<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) September 10, 1999
------------------
Wells Real Estate Investment Trust, Inc.
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(Exact name of registrant as specified in its charter)
Maryland
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(State or other jurisdiction of incorporation)
0-25739 58-2328421
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(Commission File Number) (IRS Employer Identification No.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
-----------------------------
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition of Assets
Purchase of the Videojet Building. On September 10, 1999, 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 "Registrant"), a Maryland corporation,
acquired an office, assembly and manufacturing building containing approximately
250,354 rentable square feet located in Wood Dale, DuPage County, Illinois (the
"Videojet Building"). Wells OP acquired the Videojet Building from Sun-Pla, A
California Limited Partnership (the "Seller"), pursuant to that certain
Agreement of Purchase and Sale (the "Contract") between the Seller and Wells
Capital, Inc., an affiliate of the Registrant. The Seller is not in any way
affiliated with the Registrant or its Advisor.
The rights under the Contract were assigned by Wells Capital, Inc, the
original purchaser under the Contract, to Wells OP at closing. The original
purchase price for the Videojet Building was $33,100,000. The Seller was subject
to a loan prepayment penalty to its lender in connection with the sale of the
Videojet Building to Wells OP. Since the prepayment penalty was less than the
parties had anticipated, the purchase price was adjusted downward by $469,060
resulting in an adjusted purchase price of $32,630,940. Since the parties
believe that the lender made an error in calculating the prepayment penalty and
as a condition to receiving the benefit of the full purchase price adjustment of
$469,060, Wells OP agreed to assume an obligation of up to $183,000 in the event
that the lender requests retribution. In addition, Wells OP paid brokerage
commissions of $500,000 at closing. Wells OP incurred acquisition expenses in
connection with the purchase of the Videojet Building, including attorneys fees,
appraisers fees, environmental consultants fees and other closing costs, of
approximately $27,925.
The $33,158,865 required to close the Videojet acquisition consisted of
$26,158,865 in cash funded from a capital contribution by the Registrant and
$7,000,000 in loan proceeds obtained from SouthTrust Bank, N.A. pursuant to the
revolving credit facility (the "SouthTrust Loan") originally extended to Wells
OP in connection with the acquisition of the PriceWaterhouseCoopers Building in
Tampa, Florida (the "PWC Building").
Description of the SouthTrust Loan. On December 31, 1998, Wells OP purchased the
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PWC Building subject to the SouthTrust Loan which, at that time, had an
outstanding principal balance of $14,132,538. Wells OP has since used proceeds
from the sale of shares of common stock by the Registrant from its public
offering to pay off the entire principal balance of this loan. Subsequently,
Wells OP borrowed $7,000,000 pursuant to the SouthTrust Loan in order to
partially finance the acquisition and development of the Matsushita Project in
Lake Forest, California, which is still under construction.
The SouthTrust Loan consists of a revolving credit facility whereby
SouthTrust has agreed to loan up to $15,200,000 to Wells OP. The SouthTrust Loan
requires monthly payments of interest only and matures on December 31, 2000. The
interest rate on the SouthTrust Loan is a variable rate per annum equal to the
London InterBank Offered Rate for a thirty day period plus 200 basis points. The
current interest rate under the SouthTrust Loan is
1
<PAGE>
7.44%. The SouthTrust Loan is secured by a first mortgage against the PWC
Building.
Following the funding of the additional $7,000,000 in loan proceeds
required to close the Videojet acquisition, the current outstanding balance of
the SouthTrust Loan is $14,000,000.
Description of the Building and the Site. The Videojet Building is a two story
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corporate headquarters facility with 128,247 square feet of office space and
122,107 square feet of assembly and distribution space. The Videojet Building,
which was completed in 1991, has tilt-up concrete panels throughout with bands
of insulated glass surrounding the office portion of the building.
The Videojet Building is located at 1500 Mittel Boulevard in the
Chancellory Business Park in Wood Dale, Illinois. The site is a 15.3 acre tract
of land that is adjacent to the western entrance to O'Hare International
Airport.
An independent appraisal of the Videojet Building was prepared by Appraisal
Research Counselors, Ltd., real estate appraisers, as of August 16, 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 $33,600,000, in cash
or terms equivalent to cash. This value estimate was based upon a number of
assumptions, including that the Videojet Building will continue operating at a
stabilized level with Videojet Systems International, Inc. ("Videojet")
occupying 100% of the rentable area, and is not necessarily an accurate
reflection of the fair market value of the property or the net proceeds which
would result from a sale of this property. Wells OP also obtained an
environmental report prior to closing evidencing that the environmental
condition of the land and the Videojet Building were satisfactory.
The Lease. The entire 250,354 rentable square feet of the Videojet Building is
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currently under a net lease agreement with Videojet dated May 31, 1991 (the
"Lease"). The landlord's interest in the Lease was assigned to Wells OP at the
closing.
The initial term of the Lease is twenty years which commenced in November
1991 and expires in November 2011. Videojet has the right to extend the Lease
for one additional five year period of time. The extension option must be
exercised by giving notice to the landlord at least 365 days prior to the
expiration date of the current lease term.
The base rent payable for the remainder of the Lease term is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Lease Year Yearly Base Rent Monthly Base Rent
---------------------------------------------------------------------------
<S> <C> <C>
2000-2001 $2,838,952 $236,579.33
---------------------------------------------------------------------------
2002-2011 $3,376,746 $281,395.50
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Extension Term $4,667,439 $388,953.25
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</TABLE>
Under its lease, Videojet is responsible for repair and maintenance of the
roof, walls,
2
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structure and foundation, landscaping and the heating, ventilating, air
conditioning, mechanical, electrical, plumbing and other systems and all other
operating costs, including, but not limited to, real estate taxes, special
assessments, utilities and insurance.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements. The following financial statements relating to
--------------------
the real property acquired by Wells OP are submitted at the end of this Current
Report and are filed herewith and incorporated herein by reference:
<TABLE>
<CAPTION>
Page
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<S> <C>
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 six month period ended June 30, 1999 (Unaudited) F-2
Notes to Statements of Revenues Over Certain
Operating Expenses for the year ended December 31, 1998 (Audited)
and for the six month period ended June 30, 1999 (Unaudited) F-3
</TABLE>
(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:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of Unaudited Pro Forma Financial Statements F-5
Pro Forma Balance Sheet as of June 30, 1999 F-6
Pro Forma Statement of Income for the year ended
December 31, 1998 F-7
Pro Forma Statement of Income for the six months
ended June 30, 1999 F-8
</TABLE>
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.
3
<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 INVESTMENT
TRUST, INC. (Registrant)
By: /s/ Leo F. Wells, III
--------------------------------
Leo F. Wells, III
President
Date: September 16, 1999
4
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[LETTERHEAD OF ARTHUR ANDERSEN LLP]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying statement of revenues over certain operating
expenses for the VIDEOJET 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 Videojet
Building after acquisition by the Wells Operating Partnership, L.P. (on behalf
of Wells Real Estate Investment Trust, Inc.). 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 Videojet
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 Videojet Building for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
Atlanta, Georgia
September 17, 1999
<PAGE>
VIDEOJET BUILDING
STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ --------
(Unaudited)
<S> <C> <C>
RENTAL REVENUES $ 2,995,806 $ 1,497,903
OPERATING EXPENSES, net of reimbursements 0 0
----------- -----------
REVENUES OVER CERTAIN OPERATING EXPENSES
$ 2,995,806 $ 1,497,903
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
VIDEOJET BUILDING
NOTES TO STATEMENTS OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Real Estate Property Acquired
On September 10, 1999, the Wells Operating Partnership L.P. ("Wells OP"), a
Delaware Limited Partnership formed to acquire, own, lease, operate, and
manage real properties on behalf of the Wells Real Estate Investment Trust,
Inc., acquired a two-story corporate office building with a single story
assembly and manufacturing space containing approximately 250,354 rentable
square feet located in Wood Dale, DuPage County, Illinois (the "Videojet
Building"). The purchase price of the Videojet Building was $33,158,865
which includes acquisition related expenses and $500,000 in selling
commissions paid by Wells OP. Wells OP paid $26,130,940 in cash and
obtained $7,000,000 in loan proceeds from a line of credit held by
SouthTrust Bank, N.A. Additional acquisition fees of $27,925 were incurred
related to attorneys' fees, environmental consultants fees, appraisers
fees, and other costs.
The entire 250,354 rentable square feet of the Videojet Building is
currently under a net lease agreement dated November 1991 (the "Lease")
with Videojet Systems International, Inc. ("Videojet"). The Lease was
assigned to Wells OP at the closing. The initial term of the Lease is 20
years which commenced in November 1991 and expires in November 2011.
Videojet has the right to extend the Lease for one additional five-year
period. The extension option must be exercised by giving notice to the
landlord at least 365 days prior to the expiration date of the then current
lease term. The monthly base rent payable under the Lease is $236,579
through November 2001 and will be $281,396 for the remainder of the lease
term. The monthly base rent payable for the extended term of the Lease will
be $388,953, should Videojet choose to extend the lease.
Under the Lease, Videojet is required to pay as additional rent all real
estate taxes, special assessments, utilities, taxes, insurance, and other
operating costs associated with the Videojet Building during the term of
the Lease. In addition, Videojet is responsible for repair and maintenance
of the roof, walls, structure and foundation, landscaping and the heating,
ventilating, air conditioning, mechanical, electrical, plumbing, and other
systems.
<PAGE>
Rental Revenues
Rental income from the lease is recognized on a straight-line basis over
the life of the lease.
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,
interest, and management fees, not comparable to the operations of the
Videojet Building after acquisition by Wells OP.
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WELLS REAL ESTATE INVESTMENT TRUST, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet as of June 30, 1999 has been
prepared to give effect to the acquisition of the Videojet Building by the Wells
Operating Partnership, L.P. as if the acquisition occurred as of June 30, 1999.
The following unaudited pro forma statements of income have been prepared to
give effect to the acquisition of the Videojet Building by the Wells Operating
Partnership, L.P. as if the acquisition occurred on January 1, 1998.
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
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WELLS REAL ESTATE INVESTMENT TRUST, INC.
PRO FORMA BALANCE SHEET
JUNE 30, 1999
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
Wells Real
Estate Pro
Investment Pro Forma Forma
Trust, Inc. Adjustments Total
----------- -------------- -----------
REAL ESTATE, at cost:
<S> <C> <C> <C>
Land $ 6,787,902 $ 5,208,335 (a)(b) $11,996,237
Building and improvements, less accumulated depreciation of $612,243 34,483,001 29,332,160 (a)(b) 63,815,161
----------- -------------- -----------
Total real estate 41,270,903 34,540,495 75,811,398
INVESTMENTS IN JOINT VENTURES 15,143,866 0 15,143,866
DUE TO AFFILIATES 297,953 0 297,953
CASH AND CASH EQUIVALENTS 19,449,957 (19,449,957)(a) 0
DEFERRED PROJECT COSTS 949,252 (949,252)(b) 0
DEFERRED OFFERING COSTS 529,524 0 529,524
PREPAID EXPENSES AND OTHER ASSETS 1,594,178 0 1,594,178
----------- -------------- -----------
Total assets $79,235,633 $ 14,141,286 $93,376,919
=========== ============== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 321,444 $ 0 $ 321,444
NOTES PAYABLE 9,918,935 7,000,000 (a) 16,918,935
DUE TO AFFILIATES 614,274 432,378 (b) 7,755,560
6,708,908 (a)
DIVIDENDS PAYABLE 1,119,829 0 1,119,829
MINORITY INTEREST OF UNIT HOLDER IN OPERATING PARTNERSHIP
200,000 0 200,000
----------- -------------- -----------
Total liabilities 12,174,482 14,141,286 26,315,768
----------- -------------- -----------
COMMON SHARES, $.01 par value; 40,000,000 shares
authorized, 7,770,581 shares issued and outstanding 77,706 0 77,706
ADDITIONAL PAID-IN CAPITAL 65,653,998 0 65,653,998
RETAINED EARNINGS 1,329,447 0 1,329,447
----------- -------------- -----------
Total shareholders' equity 67,061,151 0 67,061,151
----------- -------------- -----------
Total liabilities and shareholders' equity $79,235,633 $ 14,141,286 $93,376,919
=========== ============== ===========
</TABLE>
(a) Reflects Wells Real Estate Investment Trust, Inc.'s purchase
price related to the Videojet Building.
(b) Reflects deferred project costs allocated to the Videojet
Building.
F-6
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDING DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Wells Real
Estate Pro
Investment Pro Forma Forma
Trust, Inc. Adjustments Total
----------- ------------ ----------
<S> <C> <C> <C>
REVENUES:
Rental income $ 20,994 $2,995,806(a) $3,016,800
Equity in income of joint ventures 263,315 0 263,315
Interest income 110,869 0 110,869
----------- ---------- ----------
395,178 2,995,806 3,390,984
----------- ---------- ----------
EXPENSES:
Operating costs, net of reimbursements 11,033 0 11,033
Depreciation 0 1,173,286(b) 1,173,286
Interest 0 520,625(c) 520,625
General and administrative 29,943 0 29,943
Legal and accounting 19,552 0 19,552
Computer costs 616 0 616
----------- ---------- ----------
61,144 1,693,911 1,755,055
----------- ---------- ----------
NET INCOME $ 334,034 $1,301,895 $1,635,929
=========== ========== ==========
EARNINGS PER SHARE (BASIC AND DILUTED) $ 0.40 $ 1.56 $ 1.96
=========== ========== ==========
</TABLE>
(a) Rental income recognized on a straight-line basis.
(b) Depreciation expense on the Videojet Building using the
straight line method and a 25-year life.
(c) Interest expense on the $7,000,000 note payable which bears
interest at 7.4375%.
F-7
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE SIX-MONTH PERIOD ENDING JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Wells Real
Estate Pro
Investment Pro Forma Forma
Trust, Inc. Adjustments Total
----------- ------------- -----------
<S> <C> <C> <C>
REVENUES:
Rental income $ 1,579,014 $ 1,497,903(a) $ 3,076,917
Equity in income of joint ventures 398,178 0 398,178
Interest income 215,746 0 215,746
----------- ----------- -----------
2,192,938 1,497,903 3,690,841
----------- ----------- -----------
EXPENSES:
Operating costs, net of reimbursements 370,744 0 370,744
Management and leasing fees 82,085 0 82,085
Depreciation 612,243 586,643(b) 1,198,886
Interest 0 260,313(c) 260,313
General and administrative costs 69,940 0 69,940
Legal and accounting 56,450 0 56,450
Computer costs 6,063 0 6,063
----------- ----------- -----------
1,197,525 846,956 2,044,481
----------- ----------- -----------
NET INCOME $ 995,413 $ 650,947 $ 1,646,360
=========== =========== ===========
EARNINGS PER SHARE (BASIC AND DILUTED) $ 0.19 $ 0.12 $ 0.31
=========== =========== ===========
</TABLE>
(a) Rental income recognized on a straight-line basis.
(b) Depreciation expense on the Videojet Building using the
straight-line method and a 25-year life.
(c) Interest expense on the $7,000,000 note payable which bears
interest at 7.4375%.
F-8
