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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1998 or
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[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
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Commission file number 333-7979 (1933 Act)
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Wells Real Estate Fund XI L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2250093
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
Securities registered pursuant to Section 12 (g) of the Act:
None
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(Title of Class)
None
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Aggregate market value of the voting stock
held by non-affiliates: Not Applicable
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PART I
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ITEM 1. BUSINESS
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General
Wells Real Estate Fund XI, L.P. (the "Partnership") is a Georgia public limited
partnership having Leo F. Wells, III and Wells Partners, L.P., a Georgia non-
public limited partnership, as General Partners. The Partnership was formed on
June 20, 1996, for the purpose of acquiring, developing, constructing, owning,
operating, improving, leasing and otherwise managing for investment purposes
income-producing commercial or industrial properties.
On December 31, 1997, 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 filed on Form S-11 under the Securities Act of 1933. The
Partnership commenced active operations on March 3, 1998, when it received and
accepted subscriptions for 125,000 units. An aggregate requirement of
$2,500,000 of offering proceeds was reached on March 30, 1998, thus allowing for
the admission of New York and Pennsylvania investors in the Partnership. As of
December 31, 1998 the Partnership had sold 1,302,942 Class A Status Units, and
350,338 Class B Status Units, held by a total of 1,250 and 95 Limited Partners
respectively, for total Limited Partner capital contributions of $16,532,802.
After payment of $578,648 in acquisition and advisory fees and expenses, payment
of $2,066,600 in selling commissions and organization and offering expenses, the
investment of $2,482,810 in the Fund IX-X-XI-REIT Joint Venture, and the
investment of $2,398,767 in the Fund X-XI Joint Venture, as of December 31,
1998, the Partnership was holding net offering proceeds of $9,005,977 available
for investment in properties.
The Partnership owns interest in properties through equity ownership in the
following joint ventures: (i) Fund IX-X-XI-REIT Joint Venture, a joint venture
between the Partnership and Wells Real Estate Fund IX, Wells Real Estate Fund X
and Wells Real Estate Investment Trust, Inc., (the "Fund IX-X-XI-REIT Joint
Venture), and (ii) Fund X and Fund XI Joint Venture, a joint venture between the
Partnership and Wells Real Estate Fund X, L.P. (the "Fund X-Fund XI Joint
Venture")
As of December 31, 1998 the Partnership owned interest in the following
properties through its ownership of the foregoing joint ventures: (i) a three-
story office building in Knoxville, Tennessee (the "ABB Building) which is owned
by the Fund IX-Fund X Joint Venture; (ii) a two-story office building in 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,
Colorado (the "360 Interlocken Building") which is owned by the Fund IX-X-XI-
REIT Joint Venture; (iv) 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; (v) a single-story warehouse and office building located
in Ogden, Weber County, Utah (the "Iomega Building), which is owned by the Fund
IX-X-XI-REIT Joint Venture; (vi) a two-story office building located in Fremont,
California (the "Fairchild Building"), which is owned by Fund X and XI
Associates and (vii) a one-story office and warehouse building located in
Fountain Valley, California (the "Cort Building") which is owned by the Fund X
and XI Associates.
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Employees
The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the sole general partner of Wells Partners, L.P., perform a full range of real
estate services including leasing and property management, accounting, asset
management and investor relations for the Partnership.
Insurance
Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all the properties
owned directly or indirectly by the Partnership. In the opinion of management
of the registrant, the properties are adequately insured.
Competition
The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the General Partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements and other inducements, all of which may
have an adverse impact on the results of operations. At the time the
Partnership elects to dispose of its properties, the Partnership will also be in
competition with sellers of similar properties to locate suitable purchasers for
its properties.
ITEM 2. PROPERTIES.
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The Partnership owns interest in seven 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 venture is recorded using the equity method.
As of December 31, 1998, these properties were 100% occupied. As of December
31, 1998, the Partnership was holding approximately $9,005,977 to invest in
properties.
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The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1998, assuming no exercise of renewal options
or termination right
<TABLE>
<CAPTION>
Partnerships
Year of Number of Annualized Share of Percentage of Percentage of
Lease Leases Square Gross Base Annualized Total Square Total Annualized
Expiration Expiring Feet Expiring Rent(1) Gross Base Rent(1) Feet Expiring Base Rent
- ---------- --------- ------------- ---------- ------------------ ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
1999 1 23,490 236,748 15,860 4.6% 4.2%
2000 - - - - - -
2001 2 20,739 328,620 22,015 4.0% 5.8%
2002 3 12,606 256,980 17,216 2.4% 4.5%
2003(2) 2 69,146 1,072,828 18,577 13.5% 18.9%
2004(3) 1 58,424 902,946 101,563 11.4% 15.9%
2005(4) 1 106,750 1,027,320 68,822 20.9% 18.1%
2006(5) 1 108,250 497,892 33,355 21.2% 8.8%
2007(6) 1 55,000 764,364 51,206 10.8% 3.5%
2008(7) 1 57,186 583,020 39,058 11.2% 10.3%
-- ------- --------- ------- ----- -----
13 511,591 5,670,718 367,672 100.0% 100.0%
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</TABLE>
(1) Average monthly gross rent over life of the lease, annualized.
(1) Expiration of Cort Furniture lease, Fountain Valley, California
(1) Expiration of Fairchild lease, Fremont, California
(1) Expiration of Ohmeda lease, Louisville, Colorado
(1) Expiration of Iomega lease, Ogden, Utah
(1) Expiration of ABB lease, Knoxville, Tennessee.
(1) Expiration of Lucent Technologies lease, Oklahoma City, Oklahoma
The following describes additional information about the properties in which the
Partnership owns interests at December 31, 1998:
Fund IX-X-XI-REIT Joint Venture
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On June 11, 1998, Fund IX and Fund X Associates (the "Joint Venture"), a joint
venture between the Partnership and Wells Real Estate Fund IX and ("Wells Fund
IX"), a Georgia public limited partnership, was amended and restated to admit
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 X, 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 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,
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1998, the Fund X contributed the Iomega Building located in Ogden, Weber County,
Utah to the Fund IX-X-XI-REIT Joint Venture.
As of December 31, 1998, Fund X had contributed $2,482,810 and held an
approximate 6.7% equity interest in the Fund IX-X-XI-REIT Joint Venture. As of
December,31, 1998 Wells Fund IX had an approximate 39.8% equity interest, Wells
Fund X had an approximate 49.7% equity interest, and Wells OP had an approximate
3.8% equity interest in the Fund IX-X-XI-REIT Joint Venture.
The ABB Building
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On March 20, 1997, the Joint Venture began construction on a three-story office
building containing approximately 83,885 rentable square feet (the "ABB
Building") on a 5.62 acre tract of real property in Knoxville, Knox County,
Tennessee.
ABB Environmental Systems, a subsidiary of ABB, Inc., has executed its lease
space of 55,000 rentable square feet comprising approximately 67% of the
building in December 1997. The initial term of the lease is 9 years and 11
months commencing in December, 1997. 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 addition to the base rent, ABB is required to pay
additional rent equal to its share of operating expenses during the lease term.
It is currently anticipated that the remaining cost to complete this project
which includes the final buildout of remaining space will be approximately
$170,000, which it is anticipated will be contributed by Wells Fund IX. The
average effective annual rental per square foot at the ABB Building was $9.97
for 1998 and $8.16 for 1997, the first year of occupancy. The occupancy rate at
year end was 95% for 1998 and 67% for 1997.
For additional information regarding the ABB Building, refer to Supplement No.2
dated June 30, 1998 to the Prospectus of Wells Real Estate Fund XI, L.P.
contained in Post-Effective Amendment No. 6 to Form S-11 Registration Statement
of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., which was
filed with the Commission on July 9, 1998 (Commission File No. 333-7979).
Ohmeda Building
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On February 13, 1998, the Joint Venture acquired a two story office building
that was completed in 1988 with approximately 106,750 rentable square feet (the
"Ohmeda Building") on a 15-acre tract of land located in Louisville, Boulder
County, Colorado. The purchase price for the Ohmeda Building was $10,325,000.
The Joint Venture also incurred additional acquisition expenses in connection
with the purchase of the Ohmeda Building, including attorneys' fees, recording
fees and other closing costs for a total cost of $10,347,955.
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The entire 106,750 rentable square feet of the Ohmeda Building is currently
under a net lease date February 26, 1987, as amended by First Amendment to Lease
dated December 3, 1987, as amended by Second Amendment to Lease dated October
20, 1997 (the "Lease") with Ohmeda, Inc., a Delaware corporation. The lease was
assigned to the Joint Venture at the closing. The lease currently expires in
January 2005, subject to (i) Ohmeda's right to effectuate an early termination
of the lease under the terms and conditions described below, and (ii) Ohmeda's
right to extend the lease for two additional five year periods of time at the
then current market rental rates.
The average effective annual rental per square foot at the Ohmeda Building was
$9.62, the first year of occupancy. The occupancy rate at year end was 100% for
1998.
For additional information regarding the Ohmeda Building, refer to Supplement
No. 2 dated June 30, 1998, to the Prospectus of Wells Real Estate Fund XI, L.P.
contained in Post-Effective Amendment No. 6 to Form S-11 Registration Statement
of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., which was
filed with the Commission on July 9, 1998 (Commission File No. 333-7979).
360 Interlocken Building
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On March 20, 1998 the Joint Venture acquired a three-story multi-tenant office
building containing approximately 51,974 rentable square feet (the "360
Interlocken Building") on a 5.1 acre tract of land in Broomfield, Boulder
County, Colorado 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 contain 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.
The average effective annual rental per square foot at the 360 Interlocken
Building was $16.31 the first year of occupancy. The occupancy rate at year end
was 100% for 1998.
For additional information regarding the 360 Interlocken Building, refer to
Supplement No. 2 dated June 30, 1998, to the Prospectus of Wells Real Estate
Fund XI, L.P. contained in Post-Effective Amendment No 6 to Form S-11
Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate
Fund XI, L.P., which was filed with the Commission on July 9, 1998 (Commission
File No. 333-7979).
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Lucent Technologies Building
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On May 30, 1997, the Joint Venture entered into an agreement for the purchase
and sale of real property with Wells Development Corporation ("Wells
Development"), an affiliate of the General Partners, for the acquisition and
development of a one-story office building containing 57,186 net rentable square
feet on 5.3 acres of land (the "Lucent Technologies Building"). On June 24,
1998, the Fund IX-X-XI-REIT Joint Venture purchased this property for a purchase
price of $5,504,276.
Lucent Technologies, a world-wide leader in telecommunications technology
producing a variety of communication products, has occupied the entire Lucent
Technologies Building. The initial term of the lease is ten years commencing
January 5, 1998. Lucent Technologies has the option to extend the initial term
of the lease for two additional five year periods. The annual base rent payable
during the initial term is $508,383 payable in equal monthly installments of
$42,365 during the first five years and $594,152 payable in equal monthly
installments of $49,513 during the second five years of the lease term. The
annual base rent for each extendable term will be at market rental rates. In
addition to the base rent, Lucent Technologies will be required to pay
additional rent equal to its share of operating expenses during the lease term.
The average effective annual rental per square foot at the Lucent Technologies
Building was $9.69, the first year of occupancy. The occupancy rate at year end
was 100% for 1998.
For additional information regarding the Lucent Technologies Building, refer to
Supplement No. 2 dated June 30, 1998, to the Prospectus of Wells Real Estate
Fund XI. L.P. contained in Post-Effective Amendment No. 6 to Form S-11
Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate
Fund XI, L.P., which was filed with the Commission on July 9, 1998 (Commission
File No. 333-7979).
Iomega Building
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On July 1, 1998, the Partnership contributed a single story warehouse and office
building with 108,250 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.
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The average effective annual rental per square foot at the Iomega Building was
$4.60, the first year of occupancy. The occupancy rate at year end was 100% for
1998.
For additional information regarding the Iomega Building, refer to Supplement
No. 2 dated June 30, 1998, to the Prospectus of Wells Real Estate Fund XI, L.P.
contained in Post-Effective Amendment No. 6 to Form S-11 Registration Statement
of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., which was
filed with the Commission on July 9, 1998 (Commission File No. 333-7979).
Fund X-XI Joint Venture
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On July 17, 1998 the Partnership and Wells Real Estate Fund X, L.P. ("Wells Fund
X"), a Georgia public limited partnership, affiliated with the Partnership
through common general partners, formed a joint venture known as Fund X and Fund
XI Associates (the "Fund X-XI Joint Venture). The investment objectives of
Wells Fund X and substantially identical to those of the Partnership. As of
December 31, 1998 the Partnership had contributed $4,881,577 and Wells Fund X
had contributed $5,920,896 for total contributions of $10,802,473 to the Fund X-
Fund XI Joint Venture. At this time, the Partnership's equity interest in the
Fund X-Fund XI Joint Venture is approximately 45% and Wells Fund X's equity
interest in the Fund X-Fund XI Joint Venture is approximately 55%.
Wells/Fremont Joint Venture -- Fairchild Building
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On July 15, 1998, 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 is
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 (the "Fairchild
Building"), 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 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.
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On July 17,1998 a joint venture between the Partnership and Wells Fund X (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"). 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 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.
On October 8, 1998, the Fund X-XI Joint Venture exercised its rights under the
Fremont Joint Venture Contract and purchased Wells Development's interest in the
Fremont Joint Venture and became a joint venture partner with Wells OP in the
ownership of the Fairchild Building.
On October 6, 1998, Wells OP contributed an additional $6,983,110 to the Fremont
Joint Venture. These proceeds were used to pay off the Fremont Loan. As of
December 31, 1998, Wells OP held an approximate 78% equity percentage interest
in the Fremont Joint Venture, and Fund X-XI Joint Venture held an approximate
22% equity percentage interest in the Fremont Joint Venture. As of December 31,
1998, the Partnership had made capital contributions of $2,398,767 and held an
approximate 48% equity percentage interest in the Fund X-XI Joint Venture and,
accordingly, held an approximate 11.25% equity percentage interest in the
Fairchild Building.
The average effective annual rental per square foot at the Fairchild Building
was $8.46, the first year of occupancy. The occupancy rate at year end was 100%
for 1998.
For additional information regarding the Fairchild Building, refer to supplement
No. 3 dated August 12, 1998, to the Prospectus of Wells Real Estate Fund XI,
L.P. contained in Post-Effective Amendment No. 7 to Form S-11 Registration
Statement of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P.,
which was filed with the Commission on August 14, 1998 (Commission File No. 333-
7979).
Wells/Orange County Joint Venture
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In July 1998, 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
Building for a purchase price of $6,400,000 plus acquisition expenses of
approximately $150,000. The Cort Joint Venture used the $1,668,000 aggregate
capital contributions described below to partially fund the purchase of the Cort
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").
The Cort 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
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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. 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"). Wells Development contributed the Cort Earnest Money it received from
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 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.
On September 1, 1998, Wells Fund X and the Partnership 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 to the Cort Joint Venture. These
proceeds were used to pay off the Cort Loan.
As of December 31, 1998, the Wells Operating Partnership had made total capital
contributions of $2,871,430 and held an approximate 44% equity percentage
interest in the Cort Joint Venture, and the Fund X-XI Joint Venture had
contributed $3,695,00 and held an approximate 56% equity percentage interest in
the Cort Joint Venture. As of December 31, 1998, the Partnership had made
capital contributions of $ 2,398,767 and held an approximate 48% equity
percentage interest in the Fund X-XI Joint Venture and, accordingly, held an
approximate 11.25% equity percentage interest in the Cort Building.
The average effective annual rental per square foot at the Cort Building was
$15.30, the first year of occupancy. The occupancy rate at year end was 100%
for 1998.
For additional information regarding the Cort Building, refer to Supplement No.
3 dated August 12, 1998, to the Prospectus of Wells Real Estate Fund XI, L.P.
contained in Post-Effective Amendment No. 7 to Form S-11 Registration Statement
of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., which was
filed with the Commission on August 14, 1998 (Commission File No. 333-7979).
ITEM 3. LEGAL PROCEEDINGS
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There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------
No matters were submitted to a vote of the Limited Partners during the fourth
quarter of 1998.
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PART II
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ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
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The offering for sale of Units in the Partnership terminated on December 30,
1998, at which time the Partnership had 1,302,942 outstanding Class A Status
Units held by a total of 1,250 Limited Partners and 350,338 outstanding Class B
Status Units held by a total of 95 Limited Partners. The capital contribution
per unit is $10.00. There is no established public trading for the
Partnership's limited partnership units, and it is not anticipated that a public
trading market for the units will develop. Under the Partnership Agreement, the
General Partners have the right to prohibit transfers of units.
Class A Status Limited Partners are entitled to a distribution from Net Cash
from Operations, as defined in the Partnership Agreement to mean cash flow, less
adequate cash reserves for other obligations of the Partnership for which there
is no provision, on a per Unit basis until they have received distributions in
each fiscal year of the Partnership equal to 10% of their adjusted capital
contributions. After this preference is satisfied, the General Partners will
receive an amount of Net Cash From Operations equal to 10% of the total amount
of Net Cash From Operations distributed. Thereafter, the Limited Partners
holding Class A Status Units will receive 90% of Net Cash From Operations and
the General Partners will receive 10%. No Net Cash from Operations will be
distributed to Limited Partners holding Class B Status Units. Holders of Class
A Status Units will, except in limited circumstances, be allocated none of the
Partnership's net loss, depreciation and amortization deductions. These
deductions will be allocated to the Class B Status Units, until their capital
account balances have been reduced to zero. No distributions have been made to
the General Partners as of December 31, 1998.
Cash available to distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners select to have their cash distributed
monthly. Cash distributions made to Class A Status Limited Partners during 1998
and were as follows:
Per Class A Status Unit
-------------------------
Distribution for Total Cash Investment Return of General
Quarter Ended Distributed Income Capital Partner
- ------------------ ----------- ---------- --------- -------
March 31, 1998 $ 0 $ 0 $0.00 $0.00
June 30, 1998 $ 0 $ 0 $0.00 $0.00
September 30, 1998 $ 99,874 $0.15 $0.00 $0.00
December 31, 1998 $141,007 $0.15 $0.00 $0.00
The fourth quarter distribution was accrued for accounting purposes in 1998, and
was not actually paid to Limited Partners until February, 1999. Although there
is no assurance, the General Partners anticipate that cash distributions to
Limited Partners holding Class A Status Units will continue in 1999 at a level
at least comparable with 1998 cash distributions on an annual basis.
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ITEM 6. SELECTED FINANCIAL DATA.
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The following sets forth a summary of the selected financial data for the ten
months ended December 31, 1998.
1998
-----------
Total assets $14,844,515
Total revenues 262,729
Net income 143,295
Net loss allocated
to General Partners (500)
Net income allocated to
Class A Limited Partners 254,862
Net loss allocated to
Class B Limited Partners (111,067)
Net income per weighted
average (1) Class A
Limited Partner Unit .50
Net loss per weighted
average (1) Class B
Limited Partner Unit (0.77)
Cash Distributions per
weighted average (1)
Class A Limited Partner Unit:
Investment Income 0.30
Return of Capital 0.00
- ------------
(1) The weighted average unit is calculated by averaging units over the period
they are outstanding during the time units are still being purchased by Limited
Partners in the Partnership.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATION.
- ---------------------
The following discussion and analysis should be read in conjunction with the
Selected Financial Data and 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 the Report, which
include construction costs which may exceed estimates, construction delays,
lease-up risks, inability to obtain new tenants upon the expiration
12
<PAGE>
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
- -------
The Partnership commenced active operations on March 3, 1998, when it received
and accepted subscriptions for 125,000 units. An aggregate requirement of
$2,500,000 of offering proceeds was reached on March 30, 1998, thus allowing for
the admission of New York and Pennsylvania investors into the Partnership. As
of December 31, 1998, the Partnership had sold 1,302,942 Class A Status Units
and 350,338 Class B Status Units, held by a total of 1,250 Class A and 95 Class
B Limited Partners, for total Limited Partner contributions of $16,532,802.
After payment of $578,648 in acquisition and advisory fees and expenses, payment
of $2,066,600 in selling commissions and organization and offering expenses, the
investment of $2,483,810 in the Fund IX-X-XI-REIT Joint Venture, and the
investment of $2,398,767 in the Fund X-XI Joint Venture, as of December 31,
1998, the Partnership was holding net offering proceeds of $9,005,977 available
for investment in properties.
It is anticipated that an additional investment in the Fund IX-X-XI-REIT Joint
Venture of approximately $170,000 will required to complete the ABB Property and
this investment will be contributed by Wells Fund IX.
Gross revenues of the Partnership of $262,729 for the year ended December 31,
1998, were attributable primarily to interest income earned on funds held by the
Partnership prior to the investment in joint ventures, and equity in earnings of
joint ventures
Expenses of the Partnership were $119,434 for the year ended December 31, 1998,
and consisted primarily of legal, accounting, and partnership administrative
costs. Net income of the Partnership was $143,295 for the year ended December
31, 1998. Net income allocated per weighted average unit to Class A Limited
Partners was $0.20; net loss allocated per weighted average unit to Class B
Limited Partners was $.32; and net loss allocated to General Partners was $500
for the year ended December 3, 1998.
Since the Partnership did not commence active operations until it received and
accepted subscriptions for a minimum of 125,000 Units on March 3, 1998, there is
no comparative financial data available from the prior fiscal year.
13
<PAGE>
Property Operations
- -------------------
As of December 31, 1998, the Partnership owned interests in the following
operational properties:
The ABB Building - Fund IX-X-XI-REIT Joint Venture
- --------------------------------------------------
<TABLE>
<CAPTION>
Year Ended One Month Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues:
Rental income $836,746 $ 28,512
Interest income 20,192 0
-------- --------
856,938 28,512
-------- --------
Expenses:
Depreciation 475,020 36,863
Management & leasing expenses 107,338 1,711
Operating costs, net of
reimbursements (40,641) 10,118
-------- --------
541,717 48,692
-------- --------
Net income (loss) $315,221 $(20,180)
======== ========
Occupied % 95% 67%
Partnership's Ownership % in the Fund
IX-X-XI-REIT Joint Venture 6.7%
Cash Distributions to Partnership $ 36,360
Net income (loss) allocated to Partnership $ 16,508
</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 of the project upon completion
will be approximately $7,900,000. It is currently anticipated that Wells Fund IX
will contribute approximately $170,000 to complete the building.
14
<PAGE>
Since the ABB Building was opened in December 1997, comparative income and
expense figures for 1997 are only available for a one month period. Other
operating expenses are negative due to tenant reimbursements reflected in this
category which includes management and leasing expense reimbursement.
The ABB Building incurred property taxes of $36,771 for 1998.
The Partnership was admitted to the Fund IX-X-XI-REIT Joint Venture on June 11,
1998 and began participating in net income and cash distributions in June 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item a, Business, page 2. For additional information on tenants,
etc. refer to item 2, Properties, page 3.
Iomega Building/Fund IX-X-XI-REIT Joint Venture
- -----------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended
December 31, 1998
-----------------
<S> <C>
Revenues:
Rental income $373,420
--------
Expenses:
Depreciation 145,975
Management & leasing expenses 16,808
Other operating expenses, net of reimbursements (4,579)
--------
158,204
--------
Net income $215,216
========
Occupied % 100%
Partnership's ownership % in the 6.7%
Fund IX-X-XI-EIT Joint Venture
Cash distribution to the Partnership $ 15,803
Net income allocated to the Partnership $ 10,197
</TABLE>
On April 1, 1998, the Wells Fund X acquired a two story office building
containing approximately 108,250 rentable square feet on a 8.03 acre tract of
land located in Ogden, Weber County, Utah (the "Iomega Building") for a purchase
price of $5,025,000.
On July 1, 1998, Wells Fund X contributed the Iomega Building to the Fund IX-X-
XI-REIT Joint Venture. The Partnership acquired an interest in the Iomega
Building and began participating in income and distribution from this property
as July 1, 1998. The entire Iomega Building is under a net lease with Iomega
Corporation until July 31, 2006.
Since the Iomega Building was purchased in April 1998, comparative income and
expense figures for the prior year are not available. Other operating expenses
are negative due to tenant
15
<PAGE>
reimbursements reflected in this category which includes management and leasing
expense reimbursement.
The Iomega Building incurred property taxes of $44,559 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item a, Business, page 2. For additional information on tenants,
etc. refer to item 2, Properties, page 3.
Lucent Technologies Building/Fund IX-X-XI-REIT Joint Venture
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Seven Months Ended
December 31, 1998
------------------
<S> <C>
Revenues:
Rental income $291,508
--------
Expenses:
Depreciation 106,871
Management & leasing expenses 11,281
Operating costs, net of reimbursements 9,883
--------
128,035
--------
Net income $163,473
========
Occupied % 100%
Partnership's ownership % in the Fund IX-X-XI-REIT Joint 6.7%
Venture
Cash distributions to Partnership $ 26,677
Net Income allocated to the Partnership $ 11,025
</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. Under the terms of the lease, the
tenant is responsible for all utilities, property taxes and other operating
expenses.
Since the Lucent Technologies Building was purchased by the IX-X-XI REIT Joint
Venture in June 1998, comparable income and expense figures for the prior year
are not available.
16
<PAGE>
For Comments on the general competitive conditions to which the property may be
subject, see Item a, Business, page 2. For additional information on tenants,
etc. refer to item 2, Properties, page 3.
The 360 Interlocken Building/Fund IX-X-XI-REIT Joint Venture
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Ten Months Ended
December 31, 1998
-----------------
<S> <C>
Revenues:
Rental income $655,405
Interest Income 246
--------
655,651
--------
Expenses:
Depreciation $238,299
Management & leasing expense 55,130
Other operating expenses, net of reimbursements (65,654)
--------
227,775
--------
Net income $427,876
========
Occupied % 100%
Partnership's Ownership % in the Fund IX-X-XI-REIT
Joint Venture 6.7%
Cash distribution to Partnership $ 31,653
Net income allocated to Partnership $ 21,963
</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.
Since the 360 Interlocken Building was purchased in March 1998, comparable
income and expense figures for the prior year are not available. Other operating
expenses are negative due to tenant reimbursements being greater than operating
expenses. The 360 Interlocken Building incurred property taxes of $96,747 for
1998.
17
<PAGE>
The Partnership was admitted to the Fund IX-X-XI-REIT Joint Venture on June 11,
1998 and began participating in net income and cash distributions in June 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item a, Business, page 2. For additional information on tenants,
etc. refer to item 2, Properties, page 3.
The Ohmeda Building/Fund IX-X-XI-REIT Joint Venture
- ---------------------------------------------------
<TABLE>
<CAPTION>
Eleven Months Ended
December 31, 1998
-------------------
<S> <C>
Revenues:
Rental income $898,901
--------
Expenses:
Depreciation 299,112
Management & leasing expenses 41,688
Other operating expenses, net of reimbursements 2,863
--------
343,663
--------
Net income $555,238
========
Occupied % 100%
Partnership's ownership % in the
Fund IX-X-XI-EIT Joint Venture 6.7%
Cash distribution to the Partnership $ 38,113
Net income allocated to the Partnership $ 25,656
</TABLE>
On February 13, 1998, the Fund IX-X-X-XI-REIT Joint Venture (formally, the Fund
IX Fund 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
18
<PAGE>
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. The Ohmeda Building
incurred property taxes of $143,962 for 1998.
The Partnership was admitted to the Fund IX-X-XI-REIT Joint Venture on June 11,
1998 and began participating in net income and cash distributions in June, 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item a, Business, page 2. For additional information on tenants,
etc. refer to item 2, Properties, page 3.
Fairchild Building/Wells/Fremont Joint Venture
- ----------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998
-----------------
<S> <C>
Revenues:
Rental income $401,058
Interest income 3,896
--------
$404,954
--------
Expenses:
Depreciation 142,720
Management & leasing expenses 16,726
Operating costs, net of reimbursements 83,589
--------
243,035
--------
Net income $161,919
========
Occupied % 100%
Partnership's ownership % 9.25%
Cash distributed to Partnership $ 21,313
Net Income allocated to the Partnership $ 19,725
</TABLE>
On July 21, 1998, the Wells/Fremont Joint Venture acquired a two-story warehouse
and office building containing approximately 58,424 rentable square feet on a
3.05 acre tract of land in Fremont, California (the "Fairchild Building") for a
purchase price of $8,900,000 excluding acquisition costs.
The Building is 100% occupied by Fairchild Technologies, U.S.A., Inc. with a
lease expiration of November 30, 2004. The monthly base rent payable under the
lease is $68,128 with a 3%
19
<PAGE>
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.
The tenant is responsible for property taxes.
Since the Fairchild Building was purchased in July of 1998, comparable income
and expense figures for the prior year are not available.
For comments on the general competitive conditions to which the property may be
subject, see Item a, Business, page 2. For additional information on tenants,
etc. refer to item 2, Properties, page 3.
Cort Building/Wells/Orange County Joint Venture
- -----------------------------------------------
<TABLE>
<CAPTION>
Five Months Ended
December 31, 1998
-----------------
<S> <C>
Revenues:
Rental income $331,477
Interest income 448
--------
331,925
--------
Expenses:
Depreciation 92,087
Management & leasing expenses 12,734
Operating costs, net of reimbursements 35,690
--------
140,511
--------
Net income $191,414
========
Occupied % 100%
Partnership's ownership % 21.2%
Cash distributed to Partnership $ 57,428
Net Income allocated to the Partnership $ 40,656
</TABLE>
On July 31, 1998, the Cort Joint Venture acquired a one-story office and
warehouse building containing approximately 52,000 rentable square feel 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 Cort 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.
20
<PAGE>
Since the Cort Building was purchased in July 1988, comparable income and
expense figures for the prior year are not available. The Cort Building
incurred property taxes of $14,367 for 1988. For further information, refer to
Item 2. Properties.
For comments on the general competitive conditions to which the property may be
subject, see Item a, Business, page 2. For additional information on tenants,
etc. refer to item 2, Properties, page 3.
Liquidity and Capital Resources
- -------------------------------
The Partnership commenced active operations on March 3, 1998, when it received
and accepted subscriptions for 125,000 units.
The Partnership terminated its offering on December 30, 1998, the Partnership
raised $16,532,802 in capital through the sale of 1,653,280 units.
After payment of $578,648 in acquisition and advisory fees and expenses, payment
of $2,066,600 in selling commissions and organizational and offering expenses,
the investment of $2,482,810 in Fund IX-X-XI-REIT Joint Venture, and the
Investment of $2,398,767 in the Fund X-XI Joint Venture, as of December 31,
1998, the Partnership was holding net offering proceeds of $9,005,977 available
for investment in properties
The Partnership's net cash used in operating activities of $50,858 is due
primarily to equity earnings of joint ventures and interest income earned on
funds held by the Partnership prior to investment in properties. Net cash used
in investing activities of $5,310,208 is primarily the result of the payment of
acquisition and advisory fees and investment in the Fund IX-X-IX-REIT Joint
Venture of $2,482,810 and $2,398,767 in the Fund X-XI Joint Venture. The net
cash provided by financing activities of $14,653,266 is the result of raising
$16,532,801 in Limited Partners contributions less commissions and
organizational and offering expenses and, therefore, increasing cash and cash
equivalents from $600 of General Partners' contribution at the beginning of the
year to $9,292,800 as of December 31, 1998.
The Partnership's distributions to holders of Class A Status Units for the 4th
quarter ended December 31, 1998 will be paid in February, 1999. Although there
is no assurance, the Partnership anticipates that distributions will continue to
be paid on a quarterly basis from such sources on a level at least consistent
with 1998. No cash distributions were paid to holders of Class B Status Units
in 1998.
The Partnership expects to continue to meet its short-term liquidity
requirements generally through net cash provided by operations which the
Partnership believes will continue to be adequate to meet both operating
requirements and distributions to limited partners. At this time, given the
nature of the joint venture and property in which the Partnership has invested,
there are no known improvements or renovations to the properties expected to be
funded from cash flow from operations.
21
<PAGE>
The Partnership expects to make future real estate investments, directly or
through investments in joint ventures, from Limited Partners' contributions. As
of December 31, 1998, the Partnership was holding net offering proceeds of
$9,005,977 for this purpose.
Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
Inflation
- ---------
The real estate market has not been affected significantly by inflation in the
past three years due to the relatively low inflation rate. There are provisions
in the majority of tenant leases to protect the Partnership from the impact of
inflation. These leases contain common area maintenance charges (CAM charges),
real estate tax and insurance reimbursements on a per square foot bases, or in
some cases, annual reimbursement of operating expenses above a certain per
square foot allowance. These provisions should reduce the Partnership's
exposure to increases in costs and operating expenses resulting from inflation.
Year 2000 Compliance
- --------------------
The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A full
assessment of Year 2000 compliance issues was begun in late 1997 and is expected
to be completed by March 31, 1999. Renovations and replacements of equipment
have been and are being made as warranted as the assessment progresses. The
costs incurred by the Partnership and its affiliates thus far for renovations
and replacements have been immaterial. Some testing of systems has begun and
all testing is expected to be complete by June 30, 1999.
As to the status of the Partnership's information technology systems, it is
presently believed that all major systems and software packages with the
exception of the accounting and property management package are Year 2000
compliant. The Partnership's affiliated entities are purchasing the upgrade for
the accounting and property management package system; however, it is not slated
to be available until the end of the first quarter of 1999. At the present
time, it is believed that all major non-information technology systems are Year
2000 compliant. The cost to upgrade any non-compliant systems is believed to be
immaterial.
The Partnership is in the process of confirming with the Partnership's vendors,
including third-party service providers such as banks, that their systems will
be Year 2000 compliant. Based on the information received thus far, the primary
third-party service providers with which the Partnership has relationships have
confirmed their Year 2000 readiness.
The Partnership relies on computers and operating systems provided by equipment
manufacturers, and also on application software designed for use with its
accounting, property management and investment portfolio tracking. The
Partnership has preliminarily determined that any costs, problems or
uncertainties associated with the potential consequences of Year 2000 issues are
not expected to have a material impact on the future operations or financial
condition of the Partnership. The Partnership will perform due diligence as to
the Year 2000 readiness of each property owned by the Partnership and each
property contemplated for purchase by the Partnership.
22
<PAGE>
The Partnership's reliance on embedded computer systems (i.e., microcontrollers)
is limited to facilities related matters, such as office security systems and
environmental control systems.
The Partnership is currently formulating contingency plans to cover any areas of
concern. Alternate means of operating the business are being developed in the
unlikely circumstance that the computer and phone systems are rendered
inoperable. An off-site facility from which the Partnership could operate is
being sought as well as alternate means of communication with key third-party
vendors. A written plan is being developed for testing and dispensation to each
staff member of the Advisor of the Partnership.
Management believes that the Partnership's risk of Year 2000 problems is
minimal. In the unlikely event there is a problem, the worst case scenarios
would include the risks that the elevator or security systems within the
Partnership's properties would fail or the key third-party vendors upon which
the Partnership relies would be unable to provide accurate investor information.
In the event that the elevator shuts down, the Partnership has devised a plan
for each building whereby the tenants will use the stairs until the elevators
are fixed. In the event that the security system shuts down, the Partnership
has devised a plan for each building to hire temporary on-site security guards.
In the event that a third-party vendor has Year 2000 problems relating to
investor information, the Partnership intends to perform a full system back-up
of all investor information as of December 31, 1999 so that the Partnership will
have accurate hard-copy investor information.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------
The Financial Statements of the Registrant and supplementary data are detailed
under Item 14 (a) and filed as part of the report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- --------------------
There were no disagreements with the Partnership's accountants or other
reportable events during 1998.
PART III
--------
Item 10. General Partners of the Partnership.
- ---------------------------------------------
Wells Partners, L.P. Wells Partners, L.P. is a private Georgia limited
--------------------
partnership formed on October 25, 1990. The sole General Partner of Wells
Partners, L.P. is Wells Capital, Inc., a Georgia corporation. The executive
offices of Wells Capital, Inc. are located at 3885 Holcomb Bridge Road,
Norcross, Georgia 30092.
Leo F. Wells, III. Mr. Wells is a resident of Atlanta, Georgia, is 55
-----------------
years of age and holds a Bachelor of Business Administration Degree in Economics
from the University of Georgia. Mr. Wells is the President and sole Director of
Wells Capital, Inc. Mr. Wells is the President of Wells & Associates, Inc., a
real estate brokerage and investment company formed in 1976 and incorporated in
1978, for which he serves as principal broker. Mr. Wells is also
23
<PAGE>
currently the sole Director and President of Wells Management Company, Inc., a
property management company he founded in 1983. In addition, Mr. Wells is the
President and Chairman of the Board of Wells Investment Securities, Inc., Wells
& Associates, Inc., and Wells Management Company, Inc. which are affiliates of
the General Partners. From 1980 to February 1985, Mr. Wells served as vice-
president of Hill-Johnson, Inc., a Georgia corporation engaged in the
construction business. From 1973 to 1976, he was associated with Sax Gaskin Real
Estate Company and from 1970 to 1973, he was a real estate salesman and property
manager for Roy D. Warren & Company, an Atlanta real estate company.
Item 11. Compensation of General Partners and Affiliates.
- ---------------------------------------------------------
The following table summarizes the compensation and fees (including
reimbursement of expenses) paid to the General Partners and their affiliates
during the year ended December 31, 1998.
CASH COMPENSATION TABLE
-----------------------
<TABLE>
<CAPTION>
(A) (B) (C)
Name of individual or Capacities in which served - Cash Compensation
number in group Form of Compensation
- --------------------- ---------------------------- -----------------
<S> <C> <C>
Wells Capital, Inc. General Partner of Wells $ 578,648
Partners, L.P.
Acquisition and Advisory Fees
and Expenses
Wells Capital, Inc. General Partner of Wells $ 495,984
Partners, L.P. Reimbursement
of Organization and Offering
Expenses
Leo F. Wells, III General Partner -0-
Wells Investment Dealer Manager - $1,570,616(1)
Securities, Inc. Selling Commissions
Wells Management Property Manager - $ 14,281(2)
Company, Inc. Management and Leasing Fees
</TABLE>
(1) This amount includes all selling commissions paid or payable to Wells
Investment Securities, Inc., a substantial portion of which were
reallocated to other broker-dealers.
(2) These fees are not paid directly by the Partnership but are paid by the
joint venture entities which owns the properties for which the property
management and leasing services relate and include management and leasing
fees which were accrued for accounting purposes in 1998, but not actually
paid until January, 1999.
24
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------------------------------------------------------------------------
No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.
Set forth below is the security ownership of management as of February 28, 1999.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Amount and Nature
Name of of Beneficial
Title of Class Beneficial Owner Ownership Percent of Class
- -------------- ----------------- ------------------ ----------------
<S> <C> <C> <C>
Class A Status Leo F. Wells, III 109.22 Units (IRA, less than 1%
Units 401 (k) Plan
</TABLE>
No arrangements exist which would, upon operation, result in a change in control
of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
The compensation and fees paid or to be paid by the Partnership to the General
Partners and their affiliates in connection with the operation of the
Partnership are as follows:
Interest in Partnership Cash Flow and Net Sales Proceeds. The General
--------------------------------------------------------
Partners will receive a subordinated participation in net cash flow from
operations equal to 10% of net cash flow after the Limited Partners holding
Class A Status Units have received preferential distributions equal to 10%
of their adjusted capital accounts in each fiscal year. The General
Partners will also receive a subordinated participation in net sales
proceeds and net financing proceeds equal to 20% of residual proceeds
available for distribution after Limited Partners holding Class A Status
Units have received a return of their adjusted capital contributions plus a
10% cumulative return on their adjusted capital contributions and Limited
Partners holding Class B Units have received a return of their adjusted
capital contributions plus a 15% cumulative return on their adjusted
capital contributions; provided, however, that in no event shall the
General Partners receive in the aggregate in excess of 15% of net sales
proceeds and net financing proceeds remaining after payments to Limited
Partners from such proceeds of amounts equal to the sum of their adjusted
capital contributions plus a 6% cumulative return on their adjusted capital
contributions. The General Partners did not receive any distributions from
net cash flow from operations or net sales proceeds for the year ended
December 31, 1998.
25
<PAGE>
Property Management and Leasing Fees. Wells Management Company, Inc., an
------------------------------------
affiliate of the General Partners, will receive compensation for
supervising the management of the Partnership properties equal to the
lessor of (a) fees that would be paid to a comparable outside firm or (b)
4.5% of the gross revenues generally paid over the life of the lease plus a
separate competitive fee for the one-time initial lease-up of newly
constructed properties generally paid in conjunction with the receipt of
the first month's rent. In the case of commercial properties which are
leased on a long-term (ten or more years)net basis, the maximum property
management fee from such leases shall be 1% of the gross revenues generally
paid over the life of the leases except for a one-time initial leasing fee
of 3% of the gross revenues on each lease payable over the first five full
years of the original lease term.
Management and leasing fees are not paid directly by the Partnership but by
the joint venture entity which owns the properties. The Partnership's
share of these fees were $14,811 for the year ended December 31, 1998.
Real Estate Commissions. In connection with the sale of Partnership
-----------------------
properties, the General Partners or their affiliates may receive
commissions not exceeding the lesser of (A) 50% of the commissions
customarily charged by other brokers in arm's-length transactions involving
comparable properties in the same geographic area or (B) 3% of the gross
sales price of the property, and provided that payments of such commissions
will be made only after Limited Partners have received prior distributions
totaling 100% of their capital contributions plus a 6% cumulative return on
their adjusted capital contributions. No real estate commissions were paid
to the General Partners or affiliates for the year ended December 31, 1998.
Deferred Project Costs
----------------------
The Partnership pays Acquisition and Advisory Fees and Acquisition Expenses
to Wells Capital, Inc., the General Partner of Wells Partners, L.P., for
acquisition and advisory services as a reimbursement for acquisition
expenses. These payments, as provided by the Partnership Agreement, may
not exceed 3.5% of the Limited Partners' capital contributions.
Acquisition and Advisory Fees and Acquisition Expenses paid as of December
31, 1998, amounted to $578,648 and represented approximately 3.5% of the
Limited Partners' capital contributions. These fees are allocated to
specific properties as they are purchased.
Deferred Offering Costs
-----------------------
Wells Capital, Inc. (the "Company"), the General Partner of Wells Partners,
L.P., pays all the offering expenses for the Partnership. The Company may
be reimbursed by the Partnership to the extent that such offering expenses
do not exceed 3% of total Limited Partners' capital contributions. As of
December 31, 1998, the Partnership had reimbursed the Company for $495,984
in offering expenses, which amounted to approximately 3% of Limited
Partners' capital contributions.
26
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a) 1. Financial Statements
The Financial Statements are contained on pages F-2 through F-33 of this
Annual Report on Form 10-K, and the list of the Financial Statements
contained herein is set forth on page F-1, which is hereby incorporated
by reference.
(a) 2. Financial Statement Schedule III
Information with respect to this item begins on Page S-1 of this
Annual Report on Form 10-K
(a) 3. The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(b) During the fourth quarter of 1998, the Partnership filed the following
reports on Form 8-K:
(i) Current Report on Form 8-K dated September 1, 1998, reporting the
acquisition by the Fund IX-X Joint Venture of a Joint venture
interest in Wells/Orange County Associates, a joint venture formed
to own and operate the Cort Building; and
(ii) Current Report on Form 8-K dated October 8, 1998, reporting the
acquisition by the Fund X-XI Joint Venture of a joint venture
interest in Well/Fremont Associates, a joint venture formed to own
and operate the Fairchild Building.
(c) The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index Attached hereto.
(d) See (a)2 above.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 26th day of March, .
Wells Real Estate Fund XI, L.P.
(Registrant)
By: /s/ Leo F. Wells, III
-------------------------------------------
Leo F. Wells, III
Individual General Partner and as President
and Chief Financial Officer of Wells
Capital, Inc., the General Partner of Wells
Partners, L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.
Signature Title
- --------- -----
/s/ Leo F. Wells, III Individual General Partner, March 26, 1999
- --------------------- President and Sole Director
Leo F. Wells, III of Wells Capital, Inc., the
General Partner of Wells
Partners, L.P.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.
28
<PAGE>
Wells Real Estate Fund XI, L.P.
(A Georgia Public Limited Partnership)
Financial Statements as of December 31, 1998 and 1997
Together With
Auditors' Report
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Financial Statements Page
- -------------------- -----------
Independent Auditors' Report F-2
Balance Sheets as of December 31, 1998 and 1997 F-3
Statement of Income for the Year Ended
December 31, 1998 F-4
Statement of Partners' Capital for the Year Ended
December 31, 1998 F-5
Statement of Cash Flows for the Year Ended
December 31, 1998 F-6
Notes to Financial Statements for
December 31, 1998 and 1997 F-7
Financial Statements -- Ohmeda Building F-27 - F-33
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund XI, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND XI,
L.P. (a Georgia public limited partnership) as of December 31, 1998 and 1997 and
the related statements of income, partners' capital, and cash flows for the year
ended December 31, 1998. These financial statements and the schedule referred
to below are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund XI, L.P.
as of December 31, 1998 and 1997 and the results of its operations and its cash
flows for the year ended December 31, 1998 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule III--Real Estate Investments
and Accumulated Depreciation as of December 31, 1998 is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1999
F-2
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
----------- --------
CASH AND CASH EQUIVALENTS $ 9,292,800 $ 600
INVESTMENT IN JOINT VENTURES 4,997,787 0
DEFERRED OFFERING COSTS 0 194,020
DEFERRED PROJECT COSTS 375,246 0
ORGANIZATIONAL COSTS, less accumulated
amortization of $6,250 in 1998 25,000 0
DUE FROM AFFILIATES 126,692 0
PREPAID EXPENSES AND OTHER ASSETS 26,990 0
----------- --------
Total assets $14,844,515 $194,620
=========== ========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Due to affiliate $ 88,473 $194,020
Partnership distributions payable 141,007 0
Sales commissions payable 214,609 0
----------- --------
Total liabilities 444,089 194,020
----------- --------
PARTNERS' CAPITAL:
General partners 0 500
Limited partners:
Class A 11,439,315 0
Class B 2,961,011 0
Original limited partner 100 100
----------- --------
Total partners' capital 14,400,426 600
----------- --------
Total liabilities and partners' capital $14,844,515 $194,620
=========== ========
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
REVENUES:
Equity in earnings of joint ventures $ 142,163
Interest income 120,566
---------
262,729
---------
EXPENSES:
Partnership administration 46,649
Legal and accounting 64,052
Amortization of organizational costs 6,250
Computer costs 2,483
---------
119,434
---------
NET INCOME $ 143,295
=========
NET LOSS ALLOCATED TO GENERAL PARTNERS $ (500)
=========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 254,862
=========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $(111,067)
=========
NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED PARTNER UNIT $ 0.50
=========
NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED PARTNER UNIT $ (0.77)
=========
CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT $ 0.30
=========
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Limited Partners
-------------------------------------------------------------
Class A Class B Total
------------------------ ---------------------- General Partners'
Original Units Amount Units Amount Partner Capital
-------- --------- ----------- -------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT, December 31, 1997 $100 0 $ 0 0 $ 0 $ 500 $ 600
Net income (loss) 0 0 254,862 0 (111,067) (500) 143,295
Partnership distributions 0 0 (240,881) 0 0 0 (240,881)
Limited partner contributions 0 1,302,942 13,029,423 350,338 3,503,378 0 16,532,801
Sales commissions and discounts 0 0 (1,237,834) 0 (332,821) 0 (1,570,655)
Other offering expenses 0 0 (366,255) 0 (98,479) 0 (464,734)
---- --------- ----------- ------- ---------- ----- -----------
BALANCE AT, December 31, 1998 $100 1,302,942 $11,439,315 350,338 $2,961,011 $ 0 $14,400,426
==== ========= =========== ======= ========== ===== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 143,295
-----------
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint venture (142,163)
Amortization of organizational costs 6,250
Changes in assets and liabilities:
Organizational costs (31,250)
Prepaid expenses and other assets (26,990)
-----------
Total adjustments (194,153)
-----------
Net cash used in operating activities (50,858)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures 102,662
Investment in joint venture (4,881,576)
Deferred project costs paid (531,294)
-----------
Net cash used in investing activities (5,310,208)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Limited partners' contributions 16,532,801
Sales commissions and discounts paid (1,356,046)
Offering costs paid (423,615)
Distributions to partners from accumulated earnings (99,874)
-----------
Net cash provided by financing activities 14,653,266
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,292,200
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 600
-----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 9,292,800
===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Deferred project costs contributed to joint ventures $ 203,402
===========
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund XI, L.P. (the "Partnership") is a public limited
partnership organized on June 20, 1996 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners,
L.P., a Georgia nonpublic limited partnership. The Partnership has two
classes of limited partnership units. Upon subscription for units, each
limited partner must elect whether to have their units treated as Class A
units or Class B units. Thereafter, limited partners shall have the right to
change their prior elections to have some or all of their units treated as
Class A units or Class B units one time during each quarterly accounting
period. Limited partners may vote to, among other things: (a) amend the
partnership agreement, subject to certain limitations, (b) change the
business purpose or investment objectives of the Partnership, (c) remove a
general partner, (d) elect a new general partner, (e) dissolve the
Partnership, and (f) approve a sale of assets, subject to certain
limitations. Each limited partnership unit has equal voting rights,
regardless of class.
The Partnership was formed to acquire and operate commercial real estate
properties, including properties which are either to be developed, currently
under development or construction, newly constructed, or have operating
histories. The Partnership owns an interest in several properties through a
joint venture between the Partnership, Wells Real Estate Fund IX, L.P.
("Wells Fund IX"), Wells Real Estate Fund X, L.P. ("Wells Fund X"), and Wells
Operating Partnership, L.P. (the "Operating Partnership"), a Delaware limited
partnership having Wells Real Estate Investment Trust, Inc. ("Wells REIT"), a
Maryland corporation, as its general partner. This joint venture is referred
to as "Fund IX, X, XI, and REIT Joint Venture." In addition, the Partnership
owns two properties through a joint venture between the Partnership and Wells
Fund X, referred to as "Fund X and XI Associates."
Through its investment in Fund IX, X, XI, and REIT Joint Venture, the
Partnership owns interests in the following properties: (i) a three-story
office building in Knoxville, Tennessee (the "ABB Building"), (ii) a two-
story office building in Louisville, Colorado (the "Ohmeda Building"), (iii)
a three-story office building in Broomfield, Colorado (the "360 Interlocken
Building"), (iv) a one-story warehouse facility in Ogden, Utah (the "Iomega
Corporation Building"), and (v) a one-story office building in Oklahoma City,
Oklahoma (the "Lucent Technologies Building").
The following properties are owned by Fund X and XI Associates through
investment in joint ventures with the Operating Partnership: (i) a one-story
office and warehouse building in Fountain Valley, California (the "Cort
Building") and (ii) a warehouse and office building in Fremont, California
(the "Fairchild Building").
F-7
<PAGE>
Use of Estimates and Factors Affecting the Partnership
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The carrying values of real estate are based on management's current intent
to hold the real estate assets as long-term investments. The success of the
Partnership's future operations and the ability to realize the investment in
its assets will be dependent on the Partnership's ability to maintain rental
rates, occupancy, and an appropriate level of operating expenses in future
years. Management believes that the steps it is taking will enable the
Partnership to realize its investment in its assets.
Income Taxes
The Partnership is not subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying balance sheets.
The partners are required to include their respective share of profits and
losses in their individual income tax returns.
Distributions of Net Cash From Operations
Cash available for distribution, as defined by the partnership agreement,
will be distributed to the limited partners on a quarterly basis. In
accordance with the partnership agreement, distributions are paid first to
limited partners holding Class A units until they have received a 10% per
annum return on their net capital contributions, as defined. Then, such
distributions are paid to the general partners until they have received 10%
of the total amount distributed thus far. Any remaining cash available for
distribution is split 90% to the limited partners holding Class A units and
10% to the general partners. No such distributions will be made to the
limited partners holding Class B units.
Distribution of Sales Proceeds
Upon sales of properties, the net sales proceeds will be distributed in the
following order:
. To limited partners holding units which at any time have been treated
as Class B units until they receive an amount necessary to equal the
net cash available for distribution received by the limited partners
holding Class A units
. To limited partners on a per unit basis until each limited partner
has received 100% of their net capital contributions, as defined
. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their net capital contributions,
as defined
. To limited partners on a per unit basis until they receive an amount
equal to their preferential limited partner return (defined as the
sum of a 10% per annum cumulative return on net capital contributions
for all periods during which the units were treated as Class A units
and a 15% per annum cumulative return on net capital contributions
for all periods during which the units were treated as Class B units)
. To the general partners until they have received 100% of their
capital contributions, as defined
F-8
<PAGE>
. Then, if limited partners have received any excess limited partner
distributions (defined as distributions to limited partners over the
life of their investment in the Partnership in excess of their net
capital contributions, as defined, plus their preferential limited
partner return), to the general partners until they have received
distributions equal to 20% of the sum of any such excess limited
partner distributions plus distributions made to the general partners
pursuant to this provision
. Thereafter, 80% to the limited partners on a per unit basis and 20%
to the general partners
Allocation of Net Income, Net Loss, and Gain on Sale
Net income is defined as net income recognized by the Partnership, excluding
deductions for depreciation and amortization. Net income, as defined, of the
Partnership will be allocated each year in the same proportion that net cash
from operations is distributed to the partners. To the extent the
Partnership's net income in any year exceeds net cash from operations, it
will be allocated 99% to the limited partners holding Class A units and 1% to
the general partners.
Net loss, depreciation, and amortization deductions for each fiscal year will
be allocated as follows: (a) 99% to the limited partners holding Class B
units and 1% to the general partners until their capital accounts are reduced
to zero; (b) then to any partner having a positive balance in his capital
account in an amount not to exceed such positive balance; and (c) thereafter
to the general partners.
Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (a) allocations made pursuant to the qualified income offset
provisions of the partnership agreement; (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero; and (c) allocations to limited partners holding Class B
units in amounts equal to the deductions for depreciation and amortization
previously allocated to them with respect to the specific partnership
property sold, but not in excess of the amount of gain on sale recognized by
the Partnership with respect to the sale of such property.
Investment in Joint Ventures
Basis of Presentation. The Partnership does not have control over the
operations of the joint ventures; however, it does exercise significant
influence. Accordingly, the Partnership's investment in the joint ventures
is recorded using the equity method of accounting.
Real Estate Assets. Real estate assets held by the joint ventures are stated
at cost less accumulated depreciation. Major improvements and betterments
are capitalized when they extend the useful life of the related asset. All
repair and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets by
determining whether the carrying value of such real estate assets will be
recovered through the future cash flows expected from the use of the asset
and its eventual disposition. Management has determined that there has been
no impairment in the carrying value of real estate assets held by the joint
ventures as of December 31, 1998.
F-9
<PAGE>
Depreciation for building and improvements is calculated using the straight-
line method over 25 years. Tenant improvements are amortized over the life
of the related lease or the life of the asset, whichever is shorter.
Revenue Recognition. All leases on real estate assets held by the joint
ventures are classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective leases.
Partners' Distributions and Allocations of Profit and Loss. Cash available
for distribution and allocations of profit and loss to the Partnership by the
joint ventures are made in accordance with the terms of the individual joint
venture agreement. Generally, these items are allocated in proportion to the
partners' respective ownership interests. Cash is paid from the joint
ventures to the Partnership on a quarterly basis.
Deferred Lease Acquisition Costs. Costs incurred to procure operating leases
are capitalized and amortized on a straight-line basis over the terms of the
related leases.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Partnership considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximate fair value, and consist of investments in money market accounts.
Per Unit Data
Net income (loss) per unit with respect to the Partnership for the year ended
December 31, 1998 is computed based on the weighted average number of units
outstanding during the period.
2. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner contributions to Wells
Capital, Inc. (the "Company"), the general partner of Wells partners, for
acquisition and advisory fees and expenses. These payments, as stipulated by
the partnership agreement can be up to 3.5% of the limited partner
contributions, subject to certain overall limitations contained in the
partnership agreement. Aggregate fees paid through December 31, 1998 were
$578,648 and amounted to 3.5% of the limited partners' contributions
received. These fees are allocated to specific properties as they are
purchased or developed and are included in capitalized assets of the joint
ventures. Deferred project costs at December 31, 1998 represent fees not yet
applied to properties.
3. DEFERRED OFFERING COSTS
Organization and offering expenses, to the extent they exceed 3% of gross
proceeds, will be paid by the Company and not by the Partnership.
Organization and offering expenses do not include sales or underwriting
commissions but do include such costs as legal and accounting fees, printing
costs, and other offering expenses.
As of December 31, 1998, the Company paid organization and offering expenses
on behalf of the Partnership in the aggregate amount of $886,630, of which
the Company was reimbursed $495,979, which did not exceed the 3% limitation.
The Company absorbed the remaining $390,651 of offering
F-10
<PAGE>
and organization expenses which exceeded the 3% limitation. The liability of
$47,355 for the unpaid balance of the aforementioned expenses is included in
due to affiliate at December 31, 1998.
4. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1998 represent the Partnership's share of
cash to be distributed from its joint venture investments for the fourth
quarter of 1998:
Fund IX, X, XI, and REIT Joint Venture $ 59,692
Fund X and XI Associates 67,000
--------
$126,692
========
The Partnership entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for supervising the management and leasing of the
Partnership's properties, the Partnership will pay Wells Management
management and leasing fees equal to the lesser of (a) fees that would be
paid to a comparable outside firm, or (b) 4.5% of the gross revenues
generally paid over the life of the lease plus a separate competitive fee for
the one-time initial lease-up of newly constructed properties generally paid
in conjunction with the receipt of the first month's rent. In the case of
commercial properties which are leased on a long-term net basis (ten or more
years), the maximum property management fee from such leases shall be 1% of
the gross revenues generally paid over the life of the leases except for a
one-time initial leasing fee of 3% of the gross revenues on each lease
payable over the first five full years of the original lease term.
The Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $14,281 for the year ended December 31,
1998 which were paid to Wells Management.
The Company performs certain administrative services for the Partnership,
such as accounting and other partnership administration, and incurs the
related expenses. Such expenses are allocated among the various Wells Real
Estate Funds based on time spent on each fund by individual administrative
personnel. In the opinion of management, such allocation is a reasonable
estimation of such expenses.
The general partners are also general partners in other Wells Real Estate
Funds. As such, there may exist conflicts of interest where the general
partners in the capacity as general partners for other Wells Real Estate
Funds may be in competition with the Partnership for tenants in similar
geographic markets.
5. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in joint ventures at
December 31, 1998 is summarized as follows:
Amount Percent
---------- -------
Fund IX, X, XI, and REIT Joint Venture $2,521,003 7%
Fund X and XI Associates 2,476,784 42
----------
$4,997,787
==========
F-11
<PAGE>
The following is a roll forward of the Partnership's investment in joint
ventures for the year ended December 31, 1998:
Investment in joint ventures, beginning of year $ 0
Equity in income of joint ventures 142,163
Contributions to joint ventures 5,084,978
Distributions from joint ventures (229,354)
----------
Investment in joint ventures, end of year $4,997,787
==========
Fund IX, X, XI, and REIT Joint Venture
On March 20, 1997, Wells Fund IX and Wells Fund X entered into a joint
venture agreement. The joint venture, Fund IX and X Associates, was formed
to acquire, develop, operate, and sell real properties. On March 20, 1997,
Wells Fund IX contributed a 5.62-acre tract of real property in Knoxville,
Tennessee, and improvements thereon, known as the ABB Building, to the Fund
IX and X Associates joint venture. A 83,885-square-foot, three-story
building was constructed and commenced operations at the end of 1997.
On February 13, 1998, the joint venture purchased a two-story office
building, known as the Ohmeda Building, in Louisville, Colorado. On March
20, 1998, the joint venture purchased a three-story office building, known as
the 360 Interlocken Building, in Broomfield, Colorado. On June 11, 1998,
Fund IX and X Associates was amended and restated to admit the Partnership
and the Operating Partnership. The joint venture was renamed Fund IX, X, XI,
and REIT Joint Venture. On June 24, 1998, the new joint venture purchased a
one-story office building, known as the Lucent Technologies Building, in
Oklahoma City, Oklahoma. On April 1, 1998, Wells Fund X purchased a one-
story warehouse facility, known as the Iomega Corporation Building, in Ogden,
Utah. On July 1, 1998, Wells Fund X contributed the Iomega Corporation
Building to Fund IX, X, XI, and REIT Joint Venture.
F-12
<PAGE>
Following are the financial statements for the Fund IX, X, XI, and REIT Joint
Venture:
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheets
December 31, 1998 and 1997
Assets
1998 1997
----------- ----------
Real estate assets, at cost:
Land $ 6,454,213 $ 607,930
Building and improvements, less accumulated
depreciation of $1,253,156 in 1998
and $36,863 in 1997 30,686,845 6,445,300
Construction in progress 990 35,622
----------- ----------
Total real estate assets 37,142,048 7,088,852
Cash and cash equivalents 1,329,457 289,171
Accounts receivable 133,257 40,512
Prepaid expenses and other assets 441,128 329,310
----------- ----------
Total assets $39,045,890 $7,747,845
=========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 409,737 $ 379,770
Due to affiliates 4,406 2,479
Partnership distributions payable 1,000,127 0
----------- ----------
Total liabilities 1,414,270 382,249
----------- ----------
Partners' capital:
Wells Real Estate Fund IX 14,960,100 3,702,793
Wells Real Estate Fund X 18,707,139 3,662,803
Wells Real Estate Fund XI 2,521,003 0
Wells Operating Partnership, L.P. 1,443,378 0
----------- ----------
Total partners' capital 37,631,620 7,365,596
----------- ----------
Total liabilities and partners' capital $39,045,890 $7,747,845
=========== ==========
F-13
<PAGE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Income (Loss)
for the Year Ended December 31, 1998 and
for the Period from Inception (March 20, 1997) to December 31, 1997
1998 1997
---------- --------
Revenues:
Rental income $2,945,980 $ 28,512
Interest income 20,438 0
---------- --------
2,966,418 28,512
---------- --------
Expenses:
Depreciation 1,216,293 36,863
Management and leasing fees 226,643 1,711
Operating costs, net of reimbursements (140,506) 10,118
Property administration 34,821 0
Legal and accounting 15,351 0
---------- --------
1,352,602 48,692
---------- --------
Net income (loss) $1,613,816 $(20,180)
========== ========
Net income (loss) allocated to Wells Real Estate Fund IX $ 692,116 $(10,145)
========== ========
Net income (loss) allocated to Wells Real Estate Fund X $ 787,481 $(10,035)
========== ========
Net income allocated to Wells Real Estate Fund XI $ 85,352 $ 0
========== ========
Net income allocated to Wells Operating Partnership, L.P. $ 48,867 $ 0
========== ========
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Year Ended December 31, 1998 and
for the Period from Inception (March 20, 1997) to December 31, 1997
<TABLE>
<CAPTION>
Wells Real Wells Real Wells Real Wells Total
Estate Estate Estate Operating Partners'
Fund IX Fund X Fund XI Partnership, L.P. Capital
----------- ----------- ---------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 0 $ 0 $ 0 $ 0 $ 0
Net loss (10,145) (10,035) 0 0 (20,180)
Partnership contributions 3,712,938 3,672,838 0 0 7,385,776
----------- ----------- ---------- ---------- -----------
Balance, December 31, 1997 3,702,793 3,662,803 0 0 7,365,596
Net income 692,116 787,481 85,352 48,867 1,613,816
Partnership contributions 11,771,312 15,613,477 2,586,262 1,480,741 31,451,792
Partnership distributions (1,206,121) (1,356,622) (150,611) (86,230) (2,799,584)
----------- ----------- ---------- ---------- -----------
Balance, December 31, 1998 $14,960,100 $18,707,139 $2,521,003 $1,443,378 $37,631,620
=========== =========== ========== ========== ===========
</TABLE>
F-14
<PAGE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Cash Flows
for the Year Ended December 31, 1998 and
for the Period from Inception (March 20, 1997) to December 31, 1997
1998 1997
------------ -----------
Cash flows from operating activities:
Net income (loss) $ 1,613,816 $ (20,180)
------------ -----------
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 1,216,293 36,863
Changes in assets and liabilities:
Accounts receivable (92,745) (40,512)
Prepaid expenses and other assets (111,818) (329,310)
Accounts payable 29,967 379,770
Due to affiliates 1,927 2,479
------------ -----------
Total adjustments 1,043,624 49,290
------------ -----------
Net cash provided by operating activities 2,657,440 29,110
------------ -----------
Cash flows from investing activities:
Investment in real estate (24,788,070) (5,715,847)
------------ -----------
Cash flows from financing activities:
Distributions to joint venture partners (1,799,457) 0
Contributions received from partners 24,970,373 5,975,908
------------ -----------
Net cash provided by financing activities 23,170,916 5,975,908
------------ -----------
Net increase in cash and cash equivalents 1,040,286 289,171
Cash and cash equivalents, beginning of period 289,171 0
------------ -----------
Cash and cash equivalents, end of year $ 1,329,457 $ 289,171
============ ===========
Supplemental disclosure of noncash activities:
Deferred project costs contributed $ 1,470,780 $ 318,981
============ ===========
Contribution of real estate assets $ 5,010,639 $ 1,090,887
============ ===========
Fund X and XI Associates
On July 15, 1998, the Operating Partnership entered into a joint venture
agreement with Wells Development Corporation, referred to as Wells/Fremont
Associates. On July 21, 1998, Wells/Fremont Associates acquired a 58,424-
square-foot warehouse and office building located in Fremont, California,
known as the Fairchild Building. The Wells/Fremont Joint Venture contributed
aggregate capital of $2,995,480 to partially fund the purchase of the
Fairchild Building. The Wells/Freemont Joint Venture obtained a loan (the
"Fairchild Loan") 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.
On July 17, 1998, the Partnership and Wells Fund XI entered into a joint
venture agreement. The joint venture, Fund X and XI Associates, was formed
to acquire, develop, operate, and sell real properties. On July 17, 1998,
Fund X and XI Associates entered into an Agreement for the Purchase and Sale
of Joint Venture Interest (the "Fremont JV Contract") with Wells Development
Corporation.
F-15
<PAGE>
At the time of entering into the Fremont JV Contract, Fund X and XI
Associates paid $2,000,000 to Wells Development as an earnest money deposit
(the "Fremont Earnest Money"). Wells Fund X and Wells Fund XI each
contributed $1,000,000 of the Fremont Earnest Money as a capital contribution
to the Fund X-XI Joint Venture. Wells Development contributed the Fremont
Earnest Money it received from Fund X and XI Associates to the Fremont Joint
Venture as its initial capital contribution, and the Operating Partnership
simultaneously contributed $1,000,000 to the Fremont Joint Venture as its
initial capital contribution.
The Operating Partnership contributed an additional $5,982,591. The
additional proceeds were used to pay off the Fairchild Loan. Pursuant to the
Fremont JV Contract, Fund X and XI Associates contracted to acquire Wells
Development Corporation's interest in Wells/Fremont Associates which resulted
in Fund X and XI Associates becoming a joint venture partner with the
Operating Partnership I the ownership of the Fairchild Building. Concurrent
with the Fund X and XI Associates becoming a joint venture partner in the
Wells/Fremont Joint Venture, the note payable to NationsBank, N.A. was
repaid; consequently, no interest expense associated with the Fairchild Loan
was allocated to Fund X and XI Associates.
On July 27, 1998, the Operating Partnership entered into a joint venture
agreement with Wells Development Corporation, referred to as Wells/Orange
County Associates. On July 31, 1998, Wells/Orange County Associates acquired
a 52,000-square-foot warehouse and office building located in Fountain
Valley, California, known as the Cort Building. The Wells/Orange County
Joint Venture used $1,668,000 of aggregate capital contributions to partially
fund the purchase of the Cort Furniture Building. The Wells/Orange County
Joint Venture obtained a loan (the "Cort 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.
On July 30, 1998, Fund X and XI Associates entered into an agreement for the
purchase and sale of joint venture interest (the "Cort JV Contract") with
Wells Development Corporation. On September 1, 1998, Wells Fund X, and Wells
Fund XI contributed an additional $1,546,233 and $648,767, respectively, to
Fund X and XI Associates. Fund X and XI Associates contributed these total
proceeds of $2,195,000 to the Wells/Orange County Joint Venture. Pursuant to
the Cort JV Contract, Fund X and XI Associates contracted to acquire Wells
Development Corporation's interest in Wells/Orange County Associates which
resulted in Fund X and XI Associates becoming a joint venture partner with
the Operating Partnership in the ownership of the Cort Building. Concurrent
with Fund X and XI Associates becoming a joint venture partner in the
Wells/Orange County Joint Venture, the note payable to NationsBank, N.A. was
repaid; consequently, no interest expense associated with the Cort Loan was
allocated to Fund X and XI Associates.
F-16
<PAGE>
Following are the financial statements for Fund X and XI Associates:
Fund X and XI Associates
(A Georgia Joint Venture)
Balance Sheet
December 31, 1998
Assets
Investment in joint ventures $5,896,921
Due from affiliates 142,120
----------
Total assets $6,039,041
==========
Liabilities and Partners' Capital
Liabilities:
Partnership distributions payable $ 142,120
----------
Partners' capital:
Wells Real Estate Fund X 3,420,137
Wells Real Estate Fund XI 2,476,784
----------
Total partners' capital 5,896,921
----------
Total liabilities and partners' capital $6,039,041
==========
Fund X and XI Associates
(A Georgia Joint Venture)
Statement of Income
for the Period From Inception (July 17, 1998)
to December 31, 1998
Equity in income of joint ventures $ 138,885
Expenses 0
----------
Net income $ 138,885
==========
Net income allocated to Wells Real Estate Fund X $ 82,074
==========
Net income allocated to Wells Real Estate Fund XI $ 56,811
==========
F-17
<PAGE>
Fund X and XI Associates
(A Georgia Joint Venture)
Statement of Partners' Capital
for the Period From Inception (July 17, 1998)
to December 31, 1998
Wells Real Wells Real Total
Estate Estate Partners'
Fund X Fund XI Capital
---------- ---------- ----------
Balance, December 31, 1997 $ 0 $ 0 $ 0
Net income 82,074 56,811 138,885
Partnership contributions 3,447,890 2,498,716 5,946,606
Partnership distributions (109,827) (78,743) (188,570)
---------- ---------- ----------
Balance, December 31, 1998 $3,420,137 $2,476,784 $5,896,921
========== ========== ==========
Fund X and XI Associates
(A Georgia Joint Venture)
Statement of Cash Flows
for the Period From Inception (July 17, 1998)
to December 31, 1998
Cash flows from operating activities:
Net income $ 138,885
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in income of joint ventures (138,885)
-----------
Net cash provided by operating activities 0
-----------
Cash flows from investing activities:
Distribution received from joint ventures 46,450
Investment in joint ventures (5,695,000)
-----------
Net cash used in investing activities (5,648,550)
-----------
Cash flows from financing activities:
Contributions received from partners 5,695,000
Distributions to joint venture partners (46,450)
-----------
Net cash provided by financing activities 5,648,550
-----------
Net increase in cash and cash equivalents 0
Cash and cash equivalents, beginning of period 0
-----------
Cash and cash equivalents, end of year $ 0
===========
Supplemental disclosure of noncash investing activities:
Deferred project costs contributed $ 251,606
===========
F-18
<PAGE>
Fund X and XI Associates' investment in joint ventures and percentage
ownership at December 31, 1998 is summarized as follows:
Amount Percent
---------- -------
Wells/Orange County Associates $3,816,766 56%
Wells/Fremont Associates 2,080,155 22
----------
$5,896,921
==========
Following are the financial statements for Wells/Orange County Associates:
Wells/Orange County Associates
(A Georgia Joint Venture)
Balance Sheet
December 31, 1998
Assets
Real estate assets, at cost:
Land $2,187,501
Building, less accumulated depreciation of $92,087 4,572,028
----------
Total real estate assets 6,759,529
Cash and cash equivalents 180,895
Accounts receivable 13,123
----------
Total assets $6,953,547
==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 1,550
Partnership distributions payable 176,614
----------
Total liabilities 178,164
----------
Partners' capital:
Wells Operating Partnership, L.P. 2,958,617
Fund X and XI Associates 3,816,766
----------
Total partners' capital 6,775,383
----------
Total liabilities and partners' capital $6,953,547
==========
F-19
<PAGE>
Wells/Orange County Associates
(A Georgia Joint Venture)
Statement of Income
for the Period From Inception (July 27, 1998)
to December 31, 1998
Revenues:
Rental income $331,477
Interest income 448
--------
331,925
Expenses:
Depreciation 92,087
Management and leasing fees 12,734
Operating costs, net of reimbursements 2,288
Interest 29,472
Legal and accounting 3,930
--------
140,511
--------
Net income $191,414
========
Net income allocated to Wells Operating Partnership, L.P. $ 91,978
========
Net income allocated to Fund X and XI Associates $ 99,436
========
Wells/Orange County Associates
(A Georgia Joint Venture)
Statement of Partners' Capital
for the Period From Inception (July 27, 1998)
to December 31, 1998
Wells
Operating Fund X Total
Partnership, and XI Partners'
L.P. Associates Capital
----------- ---------- ----------
Balance, December 31, 1997 $ 0 $ 0 $ 0
Net income 91,978 99,436 191,414
Partnership contributions 2,991,074 3,863,272 6,854,346
Partnership distributions (124,435) (145,942) (270,377)
---------- ---------- ----------
Balance, December 31, 1998 $2,958,617 $3,816,766 $6,775,383
========== ========== ==========
F-20
<PAGE>
Wells/Orange County Associates
(A Georgia Joint Venture)
Statement of Cash Flows
for the Period From Inception (July 27, 1998)
to December 31, 1998
Cash flows from operating activities:
Net income $ 191,414
-----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 92,087
Changes in assets and liabilities:
Accounts receivable (13,123)
Accounts payable 1,550
-----------
Total adjustments 80,514
-----------
Net cash provided by operating activities 271,928
-----------
Cash flows from investing activities:
Investment in real estate (6,563,700)
-----------
Cash flows from financing activities:
Issuance of note payable 4,875,000
Payment of note payable (4,875,000)
Distributions to partners (93,763)
Contributions received from partners 6,566,430
-----------
Net cash provided by financing activities 6,472,667
-----------
Net increase in cash and cash equivalents 180,895
Cash and cash equivalents, beginning of period 0
-----------
Cash and cash equivalents, end of year $ 180,895
===========
Supplemental disclosure of noncash investing activities:
Deferred project costs contributed $ 287,916
===========
F-21
<PAGE>
Following are the financial statements for Wells/Fremont Associates:
Wells/Fremont Associates
(A Georgia Joint Venture)
Balance Sheet
December 31, 1998
Assets
Real estate assets, at cost:
Land $2,219,251
Building, less accumulated depreciation of $142,720 6,995,439
----------
Total real estate assets 9,214,690
Cash and cash equivalents 192,512
Accounts receivable 34,742
----------
Total assets $9,441,944
==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 3,565
Due to affiliate 2,052
Partnership distributions payable 189,490
----------
Total liabilities 195,107
----------
Partners' capital:
Wells Operating Partnership, L.P. 7,166,682
Fund X and XI Associates 2,080,155
----------
Total partners' capital 9,246,837
----------
Total liabilities and partners' capital $9,441,944
==========
F-22
<PAGE>
Wells/Fremont Associates
(A Georgia Joint Venture)
Statement of Income
for the Period From Inception (July 15, 1998)
to December 31, 1998
Revenues:
Rental income $401,058
Interest income 3,896
--------
404,954
--------
Expenses:
Depreciation 142,720
Management and leasing fees 16,726
Operating costs, net of reimbursements 3,364
Interest 73,919
Legal and accounting 6,306
--------
243,035
--------
Net income $161,919
--------
Net income allocated to Wells Operating Partnership, L.P. $122,470
========
Net income allocated to Fund X and XI Associates $ 39,449
========
Wells/Fremont Associates
(A Georgia Joint Venture)
Statement of Partners' Capital
for the Period From Inception (July 15, 1998)
to December 31, 1998
Wells
Operating Fund X Total
Partnership, and XI Partners'
L.P. Associates Capital
------------ ---------- ----------
Balance, December 31, 1997 $ 0 $ 0 $ 0
Net income 122,470 39,449 161,919
Partner contributions 7,274,075 2,083,334 9,357,409
Partnership distributions (229,863) (42,628) (272,491)
---------- ---------- ----------
Balance, December 31, 1998 $7,166,682 $2,080,155 $9,246,837
========== ========== ==========
F-23
<PAGE>
Wells/Fremont Associates
(A Georgia Joint Venture)
Statement of Cash Flows
for the Period From Inception (July 15, 1998)
to December 31, 1998
Cash flows from operating activities:
Net income $ 161,919
-----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 142,720
Changes in assets and liabilities:
Accounts receivable (34,742)
Accounts payable 3,565
Due to affiliate 2,052
-----------
Total adjustments 113,595
-----------
Net cash provided by operating activities 275,514
-----------
Cash flows from investing activities:
Investment in real estate (8,983,111)
-----------
Cash flows from financing activities:
Issuance of note payable 5,960,000
Payment of note payable (5,960,000)
Distributions to partners (83,001)
Contributions received from partners 8,983,110
-----------
Net cash provided by financing activities 8,900,109
-----------
Net increase in cash and cash equivalents 192,512
Cash and cash equivalents, beginning of period 0
-----------
Cash and cash equivalents, end of year $ 192,512
===========
Supplemental disclosure of noncash investing activities:
Deferred project costs contributed $ 374,299
===========
6. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the year ended December 31,
1998 is calculated as follows:
Financial statement net income $143,295
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 45,158
Expenses deducted for financial reporting purposes,
capitalized for income tax purposes 347
Rental income accrued for financial reporting purposes
in excess of amounts for income tax purposes (11,108)
--------
Income tax basis net income $177,692
========
F-24
<PAGE>
The Partnership's income tax basis partners' capital at December 31, 1998 is
computed as follows:
Financial statements partners' capital $14,400,426
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 45,158
Capitalization of syndication costs for income tax
purposes, which are accounted for as cost of capital for
financial reporting purposes 2,035,389
Accumulated rental income accrued for financial reporting
purposes in excess of amounts for income tax purposes (11,108)
Accumulated expenses deducted for financial reporting
purposes, capitalized for income tax purposes 23,519
Partnership's distributions payable 141,007
-----------
Income tax basis partners' capital $16,634,391
===========
7. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interest in the joint ventures under noncancelable operating leases
at December 31, 1998 is as follows:
Year ended December 31:
1999 $ 494,176
2000 491,465
2001 500,373
2002 481,327
2003 456,406
Thereafter 631,633
----------
$3,055,380
==========
Four significant tenants contributed 29%, 18%, 16%, and 11% of rental income,
which is included in equity in income of joint ventures for the year ended
December 31, 1998. In addition, three significant tenants will contribute
15%, 14%, and 12% of future minimum rental income.
The future minimum rental income due Fund IX, X, XI, and REIT Joint Venture
under noncancelable operating leases at December 31, 1998 is as follows:
Year ended December 31:
1999 $ 3,689,498
2000 3,615,011
2001 3,542,714
2002 3,137,241
2003 3,196,100
Thereafter 8,225,566
-----------
$25,406,130
===========
F-25
<PAGE>
Three significant tenants contributed 31%, 26%, and 13% of rental income for
the year ended December 31, 1998. In addition, four significant tenants will
contribute 27%, 25%, 21%, and 15% of future minimum rental income.
The future minimum rental income due Wells/Orange County Associates under
noncancelable operating leases at December 31, 1998 is as follows:
Year ended December 31:
1999 $ 758,964
2000 758,964
2001 809,580
2002 834,888
Thereafter 695,740
----------
$3,858,136
==========
One tenant contributed 100% of rental income for the year ended December 31,
1998 and will contribute 100% of future minimum rental income.
The future minimum rental income due Wells/Fremont Associates under
noncancelable operating leases at December 31, 1998 is as follows:
Year ended December 31:
1999 $ 844,167
2000 869,492
2001 895,577
2002 922,444
2003 950,118
Thereafter 894,832
----------
$5,376,630
==========
One tenant contributed 100% of rental income for the year ended December 31,
1998 and will contribute 100% of future minimum rental income.
8. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund IX, L.P.,
Wells Real Estate Fund X, L.P.
Wells Real Estate Fund XI, L.P.
Wells Real Estate Investment
Trust, Inc. and Subsidiary:
We have audited the accompanying balance sheet of THE OHMEDA BUILDING as of
December 31, 1998 and the related statements of income, partners' capital, and
cash flows for the period from inception (February 13, 1998) to December 31,
1998. These financial statements are the responsibility of the building's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the OHmeda Building as of
December 31, 1998 and the results of its operations and its cash flows for the
period from inception (February 13, 1998) to December 31, 1998, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1999
F-27
<PAGE>
THE OHMEDA BUILDING
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
REAL ESTATE ASSETS:
Land $ 2,746,894
Building and improvements, less accumulated
depreciation of $299,112 7,858,490
-----------
Total real estate assets 10,605,384
CASH AND CASH EQUIVALENTS 983,061
ACCOUNTS RECEIVABLE 13,969
-----------
Total assets $11,602,414
===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 157,691
Due to affiliates 825,380
-----------
Total liabilities 983,071
-----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Wells Real Estate Fund IX, L.P. 3,519,869
Wells Real Estate Fund X, L.P. 7,119,063
Wells Real Estate Fund XI, L.P. (12,456)
Wells Real Estate Investment Trust, Inc. and Subsidiary (7,133)
-----------
Total partners' capital 10,619,343
-----------
Total liabilities and partners' capital $11,602,414
===========
The accompanying notes are an integral part of this balance sheet.
F-28
<PAGE>
THE OHMEDA BUILDING
STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
REVENUES:
Rental income $898,901
--------
EXPENSES:
Depreciation 299,112
Operating costs, net of reimbursements 663
Management and leasing fees 41,688
Legal and accounting 2,200
--------
343,663
--------
NET INCOME $555,238
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND IX, L.P. $243,597
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND X, L.P. $271,294
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND XI, L.P. $ 25,656
========
NET INCOME ALLOCATED TO WELLS REAL ESTATE INVESTMENT
TRUST, INC. AND SUBSIDIARY $ 14,691
========
The accompanying notes are an integral part of this statement.
F-29
<PAGE>
THE OHMEDA BUILDING
STATEMENT OF PARTNERS' CAPITAL
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Wells Real
Wells Real Wells Real Wells Real Estate Investment Total
Estate Estate Estate Trust, Inc. and Partners'
Fund IX, L.P. Fund X, L.P. Fund XI, L.P. Subsidiary Capital
------------- ------------ ------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 $ 0 $ 0 $ 0 $ 0 $ 0
Contributions 3,636,662 7,252,823 0 0 10,889,485
Net income 243,597 271,294 25,656 14,691 555,238
Distributions (360,390) (405,054) (38,112) (21,824) (825,380)
---------- ---------- -------- -------- -----------
BALANCE, December 31, 1998 $3,519,869 $7,119,063 $(12,456) $ (7,133) $10,619,343
========== ========== ======== ======== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-30
<PAGE>
THE OHMEDA BUILDING
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 555,238
------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 299,112
Changes in assets and liabilities:
Accounts receivable (13,969)
Accounts payable and accrued expenses 157,691
------------
Total adjustments 442,834
------------
Net cash provided by operating activities 998,072
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate (10,904,496)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions received from partners 10,889,485
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 983,061
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 0
------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 983,061
============
The accompanying notes are an integral part of this statement.
F-31
<PAGE>
THE OHMEDA BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Ohmeda Building ("Ohmeda") is a two-story office building located in
Louisville, Colorado. The building is owned by Fund IX, X, XI, and REIT
Associates, a joint venture between Wells Real Estate Fund IX, L.P. ("Fund
IX"), Wells Real Estate Fund X, L.P. ("Fund X"), Wells Real Estate Fund XI,
L.P. ("Fund XI"), and Wells Real Estate Investment Trust, Inc. ("REIT"). As
of December 31, 1998, Fund IX, Fund X, Fund XI, and REIT owned 40%, 50%, 6%,
and 4% of Ohmeda, respectively. Allocation of net income and distributions
are made in accordance with ownership percentages.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
Ohmeda is not deemed to be a taxable entity for federal income tax purposes.
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation. Major
improvements and betterments are capitalized when they extend the useful life
of the related asset. All repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets by
determining whether the carrying value of such real estate assets will be
recovered through the future cash flows expected from the use of the asset
and its eventual disposition. Management has determined that there has been
no impairment in the carrying value of Ohmeda as of December 31, 1998.
Depreciation is calculated using the straight-line method over 25 years.
F-32
<PAGE>
Revenue Recognition
The lease on Ohmeda is classified as an operating lease, and the related
rental income is recognized on a straight-line basis over the terms of the
lease.
2. RENTAL INCOME
The future minimum rental income due Ohmeda under noncancelable operating
leases at December 31, 1998 is as follows:
Year ending December 31:
1999 $1,004,517
2000 1,004,517
2001 1,004,517
2002 1,004,517
2003 1,050,509
Thereafter 1,194,889
----------
$6,263,466
==========
One tenant contributed 100% of rental income for the year ended December 31,
1998 and represents 100% of the future minimum rental income above.
3. RELATED-PARTY TRANSACTIONS
Fund IX, Fund X, Fund XI, and REIT entered into a property management
agreement with Wells Management Company, Inc. ("Wells Management"), an
affiliate of Fund IX, Fund X, Fund XI, and REIT. In consideration for
supervising management of the property, Fund IX, Fund X, Fund XI, and REIT
will generally pay Wells Management management and leasing fees equal to (a)
3% of the gross revenues for management and 3% of the gross revenues for
leasing (aggregate maximum of 6%) plus a separate fee for the one-time
initial lease-up of newly constructed properties in an amount not to exceed
the fee customarily charged in arm's-length transactions by others rendering
similar services in the same geographic area for similar properties or (b) in
the case of commercial properties which are leased on a long-term net basis
(ten or more years), 1% of the gross revenues except for initial leasing fees
equal to 3% of the gross revenues over the first five years of the lease
term.
Ohmeda incurred management and leasing fees of $41,688 for the year ended
December 31, 1998 which were paid to Wells Management.
F-33
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Initial Cost Costs of
------------------------------ ------------
Buildings and Capitalized
Description Encumbrances Land Improvements Improvements
- ----------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
ABB PROPERTY (A) None $ 582,897 $ 744,164 $6,542,818
LUCENT TECHNOLOGIES (B) None 1,002,723 4,386,374 237,971
360 INTERLOCKEN (C) None 1,570,000 6,733,500 437,266
IOMEGA PROPERTY (D) None 385,000 4,674,624 193,372
OHMEDA PROPERTY (E) None 2,613,600 7,762,481 528,415
FAIRCHILD PROPERTY (F) None 2,130,480 6,852,630 374,300
ORANGE COUNTY PROPERTY (G) None 2,100,000 4,463,700 287,916
----------- ----------- ----------
Total $10,384,700 $35,617,473 $8,602,058
=========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at December 31, 1998
----------------------------------------------------------------------
Buildings and Construction
Description Land Improvements in Progress Total
- ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
ABB PROPERTY (A) $ 607,930 $ 7,261,949 $ 0 $ 7,869,879
LUCENT TECHNOLOGIES (B) 1,045,878 4,580,200 990 5,627,068
360 INTERLOCKEN (C) 1,650,070 7,090,696 0 8,740,766
IOMEGA PROPERTY (D) 403,442 4,849,554 0 5,252,996
OHMEDA PROPERTY (E) 2,746,894 8,157,602 0 10,904,496
FAIRCHILD PROPERTY (F) 2,219,251 7,138,159 0 9,357,410
ORANGE COUNTY PROPERTY (G) 2,187,501 4,664,115 0 6,851,616
----------- ----------- ---- -----------
Total $10,860,966 $43,742,275 $990 $54,604,231
=========== =========== ==== ===========
</TABLE>
<TABLE>
<CAPTION>
Life on Which
Accumulated Date of Date Depreciation
Description Depreciation Construction Acquired Is Computed (h)
- ----------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C>
ABB PROPERTY (A) $ 511,883 1997 12/10/96 20 to 25 years
LUCENT TECHNOLOGIES (B) 106,871 1998 6/24/98 20 to 25 years
360 INTERLOCKEN (C) 238,299 1996 3/20/98 20 to 25 years
IOMEGA PROPERTY (D) 96,991 1998 7/01/98 20 to 25 years
OHMEDA PROPERTY (E) 299,112 1998 2/13/98 20 to 25 years
FAIRCHILD PROPERTY (F) 142,720 1998 7/21/98 20 to 25 years
ORANGE COUNTY PROPERTY (G) 92,087 1998 7/31/98 20 to 25 years
----------
Total $1,487,963
==========
</TABLE>
(a) The ABB Property is a 5.6-acre tract of real property under construction in
Knoxville, Tennessee. It is owned by Fund IX and X Associates. The
Partnership owned a 7% interest in Fund IX and X Associates at December 31,
1998.
(b) The Lucent Technologies property consists of a one-story office building
located in Oklahoma City, Oklahoma. It is owned by Fund IX-X-XI-REIT Joint
Venture. The Partnership owned a 7% interest in Fund IX-X-XI-REIT Joint
Venture at December 31, 1998.
(c) The 360 Interlocken property consists of a three-story multi-tenant office
building located in Broomfield, Colorado. It is owned by Fund IX-X-XI-REIT
Joint Venture. The Partnership owned a 7% interest in Fund IX-X-XI-REIT
Joint Venture at December 31, 1998.
(d) The Iomega Property consists of a one-story warehouse and office building
located in Ogden, Utah. It is owned by Fund IX-X-XI-REIT Joint Venture. The
Partnership owned a 7% interest in Fund IX-X-XI-REIT Joint Venture at
December 31, 1998.
(e) The Ohmeda Property consists of a two-story office building located in
Louisville, Colorado. It is owned by Fund IX-X-XI-REIT Joint Venture. The
Partnership owned a 7% interest in Fund IX-X-XI-REIT Joint Venture at
December 31, 1998.
(f) The Fairchild Property consists of a two-story warehouse and office building
located in Fremont, California. It is owned by Wells/Freemont Associates.
The Partnership owned a 9% interest in Wells/Freemont Associates at December
31, 1998.
(g) The Orange County Property consists of a one-story warehouse and office
building located in Fountain Valley, California. It is owned by Wells/Orange
County Associates. The Partnership owned a 23% interest in Wells/Orange
County Associates at December 31, 1998.
(h) Depreciation lives used for buildings are 25 years. Depreciation lives used
for land improvements are 20 years.
S-1
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
Accumulated
Cost Depreciation
----------- ------------
BALANCE AT DECEMBER 31, 1997 $ 0 $ 0
1998 additions 54,604,231 1,487,963
----------- ----------
BALANCE AT DECEMBER 31, 1998 $54,604,231 $1,487,963
=========== ==========
S-2
<PAGE>
EXHIBIT INDEX
-------------
(Wells Real Estate Fund XI, L.P.)
The following documents are filed as exhibits to this report. Those
exhibits previously filed and incorporated herein by reference are identified
below by an asterisk. For each such asterisked exhibit, there is shown below the
description of the previous filing. Exhibits which are not required for this
report are omitted.
Exhibit
Number Description of Document
- ------ -----------------------
*3(a) Amended and Restated Agreement of Limited Partnership of Wells Real
Estate Fund XI, L.P. (Exhibit 3(a) to Form S-11 Registration Statement
of Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P.,
as amended to date, Commission File No. 333-7979)
*3(b) Certificate of Limited Partnership of Wells Real Estate Fund XI, L.P.
(Exhibit 3(c) to Form S-11 Registration Statement of Wells Real Estate
Fund X, L.P. and Wells Real Estate Fund XI, L.P., as amended to date,
Commission File No. 333-7979)
*10(a) Leasing and Tenant Coordinating Agreement with Wells Management
Company, Inc. (Exhibit 10(d) to Form S-11 Registration Statement of
Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as
amended to date, Commission File No. 333-7979)
*10(b) Management Agreement with Wells Management Company, Inc. (Exhibit 10(e)
to Form S-11 Registration Statement of Wells Real Estate Fund X, L.P.
and Wells Real Estate Fund XI, L.P., as amended to date, Commission
File No. 333-7979)
*10(c) Custodial Agency Agreement with The Bank of New York (Exhibit 10(f) to
Form S-11 Registration Statement of Wells Real Estate Fund X, L.P. and
Wells Real Estate Fund XI, L.P., as amended to date, Commission File
No. 333-7979)
*10(d) Joint Venture Agreement of Fund IX and Fund X Associates dated March
20, 1997 (Exhibit 10(g) to 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., as amended to date, Commission File No. 333-7979)
*10(e) Lease Agreement for the ABB Building dated December 10, 1996, between
Wells Real Estate Fund IX, L.P. and ABB Flakt, Inc. (Exhibit 10(kk) to
Post-Effective Amendment No. 13 to Form S-11 Registration Statement of
Wells Real Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P.,
as amended to date, Commission File No. 33-83852)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
*10(f) Development Agreement relating to the ABB Building dated December 10,
1996, between Wells Real Estate Fund IX, L.P. and ADEVCO Corporation
(Exhibit 10(ll) to Post-Effective Amendment No. 13 to Form S-11
Registration Statement of Wells Real Estate Fund VIII, L.P. and Wells
Real Estate Fund IX, L.P., as amended to date, Commission File No. 33-
83852)
*10(g) Owner-Contractor Agreement relating to the ABB Building dated November
1, 1996, between Wells Real Estate Fund IX, L.P. and Integra
Construction, Inc. (Exhibit 10(mm) to Post-Effective Amendment No. 13
to Form S-11 Registration Statement of Wells Real Estate Fund VIII,
L.P. and Wells Real Estate Fund IX, L.P., as amended to date,
Commission File No. 33-83852)
*10(h) Agreement for the Purchase and Sale of Real Property relating to the
Lucent Technologies Building dated May 30, 1997, between Fund IX and
Fund X Associates and Wells Development Corporation (Exhibit 10(k) to
Post-Effective Amendment No. 2 to Form S-11 Registration Statement of
Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as
amended to date, Commission File No. 333-7979)
*10(i) Net Lease Agreement for the Lucent Technologies Building dated May 30,
1997 (Exhibit 10(l) to Post-Effective Amendment No. 2 to Form S-11
Registration Statement of Wells Real Estate Fund X, L.P. and Wells Real
Estate Fund XI, L.P., as amended to date, Commission File No. 333-7979)
*10(j) Development Agreement relating to the Lucent Technologies Building
dated May 30, 1997, between Wells Development Corporation and ADEVCO
Corporation (Exhibit 10(m) to Post-Effective Amendment No. 2 to Form S-
11 Registration Statement of Wells Real Estate Fund X, L.P. and Wells
Real Estate Fund XI, L.P., as amended to date, Commission File No. 333-
7979)
*10(k) First Amendment to Net Lease Agreement for the Lucent Technologies
Building dated March 30, 1998 (Exhibit 10.10(a) to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(l) Amended and Restated Joint Venture Agreement of The Fund IX, Fund X,
Fund XI and REIT Joint Venture (the "IX-X-XI REIT Joint Venture") dated
July 11, 1998 (Exhibit 10.4 to Form S-11 Registration Statement of
Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-32099)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
*10(m) Agreement for the Purchase and Sale of Real Property relating to the
Ohmeda Building dated November 14, 1997 between Lincor Centennial, Ltd.
and Wells Real Estate Fund X, L.P. (Exhibit 10.6 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(n) Agreement for the Purchase and Sale of Property relating to the 360
Interlocken Building dated February 11, 1998 between Orix Prime West
Broomfield Venture and Wells Development Corporation (Exhibit 10.7 to
Form S-11 Registration Statement of Wells Real Estate Investment Trust,
Inc., as amended to date, Commission File No. 333-32099)
*10(o) Purchase and Sale Agreement relating to the Iomega Building dated
February 4, 1998 with SCI Development Services Incorporated (Exhibit
10.11 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10(p) Lease Agreement for the Iomega Building dated April 9, 1996 (Exhibit
10.12 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10(q) Agreement for the Purchase and Sale of Property relating to the
Fairchild Building dated June 8, 1998 (Exhibit 10.13 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(r) Restatement of and First Amendment to Agreement for the Purchase and
Sale of Property relating to the Fairchild Building dated July 1, 1998
(Exhibit 10.14 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10(s) Joint Venture Agreement of Wells/Fremont Associates (the "Fremont Joint
Venture") dated July 15, 1998 between Wells Development Corporation and
Wells Operating Partnership, L.P. (Exhibit 10.17 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(t) Joint Venture Agreement of Fund X and Fund XI Associates (the "Fund X-
XI Joint Venture") dated July 15, 1998 (Exhibit 10.18 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(u) Agreement for the Purchase and Sale of Joint Venture Interest relating
to the Fremont Joint Venture dated July 17, 1998 between Wells
Development
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
Corporation and the Fund X-XI Joint Venture (Exhibit 10.19
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(v) Lease Agreement for the Fairchild Building dated September 19, 1997
between the Fremont Joint Venture (as successor in interest by
assignment) and Fairchild Technologies USA, Inc. (Exhibit 10.20 to Form
S-11 Registration Statement of Wells Real Estate Investment Trust,
Inc., as amended to date, Commission File No. 333-32099)
*10(w) First Amendment to Joint Venture Agreement of Wells/Fremont Associates
dated October 8, 1998 (Exhibit 10(w) to Form 10-K of Wells Real Estate
Fund X, L.P. for the fiscal year ended December 31, 1998, Commission
File No. 0-23719)
*10(x) Purchase and Sale Agreement and Joint Escrow Instructions relating to
the Cort Furniture Building dated June 12, 1998 between the Cort Joint
Venture (as successor in interest by assignment) and Spencer Fountain
Valley Holdings, Inc. (Exhibit 10.21 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)
*10(y) First Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions relating to the Cort Furniture Building dated July 16,
1998 between the Cort Joint Venture (as successor in interest by
assignment) and Spencer Fountain Valley Holdings, Inc. (Exhibit 10.22
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(z) Promissory Note for $4,875,000 from the Cort Joint Venture to
NationsBank, N.A. relating to the Cort Furniture Building dated July
30, 1998 (Exhibit 10.23 to Form S-11 Registration Statement of Wells
Real Estate Investment Trust, Inc., as amended to date, Commission File
No. 333-32099)
*10(aa) Deed of Trust securing the Cort Furniture Building dated July 30, 1998
between the Fremont Joint Venture and NationsBank, N.A. (Exhibit 10.24
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10(bb) Joint Venture Agreement of Wells/Orange County Associates (the "Cort
Joint Venture") dated July 27, 1998 between Wells Development
Corporation and Wells Operating Partnership, L.P. (Exhibit 10.25 to
Form S-11 Registration Statement of Wells Real Estate Investment Trust,
Inc., as amended to date, Commission File No. 333-32099)
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
*10(cc) Agreement for the Purchase and Sale of Joint Venture Interest relating
to the Cort Joint Venture dated July 30, 1998 between Wells Development
Corporation and the Fund X-XI Joint Venture (Exhibit 10.26 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10(dd) First Amendment to Joint Venture Agreement of Wells/Orange County
Associates dated September 1, 1998 (Exhibit 10(dd) to Form 10-K of
Wells Real Estate Fund X, L.P. for the fiscal year ended December 31,
1998, Commission File No. 0-23719)
*10(ee) Temporary Lease Agreement for remainder of the ABB Building dated
September 10, 1998 between the IX-X-XI-REIT Joint Venture and
Associates Housing Finance, LLC (Exhibit 10.35 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,292,800
<SECURITIES> 4,997,787
<RECEIVABLES> 126,692
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 427,236
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,844,515
<CURRENT-LIABILITIES> 444,089
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,400,426
<TOTAL-LIABILITY-AND-EQUITY> 14,844,515
<SALES> 0
<TOTAL-REVENUES> 262,729
<CGS> 0
<TOTAL-COSTS> 119,434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 143,295
<INCOME-TAX> 143,295
<INCOME-CONTINUING> 143,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,295
<EPS-PRIMARY> .50
<EPS-DILUTED> 0
</TABLE>
