<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1998 or
------------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from__________________to__________________
Commission file number 0-23719
------------------------------
Wells Real Estate Fund X, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2250093
- ------------------------------- -----------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
--------------
_______________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No___
---
<PAGE>
Form 10-Q
Wells Real Estate Fund X, L.P.
------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1998
and December 31, 1997........................................................................ 3
Statement of Income for the Three and Nine Months
Ended September 30, 1998 and 1997............................................................ 4
Statements of Partners' Capital for the Year Ended
December 31, 1997 and for the Nine Months
Ended September 30, 1998..................................................................... 5
Statements of Cash Flows for the Nine
Months Ended September 30, 1998 and 1997..................................................... 6
Condensed Notes to Financial Statements...................................................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................ 12
PART II. OTHER INFORMATION.................................................................................. 20
</TABLE>
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets September 30, 1998 December 31, 1997
------ --------------------- ---------------------
<S> <C> <C>
Investment in joint venture (Note 3) $22,297,955 $ 3,662,803
Cash and cash equivalents 281,987 18,404,232
Deferred project costs 60,030 912,317
Organization cost, less accumulated
amortization of $10,937 in 1998 & $6,250 in 1997 20,313 25,000
Prepaid expenses and other assets 11,850 712,392
Due from affiliates 449,439 0
----------- -----------
Total assets $23,121,574 $23,716,744
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Sales commissions payable $ 0 $ 242,387
Due to affiliates 3,401 105,008
Partnership distribution payable 436,659 294,309
----------- -----------
Total liabilities 440,060 641,704
----------- -----------
Partners' capital:
General partners 0 338
Original limited partner 0 0
Limited Partners:
Class A - 2,117,136 units outstanding 18,105,513 18,019,767
Class B - 595,755 units outstanding 4,576,001 5,054,935
----------- -----------
Total partners' capital 22,681,514 23,075,040
----------- -----------
Total liabilities and partners' capital $23,121,574 $23,716,744
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements
3
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 0 $ 0 $ 120,000 $ 0
Interest income 26,880 120,514 220,930 208,976
Equity in income of joint venture 262,233 0 502,298 0
-------------- -------------- -------------- --------------
289,113 120,514 843,228 208,976
Expenses:
Operating Cost-rental property 0 0 2,660 0
Management and leasing expense 0 0 5,603 0
Depreciation 0 0 48,984 0
Amortization of organization
costs 1,563 0 4,687 0
Computer costs 2,326 3,053 6,164 5,785
Printing and notebooks 184 5,496 4,748 18,651
Partnership administration 7,779 14,492 29,967 34,368
Legal and accounting 1,913 0 21,177 4,959
-------------- -------------- -------------- --------------
13,765 23,041 123,990 63,763
-------------- -------------- -------------- --------------
Net earnings $ 275,348 $ 97,473 $ 719,238 $145,213
============== ============== ============== ==============
Net income (loss) allocated to
General Partners $ 0 $ 0 $ (338) $ 0
Net income allocated to Class
A Limited Partners $ 482,729 $ 97,473 $1,190,009 $145,213
Net income (loss) allocated to
Class B Limited Partners $(206,705) $ 0 $ (470,433) $ 0
Net income per Class A weighted
average Limited Partner Unit $ .23 $.09 $ .57 $.18
Net income (loss) per Class B
weighted average Limited Partner
Unit $ (.35) $ 0 $ (.79) $ 0
Cash distribution per Class A
Limited Partner Unit $ .21 $ 0 $ .53 $ 0
</TABLE>
See accompanying condensed notes to financial statements
4
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1997
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
LIMITED PARTNERS TOTAL
----------------
CLASS A CLASS B GENERAL PARTNERS'
------------------------ ----------------------
ORIGINAL UNITS AMOUNTS UNITS AMOUNTS PARTNERS CAPITAL
--------- --------- ------------- -------- ------------ --------- -------------
BALANCE,
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996 $ 100 0 $ 0 0 $ 0 $ 500 $ 600
Limited partner contributions 0 2,116,099 21,160,987 596,792 5,967,925 0 27,128,912
Net income (loss) 0 0 302,862 0 (24,675) (162) 278,025
Partnership distributions 0 0 (294,309) 0 0 0 (294,309)
Return of capital (100) 0 0 0 0 0 (100)
Sales commissions 0 0 (2,116,099) 0 (596,792) 0 (2,712,891)
Other offering expenses 0 0 (1,033,674) 0 (291,523) 0 (1,325,197)
----- --------- ----------- ------- ---------- ----- -----------
BALANCE,
DECEMBER 31, 1997 0 2,116,099 18,019,767 596,792 5,054,935 338 23,075,040
Net income (loss) 0 0 1,190,009 0 (470,433) (338) 719,238
Partnership distributions 0 0 (1,112,764) 0 0 0 (1,112,764)
Class B conversion elections 0 1,037 8,501 (1,037) (8,501) 0 0
----- --------- ----------- ------- ---------- ----- -----------
BALANCE,
SEPTEMBER 30, 1998 0 2,117,136 $18,105,513 595,755 $4,576,001 0 $22,681,514
===== ========= =========== ======= ========== ===== ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
----------------------------------------------------
Sept 30, 1998 Sept 30, 1997
---------------------- -------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 719,238 $ 145,213
Adjustments to reconcile net income
to net cash (used in) provided by operating activities:
Equity in income of joint ventures (502,298) 0
Depreciation 48,984 0
Amortization of organization costs 4,687 0
Changes in assets and liabilities:
Prepaid expenses and other assets 56,000 (40,392)
Accounts payable 0 18
Due to affiliates (101,607) 88,532
------------ -----------
Net cash provided by operating activities 225,004 193,371
------------ -----------
Cash flows from investing activities:
Distributions received from joint ventures 437,408 0
Deferred project costs paid 0 (758,253)
Investment in joint venture (17,571,855) (2,150,000)
------------ -----------
Net cash (used in) investing activities (17,134,447) (2,908,253)
------------ -----------
Cash flows from financing activities:
Distributions to partners from accumulated earnings (970,414) 0
Limited partners' contributions 0 18,956,329
Sales commissions (242,388) (1,788,672)
Offering costs 0 (947,817)
Return of original limited partner
contribution 0 (100)
------------ -----------
Net cash provided by (used in) financing activities (1,212,802) 16,219,740
------------ -----------
Net (decrease) increase in cash and cash equivalents (18,122,245) 13,504,858
Cash and cash equivalents, beginning of year 18,404,232 600
------------ -----------
Cash and cash equivalents, end of period $ 281,987 $13,505,458
============ ===========
Supplemental disclosure of noncash investment activities:
Deferred project costs applied to joint venture
property $ 852,287 0
Escrow funds applied to joint venture property 644,541 0
------------ -----------
Total noncash investment activities $ 1,496,828 $ 0
============ ===========
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND X, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
September 30, 1998
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
-----------
Wells Real Estate Fund X, L.P. (the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Partners, L.P., as
General Partners. The Partnership was formed on June 20, 1996, for the
purpose of acquiring, developing, owning, operating, improving, leasing,
and otherwise managing for investment purposes, income producing commercial
properties.
On December 31, 1996, the Partnership commenced a public offering of up to
$35,000,000 of limited partnership units ($10.00 per unit) pursuant to a
Registration Statement on Form S-11 filed under the Securities Act of 1933.
The Partnership commenced active operations on February 4, 1997, when it
received and accepted subscriptions for 125,000 units. The offering was
terminated on December 30, 1997, at which time the Partnership had sold
2,116,099 Class A Status Units, and 596,792 Class B Status Units, held by a
total of 1,588 and 218 Limited Partners, respectively, for total Limited
Partner capital contributions of $27,128,912. After payment of $1,085,157
in Acquisition and Advisory Fees and expenses, $4,069,338 in selling
commissions and organization and offering expenses, investment of
$18,420,162 in the Fund IX-X-XI-REIT Joint Venture, and investment of
$3,296,233 in the Fund X-XI Joint Venture, as of September 30, 1998, the
Partnership was holding net offering proceeds of $258,022 available for
investment in properties.
The Partnership owns interests in properties through equity ownership in
the following joint ventures: Fund IX-X-XI-REIT Associates, a joint
venture among the Partnership, Wells Real Estate Fund IX, L.P., Wells Real
Estate Fund XI, L.P. and Wells Operating Partnership, L.P. (the "Fund IX-X-
XI-REIT Joint Venture"), and Fund X-XI Associates, a joint venture among
the Partnership and Wells Real Estate Fund XI, L.P. (the "Fund X-XI Joint
Venture").
As of September 30, 1998, the Partnership owned interests in the following
properties through its ownership of the foregoing joint venture: (i) a
three story office building in Knoxville, Tennessee (the "ABB Building"),
which is owned by the Fund IX-X-XI-REIT Joint Venture; (ii) a two story
office building located in Louisville, Boulder County, Colorado (the
"Ohmeda Building"), which is owned by the Fund IX-X-XI-REIT Joint Venture;
(iii) a three story office building located in Broomfield, Boulder County,
7
<PAGE>
Colorado (the "360 Interlocken Building"), which is owned by the Fund IX-X-
XI-REIT Joint Venture; (iv) a one-story warehouse facility located in
Ogden, Utah ("Iomega Corporation Building") which is owned by Fund IX-X-XI-
REIT Joint Venture; (v) a one-story office building located in Oklahoma
City, Oklahoma (the "Lucent Technologies Building"), which is owned by the
Fund IX-X-XI-REIT Joint Venture; and (vi) a one-story office and warehouse
building located in Fountain Valley, California (the "Cort Building"),
which is owned by a joint venture (the "Cort Joint Venture") between the
Fund X-XI Joint Venture and Wells Operating Partnership, L.P.
(b) 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. For further information, refer to the
financial statements and footnotes included in the Partnership's Form 10-K
for the year ended December 31, 1997.
(2) Investments in Joint Venture
----------------------------
The Partnership owns interests in six office buildings through its
ownership in two joint ventures. The Partnership does not have control
over the operations of these two joint ventures; however, it does exercise
significant influence. Accordingly, investment in joint ventures is
recorded using the equity method.
The following describes additional information about the properties in
which the Partnership owns an interest as of September 30, 1998:
FUND IX, FUND X, FUND XI AND REIT JOINT VENTURE
-----------------------------------------------
On June 11, 1998, Fund IX and Fund X Associates (the "Fund IX-X Joint
Venture"), a joint venture between the Partnership and Wells Real Estate
Fund IX, L.P. ("Wells Fund IX"), a Georgia public limited partnership, was
amended and restated to admit the Wells Real Estate Fund XI, L.P. ("Wells
Fund XI"), a Georgia public limited partnership, and Wells Operating
Partnership, L.P. ("Wells OP"), a Delaware limited partnership having Wells
Real Estate Investment Trust, Inc. (the "Wells REIT"), a Maryland
corporation, as its General Partner. Wells Fund IX, Wells Fund XI, Wells
OP and the Wells REIT are all Affiliates of the Partnership and its General
Partners.
The Joint Venture, which changed its name to the Fund IX-X-XI-REIT Joint
Venture had previously acquired and owned the following three properties:
(i) the ABB Building located in Knoxville, Knox County, Tennessee, (ii) the
Ohmeda Building located in
8
<PAGE>
Louisville, Boulder County, Colorado, and (iii) the 360 Interlocken
Building located in Broomfield, Boulder County, Colorado. On June 24, 1998,
the Fund IX-X-XI-REIT Joint Venture purchased the Lucent Technologies
Building located in Oklahoma City, Oklahoma County, Oklahoma. On July 1,
1998, the Partnership contributed the Iomega building located in Ogden,
Weber County, Utah to the Fund IX-X-XI-REIT Joint Venture.
As of September 30, 1998, the Partnership had contributed $18,420,162 and
held an approximate 49.7% equity interest in the Fund IX-X-XI-REIT Joint
Venture. As of September 30, 1998, Wells Fund IX had an approximate 39.8%
equity interest, Wells Fund XI had an approximate 6.7% equity interest, and
Wells OP held an approximate 3.8% equity interest in the Fund IX-X-XI-REIT
Joint Venture.
IOMEGA BUILDING
---------------
On July 1, 1998, the Partnership contributed a single story warehouse and
office building with 108,000 rentable square feet (the "Iomega Building")
and was credited with making a capital contribution to the IX-X-XI-REIT
Joint Venture in the amount of $5,050,425, which represents the purchase
price of $5,025,000 plus acquisition expenses of $25,425 originally paid by
the Partnership for the Iomega Building on April 1, 1998.
The building is 100% occupied by one tenant with a ten year lease term that
expires on July 31, 2006. The monthly base rent payable under the lease is
$40,000 through November 12, 1999. Beginning on the 40th and 80th
months of the lease term, the monthly base rent payable under the lease
will be increased to reflect an amount equal to 100% of the increase in the
Consumer Price Index (as defined in the lease) during the preceding 40
months; provided however, that in no event shall the base rent be increased
with respect to any one year by more than 6% or by less than 3% per annum,
compounded annually, on a cumulative basis from the beginning of the lease
term. The lease is a triple net lease, whereby the terms require the
tenant to reimburse the IX-X-XI-REIT Joint Venture for certain operating
expenses, as defined in the lease, related to the building.
WELLS/FREMONT JOINT VENTURE
---------------------------
On July 15, 1998, the Wells/Fremont Joint Venture was formed. Wells OP
entered into a joint venture agreement known as Wells/Fremont Associates
("Fremont Joint Venture") with Wells Development Corporation, a Georgia
Corporation ("Wells Development"). Wells Development in an affiliate of
the Partnership and its General Partners. On July 21, 1998, the Fremont
Joint Venture acquired the Fairchild Building, a 58,424-square-foot
warehouse and office building located in Fremont, California, for a
purchase price of $8,900,000 plus acquisition expenses of approximately
$60,000. The Fremont Joint Venture used the $2,995,480 aggregate capital
contributions described below to partially fund the purchase of the
Fairchild Building. The Fremont Joint Venture also obtained a
9
<PAGE>
loan in the amount of $5,960,000 from NationsBank, N.A., the proceeds of
which were used to fund the remainder of the cost of the Fairchild Building
(the "Fairchild Loan"). The Fairchild Loan had a one year term maturing on
July 21, 1999. The interest rate on the Fairchild Loan is a variable rate
per annum equal to the LIBOR Rate for a 30-day period plus 220 basis
points.
The Fairchild Building is 100% occupied by one tenant with a seven-year
lease term that commenced on December 1, 1997 (with an early possession
date of October 1, 1997) and expires on November 30, 2004. The monthly
base rent payable under the lease is $68,128 with a 3% increase on each
anniversary of the commencement date. The lease is a triple net lease,
whereby the terms require the tenant to reimburse the landlord for certain
operating expenses, as defined in the lease, related to the building.
Prior to October 1, 1997, the building was unoccupied and all operating
expenses were paid by the former owner of the Fairchild Building.
Wells Real Estate Fund XI, L.P. ("Wells Fund XI") entered into a Joint
Venture Agreement with the Partnership known as Fund X and Fund XI
Associates ("Fund X-XI Joint Venture") for the purpose of the acquisition,
ownership, leasing, operation, sale and management of real properties, and
interests in real properties, including but not limited to, the acquisition
of equity interests in the Fremont Joint Venture.
On July 17, 1998, the Fund X-XI Joint Venture entered into an Agreement for
the Purchase and Sale of Joint Venture Interest (the "Fremont JV Contract")
with Wells Development. Pursuant to the Fremont JV Contract, the Fund X-XI
Joint Venture contracted to acquire Wells Development's interest in the
Fremont Joint Venture (the "Fremont JV Interest") which at closing, will
result in the Fund X-XI Joint Venture becoming a joint venture partner with
Wells OP in the ownership of the Fairchild Building. At the time of the
entering into the Fremont JV Contract, the Fund X-XI Joint Venture
delivered $2,000,000 to Wells Development as an earnest money deposit (the
"Fremont Earnest Money") Wells Fund XI contributed $1,000,000 of the
Fremont Earnest Money as a capital contribution to the Fund X-XI Joint
Venture and the Partnership contributed $1,000,000 of the Fremont Earnest
Money as capital contribution to the Fund X-XI Joint Venture. Wells
Development contributed the Fremont Earnest Money it received from the Fund
X-XI Joint Venture to the Fremont Joint Venture as its initial capital
contribution. Wells OP has contributed $5,273,000 to the Fremont Joint
Venture as capital contribution as of September 30, 1998. As of September
30, 1998, Wells OP held an approximate 73% equity percentage interest and
Wells Development held an approximate 27% equity percentage interest in the
Fremont Joint Venture.
WELLS/CORT JOINT VENTURE
------------------------
Wells OP entered into a joint venture agreement known as Wells/Orange
County Associates ("Cort Joint Venture") with Wells Development
Corporation. On July 31, 1998, the Cort Joint Venture acquired the Cort
Furniture Building for a purchase price of $6,400,000 plus acquisition
expenses of approximately $150,000. The Cort Joint Venture
10
<PAGE>
used the $1,668,000 aggregate capital contributions described below to
partially fund the purchase of the Cort Furniture Building. The Cort Joint
Venture also obtained a loan in the amount of $4,875,000 from NationsBank,
N.A., the proceeds of which were used to fund the remainder of the cost of
the Cort Furniture Building (the "Cort Loan"). On September 1, 1998, the
Fund X-XI Joint Venture acquired an interest in the Cort Joint Venture from
Wells Development.
The Cort Furniture Building is a 52,000-square-foot warehouse and office
building located in Fountain Valley California. The building is 100%
occupied by one tenant with a 15-year lease term that commenced on November
1, 1988 and expires on October 31, 2003. The monthly base rent payable
under the lease is $63,247 through April 30, 2001, at which time the
monthly base rent will be increased 10% to $69,574 for the remainder of the
lease term. The lease is a triple net lease, whereby the terms require the
tenant to reimburse the Cort Joint Venture for certain operating expenses,
as defined in the lease, related to the building.
On July 30, 1998, the Fund X-XI Joint Venture entered into the Agreement
for the Purchase and Sale of Joint Venture Interest (the "Cort JV
Contract") with Wells Development. Pursuant to the Cort JV Contract, the
Fund X-XI Joint Venture contracted to acquire Wells Development's interest
in the Cort Joint Venture. On September 1, 1998, the Fund X-XI Joint
Venture exercised its rights under the Cort JV Contract and purchased Wells
Development's interest in the Cort Joint Venture and became a joint venture
partner with Wells OP in the ownership of the Cort Furniture Building.
At the time of entering into the Cort JV Contract, the Fund X-XI Joint
Venture paid $1,500,000 to Wells Development as an earnest money deposit
(the "Cort Earnest Money"). The Partnership and Wells Fund XI each
contributed $750,000 of the Cort Earnest Money as capital contribution to
the Fund X-XI Joint Venture. Wells Development contributed the Cort
Earnest Money it received from the Fund X-XI Joint Venture to the Cort
Joint Venture as its initial capital contribution, and Wells OP
simultaneously contributed $168,000 to the Cort Joint Venture as its
initial capital contribution.
On September 1, 1998, the Partnership and Wells Fund XI contributed an
additional $1,546,233 and $648,767, respectively, to the Fund X-XI Joint
Venture, and these aggregate proceeds of $2,195,000 were contributed to the
Cort Joint Venture. Wells OP contributed an additional $2,702,982. These
proceeds were used to pay off the Cort Loan.
As of September 30, 1998, the Partnership had made total capital
contributions of $2,296,233 to the Fund X-XI Joint Venture and held an
approximate 57.9% equity percentage interest in the Fund X-XI Joint
Venture, while Wells Fund XI had made capital contributions of $1,398,767
and held an approximate 42.1% equity percentage interest in the Fund X-XI
Joint Venture. As of September 30, 1998, the Fund X-XI Joint Venture had
made total capital contributions of $3,695,000 and held an approximate 56%
11
<PAGE>
equity percentage interest in the Cort Joint Venture, while Wells OP had
contributed $2,870,982 and held an approximate 44% equity percentage
interest in the Cort Joint Venture. Accordingly, as of September 30, 1998,
the Partnership, through its interest in the Fund X-XI Joint Venture, owned
an approximate 35% equity interest in the Cort Joint Venture.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATION.
- ---------------------
The following discussion and analysis should be read in conjunction with the
accompanying financial statements of the Partnership and notes thereto. This
Report contains forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934,
including discussion and analysis of the financial condition of the Partnership,
anticipated capital expenditures required to complete certain projects, amounts
of 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
from any forward-looking statement made in this Report, which include
construction costs which may exceed estimates, construction delays, lease-up
risks, inability to obtain new tenants upon expiration of existing leases, and
the potential need to fund tenant improvements or other capital expenditures out
of operating cash flow.
Results of Operations and Changes in Financial Conditions
- ---------------------------------------------------------
General
- -------
As of September 30, 1998, the properties owned by the Partnership were 99%
occupied.
Gross revenues of the Partnership of $843,228 for the nine months ended
September 30, 1998, consisted of rental income, equity in income of joint
ventures, and interest income earned on funds held by the Partnership prior to
the investment in properties, as compared to $208,976 for the nine months ended
September 30, 1997, which consisted of interest income. Expenses of the
Partnership were $123,990 and consisted primarily of depreciation, printing,
computer, and partnership administrative costs, as compared to $63,763 for the
same period of 1997.
Net decrease in cash and cash equivalents of $18,122,245 was primarily due to
investment in joint ventures.
Cash distributions of $0.21 per weighted average Unit were paid to Class A
Limited Partners for the three months ended September 30, 1998, while no cash
distributions were paid to Limited Partners during the third quarter of 1997.
The Partnership currently anticipates that distributions will continue to be
paid on a quarterly basis on a level at least consistent with 1998
distributions.
The Partnership expects to make future real estate investments, directly or
through investments in joint ventures from limited partners' contributions and
has approximatley $258,022 available for investment in properties.
12
<PAGE>
Since properties are acquired on all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
The General Partners have verified that all operational computer systems are
year 2000 compliant. This includes systems supporting accounting, property
management and investor services. Also, as part of this review, all building
control systems have been verified as compliant. The current line of business
applications are based on compliant operating systems and database servers. All
of these products are scheduled for additional upgrades before the year 2000.
Therefore, it is not anticipated that the year 2000 will have significant impact
on the Partnership's operations.
Recent Accounting Pronouncements
- --------------------------------
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", requires certain transactions (e.g., unrealized
gains/losses on available for sale securities) that are not reflected in net
income to be displayed as other comprehensive income. The Statement also
requires an entity to report total comprehensive income (i.e., net income plus
other comprehensive income) for every period in which an income statement is
presented. SFAS No. 130 is effective for annual and interim periods beginning
after December 15, 1997. None of the transactions required to be reported in
other comprehensive income pertain to the Partnership; consequently, adoption of
this Statement had no impact on the Partnership's disclosures.
Effective April 3, 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities". SOP 98-5 is effective for fiscal years beginning after December
15, 1998, and initial application is required to be reported as a cumulative
effect of change in accounting principle. This SOP provides guidance on the
financial reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as incurred.
Adoption of this Statement by the Partnership in the first quarter of 1999 may
result in the write-off of certain capitalized organization costs. Adoption of
this Statement is not expected to have a material impact on the Partnership's
results of operations and financial condition.
13
<PAGE>
Property Operations
- -------------------
As of September 30, 1998, the Partnership owned interest in the following
operational properties:
Iomega Building/Fund IX-X-XI-REIT Joint Venture
- -----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, 1998 September 30, 1998
------------------- --------------------
<S> <C> <C>
Revenues:
Rental income $126,666 $246,666
-------- --------
Expenses:
Depreciation 48,594 97,578
Management & leasing expenses 5,596 11,199
Operating costs, net of reimbursements 3,526 5,731
-------- --------
57,716 114,508
-------- --------
Net income $ 68,950 $132,158
======== ========
Occupied % 100% 100%
Partnership's ownership % 49.7% 49.7%
Cash distributed to the Partnership $ 55,277 $167,469
Net Income allocated to the Partnership $ 34,374 $ 97,582
</TABLE>
On April 1, 1998, the Partnership acquired a single story warehouse and office
building containing approximately 100,000 rentable square feet on a 8.03 acre
tract of land in Ogden, Weber County, Utah (the "Iomega Building") for a
purchase price of $5,025,000.
On July 1, 1998, the Partnership contributed the Iomega Building to the Fund IX-
X-XI-REIT Joint Venture.
The entire Iomega Building is under a net lease with Iomega Corporation until
June 30, 2006.
The cash distributed and net income allocated to the Partnership for the six
months ended September 30, 1998 includes the three month period when the Iomega
Building was owned entirely by the Partnership.
Since the Iomega Building was purchased in April 1998, comparable income and
expense figures for the prior year are not available.
14
<PAGE>
The ABB Building/Fund IX-X-XI-REIT Joint Venture
- -------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, 1998 Sept. 30, 1998
------------------ -----------------
<S> <C> <C>
Revenues:
Rental income $ 208,370 $ 590,342
Interest income 6,000 6,000
----------- ----------
214,370 596,342
----------- ----------
Expenses:
Depreciation 120,433 305,211
Management & leasing expense 25,577 75,765
Other operating expenses 3,050 49,717
----------- ----------
149,060 430,693
----------- ----------
Net income $ 65,310 $ 165,649
=========== ==========
Occupied % 95% 95%
Partnership's Ownership % in the Fund IX-X-XI-REIT Joint Venture 49.7% 49.7%
Cash distribution to Partnership $ 93,101 $ 190,861
Net income allocated to Partnership $ 32,566 $ 80,040
</TABLE>
ABB Environmental Systems, a subsidiary of ABB, Inc., occupied its leased space
of 56,012 rentable square feet comprising approximately 67% of the building in
December 1997. The initial term of the lease is 9 years and 11 months. ABB has
the option under its lease to extend the initial term of the lease for two
consecutive five year periods. The annual base rent payable during the initial
term is $646,250 payable in equal monthly installments of $53,854 during the
first five years and $728,750 payable in equal monthly installments of $60,729
during the last four years and 11 months of the initial term. The annual base
rent for each extended term will be at market rental rates. In additions to the
base rent, ABB is required to pay additional rent equal to its share of
operating expenses during the lease term. Another tenant has occupied 23,490
rentable square feet bringing the occupancy to 95%.
It is currently anticipated that the total cost to complete the project will be
approximately $7,900,000. It is currently anticipated that Wells Fund IX will
contribute approximately $80,000 of the remaining cost to complete the building.
Since the ABB Building was opened in December 1997, comparative income and
expense figures for the prior year are not available.
15
<PAGE>
The Ohmeda Building/Fund IX-X-XI-REIT Joint Venture
- ---------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Eight Months Ended
Sept. 30, 1998 Sept. 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues:
Rental income $ 254,940 $ 643,963
Expenses:
Depreciation 81,576 217,536
Management & leasing expense 11,618 29,546
Other operating expenses 1,171 1,082
----------- -----------
94,365 248,164
----------- -----------
Net income $ 160,575 $ 395,799
=========== ===========
Occupied % 100% 100%
Partnership's Ownership % in the Fund IX-X-XI-REIT Joint Venture 49.7% 49.7%
Cash distribution to Partnership $ 181,636 $287,137
Net income allocated to Partnership $ 121,845 $192,035
</TABLE>
On February 13, 1998, the Fund IX-X-XI-REIT Joint Venture (formerly, the Fund
IX-X Joint Venture) acquired a two story office building containing
approximately 106,750 rentable square feet on a 15-acre tract of land located in
Louisville, Boulder County, Colorado (the "Ohmeda Building") for a purchase
price of $10,325,000, excluding acquisition costs.
The entire Ohmeda building is currently under a net lease with Ohmeda, Inc. and
was assigned to the Fund IX-X-XI-REIT Joint Venture at closing. The lease
currently expires in January 2005.
The monthly base rental payable under the lease is $83,709.79 through January
31, 2003; $87,890.83 from February 1, 2003 through January 31, 2004; and
$92,249.79 from February 1, 2004 through January 31, 2005. Under the lease,
Ohmeda is responsible for all utilities, taxes, insurance and other operating
costs with respect to the Ohmeda Building under the term of the lease. In
addition, Ohmeda is required to pay a $21,000 per year management fee for
maintenance and administrative services of the Ohmeda Building. The Fund
IX-X-XI-REIT Joint Venture, as landlord, is responsible for maintenance of the
roof, exterior and structural walls, foundations, other structural members and
floor slab, provided that the landlord's obligation to make repairs specifically
excludes items of cosmetic and routine maintenance such as the painting of
walls.
Since the Ohmeda Building was purchased in February 1998, comparative income and
expense figures are not available for the prior year.
16
<PAGE>
The 360 Interlocken Building/Fund IX-X-XI-REIT Joint Venture
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Seven Months Ended
Sept. 30, 1998 Sept. 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues:
Rental income $ 215,289 $ 453,864
------------ -------------
Expenses:
Depreciation 71,793 166,432
Management & leasing expense 18,086 37,323
Other operating expenses, net of reimbursements (7,850) (56,128)
------------ ------------
82,029 147,627
------------ ------------
Net income $ 133,260 $ 306,237
============ ==============
Occupied % 100% 100%
Partnership's Ownership % in the Fund IX-X-XI-REIT Joint Venture 49.7% 49.7%
Cash distribution to Partnership $ 97,790 $ 215,729
Net income allocated to Partnership $ 66,424 $ 144,721
</TABLE>
On March 20, 1998, the Fund IX-X-XI-REIT Joint Venture (formerly, the Fund IX-X
Joint Venture) acquired a three-story multi-tenant office building containing
approximately 51,974 rentable square feet on a 5.1 tract of land located in
Broomfield, Boulder County, Colorado (the "360 Interlocken Building") for a
purchase price of $8,275,000, excluding acquisition costs.
The 360 Interlocken Building was completed in December 1996. The first floor has
multiple tenants and contains 15,599 rentable square feet; the second floor is
leased to ODS Technologies, L.P. and contains 17,146 rentable square feet; and
the third floor is leased to Transecon, Inc. and contains 19,229 rentable square
feet.
Other operating expenses are negative due to tenant reimbursements being greater
than operating expenses. Since the 360 Interlocken Building was purchased in
March 1998, comparable income and expense figures for the prior year are not
available.
17
<PAGE>
Lucent Technologies Building/Fund IX-X-XI-REIT Joint Venture
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Four Months Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Revenues:
Rental income $ 133,600 $143,485
-------- --------
Expenses:
Depreciation 51,514 55,896
Management & leasing expenses 5,084 5,084
Operating costs, net of reimbursements 7,584 7,584
-------- --------
64,182 68,564
-------- --------
Net income $ 69,418 $ 74,921
======== ========
Occupied % 100% 100%
Partnership's ownership % in the Fund IX-X-XI-REIT Joint Venture 49.7% 49.7%
Cash distributed to Partnership $ 57,043 $110,433
Net Income allocated to the Partnership $ 34,606 $ 36,915
</TABLE>
On June 24, 1998, Fund IX-X-XI-REIT Joint Venture acquired a one-story office
building containing approximately 57,186 rentable square feet on a 5.3 acre
tract of land in Oklahoma City, Oklahoma (the "Lucent Technologies Building")
for a purchase price of $5,504,276, excluding acquisition cost.
The Lucent Technologies Building was completed in January 1998 with Lucent
Technologies occupying the entire building.
Since the Lucent Technologies Building was purchased in June 1998, comparable
income and expense figures for the prior year are not available.
18
<PAGE>
Wells/Cort Joint Venture
- ------------------------
<TABLE>
<CAPTION>
Two Months Ended
----------------
Sept. 30, 1998
--------------
<S> <C>
Revenues:
Rental income $133,857
Expenses:
Depreciation 45,288
Management & leasing expenses 5,144
Operating costs, net of reimbursements 29,700
--------
80,132
--------
Net income $ 53,725
========
Occupied % 100%
Partnership's ownership % 35.1%
Cash distributed to the Partnership $ 27,399
Net income allocated to the Partnership $ 14,208
</TABLE>
On July 31, 1998, the Cort Joint Venture acquired a one-story office and
warehouse building containing approximately 52,000 rentable square feet on a
3.65 acre tract of land in Fountain Valley, California (the "Cort Building") for
a purchase price of $6,400,000, excluding acquisition costs.
The building is 100% leased by Cort Furniture Rental Corporation with a lease
expiration of October 31, 2003.
Since the Cort Building was purchased in July 1998, comparable income and
expense figures for the prior year are not available.
19
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 6 (b). No reports on Form 8-k were filed during the third quarter of
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WELLS REAL ESTATE FUND X, L.P.
(Registrant)
Dated: November 10, 1998 By: /s/ Leo F. Wells, III
---------------------
Leo F. Wells, III, as Individual
General Partner and as President
and Chief Financial
Officer of Wells Capital, Inc., the
General Partner of Wells Partners, L.P.
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 281,987
<SECURITIES> 22,297,955
<RECEIVABLES> 449,439
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 92,193
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,121,574
<CURRENT-LIABILITIES> 440,060
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,681,514
<TOTAL-LIABILITY-AND-EQUITY> 23,121,574
<SALES> 0
<TOTAL-REVENUES> 843,228
<CGS> 0
<TOTAL-COSTS> 123,990
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 719,238
<INCOME-TAX> 719,238
<INCOME-CONTINUING> 719,238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 719,238
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0
</TABLE>
