<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 20, 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 Gartner Building. On September 20, 1999, The Wells Fund XI -
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Fund XII - REIT Joint Venture (the "Joint Venture") acquired a two story office
building with approximately 62,400 rentable square feet located at 12600 Gateway
Blvd. in Fort Myers, Lee County, Florida (the "Gartner Building") from Hogan
Triad Ft. Myers I, Ltd., a Florida limited partnership (the "Seller"), pursuant
to that certain Agreement of Purchase and Sale of Property (the "Contract")
between the Seller and Wells Capital, Inc., an affiliate of Wells Real Estate
Investment Trust, Inc. (the "Registrant"). The Seller is not in any way
affiliated with the Registrant or its Advisor.
The Joint Venture is a joint venture partnership among 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
Registrant, Wells Real Estate Fund XI, L.P. ("Wells Fund XI"), an affiliated
Georgia limited partnership, and Wells Real Estate Fund XII, L.P ("Wells Fund
XII"), an affiliated Georgia limited partnership. The Joint Venture was formed
for the purpose of the acquisition, ownership, development, leasing, operation,
sale and management of real properties. The investment objectives of Wells Fund
XI and Wells Fund XII are substantially identical to those of the Registrant.
The rights under the Contract were assigned by Wells Capital, Inc, the
original purchaser under the Contract, to the Joint Venture at closing. The
purchase price for the Gartner Building was $8,320,000. The 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.
Wells OP contributed $5,441,050, Wells Fund XI contributed $106,550 and Wells
Fund XII contributed $2,800,000 to the Joint Venture for their respective share
of the acquisition costs for the Gartner Building. All income, loss, profit,
net cash flow, resale gain and sale proceeds of the Joint Venture are allocated
and distributed between the Wells OP, Wells Fund XI and Wells Fund XII based
upon their respective capital contributions to the Joint Venture.
Wells OP has made total capital contributions to the Joint Venture of
$17,634,796 and currently has an equity percentage interest in the Joint Venture
of approximately 56.77%; Wells Fund XI has made total capital contributions to
the Joint Venture of $8,131,351 and currently has an equity percentage interest
in the Joint Venture of approximately 26.17%; and Wells Fund XII has made total
capital contributions to the Joint Venture of $5,300,000 and currently has an
equity percentage interest in the Joint Venture of approximately 17.06%.
Description of the Building and the Site. As set forth above, the Gartner
- ----------------------------------------
Building is a two story office building containing approximately 62,400 rentable
square feet. The Gartner Building, which was completed in 1998, is a reinforced
concrete structure with curtained glass.
1
<PAGE>
An independent appraisal of the Gartner Building was prepared by CB Richard
Ellis, Inc., real estate appraisers, as of September 1, 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 $8,350,000, in cash or terms equivalent to
cash. This value estimate was based upon a number of assumptions, including
that the Gartner Building will continue operating at a stabilized level with
Gartner Group, Inc. ("Gartner") 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 an immediate sale of this property.
The Joint Venture also obtained an environmental report prior to closing
evidencing that the environmental condition of the land and the Gartner Building
were satisfactory.
The Gartner Building is located on a 4.9 acre tract of land within the Gateway
development at 12600 Gateway Boulevard in Fort Myers, Florida. Gateway is a
mixed use development with over 3,000 acres planned for residential purposes and
over 800 acres planned for commercial purposes. Sony Electronics and Ford Motor
Credit Company are two of the commercial tenants in this development.
The Lease. The entire 62,400 rentable square feet of the Gartner Building is
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currently under a net lease agreement with Gartner dated July 30, 1997 (the
"Lease"). The landlord's interest in the Lease was assigned to the Joint Venture
at the closing.
The initial term of the Lease is ten years which commenced on February 1, 1998
and expires on January 31, 2008. Gartner has the right to extend the Lease for
two additional five year periods of time. Each extension option must be
exercised by giving at least one year's notice to the landlord prior to the
expiration date of the then current lease term.
The base rent payable for the remainder of the Lease term is as follows:
Lease Year Yearly Base Rent Monthly Base Rent
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2/1999-1/2000 $642,798 $53,566.50
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2/2000-1/2001 $790,642 $65,886.83
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2/2001-1/2002 $810,408 $67,534.00
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2/2002-1/2003 $830,668 $69,222.35
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2/2003-1/2004 $851,435 $70,952.89
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2/2004-1/2005 $872,721 $72,726.74
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2/2005-1/2006 $894,539 $74,544.92
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2/2006-1/2007 $916,902 $76,408.54
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2/2007-1/2008 $939,825 $78,318.71
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The monthly base rent payable for each extended term of the Lease will be equal
to the lesser of (i) the prior rate increased by 2.5%, or (ii) 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 Fort Myers area.
2
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Under the 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 Lease. In
addition, Gartner is responsible for all routine maintenance and repairs to the
Gartner Building. The 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
Lease. The two option plans are described in the 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 Joint
Venture. Gartner may exercise its expansion right for the Small Option Building
by providing notice in writing to the Joint Venture on or before February 15,
2002. In the event that Gartner exercises its expansion option, the parties
shall enter into a separate lease within 30 days of such notice by Gartner with
a guaranteed ten year lease term and yearly base rent to be determined by mutual
agreement of the parties.
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 Joint
Venture. Gartner may exercise its expansion right for the Small Option Building
by providing notice in writing to the Joint Venture on or before February 15,
2002. In the event that Gartner exercises its expansion option, the parties
shall enter into a separate lease within 30 days of such notice by Gartner with
a guaranteed ten year lease term and yearly base rent to be determined by mutual
agreement of the parties.
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
Gartner Building. The Joint Venture shall pay management and leasing fees to
Wells Management in the amount of 4.5% of gross revenues from the Gartner
Building.
3
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements. The following financial statements relating
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to the real property acquired by the Joint Venture 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 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
(b) Pro Forma Financial Information. The following unaudited pro forma
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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 June 30, 1999 F-6
Pro Forma Statement of Income for year ended December 31, 1998 F-7
Pro Forma Statement of Income for the six months
ended June 30, 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
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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 29, 1999
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Investment Trust, Inc.,
and Wells Real Estate Fund XII, L.P.:
We have audited the accompanying statement of revenues over certain operating
expenses for the GARTNER 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 Gartner
Building after acquisition by the Wells Fund XI-Fund XII-REIT Joint Venture (a
joint venture between the Wells Operating Partnership, L.P. [on behalf of Wells
Real Estate Investment Trust, Inc.], Wells Real Estate Fund XI, L.P., and Wells
Real Estate Fund XII, 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 Gartner 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 Gartner Building for the year ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
September 24, 1999
F-1
<PAGE>
GARTNER BUILDING
STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999
1998 1999
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(Unaudited)
RENTAL REVENUES $738,074 $402,590
OPERATING EXPENSES, net of reimbursements 8,505 75
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REVENUES OVER CERTAIN OPERATING EXPENSES $729,569 $402,515
======== ========
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
GARTNER 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 20, 1999, the Wells Fund XI-Fund XII-REIT Joint Venture (the
"Joint Venture") acquired a two story office building with approximately
62,400 rentable square feet located in Fort Myers, Lee County, Florida (the
"Gartner Building").
The Joint Venture is a partnership between Wells Real Estate Fund XII, L.P.
("Wells Fund XII"), Wells Real Estate Fund XI, L.P. ("Wells Fund XI"), 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 purchase price for the Gartner Building was $8,320,000. The 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 $27,600.
The Wells Fund XII contributed $2,800,000, Wells Fund XI contributed
$106,550, and Wells OP contributed $5,441,050 to the Joint Venture for their
respective share of the acquisition costs for the Gartner Building.
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 "Lease").
The Lease was assigned to the Joint Venture at the closing.
The initial term of the Lease is ten years which commenced on February 1,
1998 and expires on January 31, 2008. Gartner has the right to extend the
Lease for two additional five year periods of time. Each extension option
must be exercised by giving at least one year's notice to the landlord prior
to the expiration date of the then current lease term.
Under the 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
Lease. In addition, Gartner
F-3
<PAGE>
is responsible for all routine maintenance and repairs to the Gartner
Building. The Joint Venture, as landlord, is responsible for repair and
replacement of the roof, structure, and paved parking areas.
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 and
management and leasing fees, not comparable to the operations of the Gartner
Building after acquisition by the Joint Venture.
F-4
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet as of June 30, 1999 and the pro
forma statements of income for the year ending December 31, 1998 and the six-
month period ending June 30, 1999 have been prepared to give effect to the
acquisition of the Gartner Building by the Wells Fund XI-Fund XII-REIT Joint
Venture (a joint venture between the Wells Operating Partnership, L.P., Wells
Real Estate Fund XI, L.P., and Wells Real Estate Fund XII, L.P.) as if the
acquisition occurred as of June 30, 1999 with respect to the balance sheet and
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 INVESTMENT TRUST, INC.
PRO FORMA BALANCE SHEET
JUNE 30, 1999
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
Wells Real
Estate
Investment Pro Forma Pro Forma
Trust, Inc. Adjustments Total
----------- ----------- ---------
REAL ESTATE, at cost:
<S> <C> <C> <C>
Land $ 6,787,902 $ 0 $ 6,787,902
Building and improvements, less accumulated depreciation of $612,243 34,483,001 0 34,483,001
----------- ----------- -----------
Total real estate 41,270,903 0 41,270,903
INVESTMENTS IN JOINT VENTURES 15,143,866 5,667,779 (a) 20,811,645
DUE TO AFFILIATES 297,953 0 297,953
CASH AND CASH EQUIVALENTS 19,449,957 (5,441,050)(b) 14,008,907
DEFERRED PROJECT COSTS 949,252 (226,729)(c) 722,523
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 $ 0 $79,235,633
=========== =========== ===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ACCOUNTS PAYABLE $ 321,444 $ 0 $ 321,444
NOTES PAYABLE 9,918,935 0 9,918,935
DUE TO AFFILIATES 614,274 0 614,274
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 0 12,174,482
----------- ----------- -----------
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 $ 0 $79,235,633
=========== =========== ===========
</TABLE>
(a) Reflects Wells Real Estate Investment Trust Inc.'s contribution to
the Wells Fund XI-Fund XII-REIT Joint Venture.
(b) Reflects Wells Real Estate Investment Trust Inc.'s portion of the
purchase price.
(c) Reflects deferred project costs contributed to the Wells Fund XI-
Fund XII-REIT Joint Venture.
F-6
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDING DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Well Real
Estate
Investment Pro Form Pro Forma
Trust, Inc. Adjustment Total
----------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Rental income $ 20,994 $ 0 $ 20,994
Equity in income of joint ventures 263,315 258,285(a) 521,600
Interest income 110,869 0 110,869
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395,178 258,285 653,463
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EXPENSES:
Operating costs, net of reimbursements 11,033 0 11,033
General and administrative 29,943 0 29,943
Legal and accounting 19,552 0 19,552
Computer costs 616 0 616
-------- -------- --------
61,144 0 61,144
-------- -------- --------
NET INCOME $334,034 $258,285 $592,319
======== ======== ========
EARNINGS PER SHARE (BASIC AND DILUTED) $ 0.40 $ 0.31 $ 0.71
======== ======== ========
</TABLE>
(a) Reflects Wells Real Estate Investment Trust Inc.'s equity in income
of the Wells Fund XI-Fund XII-REIT Joint Venture related to the
Gartner Building. The pro forma adjustment results from rental
revenues less operating expenses, management and leasing fees, and
depreciation.
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
Investment Pro Forma Pro Forma
Trust, Inc. Adjustment Total
----------- ---------- ---------
<S> <C> <C> <C>
REVENUES:
Rental income $1,579,014 $ 0 $1,579,014
Equity in income of joint ventures 398,178 133,568(a) 531,746
Interest income 215,746 0 215,746
---------- -------- ----------
2,192,938 133,568 2,326,506
---------- -------- ----------
EXPENSES:
Operating costs, net of reimbursements 370,744 0 370,744
Management and leasing fees 82,085 0 82,085
Depreciation 612,243 0 612,243
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 0 1,197,525
---------- -------- ----------
NET INCOME $ 995,413 $133,568 $1,128,981
========== ======== ==========
EARNINGS PER SHARE (BASIC AND DILUTED) $ 0.19 $ 0.03 $ 0.22
========== ======== ==========
</TABLE>
(a) Reflects Wells Real Estate Investment Trust, Inc.'s equity in income
of the Wells Fund XI-Fund XII-REIT Joint Venture related to the
Gartner Building. The pro forma adjustment results from rental
revenues less operating expenses, management and leasing fees, and
depreciation.
F-8
<PAGE>
[LETTERHEAD OF HOLLAND & KNIGHT LLP]
October 5, 1999 MICHAEL K. RAFTER
404-898-8163
VIA EDGAR
- ---------
Main Filing Desk
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Wells Real Estate Investment Trust, Inc.
Commission File No.: 0-25739
Ladies and Gentlemen:
Transmitted herewith for filing is a Current Report on Form 8-K of Wells
Real Estate Investment Trust, Inc.
Please do not hesitate to contact the undersigned if you have any questions
regarding this filing.
Very truly yours,
HOLLAND & KNIGHT LLP
By: /s/ Michael K. Rafter
---------------------
Michael K. Rafter
MKR/bs
enclosure
cc: Mr. Leo F. Wells, III (w/ encl.)
Mr. Michael C. Berndt (w/ encl.)
Ms. Vee Kimbrell (w/ encl.)
Mr. Donald Kennicott (w/ encl.)
Mr. Thomas Panther (w/ encl.)
