lump sum upon completion of the tenant improvements. The
Development Agreement also contains a provision appointing the Developer as the
Joint Venture's non-exclusive agent during development and construction of the
Project to offer for lease space which is not initially leased by ABB. The
Developer will receive certain performance based lease-up fees equal to 5% of
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all gross base rents (excluding escalations in operating costs) actually paid by
the tenant to the Joint Venture during each month of the initial term of such
tenant's lease should the Developer lease any such additional space to any
tenants (including without limitation the lease to ABB of additional space not
initially leased by ABB) during the development and construction of the Project,
plus, if such lease grants to the tenant an option to extend or renew the term
of the lease and the tenant exercises such option, an amount equal to 5% of all
gross base rents (excluding escalations and operating costs) actually paid by
the tenant during each month of the extended term of such tenant's lease. In
any event, the Joint Venture's obligation to pay the foregoing leasing fees with
respect to the additional space will terminate 10 years after the commencement
date of the applicable lease, even if the term of the applicable lease is
extended beyond such 10 year period. The Development Agreement further provides
that the Joint Venture and the Developer agree to consider the possible cash-out
of the commission obligation for the leasing of the additional space, but shall
not be obligated to agree to any such cash-out arrangement. The Developer is
not entitled to a commission or fee in the event ABB exercises any right of
first refusal or expansion option as set forth in the Lease. The Joint
Venture's obligation to pay these lease-up fees to the Developer would terminate
10 years after the commencement date of the tenant's lease, even if the lease is
extended beyond a 10 year period.
It is anticipated that the aggregate of all costs and expenses to be
incurred by the Joint Venture with respect to the acquisition of the Property,
the planning, design, development, construction and completion of the Project
and the build-out of tenant improvements under the Lease and tenant improvements
for the premises not leased initially by ABB will total approximately
$7,693,791, comprised of the following expenditures:
<TABLE>
<CAPTION>
<S> <C>
Construction Contract $4,134,814
Tenant Improvements - ABB Premises 936,259
Tenant Improvements - Additional Space 470,176
Land 583,800
Closing Costs 58,113
Leasing Commissions - Lease 330,000
Leasing Commissions - Additional Space 57,500
Architectural Fees 217,500
Architect's Expenses 30,000
Space Planning 110,000
Development Fee 175,000
ABB Work Fee 125,000
Additional Space Work Fee 66,435
Survey and Engineering 42,300
Landscaping 150,000
Lake Improvement 50,000
Signage 12,500
Appraisal Fee 6,000
Marketing 10,500
Contingency 127,894
</TABLE>
The total of all the foregoing expenses anticipated to be incurred by the Joint
Venture with respect to the Project, exclusive of costs relating to marketing,
closing costs and tenant improvements and leasing commissions for the premises
not leased initially by ABB, will total approximately $7,031,067. Under the
terms of the Development Agreement, the Developer has agreed that in the event
that the total of all such costs and expenses exceeds $7,031,067, the amount of
fees payable to the Developer shall be reduced by the amount of any such excess.
Unless the fees otherwise payable to the Developer are reduced as set forth
above, it is estimated that the total sums due and payable to the Developer
under the Development Agreement will be approximately $300,000 (plus any fees
earned relating to the lease-up of space not initially leased by ABB). As of
March 10, 1997, the Developer had received a total of $33,400 under the terms of
the Development Agreement.
The item shown above in the estimated expenditures for the Project of
$50,000 for "lake improvement" refers to the anticipated additional landscaping
costs which will be incurred to enhance the appearance of the retention pond
which abuts the Knoxville Property. The pond will be improved to serve as an
attractive amenity for the Project. The improvements will include a fountain
which will be installed in the pond and other landscaping surrounding the area,
including benches to provide a recreational space for employees working in the
building.
<PAGE>
In the event the Developer should for any reason cease to manage the
development of the Project, the Joint Venture would have to locate a suitable
successor development manager. No assurances can be given as to whether a
suitable successor development manager could be found, or what the contractual
terms or arrangement with any such successor would be.
Construction Contract. Wells Fund IX entered into a construction contract
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(the "Construction Contract") on November 1, 1996 with the general contracting
firm of Integra Construction, Inc. (the "Contractor") for the construction of
the Project. Wells Fund IX assigned its interest in the Construction Contract
to the Joint Venture on March 26, 1997. The Contractor is a Georgia
corporation based in Atlanta specializing in commercial, industrial and
institutional building. The Contractor commenced operations in November 1994.
Its principals were formerly employed by McDevitt & Street Company, a large
general contracting firm which operates throughout the United States and which
has served previously as the general contractor for properties developed by
other limited partnerships sponsored by the General Partners. The Contractor is
presently engaged in the construction of two office buildings, a utilities
building and a church, and since July 1995, has completed nine projects with a
total construction value in excess of $7,700,000. The Contractor has served as
the general contractor for the construction of the Gainesville Project, an
office building in Gainesville, Florida which is owned by a joint venture
between Wells Fund VII and Wells Fund VIII. The Contractor is not affiliated
with Wells Fund IX, Wells Fund X or their General Partners.
Under the terms of the Construction Contract, the Contractor is responsible
for the construction of the Project which will consist of a three-story steel
framed office building with reflective insulated glass and brick exterior
containing approximately 87,000 gross square feet and 83,885 of rentable square
feet. The Project site will have approximately 297 paved parking spaces. The
Property is currently zoned to permit the intended development and operation of
the Project as a commercial office building and has access to all utilities
necessary for the development and operation of the Project, including water,
electricity, sanitary sewer and telephone. As of March 25, 1997, the status of
construction of the Project under the Construction Contract was as follows: (i)
grading and site utilities were approximately 30% complete; (ii) foundation
slabs were completed; and (iii) first floor slabs were approximately 50%
complete. Based on the forgoing, as of March 25, 1997, the General Partners
believe that construction of the Project under the Construction Contract was
substantially on schedule.
The Construction Contract provides that the Joint Venture will pay the
Contractor a fixed sum of $4,134,814 for the construction of the Project,
excluding tenant improvements. It is anticipated that the Construction Contract
will be amended to provide for the construction of the tenant improvements
required pursuant to the Lease at such time as the plans and specifications are
drawn for such improvements and the budget for such improvements is firmly
established. The Contractor will be responsible for all costs of labor,
materials, construction equipment and machinery necessary for completion of the
Project. In addition, the Contractor will be required to secure and pay for any
additional business licenses, tap fees and building permits which may be
necessary for construction of the Project.
The Joint Venture will make monthly progress payments to the Contractor in
an amount of 90% of the portion of the contract price properly allocable to
labor, materials and equipment, less the aggregate of any previous payments made
under the contract; provided, however, that when a total of $206,740 has been
withheld as retainage, no further retainage will be withheld from the monthly
progress payments. When construction is substantially complete and the space is
available for occupancy, the Joint Venture will make a semi-final payment in the
amount of all of the unpaid balance, except that the Joint Venture may retain an
amount in accordance with the terms of the Construction Contract which is
necessary to protect its remaining interest until final completion of the
Project. The Joint Venture will pay the entire unpaid balance when the Project
has been fully completed in accordance with the terms and conditions of the
Construction Contract. As a condition of final payment, the Contractor will be
required to execute and deliver a release of all claims and liens against the
Joint Venture. As of March 10, 1997, the Contractor had been paid $95,357
pursuant to the terms of the Construction Contract.
The Contractor will be responsible to the Joint Venture for the acts or
omissions of its subcontractors and suppliers of materials and of persons either
directly or indirectly employed by them. The Contractor has agreed to indemnify
the Joint Venture from and against all liability, claims, damages, losses,
expenses and costs of any kind or description arising out of or in connection
with the performance of the Construction Contract, provided that such liability,
claim, damage, loss or expense is caused in whole or in part by any action or
omission of the Contractor, any subcontractor or materialmen, anyone directly or
indirectly employed by any of them or anyone for whose acts any of them may be
liable. The Construction Contract also requires the Contractor to obtain and
<PAGE>
maintain, until completion of the Project, adequate insurance coverage relating
to the Project, including insurance for workers' compensation, personal injury
and property damage.
The Contractor is required to work expeditiously and diligently to maintain
progress in accordance with the construction schedule and to achieve substantial
completion of the Project within the contract time. The Contractor is required
to employ all such additional labor, services and supervision, including such
extra shifts and overtime, as may be necessary to maintain progress in
accordance with the construction schedule. It is anticipated that the Project
will be completed on or before December 1, 1997. As described below, in the
event the Project is not completed by December 1, 1997, the Joint Venture will
be required to reimburse ABB for rental and operating expense costs incurred by
ABB for holding over in ABB's current premises (but only to the extent such
costs, computed on a per diem basis, exceed the per diem rental and operating
expense costs payable by ABB for the last 12 months of the term of ABB's current
lease). Although completion or performance bonds are often obtained in
connection with the development and construction of commercial properties such
as the Project to reduce the risk of non-performance and to assure compliance
with approved plans and specifications, due to the historical performance of the
Contractor, the General Partners have determined that the risks of non-
performance by the Contractor do not justify the cost required to obtain a
completion or performance bond with respect to the Project. However,
performance by the Contractor of the Construction Contract has been personally
guaranteed by David B. Blackmore and Drew S. White, founding principals of the
Contractor, as well as David Kraxberger, a principal of the Developer.
Architect's Agreement. Smallwood, Reynolds, Stewart, Stewart & Associates,
---------------------
Inc. (the "Architect") will be the architect for the Project pursuant to the
Architect's Agreement entered into with Wells Fund IX and assigned to the Joint
Venture. The Architect is based in Atlanta, Georgia, was founded in 1979, has a
staff of over 200 persons, and specializes in programming, planning,
architecture, interior design, landscape architecture and construction
administration. The Architect has its principal office in Atlanta, Georgia and
additional offices in Tampa, Florida and Singapore. The Architect has designed
a wide variety of projects, with a total construction cost in excess of $2
billion, including facilities for corporate office space, educational and
athletic facilities, retail space, manufacturing, warehouse and distribution
facilities, hotels and resorts, correctional institutions, and luxury
residential units. The Architect has performed architectural services with
respect to the Gainesville Project, a two-story office building containing
approximately 62,000 rentable square feet located near Gainesville, Florida,
owned by a joint venture between Wells Fund VII and Wells Fund VIII. The
Architect is not affiliated with Wells Fund IX, Wells Fund X or their General
Partners.
The Architect's basic services under the Architect's Agreement include the
schematic design phase, the design development phase, the construction documents
phase and the construction phase. During the schematic design phase, the
Architect will prepare schematic design documents consisting of drawings and
other documents illustrating the scale and relationship of Project components.
The Architect will be paid a fee of $32,625 for such services. During the
design development phase, the Architect will prepare design development
documents consisting of drawings and other documents to fix and describe the
size and character of the entire Project as to architectural, structural,
mechanical, plumbing and fire protection and electrical systems, materials and
such other elements as may be appropriate. The Architect will be paid $65,250
for these services. During the construction documents phase, the Architect will
prepare construction documents consisting of drawings and specifications setting
forth in detail the requirements for the construction of the Project. The
Architect will be paid $97,875 for these services. During the construction
phase, the Architect is to provide administration of the Construction Contract
and advise and consult with the Developer and the Joint Venture concerning
various matters relating to the construction of the Project. The Architect is
required to visit the Project site at intervals appropriate to the stage of
construction and to become generally familiar with the progress and quality of
the work and to determine if, in general, the work is proceeding in accordance
with the contract schedule. The Architect is required to keep the Joint Venture
informed of the progress and quality of the work. The Architect is also
required to determine the amounts owing to the Contractor based on observations
of the site and evaluations of the Contractor's application for payment and
shall issue certificates for payment in amounts determined in accordance with
the Construction Contract described above. The Architect will also conduct
inspections to determine the date of completion of the Project and shall issue a
final certificate for payment. The Architect will be paid $21,750 for its
services performed during the construction phase.
The total amount of fees payable to the Architect under the Architect's
Agreement is $217,500. Payments will be paid to the Architect on a monthly
basis in proportion to the services performed within each phase of service. In
addition, the Architect and its employees and consultants will be reimbursed for
<PAGE>
expenses including, but not limited to, transportation in connection with the
Project, living expenses in connection with out-of-town travel, long distance
communications and fees paid for securing approval of authorities having
jurisdiction over the Project. It is estimated that the reimbursable expenses
in connection with the development of the Project will be approximately $30,000.
As of March 10, 1997, the Architect had been paid $246,857 pursuant to the
terms of the Architect's Agreement.
Lease. On December 10, 1996, Wells Fund IX entered into a Lease Agreement
-----
(the "Lease") with ABB pursuant to which ABB agreed to lease 55,000 rentable
square feet of the Project, comprising approximately 66% of the Project. Wells
Fund IX assigned its interest in the Lease to the Joint Venture on March 26,
1997.
ABB is a Delaware corporation which is principally engaged in the business
of pollution control engineering and consulting. ABB will use the leased area
as office space for approximately 220 employees. ABB Asea Brown Boveri Ltd.
("ABB-Switzerland"), a Swiss corporation based in Zurich, is the holding company
of the ABB Asea Brown Boveri Group (the "ABB Group") which is comprised of
approximately 1,000 companies around the world, including ABB. While the shares
of ABB-Switzerland are not publicly traded, the shares of two of the parent
companies in the ABB Group are listed on various stock exchanges in Europe and
the United States. ABB-Switzerland is owned in equal parts by ASEA AB, a
Swedish corporation, and BBC Brown Boveri Ltd., a Swiss corporation. The ABB
Group's companies do business in 140 countries. The Group's revenues are
predominantly provided by contracts with utilities and independent power
producers for the design, engineering, construction, manufacture and marketing
of products, services and systems in connection with the generation,
transmission and distribution of electricity. In addition, the ABB Group
generates a significant portion of its revenues from the sale of industrial
automation products, systems and services to pulp and paper, automotive, and
other manufacturers. The ABB Group also provides financial services principally
for its internal businesses and affiliates. The ABB Group reported net income
in 1995 of approximately $34 billion and net worth of approximately $5.2
billion. The ABB Group's total number of employees for 1995 was approximately
210,000 worldwide and approximately 25,000 in the United States. ABB Inc., the
United States parent company of ABB, reported a net worth in 1995 of in excess
of $500,000,000, gross revenues in excess of $4 billion, and total assets in
excess of $4 billion. ABB reported a net worth in 1995 of in excess of $15
million, gross revenues in excess of $300 million and total assets in excess of
$150 million.
The initial term of the Lease will be nine years and 11 months to commence
(the "Rental Commencement Date") on the later of (a) January 1, 1998, or (b) the
earlier of (i) the date which is 30 days after substantial completion of the
Project, or (ii) 30 days after the date upon which ABB takes possession and
occupies any portion of the leased premises for business purposes. ABB has the
option to extend the initial term of the Lease for two successive five year
periods. Each extension option must be exercised, if at all, no less than six
months prior to the expiration of the then current lease term.
The annual base rent payable under the Lease will be $646,250 payable in
equal monthly installments of $53,854 during the first five years of the initial
lease term, and $728,750 payable in equal monthly installments of $60,729 during
the last four years and 11 months of the initial lease term. The annual base
rent for each extended term under the Lease will be the market rate for the
period covered by the extended term. The term "market rate" is defined in the
Lease as the annual effective rental rate per square foot of rentable floor area
then being charged by landlords under new leases of office space in the
metropolitan Knoxville, Tennessee market for similar space in a building of
comparable quality and with comparable parking and other amenities. The Lease
provides that if the parties cannot agree on the appropriate market rate, the
market rate shall be established by real estate appraisers. The Lease provides
that ABB has the option to require the Joint Venture to make available to ABB an
amount equal to up to $165,000 to be used by ABB for the purchase of systems
furniture to be installed in the leased premises, upon written request of ABB to
the Joint Venture within 30 days after the Rental Commencement Date. If ABB
elects to use all or any portion of the furniture allowance, the amount of the
furniture allowance actually paid by the Joint Venture to ABB shall be amortized
in equal monthly payments over the number of months left in the lease term at an
interest rate of 10% per annum, and such amounts shall be added to and become
part of the base rental. ABB is required to provide the Joint Venture a valid
first lien upon all of the furniture with respect to which ABB has purchased
with or received reimbursement from the furniture allowance to secure payment of
all amounts due by ABB to the Joint Venture under the Lease.
In addition to the base rent, ABB is required to pay additional rent equal
to its share of all "operating expenses" during the lease term. "Operating
expenses" is defined to include all expenses, costs and disbursements (excluding
specific costs billed to specific tenants of the building) of every kind and
<PAGE>
nature, relating to or incurred or paid in connection with the ownership,
management, operation, repair and maintenance of the Project, including
compensation of employees engaged in the operation, management or maintenance of
the Project, supplies, equipment and materials, utilities, repairs and general
maintenance, insurance, a management fee in the amount of 4% of the gross rental
income from the Project, and all taxes and governmental charges attributable to
the Project or its operation (excluding taxes imposed or measured on or by the
income of the Joint Venture from operation of the Project).
Under the terms of the Lease, the Joint Venture is responsible for a
construction allowance of $976,600 (calculated at the rate of $19 per usable
square foot of the premises). The Lease also provides that so long as ABB shall
occupy 40% or more of the rentable floor area of the building, ABB shall have
the right to design and designate the location of one monument-type sign naming
the building and the Joint Venture will pay $5,000 of the cost associated with
purchasing and installing such signage. In addition, the Joint Venture has
agreed to provide ABB on the fifth anniversary of the Rental Commencement Date a
redecoration allowance of an amount equal to (i) $5 per square foot of usable
area of the premises leased as of the fifth anniversary of the Rental
Commencement Date which has been leased and occupied by ABB for at least three
consecutive years ending with such fifth anniversary, reduced by (ii) $177,000
(i.e., assuming ABB continues to lease 51,250 square feet pursuant to the terms
of the Lease during such five year period, the redecoration allowance would be
$79,250).
The terms of the Lease provide that ABB has a right of first refusal for
the lease of any space in the building not initially leased by ABB. In the
event that the Joint Venture has secured a potential tenant for any of such
space, the Joint Venture has agreed to give ABB 10 business days to exercise its
right to add such space to the leased premises. In the event that ABB exercises
its right of first refusal, the lease of the additional space will be subject to
all the terms and conditions of the Lease, provided that the base rental and
other charges and any allowances shall be solely as set forth in the notice to
ABB of the proposed terms of lease for the potential tenant of such space. If
ABB does not so exercise its right of first refusal within such 10 business day
period, the Joint Venture will have the right to lease the space to the
potential tenant except that, after the expiration of any such lease to another
party, such space will again become subject to ABB's right of first refusal.
The Lease further provides that the Joint Venture has agreed that during the
term of the Lease, no leases of space with other tenants for any of the space
not initially leased by ABB pursuant to the Lease shall have terms in excess of
three years from the last day of the month in which such third party tenant
takes possession of such space.
ABB has a one-time option to terminate the Lease as of the seventh
anniversary of the Rental Commencement Date, which is exercisable by written
notice to the Joint Venture at least 12 months in advance of such seventh
anniversary. If ABB elects to exercise this termination option, ABB is required
to pay to the Joint Venture, on or before 90 days prior to the seventh
anniversary of the Rental Commencement Date, a termination payment intended to
compensate the Joint Venture for the present value of certain sums which the
Joint Venture has expended in connection with the Lease amortized over and
attributable to the remaining lease term (in the nature of the leasing
commissions, construction allowance, furniture allowance and redecoration
allowance, etc.) and a rent payment equal to approximately 15 months of monthly
base rental payments. (The termination payment would be approximately
$1,818,000 under certain assumptions, including ABB is leasing upon termination
69,000 square feet of rentable area and 60,000 square feet of usable area.)
The Lease provides that the Joint Venture is required to cause the Project
to be substantially completed as soon as practicable under the circumstances,
with a goal of achieving substantial completion on or before December 1, 1997
(subject to force majeure and any delays caused by ABB). If substantial
completion has not occurred on or before December 1, 1997 (extended on a day for
day basis for delays due to force majeure and for delays caused by ABB), ABB's
sole right and remedy shall be for the Joint Venture to reimburse ABB for rental
and operating expense costs incurred by ABB for holding over in ABB's current
premises, but only to the extent such costs, computed on a per diem basis,
exceed the per diem rental and operating expense cost payable by ABB for the
last 12 months of the term of ABB's current lease. As of March 25, 1997,
construction of the Project was on schedule to be completed on or before
December 1, 1997.]
As security for ABB's obligations under the Lease, ABB has provided to
Wells Fund IX (and Wells Fund IX has in turn assigned to the Joint Venture), and
agreed to maintain in full force and effect at all times during the 10 year
period from the Rental Commencement Date, an irrevocable standby letter of
credit in accordance with the terms and conditions set forth in the Lease. Each
letter of credit issued pursuant to the provisions of the Lease is required to
be in a form of an irrevocable credit, to be issued by an "approved issuer," to
<PAGE>
name the Joint Venture as the beneficiary and to specify that the Joint Venture,
as beneficiary, may draw against the letter of credit upon the occurrence of a
"drawing event." "Approved issuer" is defined to require that the letter of
credit issuer shall have and maintain a Moody's Bank Credit Report Service
rating of P-1 or its equivalent. "Drawing event" is defined to include any
failure of ABB to pay any installment of rent or other charge or assessment
pursuant to the terms of the Lease within five days of notice thereof, or any
other event of default with respect to which the Joint Venture has exercised or
is exercising its remedies. The letter of credit maintained by ABB is required
to be in the amount of $4,000,000 until the seventh anniversary of the Rental
Commencement Date, $3,000,000 from the seventh anniversary of the Rental
Commencement Date to the eighth anniversary of the Rental Commencement Date,
$2,000,000 from the eighth anniversary of the Rental Commencement Date to the
ninth anniversary of the Rental Commencement Date, and $1,000,000 from the ninth
anniversary of the Rental Commencement Date to the tenth anniversary of the
Rental Commencement Date. The original letter of credit which was delivered by
ABB to Wells Fund IX simultaneously with the execution of the Lease was issued
by Svenska Handelsbanken, a Swedish bank which is the largest bank in the Nordic
region with over $90 billion of assets and a credit rating issued by Moody's
Bank Credit Report Service of P-1/Aa3, and was issued in the amount of
$4,000,000 for a one year term. If the Joint Venture draws on the letter of
credit, the Joint Venture shall apply the proceeds first toward the performance
of the obligations which ABB has failed to perform under the Lease, and the
remainder, if any, shall be held by the Joint Venture in certain permitted
investments as additional security for the performance by ABB of the Lease.
In connection with the execution of the Lease, Wells Fund IX entered into
an agreement with each of two real estate brokers, one of which is a firm
affiliated with the Developer, for the payment of commissions in consideration
of services rendered in procuring the Lease. The commission agreements require
Wells Fund IX to pay a total of $330,000 in leasing commissions, one-half of
which has been paid by Wells Fund IX and the remaining one-half of which is
payable by the Joint Venture upon ABB's occupancy and acceptance of the leased
premises. Neither broker is affiliated with Wells Fund IX, Wells Fund X or
their General Partners.
Property Management Fees. Following construction and completion of the
------------------------
Project, property management and leasing services will be performed by Wells
Management Company, Inc. (the "Property Manager"), a Georgia corporation
affiliated with the General Partners. As compensation for its services, the
Property Manager will receive fees equal to 3% of the gross revenues for
property management services and 3% of the gross revenues for leasing services
with respect to the Project. In addition, the Property Manager will receive a
one-time initial lease-up fee relating to the Lease equal to the first month's
rent plus 5% of the gross revenues over the initial term of the Lease. In
addition, the Property Manager may also receive initial lease-up fees relating
to the lease-up of space not initially leased by ABB, as provided in the
Prospectus.
Lease-Up Risk. As set forth above, ABB has agreed to lease approximately
-------------
66% of the Project. However, since the Joint Venture has not yet obtained any
leases for the remaining approximately 34% of office space at the Project, the
Joint Venture will be subject to the normal lease-up risks of a new commercial
office building with respect to the unleased portion of the Project. No
assurances can be given that the Joint Venture will be able to attract or obtain
suitable tenants for the remaining approximately 34% of space at the Project or
that it will be able to attract or obtain suitable tenants for the space
initially leased by ABB upon the expiration of its lease.
REORGANIZATION OF AFFILIATED ENTITIES
On February 17, 1997, Leo F. Wells, III organized Wells Real Estate Funds,
Inc., a Georgia corporation, to act as a holding company for certain entities
previously wholly owned by Mr. Wells. On February 28, 1997, Mr. Wells
transferred all of the outstanding capital stock of Wells Capital, Inc., Wells
Investment Securities, Inc. (the Dealer Manager) and Wells Management Company,
Inc. (the Property Manager) to Wells Real Estate Funds, Inc. in exchange for all
of the outstanding capital stock of Wells Real Estate Funds, Inc. Accordingly,
the "CONFLICTS OF INTEREST" section of the Prospectus is revised as of the date
of this Supplement by the deletion of the last paragraph on page 31 and the
chart on page 32 and the insertion of the following in lieu thereof:
The General Partners of Wells Fund X are Leo F. Wells, III and Wells
Partners, L.P., a Georgia limited partnership having Wells Capital, Inc., a
Georgia corporation, as its sole general partner. Leo F. Wells, III owns
all of the outstanding capital stock of Wells Real Estate Funds, Inc., a
Georgia corporation which owns all of the outstanding capital stock of
Wells Capital, Inc., Wells Investment Securities, Inc. (the Dealer
Manager), and Wells Management Company, Inc. (the Property Manager). (See
"MANAGEMENT.")
<PAGE>
The following chart indicates the relationship between the General
Partners and their Affiliates which will be providing services to Wells
Fund X.
===============================================================================
LEO F. WELLS, III
(GENERAL PARTNER)
===============================================================================
|
100%
|
===============================================================================
WELLS REAL ESTATE FUNDS, INC.
===============================================================================
| | |
100% 100% 100%
| | |
======================== ======================== ======================
WELLS CAPITAL, INC. WELLS INVESTMENT WELLS MANAGEMENT
SECURITIES, INC. COMPANY, INC.
(DEALER MANAGER) (PROPERTY MANAGER)
======================== ======================== ======================
|
| General
| Partner
========================
WELLS PARTNERS, L.P.
(GENERAL PARTNER)
========================
In addition to the foregoing revisions to the "CONFLICTS OF INTEREST"
section of the Prospectus, the "MANAGEMENT" section of the Prospectus is hereby
revised as of the date of this Supplement so as to modify any references to the
ownership of the common stock of Wells Capital, Inc., Wells Management Company,
Inc. and Wells Investment Securities, Inc., all of which common stock was
previously owned directly by Leo F. Wells, III, and to disclose in lieu thereof
that Leo F. Wells, III now owns all of the outstanding common stock of Wells
Real Estate Funds, Inc. which is the sole shareholder of each of Wells Capital,
Inc., Wells Management Company, Inc. and Wells Investment Securities, Inc. Leo
F. Wells is also the President and sole Director of Wells Real Estate Funds,
Inc.
RISK FACTORS
The information contained on pages 7 through 11 of the Prospectus in the
"RISK FACTORS" section of the Prospectus under the heading "Investment Risks" is
revised as of the date of this Supplement by the insertion of the following
paragraph:
ACQUISITION OF PROPERTIES FROM WELLS DEVELOPMENT COMPANY, INC. The
Partnership may enter into one or more contracts, either directly or
indirectly through joint ventures with Affiliates, to acquire real property
from Wells Development Company, Inc., an Affiliate of the General Partners
("Well Development"). The properties to be acquired from Wells Development
would be either existing income-producing properties or properties to be
developed or under development. It is anticipated that contracts to acquire
properties between the Partnership and Wells Development will obligate the
Partnership to pay a substantial earnest money deposit at the time of
contracting and, in the case of properties to be developed by Wells
Development, would require the Partnership to close the purchase of the
property upon completion of the development of the property by Wells
Development and the tenant taking possession of the property. At the time
of contracting and the payment of the earnest money deposit by the
Partnership, Wells Development will not have acquired title to any real
property, but will have only a contract to acquire land, development
agreements to develop a building on the land, and an agreement with a
tenant to lease the property upon its completion. The Partnership may enter
into such a contract notwithstanding the fact that at the time of
contracting the Partnership has not yet raised sufficient proceeds in its
<PAGE>
Offering to enable it to close the purchase of such property. In the event
that Wells Development fails to develop the property or the tenant fails to
take possession under its lease for any reason, or in the event that the
Partnership is unable to raise sufficient proceeds in its Offering to pay
the purchase price at closing, the Partnership would not be required to
close, and Wells Development would be obligated to refund the amount of the
earnest money deposit to the Partnership. Such obligation is unsecured,
however, and it is unlikely that the Partnership would be able to collect
its earnest money deposit from Wells Development under such circumstances
since Wells Development is a newly formed entity without substantial assets
or operations. Although Wells Development's obligation to refund the
earnest money deposit to the Partnership under such circumstances will be
guaranteed by Wells Management Company, Inc., an Affiliated entity ("Wells
Management"), Wells Management has no substantial assets other than
contracts for property management and leasing services pursuant to which it
receives substantial monthly fees and, therefore, there are no assurances
that Wells Management would be able to refund to the Partnership all of the
earnest money deposit in a lump sum. If the Partnership is forced to
collect its earnest money deposit by enforcing the guaranty of Wells
Management, it is likely that the Partnership would be required to accept
installment payments over time from Wells Management out of the revenues of
Wells Management's property management and leasing operations. There is no
assurance that the Partnership would be able to collect the entire amount
of its earnest money deposit under such circumstances. (See "INVESTMENT
OBJECTIVES AND CRITERIA- Acquisition of Properties To Be Developed by Wells
Development Company, Inc.")
INVESTMENT OBJECTIVES AND CRITERIA
The information contained on pages 45 through 51 of the Prospectus in the
"INVESTMENT OBJECTIVES AND CRITERIA" section of the Prospectus is revised as of
the date of this Supplement by the insertion of the following:
ACQUISITION OF PROPERTIES TO BE DEVELOPED BY WELLS DEVELOPMENT COMPANY,
INC.
The Partnership may acquire properties, directly or through joint
ventures with Affiliated entities, from Wells Development Company, Inc.
("Wells Development"), a Georgia corporation which the General Partners are
forming for the purposes of (i) acquiring existing income-producing
commercial real properties, and (ii) acquiring land, developing commercial
real properties, securing tenants for such properties, and selling such
properties upon completion to the Partnership, Prior Wells Public Programs
sponsored by the General Partners and their Affiliates, and other
Affiliates. In the case of properties to be developed by Wells Development
and sold to the Partnership, it is anticipated that Wells Development would
acquire a parcel of land, enter into contracts for the construction and
development of a commercial building thereon, and enter into an agreement
with one or more tenants to lease all or a majority of the property upon
its completion, as well as secure a financing commitment from a commercial
bank to finance the acquisition and development of the property, all of
which occur prior to entering into a contract with the Partnership to
acquire the developed property upon its completion and upon the tenant
taking possession under its lease. The Partnership would be required to
pay a substantial sum to Wells Development at the time of entering into the
contract as a refundable earnest money deposit to be credited against the
purchase price at closing, which Wells Development would apply to the cost
of acquiring the land and initial development costs. It is anticipated
that the earnest money deposit would represent approximately twenty to
thirty percent (20-30%) of the purchase price of the developed property set
forth in the purchase contract. The purchase price for the developed
property to be paid by the Partnership to Wells Development would not
exceed the cost to Wells Development of the acquisition, construction and
development of the project, including interest and other carrying costs of
Wells Development, and no other benefit will accrue to Wells Development or
its affiliates from the sale of such property except for Acquisition and
Advisory Fees payable to the General Partners or their Affiliates which are
described in detail elsewhere herein. (See "COMPENSATION OF THE GENERAL
PARTNERS AND AFFILIATES".) In the case of properties acquired by the
Partnership from Wells Development that have already been developed, Wells
Development would be required to obtain an appraisal for the property prior
to contracting with the Partnership, and the purchase price payable by the
<PAGE>
Partnership under the purchase contract would not exceed the fair market
value of the property as determined by the appraisal. In the case of
properties to be acquired by the Partnership from Wells Development which
have not yet been constructed at the time of contracting, Wells Development
would be required to obtain an independent "as built" appraisal for the
property prior to contracting with the Partnership, and the purchase price
payable by the Partnership under the purchase contract will not exceed the
anticipated fair market value of the developed property as determined by
the appraisal. All funds paid to Wells Development would be disbursed
through The Bank of New York under the Custodial Agency Agreement.
It is anticipated that Wells Development would use the earnest money
deposit received from the Partnership upon execution of a purchase contract
as partial payment for the cost of the acquisition of the land and
construction expenditures, and would borrow the remaining funds necessary
to complete the development of the property from an independent commercial
bank or other institutional lender by pledging the real property,
development contracts and lease agreement as security for such borrowing.
The contract between the Partnership and Wells Development would require
Wells Development to deliver at closing to the Partnership title to the
property, as well as an assignment of the lease agreement, free and clear
of all encumbrances relating to any such borrowing, and in no event will
the Partnership take title to the property subject to a mortgage or
otherwise incur indebtedness in connection with the acquisition of such
property. Wells Development would hold the title to the property on a
temporary basis only for the purpose of facilitating the acquisition and
development of the property, and it is anticipated that Wells Development
will not hold title to any property which is ultimately resold to the
Partnership for a period in excess of 12 months.
The Partnership may enter into a contract to acquire property from
Wells Development notwithstanding the fact that at the time of contracting,
the Partnership has not yet raised sufficient proceeds to enable it to pay
the full amount of the purchase price at closing, under the expectation
that the Partnership will raise sufficient additional proceeds from its
Offering during the period between execution of the contract and the date
provided in the contract for closing. In the case of properties to be
developed by Wells Development, the contract will likely provide that the
closing will occur immediately following the completion of the development
by Wells Development. However, it is likely that the contract will also
provide that the Partnership may elect to close the purchase of the
property before the development has been completed, in which case the
Partnership would obtain an assignment of the construction and development
contracts from Wells Development and would complete the construction either
directly or through a joint venture with an Affiliate. Any contract
between the Partnership (directly or indirectly through a joint venture
with an Affiliate) and Wells Development for the purchase of property to be
developed by Wells Development will provide that the Partnership would be
obligated to purchase the property only if (i) Wells Development completes
the development of the improvements in accordance with the specifications
of the contract, and an approved tenant takes possession of the building
under a lease satisfactory to the Partnership; and (ii) the Partnership has
sufficient net proceeds available for investment in properties at closing
to pay the balance of the purchase price remaining after payment of the
earnest money deposit. The General Partners will not cause the Partnership
to enter into a contract to acquire property from Wells Development if they
do not reasonably anticipate that the Partnership will have the funds
available to purchase the property at the time of closing. However, if the
Partnership enters into a contract to acquire property from Wells
Development and, at the time for closing, is unable to purchase the
property because it does not have sufficient net proceeds available for
investment, the Partnership would not be required to close the purchase of
the property and would be entitled to a refund of its earnest money deposit
from Wells Development. Because Wells Development is a newly formed entity
without substantial assets or operations, Wells Development's obligations
to refund the Partnership's earnest money deposit will be guaranteed by
Wells Management Company, Inc. ("Wells Management"), an Affiliated entity
engaged in the business of real estate management.
Wells Management currently manages in excess of 1,500,000 square feet
of office buildings and shopping centers and derives substantial income
from such operations which the Partnership could obtain under the guaranty
in the event that Wells Development is unable to meet its obligation to
repay the earnest money deposit to the Partnership. For the fiscal year
<PAGE>
ended February 28, 1997, Wells Management reported $1,152,298 in gross
operating revenues and $132,788 in net income. Under such circumstances,
the Partnership may not be able to obtain the earnest money deposit from
Wells Management in a lump sum since Wells Management's only significant
assets are its contracts for property management and leasing services, but
would more likely be required to accept installment payments over some
period of time out of Wells Management's operating revenues. (See "RISK
FACTORS.")
The acquisition of real properties from Wells Development, as outlined
above, will involve significant risks, as further set forth in "RISK
FACTORS - Acquisition of Properties to be Developed by Wells Development
Company, Inc."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information contained on page 53 of the Prospectus in the "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
section of the Prospectus is revised as of the date of this Supplement by the
deletion of the first paragraph of that section and the insertion of the
following paragraph in lieu thereof:
Wells Real Estate Fund X, L.P. ("Wells Fund X") commenced operations
on February 4, 1997, upon the acceptance of subscriptions for the minimum
offering of $1,250,000 (125,000 Units). As of March 10, 1997, Wells Fund X
had raised a total of $4,557,541 in offering proceeds (455,754 Units),
comprised of $3,563,313 raised from the sale of Class A Status Units
(356,331 Class A Status Units) and $994,228 raised from the sale of Class B
Status Units (99,423 Class B Status Units). After the payment of $182,302
in Acquisition and Advisory Fees, and the payment of $683,631 in selling
commissions and organizational and offering expenses, as of March 10, 1997,
Wells Fund X was holding net offering proceeds of $3,691,608 available for
investment in properties.
EXPERTS
The information contained on page 97 of the Prospectus in the "EXPERTS"
section of the Prospectus is revised as of the date of this Supplement by the
insertion of the following sentence at the end of the paragraph:
The financial statements of Wells Real Estate Fund X, L.P., Wells Real
Estate Fund XI, L.P., Wells Partners, L.P. and Wells Capital, Inc. included
in Appendix I to Supplement No. 1 to this Prospectus, to the extent and for
the periods indicated in their reports, have been audited by Arthur
Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
