<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1999 or
-----------------------------------
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____________ to ___________
Commission file number 0-25731
-----------------------------------------
WELLS REAL ESTATE FUND XI, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-2250094
- --------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- ------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
---------------------
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _______
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FORM 10-Q
WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets--September 30, 1999 and December 31, 1998 3
Statements of Income for the Three Months and Nine Months Ended
September 30, 1999 and 1998 4
Statements of Partners' Capital for the Nine Months Ended September
30, 1999 and the Year Ended December 31, 1998 5
Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 6
Condensed Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 12
PART II. OTHER INFORMATION 26
</TABLE>
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WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------------- -------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 2,137 $ 9,292,800
Investment in joint venture (Note 2) 14,192,400 4,997,787
Deferred project costs 37 375,246
Organizational costs, less accumulated amortization
of $6,250 in December 1998 and $15,625 in
September 1999 15,625 25,000
Due from affiliates 241,287 126,692
Prepaid expenses and other assets 5,490 26,990
--------------- ------------
Total assets $ 14,456,976 $ 14,844,515
=============== ============
LIABILITIES AND PARTNERS' CAPITAL:
Due to affiliates $ (595) $ 88,473
Partnership distributions payable 262,981 141,007
Sales commissions payable 0 214,609
--------------- ------------
Total liabilities 262,386 444,089
--------------- ------------
Partners' capital:
Limited partners:
Class A--1,314,906 units outstanding at
September 30, 1999 and 1,302,942 at
December 31, 1998 11,572,858 11,439,315
Class B--338,374 units outstanding at
September 30, 1999 and 350,337 at
December 31, 1998 2,621,732 2,961,011
Original partner 0 100
--------------- ------------
Total partners' capital 14,194,590 14,400,426
=============== ============
Total liabilities and partners' capital $ 14,456,976 $ 14,844,515
=============== ============
</TABLE>
See accompanying condensed notes to financial statements.
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WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months Seven Months
Three Months Ended Ended Ended
-----------------------------
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Interest income $ 12,818 $ (2,640) $ 159,004 $ 74,388
Equity in income of joint ventures (Note 2) 205,332 41,088 392,127 52,669
---------- ----------- --------- -----------
218,150 38,448 551,131 127,057
---------- ----------- --------- -----------
EXPENSES:
Computer costs 2,558 1,170 5,699 1,867
Partnership administration 13,531 8,945 47,039 23,151
Legal and accounting 8,499 9,770 39,698 32,784
Amortization of organizational costs 6,250 0 9,375 0
---------- ----------- --------- -----------
30,838 19,885 101,811 57,802
---------- ----------- --------- -----------
Net income $ 187,312 $ 18,563 $ 449,320 $ 69,255
========== =========== ========= ===========
NET LOSS ALLOCATED TO GENERAL
PARTNERS $ 0 $ (381) $ 0 $ (454)
========== =========== ========= ===========
NET INCOME ALLOCATED TO CLASS A
LIMITED PARTNERS $ 313,127 $ 56,719 $ 687,495 $ 114,666
========== =========== ========= ===========
NET LOSS ALLOCATED TO CLASS B LIMITED
PARTNERS $(125,815) $ (37,775) $(238,175) $ (44,957)
========== =========== ========= ===========
NET INCOME PER CLASS A WEIGHTED
AVERAGE LIMITED PARTNER UNIT $ 0.24 $ 0.14 $ 0.52 $ 0.36
========== =========== ========= ===========
NET LOSS PER CLASS B WEIGHTED AVERAGE
LIMITED PARTNER UNIT $ (0.37) $ 0.11 $ (0.70) $ 0.13
========== =========== ========= ===========
CASH DISTRIBUTION PER CLASS A LIMITED
PARTNER UNIT $ 0.20 $ 0.15 $ 0.50 $ 0.15
========== =========== ========= ===========
</TABLE>
See accompanying condensed notes to financial statements.
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WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
THE NINE MONTHS ENDED SEPTEMBER 30, 1999
AND FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Limited Partners
---------------------------------------------- Total
Class A Class B General Partners'
---------------------- ----------------------
Original Units Amounts Units Amounts Partners Capital
-------- --------- ----------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 $ 100 0 $ 0 $ 0 $ 0 $ 500 $ 600
Limited partner contributions 0 1,302,942 13,029,423 350,338 3,503,378 0 16,532,801
Net income (loss) 0 0 254,862 0 (111,067) (500) 143,295
Sales commissions 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)
Partnership distributions 0 0 (240,881) 0 0 0 (240,881)
-------- --------- ----------- -------- ----------- -------- ------------
BALANCE, December 31, 1998 100 1,302,942 11,439,315 350,338 2,961,011 0 14,400,426
Net income (loss) 0 0 687,495 0 (238,175) 0 449,320
Partnership distributions 0 0 (655,056) 0 0 0 (655,056)
Class B conversion elections 0 12,000 101,424 (12,000) (101,424) 0 0
Class A conversion elections 0 (36) (320) 36 320 0 0
Return of original limited
partner investment (100) 0 0 0 0 0 (100)
-------- --------- ----------- -------- ----------- -------- ------------
BALANCE, September 30, 1999 $ 0 1,314,906 $11,572,858 338,374 $ 2,621,732 $ 0 $ 14,194,590
======== ========= =========== ======== =========== ======== ============
</TABLE>
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WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Seven Months
Ended Ended
September 30, September 30,
1999 1998
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 449,320 $ 69,255
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in income of joint ventures (392,127) (52,669)
Changes in assets and liabilities:
Amortization of organizational costs 9,375 0
Accounts receivables 21,500 (10,000)
Accounts payable (1,125) 0
Prepaid expenses and other assets (9,964) (5,000)
Due to affiliates (22,944) 44,070
----------- -----------
Net cash provided by operating activities 54,035 45,656
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred project costs 0 (341,285)
Investments in joint ventures (9,005,977) (4,881,577)
Distributions received from joint ventures 409,070 26,736
----------- -----------
Net cash used in investing activities (8,596,907) (5,196,126)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Limited partners' contributions 0 9,750,998
Sales commissions (214,609) (895,976)
Offering costs 0 (292,530)
Distributions to partners from accumulated earnings (533,082) 0
Return of original limited partner investment (100) 0
----------- -----------
Net cash (used in) provided by financing activities (747,791) 8,562,492
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (9,290,663) 3,412,022
CASH AND CASH EQUIVALENTS, beginning of year 9,292,800 600
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,137 $ 3,412,622
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Deferred project costs applied to joint venture property $ 375,210 $ 161,734
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
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WELLS REAL ESTATE FUND XI, L.P.
(A Georgia Public Limited Partnership)
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998 AND DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) 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. as
general partners. The Partnership was formed on June 20, 1996 for the
purpose of acquiring, developing, owning, operating, improving, leasing,
and otherwise managing for investment purposes income-producing commercial
properties.
On December 31, 1997, the Partnership commenced a public offering of up to
$35,000,000 of limited partnership units ($10 per unit) pursuant to a
registration statement on Form S-11 filed 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. The offering was
terminated on December 31, 1998 at which time the Partnership had sold
1,314,906 Class A status units and 338,374 Class B status unites held by a
total of 1,250 and 95 Class A and B limited partners, respectively, for
total limited partner capital contributions of $16,532,802. As of September
30, 1999, the Partnership has paid $578,648 in acquisition and advisory
fees and acquisition expenses and payment of $2,066,600 in selling
commissions and organization and offering expenses, and has invested
$3,357,436 in the Fund IX-X-XI-REIT Joint Venture, $2,398,767 in Fund X-XI
Joint Venture, and $8,131,351 in the Fund XI-XII-REIT Joint Venture.
The Partnership owns interest in properties through equity ownership in the
following joint ventures: (i) the Fund X and Fund XI Joint Venture, a joint
venture among the Partnership and Wells Real Estate Fund X, L.P. (the "Fund
X-XI Joint Venture"); (ii) the Fund IX-X-XI-REIT Joint Venture, a joint
venture among 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. ("Wells OP"), a Delaware limited partnership having Wells
Real Estate Investment Trust, Inc., as general partner (the "Fund IX-X-XI-
REIT Joint Venture"); and (iii) the Fund XI-XII-REIT Joint Venture, a joint
venture among the Partnership and Wells Real Estate Fund XII, L.P., and
Wells OP (the "Fund XI-XII REIT Joint Venture").
As of September 30, 1999, the Partnership owned interests 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-X-XI-REIT Joint Venture; (ii) a two-story
office building located 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
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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 Wells/Fremont Associates (the
"Fremont Joint Venture"), a joint venture between the Fund X-XI Joint
Venture and Wells OP; (vii) a one-story office and warehouse building
located in Fountain Valley, California (the "Cort Building"), which is
owned by Wells/Orange County Associates (the "Cort Joint Venture"), a joint
venture between the Fund X-XI Joint Venture and Wells OP; (viii) a two-
story manufacturing and office building located in Fountain Inn, South
Carolina (the "EYBL CarTex Building"), which is owned by Fund XI-XII-REIT
Joint Venture; (ix) a three-story office building located in Leawood,
Johnson County, Kansas (the "Sprint Building"), which is owned by Fund XI-
XII-REIT Joint Venture; (x) a one-story office building and warehouse
located in Tredyffin Township, Chester County, Pennsylvania (the "Johnson
Matthey Building"), which is owned by Fund XI-XII-REIT Joint Venture; and
(xi) a two-story office building located in Ft. Myers, Lee County, Florida
(the "Gartner Building"), which is owned by Fund XI-XII-REIT Joint Venture.
(b) Basis of Presentation
The financial statements of Wells Real Estate Fund XI, L.P. have been
prepared in accordance with instructions to Form 10-Q and do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These quarterly
statements have not been examined by independent accountants, but in the
opinion of the general partners, the statements for the unaudited interim
periods presented include all adjustments, which are of a normal and
recurring nature, necessary to present a fair presentation of the results
for such periods. For further information, refer to the financial
statements and footnotes included in the Partnership's Form 10-Q for the
year ended December 31, 1998.
2. INVESTMENTS IN JOINT VENTURES
The Partnership owns interest in several properties as of September 30,
1999 through its ownership in joint ventures. The Partnership does not have
control over the operations of the joint venture; however, it does exercise
significant influence. Accordingly, investments in joint ventures are
recorded using the equity method. For further information on investments in
joint ventures, see Form 10-K for the Partnership for the year ended
December 31, 1998.
The following describes additional information about the properties in
which the Partnership owns interests as of September 30, 1999:
Fund IX-X-XI-REIT Joint Venture
Iomega Building
On March 22, 1999, the Fund IX-X-XI-REIT Joint Venture purchased a
four-acre tract of vacant land adjacent to the Iomega Building located
in Ogden, Utah. This site is being used for additional parking and a
loading-dock area, which includes at
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least 400 new parking stalls and new site work for truck maneuver
space, in accordance with the requirements of the tenant and the city
of Ogden. The project was completed on July 31, 1999. The tenant,
Iomega Corporation, has agreed to extend the term of its lease to
April 30, 2009 and will pay as additional rent an amount equal to 13%
per annum payable in monthly installments of the direct and indirect
cost of acquiring the property and construction of improvements. This
additional rent commenced on May 1, 1999.
The land was purchased at a cost of $212,000 excluding acquisition
costs. The funds used to acquire the land and for the improvements
were funded entirely from capital contributions made by the
Partnership in the amount of $874,626. The project was completed at a
total cost of $874,626.
Fund XI-XII-REIT Joint Venture
The Sprint Building
On July 2, 1999, the Fund XI-XII-REIT Joint Venture acquired a three-
story office building with approximately 68,900 rentable square feet
on a 7.12-acre tract of land located in Leawood, Johnson County,
Kansas, from Bridge Information Systems America, Inc.
The purchase price for the Sprint Building was $9,500,000. The Fund
XI-XII-REIT Joint Venture also incurred additional acquisition
expenses in connection with the purchase of the Sprint Building,
including attorneys' fees, recording fees, and other closing costs, of
approximately $46,210.
The entire 68,900 rentable square feet of the Sprint Building is
currently under a net lease agreement with Sprint Communications, Inc.
("Sprint") dated February 14, 1997 (the "Lease"). The landlord's
interest in the Lease was assigned to the Fund XI-XII-REIT Joint
Venture at the closing.
The initial term of the Lease is ten years which commenced on May 19,
1997 and expires on May 18, 2007. Sprint has the right to extend the
Lease for two additional five-year periods of time.
The monthly base rent payable under the Lease is $83,254.17 ($14.50
per square foot) through May 18, 2002 and $91,866.67 ($16.00 per
square foot) for the remainder of the lease term. The monthly base
rent payable for each extended term of the Lease will be equal to 95%
of the then "current market rate" which is calculated as a full-
service rental rate less anticipated annual operating expenses on a
rentable square foot basis charged for space of comparable location,
size, and conditions in comparable office buildings in the suburban
south Kansas City, Missouri, and south Johnson County, Kansas areas.
Under the Lease, Sprint is required to pay as additional rent all real
estate taxes, special assessments, utilities, taxes, insurance, and
other operating costs with respect to the Sprint Building during the
term of the Lease. In addition, Sprint is responsible for all routine
maintenance and repairs including the interior mechanical and
electrical systems, the HVAC system, the parking lot, and the
landscaping to the Sprint Building. The Fund XI-XII-REIT Joint
Venture, as
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landlord, is responsible for repair and replacement of the exterior,
roof, foundation, and structure.
The Lease contains a termination option which may be exercised by
Sprint effective as of May 18, 2004 provided that Sprint has not
exercised either expansion option, as described below. Sprint must
provide notice to the Fund XI-XII-REIT Joint Venture of its intent to
exercise its termination option on or before August 21, 2003. If
Sprint exercises its termination option, it will be required to pay
the Fund XI-XII-REIT Joint Venture a termination payment equal to
$6.53 per square foot, or $450,199.
Sprint also has an expansion option for an additional 20,000 square
feet of office space which may be exercised in two expansion phases.
Sprint's expansion rights involve building on unfinished ground-level
space that is currently used as covered parking within the existing
building footprint and shell. At each exercise of an expansion option,
the remaining lease term will be extended to be a minimum of an
additional five years from the date of the completion of such
expansion space.
For additional information regarding the Sprint Building, refer to
Form 8-K of Wells Real Estate Fund XI, L.P. dated July 2, 1999, which
was filled with the Commission on July 16, 1999 (Commission File
No. 0-25731).
The Johnson Matthey Building
On August 17, 1999, the Fund XI-XII-REIT Joint Venture acquired a
research and development office and warehouse building located in
Chester County, Pennsylvania, from Alliance Commercial Properties Ltd.
Wells Capital, Inc., as original purchaser under the agreement,
assigned its rights under the agreement to the Fund XI-XII-REIT Joint
Venture at closing. The purchase price paid for the Johnson Matthey
Building was $8,000,000. The Fund XI-XII-REIT Joint Venture also
incurred additional acquisition expenses in connection with the
purchase of the Johnson Matthey Building, including attorneys' fees,
recording fees, and other closing costs, of approximately $50,000.
The Johnson Matthey Building is a 130,000 square foot research and
development office and warehouse building that was first constructed
in 1973 as a multitenant facility. It was subsequently converted into
a single-tenant facility in 1998. The site consists of a ten-acre
tract of land located at 434-436 Devon Park Drive in the Tredyffrin
Township, Chester County, Pennsylvania.
The entire 130,000 rentable square feet of the Johnson Matthey
Building is currently leased to Johnson Matthey. The Johnson Matthey
lease was assigned to the Fund XI-XII-REIT Joint Venture at the
closing with the result that the joint venture is now the landlord
under the lease. The annual base rent payable under the Johnson
Matthey lease for the remainder of the lease term is as follows: year
three-$789,750, year four-$809,250, year five-$828,750, year six-
$854,750, year seven-$874,250, year eight-$897,000, year nine-
$916,500, and year ten-$939,250.
The current lease term expires in June 2007. Johnson Matthey has the
right to extend the lease for two additional three-year periods of
time.
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Under the lease, Johnson Matthey is required to pay as additional rent
all real estate taxes, special assessments, utilities, taxes,
insurance, and other operating costs with respect to the Johnson
Matthey Building during the term of the lease. In addition, Johnson
Matthey is responsible for all routine maintenance and repairs to the
Johnson Matthey Building. The Fund XI-XII-REIT Joint Venture, as
landlord, is responsible for maintenance of the footings and
foundations and the structural steel columns and girders associated
with the building.
Johnson Matthey has a right of first refusal to purchase the Johnson
Matthey Building in the event that the Fund XI-XII REIT Joint Venture
desires to sell the building to an unrelated third party. The joint
venture must give Johnson Matthey written notice of its intent to sell
the Johnson Matthey Building, and Johnson Matthey will have ten days
from the date of such notice to provide written notice of its intent
to purchase the building. If Johnson Matthey exercises its right of
first refusal, it must purchase the Johnson Matthey Building on the
same terms contained in the offer.
For additional information regarding the Johnson Matthey Building,
refer to Form 8-K of Wells Real Estate Fund XI, L.P. dated August 17,
1999, which was filed with the Commission on September 1, 1999
(Commission File No. 0-25731).
The Gartner Building
On September 20, 1999, the Fund XI-XII-REIT Joint Venture acquired a
two-story office building with approximately 62,400 rentable square
feet on a 4.9-acre tract of land located at 12600 Gateway Boulevard in
Fort Myers, Lee County, Florida, from Hogan Triad Ft. Myers I, Ltd., a
Florida limited partnership.
The rights under the contract were assigned by Wells Capital, Inc, the
original purchaser under the contract, to the Fund XI-XII-REIT Joint
Venture at closing. The purchase price for the Gartner Building was
$8,320,000. The Fund XI-XII-REIT Joint Venture also incurred
additional acquisition expenses in connection with the purchase of the
Gartner Building, including attorneys' fees, recording fees, and other
closing costs, of approximately $27,600.
The entire 62,400 rentable square feet of the Gartner Building is
currently under a net lease agreement with Gartner dated July 30, 1997
(the "Gartner Lease"). The landlord's interest in the Gartner Lease
was assigned to the Fund XI-XII-REIT Joint Venture at the closing.
The initial term of the Gartner Lease is ten years which commenced on
February 1, 1998 and expires on January 31, 2008. Gartner has the
right to extend the Gartner Lease for two additional five-year periods
of time. The yearly base rent payable for the remainder of the Gartner
Lease term is $642,798 through January 2000, $790,642 through January
2001, and thereafter will increase by 2.5% through the remainder of
the Gartner Lease.
Under the Gartner Lease, Gartner is required to pay as additional rent
all real estate taxes, special assessments, utilities, taxes,
insurance, and other operating costs with respect to the Gartner
Building during the term of the Gartner Lease. In addition, Gartner is
responsible for all routine maintenance and repairs to the Gartner
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Building. The Fund XI-XII-REIT Joint Venture, as landlord, is
responsible for repair and replacement of the roof, structure, and
paved parking areas.
Gartner also has two expansion options for additional buildings under
the Gartner Lease. The two option plans are described in the Gartner
Lease as the "Small Option Building" and the "Large Option Building."
The "Small Option Building" expansion option allows Gartner the
ability to expand into a separate, free-standing facility on the
property containing between 30,000 and 32,000 rentable square feet to
be constructed by the Fund XI-XII-REIT Joint Venture. Gartner may
exercise its expansion right for the "Small Option Building" by
providing notice in writing to the Fund XI-XII-REIT Joint Venture on
or before February 15, 2002.
The "Large Option Building" expansion option allows Gartner the
ability to expand into a separate, free-standing facility on the
property containing between 60,000 and 75,000 rentable square feet to
be constructed by the Fund XI-XII-REIT Joint Venture. Gartner may
exercise its expansion right for the "Small Option Building" by
providing notice in writing to the Fund XI-XII-REIT Joint Venture on
or before February 5, 2002.
For additional information regarding the Gartner Building, refer to
Form 8-K of Wells Real Estate Investment Trust, Inc. dated September
20, 1999, which was filed with the Commission on October 5, 1999
(Commission File No. 0-25739).
The Partnership has made total capital contributions to the Fund XI-XII-
REIT Joint Venture of $8,131,351 and currently has an equity percentage
interest in the Fund XI-XII-REIT Joint Venture of 26.15%; Wells Fund XII
has made total capital contributions to the Fund XI-XII-REIT Joint Venture
of $5,300,000 and currently has an equity percentage interest in the Fund
XI-XII-REIT Joint Venture of 17.09%; and the Wells OP has made total
capital contributions to the Fund XI-XII-REIT Joint Venture of $17,585,311
and currently has an equity percentage interest in the Fund XI-XII-REIT
Joint Venture of 56.76%.
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
The following discussion and analysis should be read in conjunction with
the accompanying financial statements of the Partnership and notes
thereto. This report contains forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933 and Section 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 the shareholders 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 statements made in this report, which
include construction costs which may exceed estimates, construction
delays, financing risks, lease-up risks, inability to obtain new tenants
upon the expiration of existing leases, and the potential need to fund
tenant improvements or other capital expenditures out of operating cash
flow.
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1. Results of Operations and Changes in Financial Conditions
As of September 30, 1999, the developed properties owned by the
Partnership were 99.9% occupied as compared to 99% in 1998. Gross revenues
of the Partnership were $551,131 and $127,057 for the nine months ended
September 30, 1999 and 1998, respectively. The increase in revenues was
attributable primarily to interest income earned on funds held by the
Partnership prior to the investment in the properties and increase in
income from joint ventures. Expenses of the Partnership were $101,811 for
the nine months ended September 30, 1999 as compared to $57,802 for the
period in 1998. The increase was due to an increase in administrative
salaries as well as accounting and legal expenses, computer costs, and
amortization expenses, and nine months of operations as compared to seven
months for 1998.
Net income per weighted average unit for Class A Limited Partners was $.52
and $.36 for the nine months ended September 30, 1999 and 1998,
respectively.
The Partnership's distributions from net cash from operations accrued to
Class A Limited Partners for the third quarter of 1999 was $.20 per
weighted average unit compared to $.15 for the same period in 1998.
Liquidity and Capital Resources
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 ventures 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.
Year 2000
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
was completed during the first half of 1999. Renovations and replacements
of equipment have been and are being made as warranted. The costs incurred
by the Partnership and its affiliates thus far for renovations and
replacements have been immaterial. As of September 30, 1999, all testing
of systems has been completed.
As to the status of the Partnership's information technology systems, it
is presently believed that all major systems and software packages are
Year 2000 compliant. At the present time, it is believed that all major
noninformation technology systems are Year 2000 compliant. The cost to
upgrade any noncompliant systems is believed to be immaterial.
The Partnership has confirmed with the Partnership's vendors, including
third-party service providers such as banks, that their systems are Year
2000 compliant.
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
-13-
<PAGE>
potential consequences of Year 2000 issues are not expected to have a
material impact on the future operations or financial conditions 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.
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 telephone
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 dispensed to each staff member of the general
partner 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 elevators 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 elevators shut 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 systems shut 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.
-14-
<PAGE>
2. PROPERTY OPERATIONS
As of September 30, 1999, the Partnership owned interests in the following
operational properties:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ------------------------------
The ABB Building/ September 30, September 30, September 30, September 30,
Fund IX-X-XI-REIT Joint Venture 1999 1998 1999 1998
------------------------------------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $261,986 $208,370 $ 784,065 $590,342
Interest income 15,024 6,000 46,765 6,000
------------- ------------- ------------- -------------
277,010 214,370 830,830 596,342
------------- ------------- ------------- -------------
Expenses:
Depreciation 135,499 120,433 403,699 305,211
Management and leasing expenses 32,260 25,577 93,666 75,765
Other operating expenses (17,097) 3,050 (13,390) 49,717
------------- ------------- ------------- -------------
150,662 149,060 483,975 430,693
------------- ------------- ------------- -------------
Net income $126,348 $ 65,310 $ 346,855 $165,649
============= ============= ============= =============
Occupied % 98.28% 95% 98.28% 95%
============= ============= ============= =============
Partnership's ownership % in the
Fund IX-X-IX-REIT Joint Venture 8.9% 6.7% 8.9% 6.7%
============= ============= ============= =============
Cash distribution to the Partnership $ 23,412 $ 12,545 $ 62,830 $ 17,105
============= ============= ============= =============
Net income allocated to the Partnership $ 11,214 $ 4,388 $ 28,826 $ 6,488
============= ============= ============= =============
</TABLE>
Rental income increased in 1999 over 1998 due primarily to the increased
occupancy level of the property. Other operating expenses were negative
for the nine-month period ended September 30, 1999 and three-month period
ended September 30, 1999 due to an offset of tenant reimbursements in
operating costs, as well as management and leasing fee reimbursement.
Tenants are billed an estimated amount for current year common-area
maintenance which is then reconciled during the second quarter of the
following year and the difference billed to the tenants. Total expenses
increased for the nine-month period ended September 30, 1999 over the same
period for 1998 due to increased depreciation and management and leasing
fees as the building was leased up.
Cash distributions and net income allocated to the Partnership for the
quarter and nine-month period increased significantly in 1999 over 1998
amounts. The Partnership's ownership in the Fund IX-X-XI-REIT Joint
Venture increased in 1999 as compared to 1998, due to additional funding
by Wells Fund X and Wells Fund XI to the joint venture in 1999.
One major tenant, the Associates, vacated its lease space in September
1999. A new lease was executed with Center Partners Inc., a division of
WPP Group, U.S.A., for 23,992 rentable square feet. The initial term of
the lease will be five years commencing January 1, 2000 and will expire on
December 31, 2004. Center Partners Inc. has the option to extend the
initial term of the lease for two consecutive five-year periods. The
annual base rent payable during the initial term payable in equal monthly
installments is $299,900 for the first year, $307,337.52 for the second
year, $315,014.96 for the third year, $322,932.32 for the fourth year, and
$331,089.60 for the fifth year.
-15-
<PAGE>
It is currently anticipated that the total cost to complete the tenant
improvements and for leasing commissions estimated to be approximately
$257,490 will be contributed by the Wells Fund IX and Wells Fund X, L.P.
-16-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Four Months
Three Months Ended Ended Ended
------------------------------
The Lucent Technologies Building/ September 30, September 30, September 30, September 30,
Fund IX-X-XI-REIT Joint Venture 1999 1998 1999 1998
----------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 145,752 $ 133,600 $ 437,256 $ 143,485
---------- --------- ---------- ---------
Expenses:
Depreciation 45,801 51,514 137,403 55,896
Management and leasing expenses 5,370 5,084 16,109 5,084
Other operating expenses 1,766 7,584 13,964 7,584
---------- --------- ---------- ---------
52,937 64,182 167,476 68,564
---------- --------- ---------- ---------
Net income $ 92,815 $ 69,418 $ 269,780 $ 74,921
========== ========= ========== =========
Occupied % 100% 100% 100% 100%
========== ========= ========== =========
Partnership's ownership % in the
Fund IX-X-XI-REIT Joint Venture 8.9% 6.7% 8.9% 6.7%
========== ========= ========== =========
Cash distribution to the Partnership $ 11,285 $ 7,685 $ 31,153 $ 17,614
========== ========= ========== =========
Net income allocated to the Partnership $ 8,240 $ 4,664 $ 22,537 $ 5,093
========== ========= ========== =========
</TABLE>
Since the Lucent Technologies Building was purchased by the Fund IX-X-XI-REIT
Joint Venture in June 1998, comparable income and expense figures for the prior
year's period ended September 30, 1998 covered only four months. Accordingly,
the prior year's period cannot be compared to the nine months ended September
30, 1999.
Rental income increased slightly for the three months ended September 30, 1999
as compared to the same period in 1998. Total expenses decreased for the three-
month period ended September 30, 1999 as compared to the same period for 1998
due largely to the decrease in other operating expenses. Cash distributions and
net income allocated to the Partnership for the three-month period remained
relatively stable for the period ended September 30, 1999 and 1998.
The Partnership's ownership in the Fund IX-X-XI-REIT Joint Venture decreased in
1999 as compared to 1998, due to additional funding by Wells Fund X and Wells
Fund XI to the joint venture.
-17-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Eight Months
Three Months Ended Ended Ended
------------------------------
Ohmeda Building/ September 30, September 30, September 30, September 30,
Fund IX-X-XI-REIT Joint Venture 1999 1998 1999 1998
----------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 256,829 $ 254,940 $ 770,486 $ 643,963
----------- ---------- ----------- -----------
Expenses:
Depreciation 81,576 81,576 244,728 $ 217,536
Management and leasing expenses 11,618 11,618 35,293 29,546
Other operating expenses 3,899 1,171 (188) 1,082
----------- ---------- ----------- -----------
97,093 94,365 279,833 248,164
----------- ---------- ----------- -----------
Net income $ 159,736 $ 160,575 $ 490,653 $ 395,799
=========== ========== =========== ===========
Occupied % 100% 100% 100% 100%
=========== ========== =========== ===========
Partnership's ownership % in the
Fund IX-X-XI-REIT Joint Venture 8.9% 6.7% 8.9% 6.7%
=========== ========== =========== ===========
Cash distribution to the Partnership $ 20,921 $ 16,012 $ 60,142 $ 22,222
=========== ========== =========== ===========
Net income allocated to the Partnership $ 14,184 $ 10,787 $ 41,079 $ 14,975
=========== ========== =========== ===========
</TABLE>
Rental income remained relatively stable for the three months ended September
30, 1999 as compared to the same period in 1998. The nine-month period ended
September 30, 1999 cannot be compared to 1998 since the 1998 figures reflect
only eight months of activities. Other operating expenses were negative for the
nine-month period ended September 30, 1999 due to an offset of tenant
reimbursements in operating costs, as well as management and leasing fee
reimbursements. Cash distributions and net income allocated to the Partnership
increased for the nine-month period ended September 30, 1999 as compared to the
same period in 1998.
-18-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Seven Months
Three Months Ended Ended Ended
------------------------------
The 360 Interlocken Building/ September 30, September 30, September 30, September 30,
Fund IX-X-XI-REIT Joint Venture 1999 1998 1999 1998
----------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 207,791 $ 215,289 $ 622,070 $ 453,864
---------- ----------- ----------- -----------
Expenses:
Depreciation 71,670 71,793 215,010 166,432
Management and leasing expenses 18,899 18,086 54,518 37,323
Other operating expenses, net of
reimbursements (5,291) (7,850) 5,342 (56,128)
---------- ----------- ----------- -----------
85,278 82,029 274,870 147,627
========== =========== =========== ===========
Net income $ 122,513 $ 133,260 $ 347,200 $ 306,237
========== =========== =========== ===========
Occupied % 100% 100% 100% 100%
========== =========== =========== ===========
Partnership's ownership % in the
Fund IX-X-XI-REIT Joint Venture 8.9% 6.7% 8.9% 6.7%
========== =========== =========== ===========
Cash distribution to the Partnership $ 17,112 $ 13,178 $ 46,852 $ 19,215
========== =========== =========== ===========
Net income allocated to the Partnership $ 10,880 $ 8,950 $ 29,221 $ 13,814
========== =========== =========== ===========
</TABLE>
Rental income remained relatively stable for the three-month period ended
September 30, 1999 as compared to the same period for 1998. The nine-month
period ended September 30, 1999 cannot be compared to 1998 since the 1998
figures reflect only seven months of activities.
The Partnership's ownership interest in the Fund IX-X-XI-REIT Joint Venture
decreased in 1999, as compared to 1998, due to additional funding by Wells Fund
X and Wells Fund XI to the joint venture in 1999.
Cash distributed and net income allocated to the Partnership for the nine months
ended September 30, 1999 decreased as compared to the same period in 1998.
Operating expenses increased significantly for the nine-month period ended
September 30, 1999 as compared to the same period for 1998 largely attributed to
the increase in property taxes, utilities, and security. Other operating
expenses are negative for prior periods due to an offset of tenant
reimbursements in operating costs as well as management and leasing fee
reimbursements.
-19-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Six Months
Three Months Ended Ended Ended
------------------------------
The Iomega Building/ September 30, September 30, September 30, September 30,
Fund IX-X-XI-REIT Joint Venture 1999 1998 1999 1998
------------------------------------------- --------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 150,009 $ 126,666 $ 397,755 $ 246,666
--------------- -------------- -------------- ---------------
Expenses:
Depreciation 48,495 48,594 145,485 97,578
Management and leasing expenses 8,291 5,596 17,629 11,199
Other operating expenses 1,290 3,526 3,815 5,731
--------------- -------------- -------------- ---------------
58,076 57,716 166,929 114,508
--------------- -------------- -------------- ---------------
Net income $ 91,933 $ 68,950 $ 230,826 $ 132,158
=============== ============== ============== ===============
Occupied % 100% 100% 100% 100%
=============== ============== ============== ===============
Partnership's ownership % in the
Fund IX-X-XI-REIT Joint Venture 8.9% 6.7% 8.9% 6.7%
=============== ============== ============== ===============
Cash distribution to the Partnership $ 12,122 $ 7,449 $ 30,592 $ 7,449
=============== ============== ============== ===============
Net income allocated to the Partnership $ 8,160 $ 4,632 $ 19,382 $ 4,632
=============== ============== ============== ===============
</TABLE>
On April 1, 1998, Wells Fund X acquired a single-story warehouse and office
building containing approximately 108,250 rentable square feet on a 8.03-acre
tract of land in Ogden, Weber County, Utah, 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 of 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, comparable income and
expense figures for the period ended September 30, 1998 only reflect six months
of activity.
On March 22, 1999, the Fund IX-X-XI-REIT Joint Venture purchased a four-acre
tract of vacant land adjacent to the Iomega Building located in Ogden, Utah.
This site is intended to be additional parking and a loading-dock area and will
include at least 400 new parking stalls and new site work for truck maneuver
space, in accordance with the requirements of the tenants and the city of Ogden.
The project was completed on July 31, 1999. The tenant, Iomega Corporation, has
agreed to extend the term of its lease to April 30, 2009 and will pay an
additional base rent, an amount equal to 13% per annum payable in monthly
installments of the direct and indirect cost of acquiring the property and
construction of improvements. This additional base rent commenced on May 1,
1999.
The land was purchased at a cost of $212,000, excluding acquisition costs. The
funds used to acquire the land and for the improvements are funded entirely out
of capital contributions made by Wells Real Estate Fund XI, L.P. to the Fund IX-
X-XI-REIT Joint Venture in the amount of $874,625. The project was completed at
a total cost of $874,625.
-20-
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Three Months Ended Ended
------------------------------
Fairchils Building/ September 30, September 30, September 30,
WElls/Fremont Joint Venture 1999 1998 1999
-------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C> <C>
Revenues:
Rental income $ 225,210 $ 175,381 $ 675,631
-------------- ------------- ---------------
Expenses:
Depreciation 71,382 70,324 214,146
Management and leasing expenses 9,303 7,315 27,970
Other operating expenses 6,457 71,011 13,772
-------------- ------------- ---------------
87,142 148,650 255,888
-------------- ------------- ---------------
Net income $ 138,068 $ 26,731 $ 419,743
============== ============= ===============
Occupied % 100% 100% 100%
============== ============= ===============
Partnership's ownership % 11.25% 0% 11.25%
============== ============= ===============
Cash distribution to the Partnership $ 18,485 $ 0 $ 55,978
============== ============= ===============
Net income allocated to the Partnership $ 14,068 $ 0 $ 49,757
============== ============= ===============
</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, for a purchase price of
$8,900,000, excluding acquisitions 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% 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.
Since the Fairchild Building was purchased in July of 1998, comparable income
and expense figures for the prior year covered only three months. Other
operating expenses at September 30, 1998 include interest expense incurred prior
to the inclusion of the Fund X-XI Joint Venture into the Fremont Joint Venture
on October 6, 1998.
-21-
<PAGE>
<TABLE>
<CAPTION>
Three Months Two Months Nine Months
Ended Ended Ended
Cort Building/ September 30, September 30, September 30,
Wells/Cort Joint Venture 1999 1998 1999
------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Rental income $ 198,885 $ 133,857 $ 596,659
------------- ------------- -------------
Expenses:
Depreciation 46,641 45,288 139,923
Management and leasing expenses 7,590 5,144 22,770
Other operating expenses 5,993 29,700 19,446
------------- ------------- -------------
60,224 80,132 182,139
------------- ------------- -------------
Net income $ 138,661 $ 53,725 $ 414,520
============ ============= =============
Occupied % 100% 100% 100%
============ ============= =============
Partnership's ownership % of the Wells/Cort Joint Venture 21.2% 21.2% 21.2%
============ ============= =============
Cash distribution to the Partnership $ 41,681 $ 19,051 $ 124,697
============ ============= =============
Net income allocated to the Partnership $ 33,036 $ 7,664 $ 88,014
============ ============= =============
</TABLE>
On July 31, 1998, the Wells/Cort Joint Venture acquired a one-story office and
warehouse building containing approximately 52,000 rentable square feet on a
3.65-acre tract of land in Fountain Valley, California, for a purchase price of
$6,400,000, excluding acquisitions 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 of the lease
require the tenant to reimburse the Cort Joint Venture of certain operating
expenses, as defined in the lease, related to the building.
Since the Cort Building was purchased on July 31, 1998, comparable income and
expense figures for the prior year cover only the two-month period ended
September 30, 1998. Other operating expenses at September 30, 1998 include
interest expense incurred prior to the inclusion of the Fund X-XI Joint Venture
into the Cort Joint Venture on September 1, 1998.
-22-
<PAGE>
<TABLE>
<CAPTION>
Three Months Two Months
Ended Ended
EYBL CarTex Building/ September 30, September 30,
Fund XL-XII-RENT Joint Venture 1999 1998
------------------------------------------------------- ------------- -------------
<S> <C> <C>
Revenues:
Rental income $140,047 $210,173
------------- -------------
Expenses:
Depreciation 49,902 83,170
Management and leasing expenses 3,814 14,663
Operating costs, net of reimbursements 5,165 5,165
------------- -------------
58,881 102,998
------------- -------------
Net income $ 81,166 $107,175
============= =============
Occupied % 100% 100%
------------- -------------
Partnership's ownership % in the Fund XI-XII-REIT Joint Venture 26.15% 26.15%
------------- -------------
Cash distribution to the Partnership $ 36,361 $ 51,513
------------- -------------
Net income allocated to the Partnership $ 24,974 $ 32,735
============= =============
</TABLE>
On May 18, 1999, Wells Real Estate, LLC-SC I, a Georgia limited liability
company wholly owned by the Wells Fund XI-REIT Joint Venture (which later
admitted Wells Fund XII and changed its name to the Fund XI-XII-REIT Joint
Venture), acquired a manufacturing and office building containing 169,510 square
feet located in Fountain Inn, unincorporated Greenville County, South Carolina,
for the purchase price of $5,085,000, excluding acquisitions costs.
The building is 100% occupied by EYBL CarTex, Inc. with a lease expiration of
February 2008. The monthly base rent payable under the lease is $42,377.50 with
an increase to $45,905.95 in the fifth year, $49,440.42 in the seventh year, and
$50,853.00 in the ninth year. The lease is a triple net lease, whereby the terms
of the lease require the tenant to reimburse the landlord for certain operating
expenses, as defined in the lease, related to the building.
Since the EYBL CarTex Building was purchased in May of 1999, comparable income
and expense figures for the year are not available.
-23-
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended
The Sprint Building/ September 30,
Fund XI-XII-REIT Joint Venture 1999
-------------------------------------------------------------------------- -------------
<S> <C>
Revenues:
Rental income $264,654
-------------
Expenses:
Depreciation 81,776
Management and leasing expenses 7,493
Operating costs, net of reimbursements 1,283
-------------
90,552
-------------
Net income $174,102
=============
Occupied % 100%
-------------
Partnership's ownership % in the Fund XI-XII-REIT Joint Venture 26.15%
-------------
Cash distribution to the Partnership $ 73,707
Net income allocated to the Partnership $ 53,943
=============
</TABLE>
On July 2, 1999, the Fund XI-XII-REIT Joint Venture acquired a three-story
office building with approximately 68,900 rentable square feet located in
Leawood, Johnson County, Kansas, for a purchase price of $9,546,210.
The entire Sprint Building is currently under a net lease with Sprint and
expires on May 18, 2007. Sprint has the option under its lease to extend the
initial term for two consecutive five-year periods.
The annual base rent payable during the first five years of the initial term is
$999,050 in equal monthly installments of $83,254. The annual base rent during
the last five years of the lease is $1,102,400 in equal monthly installments of
$91,867. Under the Lease, Sprint is responsible for all routine maintenance and
repairs. The Fund XI-XII-REIT Joint Venture, as landlord, is responsible for
repair and replacement of the exterior, roof, foundation, and structure.
Since the Sprint Building was purchased in July 1999, comparative income and
expense figures are not available for the prior year.
-24-
<PAGE>
<TABLE>
<CAPTION>
Two Months
Ended
Johnson Matthey Building/ September 30,
Fund XI-XII-REIT Joint Venture 1999
--------------------------------------------------------------------- -------------
<S> <C>
Revenues:
Rental income $123,566
-------------
Expenses:
Depreciation 42,567
Operating costs, net of reimbursements 470
-------------
43,037
-------------
Net income $ 80,529
-------------
Occupied % 100%
-------------
Partnership's ownership % in the Fund XI-XII-REIT Joint Venture 26.15%
=============
Cash distribution to the Partnership $ 36,459
-------------
Net income allocated to the Partnership $ 24,900
-------------
</TABLE>
On August 17, 1999, the Fund XI-XII-REIT Joint Venture acquired a research and
development office and warehouse building containing approximately 130,000
rentable square feet on a ten-acre tract of land located in the Tredyffrin
Township, Chester County, Pennsylvania, for a purchase price of $8,000,000,
excluding acquisition costs.
The entire Johnson Matthey Building is currently under a net lease with Johnson
Matthey and was assigned to the Fund XI-XII-REIT Joint Venture at closing. The
lease currently expires in June 2007, and Johnson Matthey has the right to
extend the lease for two additional three-year periods of time.
The monthly base rent payable under the Johnson Matthey lease for the remainder
of the lease term is $65,812.50 through June 30, 2000, $67,437.50 through June
30, 2001, $69,062.50 through June 30, 2002, $71,229.17 through June 30, 2003,
$72,854.17 through June 30, 2004, $74,750.00 through June 30, 2005, $76,375.00
through June 30, 2006, and $78,270.84 through June 30, 2007.
Under the lease, Johnson Matthey is required to pay as additional rent all real
estate taxes, special assessments, utilities, taxes, insurance, and other
operating costs with respect to the Johnson Matthey Building. In addition,
Johnson Matthey is responsible for all routine maintenance and repairs to the
Johnson Matthey Building. The Fund XI-XII-REIT Joint Venture, as landlord, is
responsible for maintenance of the footings and foundations and the structural
steel columns and girders associated with the building.
Since the Johnson Matthey Building was purchased in August 1999, comparative
income and expense figures are not available for the prior year.
-25-
<PAGE>
<TABLE>
<CAPTION>
One Month
Ended
The Gartner Building/ September 30,
Fund XI-XII-REIT Joint Venture 1999
----------------------------------------------------------------------- -------------
<S> <C>
Revenues:
Rental income $ 32,502
-------------
Expenses:
Depreciation 25,874
-------------
Net income $ 6,628
-------------
Occupied % 100%
-------------
Partnership's ownership % in the Fund XI-XII-REIT Joint Venture 26.15%
-------------
Cash distribution to the Partnership $ 4,779
-------------
Net income allocated to the Partnership $ 1,733
-------------
</TABLE>
On September 20, 1999, the Fund XI-XII-REIT Joint Venture acquired a two-story
office and building containing approximately 62,400 rentable square feet located
on a 4.9-acre tract of land in Ft. Myers, Florida, for a purchase price of
$8,320,000, excluding acquisition costs.
The entire 62,400 rentable square feet of the Gartner Building is currently
under a net lease agreement with Gartner and was assigned to the Fund XI-XII-
REIT Joint Venture at closing. The lease currently expires on January 31, 2008.
Gartner has the right to extend the lease for two additional five-year periods
of time.
The monthly base rent payable under the Gartner Lease for the remainder of the
lease term is $53,566.50 through January 31, 2000, $65,886.83 through January
31, 2001, $67,534.00 through January 31, 2002, $69,222.35 through January 31,
2003; $70,952.89 through January 31, 2004, $72,726.74 through January 31, 2005,
$74,544.92 through January 31, 2006, $76,408.54 through January 31, 2007, and
$78,318.71 through January 31, 2008.
Under the Gartner Lease, Gartner is required to pay as additional rent all real
estate taxes, special assessments, utilities, taxes, insurance, and other
operating costs with respect to the Gartner Building during the term of the
Gartner Lease. In addition, Gartner is responsible for all routine maintenance
and repairs to the Gartner Building. The Fund XI-XII-REIT Joint Venture, as
landlord, is responsible for repairs and replacement of the roof, structure, and
paved parking areas.
Since the Gartner Building was purchased in September 1999, comparative income
and expense figures are not available for the prior year.
-26-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 (b.)
During the third quarter of 1999, the Registrant filed (i) a Current
Report on Form 8-K dated July 2, 1999 describing the acquisition of the
Sprint Building by the Fund XI-XII-REIT Joint Venture, and (ii) a Current
Report on Form 8-K dated August 17, 1999 describing the acquisition of the
Johnson Matthey Building by the Fund XI-XII-REIT Joint Venture.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Wells real estate FUND XI, L.P.
(Registrant)
Dated: November 10, 1999 By: /s/ Leo F. Wells, III
--------------------------------------
Leo F. Wells, III, as Individual
General Partner, and as President,
and Chief Financial Officer
of Wells Capital, Inc., the
General Partner of Wells Partners, L.P.
-27-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
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0
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