<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 18, 1999
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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
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(State or other jurisdiction of incorporation)
0-25731 58-2250094
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(Commission File Number) (IRS Employer Identification No.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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________________________________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
The property, located at 111 SouthChase Boulevard, was developed in the
early 1980s on a site of approximately 11.94 acres. The site is located in the
SouthChase Industrial Park, which is located adjacent to I-385 in southwest
Greenville with easy access to I-85. The current configuration of the parking
lot allows for approximately 252 spaces for vehicles, which has proven adequate
for the current tenant. The landscaping at the facility is in good condition and
is consistent with the quality level of the entire complex.
An independent appraisal of the EYBL CarTex Building was prepared by CB
Richard Ellis, real estate appraisers, as of April 27, 1999, pursuant to which
the market value of the land and the leased fee interest subject to the Lease
(described below) was estimated to be $5,250,000, in cash or terms equivalent to
cash. This value estimate was based upon a number of assumptions, including that
the EYBL CarTex Building will continue operating at a stabilized level with EYBL
CarTex occupying 100% of the rentable area, and is not necessarily an accurate
reflection of the fair market value of the property. The Registrant also
obtained an environmental report prepared by Law Engineering and Environmental
Testing, Inc. prior to closing evidencing that the environmental condition of
the land and the EYBL CarTex Building was satisfactory.
The Lease. The entire 169,510 rentable square feet of the EYBL CarTex Building
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is currently under an Agreement of Lease dated February 13, 1998, as amended by
First Amendment to Agreement of Lease dated July 24, 1998 and Second Amendment
to Agreement of Lease dated November 4, 1998 (the "Lease") with EYBL CarTex,
Inc., a South Carolina corporation ("EYBL CarTex"). The Lease was assigned to
Wells LLC at the closing.
The initial term of the Lease is ten years which commenced on March 1, 1998
and expires in February 2008. EYBL CarTex has the right to extend the Lease for
two additional five year periods of time. Each extension option must be
exercised by giving notice to the landlord at least 12 months prior to the
expiration date of the then current lease term.
The base rent payable under the Lease for the remainder of the lease term
shall be as follows:
<TABLE>
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Lease Year Annual Rent Monthly Rent
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<S> <C> <C>
2 $508,530.00 $42,377.50
3 $508,530.00 $42,377.50
4 $508,530.00 $42,377.50
5 $550,907.50 $45,908.95
6 $550,907.50 $45,908.95
7 $593,285.00 $49,440.42
8 $593,285.00 $49,440.42
9 $610,236.00 $50,853.00
10 $610,236.00 $50,853.00
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</TABLE>
The monthly base rent payable for each extended term of the Lease will be
equal to the fair market rent as submitted by the landlord. If the tenant does
not agree to the proposed rent by the landlord for the extension term, tenant
may require the fair market rent be determined by three appraisers, one of which
will be selected by the tenant, one by the landlord and the final appraiser
shall be selected by the first two appraisers.
2
<PAGE>
Under the Lease, EYBL CarTex is required to pay as additional rent all real
estate taxes, special assessments, utilities, taxes, insurance and other
operating costs with respect to the EYBL CarTex Building during the term of the
Lease. In addition, EYBL CarTex is responsible for all routine maintenance and
repairs to the EYBL CarTex Building. Wells LLC, as landlord, is responsible for
maintenance of the footings and foundations and the structural steel columns and
girders associated with the building.
Under the Lease, EYBL CarTex has an option to purchase the EYBL CarTex
Building at the expiration of the initial lease term by giving notice to the
landlord by March 1, 2007. Within 30 days after landlord receives notice of
tenant's intent to exercise its purchase option, landlord shall submit a
proposed purchase price for the EYBL CarTex Building based upon its good faith
estimate of the fair market value of the building. If tenant does not agree to
the purchase price, tenant may require that the purchase price be established by
three appraisers, one of which will be selected by the tenant, one by the
landlord and the final appraiser shall be selected by the first two appraisers.
In no event, however, will the purchase price under the purchase option be less
than $5,500,000.
Pursuant to a Lease Commission Agreement dated February 12, 1998 between
Seller and The McNamara Company, Inc., Wells LLC is required to pay on or before
March 1 of each year through March 1, 2007 an amount equal to $13,787 as a
brokerage fee to The McNamara Company, Inc.
Property Management Fees. Wells Management Company, Inc. ("Wells Management"),
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an affiliate of the Registrant, has been retained to manage and lease the EYBL
CarTex Building. Wells LLC shall pay management and leasing fees to Wells
Management in the amount of 4.5% of gross revenues from the EYBL CarTex Building
on a monthly basis.
3
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements. The following financial statements relating to the
real property acquired by Wells LLC are submitted at the end of this Current
Report and are filed herewith and incorporated herein by reference:
Page
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Report of Independent Public Accountants F-1
Statements of Revenues Over Certain Operating
Expenses for the year ended December 31, 1998 (Audited)
and for the three months ended March 31, 1999 (Unaudited) F-2
Notes to Statements of Revenues Over Certain
Operating Expenses for the year ended December 31, 1998 (Audited)
and for the three months ended March 31, 1999 (Unaudited) F-3
(b) Pro Forma Financial Information. The following unaudited pro
forma financial statements of the Registrant relating to the real property
acquired are submitted at the end of this Current Report and are filed herewith
and incorporated herein by reference:
Page
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Summary of Unaudited Pro Forma Financial Statements F-5
Pro Forma Balance Sheet as of March 31, 1999 F-6
Pro Forma Statement of Income for the year ending
December 31, 1998 F-7
Pro Forma Statement of Income for the three month
period ending March 31, 1999 F-8
After reasonable inquiry, the Registrant is not aware of any material
factors relating to the real property described in this Current Report that
would cause the financial information reported herein not to be necessarily
indicative of future operating results.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WELLS REAL ESTATE FUND XI, L.P.
Registrant
By: /s/ Leo F. Wells, III
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Leo F. Wells, III, as General Partner and
as President and sole Director of Wells
Capital, Inc., the General Partner of
Wells Partners, L.P., General Partner
Date: May 27, 1999
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund XI, L.P.:
We have audited the accompanying statement of revenues over certain operating
expenses for the EYBL CARTEX BUILDING for the year ended December 31, 1998.
This financial statement is the responsibility of management. Our
responsibility is to express an opinion on this financial statement 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 statement of revenues over certain operating
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement of
revenues over certain operating expenses. 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.
As described in Note 2, this financial statement excludes certain expenses that
would not be comparable with those resulting from the operations of the EYBL
CarTex Building after acquisition by the Wells Fund XI REIT Joint Venture (a
joint venture between the Wells Operating Partnership, L.P. [on behalf of Wells
Real Estate Investment Trust, Inc.] and Wells Real Estate Fund XI, L.P.). The
accompanying statement of revenues over certain operating expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission and is not intended to be a complete presentation of the
EYBL CarTex Building's revenues and expenses.
In our opinion, the statement of revenues over certain operating expenses
presents fairly, in all material respects, the revenues over certain operating
expenses of the EYBL CarTex Building for the year ended December 31, 1998 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
/s/ Arthur Anderson LLP
Atlanta, Georgia
May 21, 1999
F-1
<PAGE>
EYBL CARTEX BUILDING
STATEMENTS OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
1998 1999
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(UNAUDITED)
<S> <C> <C>
RENTAL REVENUES $ 213,330 $ 63,990
OPERATING EXPENSES, net of reimbursements 14,343 0
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REVENUES OVER CERTAIN OPERATING EXPENSES $ 198,987 $ 63,990
========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
EYBL CARTEX BUILDING
NOTES TO STATEMENTS OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Real Estate Property Acquired
The EYBL CarTex Building is an industrial building consisting of a total of
169,510 square feet. On May 18, 1999, Wells Real Estate, LLC - SC I ("Wells
LLC"), a Georgia limited liability company wholly owned by the Wells Fund
XI-REIT Joint Venture (the "Joint Venture"), acquired an industrial
building located in Fountain Inn, unincorporated Greenville County, South
Carolina (the "EYBL CarTex Building"). Wells LLC purchased the EYBL CarTex
Building from Liberty Property Trust, a Pennsylvania limited partnership.
The Joint Venture is a Georgia joint venture between Wells Real Estate Fund
XI, L.P. ("Wells Fund XI"), a Georgia limited partnership, and Wells
Operating Partnership, L.P. ("Wells OP"), a Delaware limited partnership
formed to acquire , own, lease, operate, and manage real properties on
behalf of Wells Real Estate Investment Trust, Inc. (the "Wells REIT"). The
Joint Venture was formed on May 1, 1999 for the purpose of the acquisition,
ownership, development, leasing, operations, sale, and management of real
properties.
The purchase price for the EYBL CarTex Building was $5,085,000. Wells LLC
also incurred additional acquisition expenses in connection with the
purchase of the EYBL CarTex Building, including attorneys' fees, recording
fees, and other closing costs of $36,828. Wells Fund XI contributed
$1,530,000 to the Joint Venture and holds an equity percentage interest in
the Joint Venture of 29.87% for its share of the purchase of the EYBL
CarTex Building. Wells OP contributed $3,591,828 to the Joint Venture and
holds an equity percentage interest in the Joint Venture of 70.13% for its
share of the purchase of the EYBL CarTex Building. All income, loss,
profit, net cash flow, resale gain, and sale proceeds of the Joint Venture
are allocated and distributed between Wells Fund XI and Wells OP based on
their respective capital contributions to the Joint Venture.
RENTAL REVENUES
Rental income from the lease is recognized on a straight-line basis over
the life of the lease.
F-3
<PAGE>
2. BASIS OF ACCOUNTING
The accompanying statements of revenues over certain operating expenses are
presented on the accrual basis. These statements have been prepared in
accordance with the applicable rules and regulations of the Securities and
Exchange Commission for real estate properties acquired. Accordingly, the
statements exclude certain historical expenses, such as depreciation and
management fees, not comparable to the operations of the EYBL CarTex
Building after acquisition by the Joint Venture.
F-4
<PAGE>
WELLS REAL ESTATE FUND, XI, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet as of March 31, 1999 and the pro
forma statements of income for the year ended December 31, 1998 and the three
months ended March 31, 1999 have been prepared to give effect to the acquisition
of the EYBL CarTex Building by the Wells XI-REIT Joint Venture (a joint venture
between the Wells Operating Partnership and Wells Real Estate Fund XI, L.P.) as
if the acquisition occurred as of March 31, 1999 with respect to the balance
sheet and on January 1, 1998 with respect to the statements of income. Wells
Operating Partnership, L.P. is a Delaware limited partnership that was organized
to own and operate properties on behalf of the Wells Real Estate Investment
Trust, Inc. Wells Real Estate Investment Trust, Inc. is the general partner of
the Wells Operating Partnership, L.P.
These unaudited pro forma financial statements are prepared for informational
purposes only and are not necessarily indicative of future results or of actual
results that would have been achieved had the acquisition been consummated at
the beginning of the period presented.
F-5
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
Wells Real Pro
Estate Pro Forma Forma
Fund XI, L.P. Adjustments Total
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<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS $ 8,163,352 $(1,530,000)(a) $ 6,633,352
INVESTMENTS IN JOINT VENTURES 5,843,448 1,593,292 (b) 7,436,740
DEFERRED PROJECT COSTS 339,830 (63,292)(c) 276,538
ORGANIZATIONAL COSTS, Less Accumulated Amortization Of $7,812 In March 1999
23,438 0 23,438
DUE FROM AFFILIATES 130,298 0 130,298
PREPAID EXPENSES AND OTHER ASSETS 26,990 0 26,990
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Total assets $14,527,356 $ 0 $14,527,356
============= =============== ===========
LIABILITIES AND PARTNERS' CAPITAL
DUE TO AFFILIATES $ 934 $ 0 $ 934
PARTNERSHIP DISTRIBUTIONS PAYABLE 195,440 0 195,440
SALES COMMISSIONS PAYABLE 0 0 0
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Total liabilities 196,374 0 196,374
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LIMITED PARTNERS:
Class A--1,302,942 11,418,247 0 11,418,247
Class B--350,338 2,912,635 0 2,912,635
ORIGINAL LIMITED PARTNER 100 0 100
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Total partners' capital 14,330,982 0 14,330,982
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Total liabilities and partners' capital $14,527,356 $ 0 $14,527,356
============= =============== ===========
</TABLE>
(a) Reflects Wells Real Estate Fund XI, L.P.'s portion of the
purchase price related to the EYBL CarTex Building.
(b) Reflects Wells Real Estate Fund XI, L.P.'s contribution to
the Wells XI-REIT Joint Venture.
(c) Reflects deferred project costs contribution to the Wells
XI-REIT Joint Venture.
F-6
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
STATEMENT OF INCOME
FOR THE YEAR ENDING DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro
Wells Real Pro Forma Forma
Estate Adjustment Total
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Fund XI, L.P.
----------------
<S> <C> <C> <C>
REVENUES:
Equity in income (loss) of joint ventures $ 142,163 $ (2,642)(a) $ 139,521
Interest income 120,566 0 120,566
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262,729 (2,642) 260,087
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EXPENSES:
Legal and accounting 64,052 0 64,052
Partnership administration 46,649 0 46,649
Computer costs 2,483 0 2,483
Amortization 6,250 0 6,250
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119,434 0 119,434
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NET (LOSS) INCOME $ 143,295 $ (2,642) $ 140,653
========== ========== ==========
NET LOSS ALLOCATED TO GENERAL PARTNERS
$ (500) $ 0 $ (500)
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NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS
$ 254,862 $ 56,484 $ 311,346
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NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS
$ (111,067) $ (59,126) $ (170,193)
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NET INCOME PER WEIGHTED AVERAGE CLASS A LIMITED
PARTNER UNIT $ 0.50 $ 0.11 $ 0.61
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NET LOSS PER WEIGHTED AVERAGE CLASS B LIMITED
PARTNER UNIT $ (0.77) $ (0.41) $ (1.18)
---------- ---------- ----------
</TABLE>
(a) Reflects Wells Real Estate Fund XI, L.P.'s equity in loss of the
Wells XI-REIT Joint Venture.
F-7
<PAGE>
WELLS REAL ESTATE FUND XI, L.P.
STATEMENT OF INCOME
FOR THE THREE-MONTH PERIOD ENDING MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Wells Real Pro
Estate Pro Forma Forma
Fund XI, L.P. Adjustment Total
------------- ---------- -----
<S> <C> <C> <C>
REVENUES:
Equity in income of joint ventures $ 88,677 $ 3,235(a) $ 91,912
Interest income 71,822 0 71,822
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160,499 3,235 163,734
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EXPENSES:
Legal and accounting 14,210 0 14,210
Partnership administration 17,068 0 17,068
Computer costs 1,664 0 1,664
Amortization 1,562 0 1,562
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34,504 0 34,504
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NET (LOSS) INCOME $ 125,995 $ 3,235 $ 129,230
--------- --------- ---------
NET INCOME ALLOCATED TO CLASS A
LIMITED PARTNERS $ 174,372 $ 18,016 $ 192,388
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NET (LOSS) INCOME $ (48,377) $ (14,781) $ (63,248)
--------- --------- ---------
NET INCOME PER WEIGHTED CLASS A
LIMITED PARTNER UNIT $ 0.13 $ 0.02 $ 0.15
--------- --------- ---------
NET LOS PER WEIGHTED AVERAGE
CLASS B LIMITED PARTNER UNIT $ (0.14) $ (0.04) $ (0.18)
--------- --------- ---------
</TABLE>
(a) Reflects Wells Real Estate Fund XI, L.P.'s equity in income of the Wells
XI-REIT Joint Venture.
F-8
