<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) March 29, 2000
-----------------------------
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.)
6200 The Corners Parkway, Suite 250, 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
Introduction
On March 29, 2000, Wells Operating Partnership, L.P. ("Wells OP"), a Delaware
limited partnership formed to acquire, own, lease and operate real properties on
behalf of Wells Real Estate Investment Trust, Inc. (the "Registrant"), a
Maryland corporation, purchased three office buildings (collectively, the
"Buildings") from Ryan Companies US, Inc. ("Ryan"), a Minnesota corporation.
Ryan is not in any way affiliated with the Registrant or Wells Capital, Inc.
(the "Advisor"), a Georgia corporation.
Dial Building
Purchase of the Dial Building. On March 29, 2000, Wells OP purchased a two
- -----------------------------
story office building with approximately 129,689 rentable square feet located at
15501 N. Dial Boulevard, Scottsdale, Maricopa County, Arizona (the "Dial
Building") from Ryan pursuant to that certain Agreement of Purchase and Sale of
property (the "Dial Contract") between Ryan and the Advisor, an affiliate of the
Registrant.
The rights under the Dial Contract were assigned by the Advisor, the original
purchaser under the Dial Contract, to Wells OP at closing. The purchase price
for the Dial Building was $14,250,000. Wells OP also incurred additional
acquisition expenses in connection with the purchase of the Dial Building,
including attorneys' fees, loan fees, recording fees and other closing costs, of
approximately $35,712.
Description of the Building and the Site. As set forth above, the Dial Building
- ----------------------------------------
is a two story office building containing approximately 129,689 rentable square
feet. The Dial Building, which was completed in 1997, is located on
approximately a 8.8375 acre tract of land within the Scottsdale Airpark
development.
The Dial Lease. The entire 129,689 rentable square feet of the Dial Building
- --------------
is currently under a net lease agreement (the "Dial Lease") with Dial
Corporation ("Dial"). The landlord's interest in the Dial Lease was assigned to
Wells OP at the closing. The Dial Lease commenced on August 14, 1997, and the
initial term expires on August 31, 2008. Dial has the right to extend the Dial
Lease for two additional five year periods of time at 95% of the then-current
"fair market rental rate." The annual rent payable for the initial term of the
Dial Lease is $1,387,672.
The Tenant. Dial, a publicly traded company which is currently headquartered in
- ----------
the Dial Building, is one of the leading consumer product manufacturers in the
United States. Dial's brands include Dial soap, Purex detergents, Renuzit air
fresheners, Armour canned meats and a variety of other leading consumer
products. During the fiscal year 1999, Dial had net income of $116 million on
revenues of over $1.7 billion and a net worth of over $411 million.
1
<PAGE>
ASML Building
Purchase of the ASML Building. On March 29, 2000, Wells OP purchased a two
- -----------------------------
story office building with approximately 95,133 rentable square feet located at
8555 South River Parkway, Tempe, Maricopa County, Arizona (the "ASML Building")
from Ryan pursuant to that certain Agreement of Purchase and Sale of Property
(the "ASML Contract") between Ryan and the Advisor.
The rights under the ASML Contract were assigned by the Advisor, the original
purchaser under the ASML Contract, to Wells OP at closing. The purchase price
for the ASML Building was $17,355,000. Wells OP also incurred additional
acquisition expenses in connection with the purchase of the ASML Building,
including attorneys' fees, recording fees, loan fees, and other closing costs,
of approximately $48,875.
Description of the Building, Site and Ground Lease. As set forth above, the
- --------------------------------------------------
ASML Building is a two story office building containing approximately 95,133
rentable square feet. The ASML Building, which was completed in June 1995, is
located on a 9.51 acre tract of land within the Arizona State University
Research Park (the "Research Park"). The land upon which the ASML building is
situated is subject to a long-term ground lease (the "ASML Ground Lease") with
Price-Elliott Research Park, Inc. and, at closing, Wells OP was assigned and
assumed all the tenant's rights, duties and obligations under the ASML Ground
Lease. The ASML Ground Lease commenced August 22, 1997 and expires on December
31, 2082. The annual ground lease payment for the first 15 years of the ASML
Ground Lease term is $186,368.
The ASML Lease. The entire 95,133 rentable square feet of the ASML Building is
- --------------
currently under a net lease agreement (the "ASML Lease") with ASM Lithography,
Inc. ("ASML"). The landlord's interest in the ASML Lease was assigned to Wells
OP at the closing. The ASML Lease commenced on June 4, 1998, and expires on
June 30, 2013. ASML has the right to extend the ASML Lease for two additional
five year periods of time at the prevailing "market rental rate," but in no
event less than the rate in force at the end of the preceding lease term. The
current annual rent payable under the ASML Lease is $1,927,788, out of which
Wells OP will be required to make the annual ground lease payment described
above.
The Tenant. ASML is a wholly-owned subsidiary of ASM Lithography Holdings NV
- ----------
("ASML Holdings"), a Dutch multi-national corporation that supplies lithography
systems used for printing integrated circuit designs onto very thin disks of
silicon, commonly referred to as wafers. These systems are supplied to
integrated circuit manufacturers throughout the United States, Asia, and Western
Europe. ASML Holdings is 24% owned by Philips Electronics and has strategic
partnerships with a number of major companies including Lucent Technologies,
Applied Materials, Motorola, Samsung, Hyundai and Motorola. ASML Holdings is a
guarantor of the ASML Lease. During the fiscal year 1999, ASML Holdings had net
income of $81.3 million on revenues of over $1.2 billion and a net worth of over
$615 million.
2
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Motorola Building
Purchase of the Motorola Building. On March 29, 2000, Wells OP purchased a two
- ---------------------------------
story office building with approximately 133,225 rentable square feet located at
8075 South River Parkway, Tempe, Maricopa County, Arizona (the "Motorola
Building") from Ryan pursuant to that certain Agreement of Purchase and Sale of
Property (the "Motorola Contract") between Ryan and the Advisor.
The rights under the Motorola Contract were assigned by the Advisor, the
original purchaser under the Motorola Contract, to Wells OP at closing. The
purchase price for the Motorola Building was $16,000,000. Wells Op also
incurred additional acquisition expenses in connection with the purchase of the
Motorola Building, including attorneys' fees, recording fees, loan fees, and
other closing costs, of approximately $36,622. In order to finance part of the
acquisition of the Motorola Building, Wells OP obtained a loan of $5,000,000
from Ryan in a seller financing transaction (the "Ryan Loan"). The Ryan Loan
matures in one year and accrues interest at the rate of nine percent (9%) per
annum, payable on a monthly basis. The Ryan Loan is secured by a first mortgage
interest on the Motorola Building.
Description of the Building, Site and Ground Lease. As set forth above, the
- --------------------------------------------------
Motorola Building is a two story office building containing approximately
133,225 rentable square feet. The Motorola Building was completed in July 1998,
and is located on a 12.44 acre tract of land within the Research Park. The land
upon which the Motorola building is situated is subject to a long-term ground
lease (the "Motorola Ground Lease") with the Research Park and, at closing,
Wells OP was assigned and assumed all the tenant's rights, duties and
obligations under the Motorola Ground Lease. The Motorola Ground Lease
commenced November 19, 1997 and expires on December 31, 2082. The annual ground
lease payment for the first 15 years of the Motorola Ground Lease term is
$243,825.
The Motorola Lease. The entire 133,225 rentable square feet of the Motorola
- ------------------
Building is currently under a net lease agreement (the "Motorola Lease") with
Motorola, Inc. ("Motorola"). The landlord's interest in the Motorola Lease was
assigned to Wells OP at the closing. The initial term of the Motorola Lease is
seven years which commenced on August 17, 1998, and expires on August 31, 2005.
Motorola has the right to extend the Motorola Lease for four additional five-
year periods of time at the prevailing "market rental rate." The current annual
rent payable under the Motorola Lease is $1,843,834, out of which Wells OP will
be required to make the annual ground lease payment described above.
The Tenant. The building is occupied by Motorola's Satellite Communications
- ----------
Division ("SATCOM"). SATCOM is a worldwide developer and manufacturer of space
and ground communications equipment and systems. This division is the prime
contractor for the Iridium system and is primarily engaged in computer design
and development functions. Motorola is a publicly traded company.
Property Management Fees. Wells Management Company, Inc. ("Wells Management"),
- ------------------------
an affiliate of the Registrant, has been retained to manage and lease the
Buildings. The Registrant shall pay management and leasing fees to Wells
Management in the amount of 4.5% of gross
3
<PAGE>
revenues from the Buildings.
Financing for the Buildings
The aggregate purchase price for the Buildings was $47,605,000. The aggregate
amount of $47,726,209 required to close the acquisition of the Buildings
consisted of (a) $7,065,411 in cash funded from a capital contribution by the
Registrant, (b) $9,000,000 in loan proceeds obtained from a revolving credit
facility established with SouthTrust Bank, N.A., (c) $26,660,798 in loan
proceeds obtained from a revolving credit facility established with Bank of
America, N.A., and (d) $5,000,000 in loan proceeds provided by Ryan as seller
financing in connection with the purchase of the Motorola Building, as described
above.
4
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements. The following financial statements relating to
--------------------
the real properties acquired by the Registrant are submitted at the end of this
Current Report and are filed herewith and incorporated herein by reference:
<TABLE>
<CAPTION>
Dial Building Page
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<S> <C>
Audited Financial Statements
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Report of Independent Public Accountants F-1
Statement of Revenues Over Certain Operating
Expenses for the year ended December 31, 1999 F-2
Notes to Statement of Revenues Over Certain
Operating Expenses for the year ended December 31, 1999 F-3
ASML Building
Audited Financial Statements
----------------------------
Report of Independent Public Accountants F-4
Statement of Revenues Over Certain Operating
Expenses for the year ended December 31, 1999 F-5
Notes to Statement of Revenues Over Certain
Operating Expenses for the year ended December 31, 1999 F-6
Motorola Building
Audited Financial Statements
----------------------------
Report of Independent Public Accountants F-7
Statement of Revenues Over Certain Operating
Expenses for the year ended December 31, 1999 F-8
Notes to Statement of Revenues Over Certain
Operating Expenses for the year ended December 31, 1999 F-9
</TABLE>
5
<PAGE>
(b) Pro Forma Financial Information. The following unaudited pro forma
-------------------------------
financial statements of the Registrant relating to the real properties 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-10
Pro Forma Balance Sheet as of December 31, 1999 F-11
Pro Forma Statement of Income for year ended December 31, 1999 F-12
</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.
6
<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: April 11, 2000
7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying statement of revenues over certain operating
expenses for the DIAL BUILDING for the year ended December 31, 1999. 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 auditing standards generally accepted
in the United States. These standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. 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 Dial
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 Dial
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 Dial Building for the year ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
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Atlanta, Georgia
April 10, 2000
F-1
<PAGE>
DIAL BUILDING
STATEMENT OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
RENTAL REVENUES $1,388,868
OPERATING EXPENSES, net of reimbursements 0
----------
REVENUES OVER CERTAIN OPERATING EXPENSES $1,388,868
==========
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
DIAL BUILDING
NOTES TO STATEMENT OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
1. organization and significant accounting policies
Description of Real Estate Property Acquired
On March 29, 2000, 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
the Dial Building from Ryan Companies US, Inc. ("Ryan"). Ryan is not an
affiliate of Wells OP. The purchase price of the Dial Building was $14,250,000.
Wells OP incurred additional acquisition expenses in connection with the
purchase of the Dial Building, including attorney's fees, recording fees, loan
fees, and other closing costs, of approximately $35,712. The funds used to
purchase the Dial Building consisted of cash and proceeds from Wells OP's lines
of credit with SouthTrust Bank, N.A. and Bank of America, N.A.
The entire 129,689 rentable square feet of the Dial Building is currently under
a net lease agreement (the "Lease") with Dial Corporation ("Dial"). The Lease
was assigned to Wells OP at closing. The Lease commenced on August 14, 1997 and
expires on August 31, 2008. Dial has the right to extend the Lease for two
additional five-year periods at 95% of the then-current fair market rental rate.
Under the Lease, Dial is required to pay as additional rent all real estate
taxes, special assessments, utilities, insurance, and other operating costs
associated with the Dial Building during the term of the Lease. In addition,
Dial is responsible for repair and maintenance of the roof, walls, structure,
and foundation, landscaping, and heating, ventilating, air conditioning,
mechanical, electrical, plumbing, and other systems.
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 statement of revenues over certain operating expenses is
presented on the accrual basis. This statement has been prepared in accordance
with the applicable rules and regulations of the Securities and Exchange
Commission for real estate properties acquired. Accordingly, the statement
excludes certain historical expenses, such as depreciation, interest, and
management fees, not comparable to the operations of the Dial Building after
acquisition by Wells OP.
F-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying statement of revenues over certain operating
expenses for the ASML BUILDING for the year ended December 31, 1999. 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 auditing standards generally accepted
in the United States. These standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. 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 ASML
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 ASML
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 ASML Building for the year ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
- --------------------------
Atlanta, Georgia
April 10, 2000
F-4
<PAGE>
ASML BUILDING
STATEMENT OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
REVENUES:
Rental income $1,849,908
Tenant reimbursements 242,143
----------
Total revenues 2,092,051
==========
OPERATING EXPENSES:
Ground lease 206,625
Insurance 9,628
----------
Total operating expenses 216,253
----------
REVENUES OVER CERTAIN OPERATING EXPENSES $1,875,798
==========
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
ASML BUILDING
NOTES TO STATEMENT OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
1. organization and significant accounting policies
Description of Real Estate Property Acquired
On March 29, 2000, 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
the ASML Building from Ryan Companies U.S., Inc. ("Ryan"). Ryan is not an
affiliate of Wells OP. The purchase price of the ASML Building was $17,355,000.
Wells OP incurred additional acquisition expenses in connection with the
purchase of the ASML Building, including attorney's fees, recording fees, loan
fees, and other closing costs, of approximately $48,875. The funds used to
purchase the ASML Building consisted of cash and proceeds obtained from Wells
OP's lines of credit with SouthTrust Bank, N.A. and Bank of America, N.A. Wells
OP also assumed a ground lease with Research Park on 9.51 acres. The ground
lease commenced August 22, 1997 and expires on December 31, 2082.
The entire 95,133 rentable square feet of the ASML Building is currently under a
net lease agreement (the "Lease") with ASML Lithography, Inc. ("ASML"). The
Lease was assigned to Wells OP at closing. The Lease commenced on June 4, 1998
and expires on June 30, 2013. ASML has the right to extend the Lease for two
additional five-year periods at the prevailing market rental rate, but in no
event less than the rate in force at the end of the preceding lease term. Under
the Lease, ASML is required to pay as additional rent the rent associated with
the ground lease described above and all real estate taxes, special assessments,
utilities, insurance, and other operating costs associated with the ASML
Building during the term of the Lease. In addition, ASML 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.
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 statement of revenues over certain operating expenses is
presented on the accrual basis. This statement has been prepared in accordance
with the applicable rules and regulations of the Securities and Exchange
Commission for real estate properties acquired. Accordingly, the statement
excludes certain historical expenses, such as depreciation, interest, and
management fees, not comparable to the operations of the ASML Building after
acquisition by Wells OP.
F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying statement of revenues over certain operating
expenses for the MOTOROLA BUILDING for the year ended December 31, 1999. 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 auditing standards generally accepted
in the United States. These standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. 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 Motorola
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 Motorola
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 Motorola Building for the year ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
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Atlanta, Georgia
April 10, 2000
F-7
<PAGE>
MOTOROLA BUILDING
STATEMENT OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
REVENUES:
Rental income $1,817,366
Tenant reimbursements 290,287
----------
Total revenues 2,107,653
----------
OPERATING EXPENSES:
Ground lease 243,826
Insurance 11,951
----------
Total operating expenses 255,777
----------
REVENUES OVER CERTAIN OPERATING EXPENSES $1,851,876
==========
The accompanying notes are an integral part of this statement.
F-8
<PAGE>
MOTOROLA BUILDING
NOTES TO STATEMENT OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
1. organization and significant accounting policies
Description of Real Estate Property Acquired
On March 29, 2000, 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
the Motorola Building from Ryan Companies US, Inc. ("Ryan"). Ryan is not an
affiliate of Wells OP. The purchase price of the Motorola Building was
$16,000,000. Wells OP incurred additional acquisition expenses in connection
with the purchase of the Motorola Building, including attorney's fees, recording
fees, loan fees, and other closing costs, of approximately $36,622. The funds
used to purchase the Motorola Building consisted of cash and proceeds obtained
from Wells OP's lines of credit with SouthTrust Bank, N.A. and Bank of America,
N.A. In addition, $5,000,000 in loan proceeds were provided by Ryan as seller
financing. Wells OP also assumed a ground lease with Research Park on 12.44
gross acres. The ground lease commenced November 19, 1997 and expires on
December 31, 2082.
The entire 133,225 rentable square feet of the Motorola Building is currently
under a net lease agreement (the "Lease") with Motorola, Inc. ("Motorola"). The
Lease was assigned to Wells OP at closing. The initial term of the Lease is
seven years, which commenced on August 17, 1998 and expires on August 31, 2005.
Motorola has the right to extend the Lease for four additional five-year periods
at the prevailing market rental rate. Under the lease, Motorola is required to
pay as additional rent the rent associated with the ground lease described above
and all real estate taxes, special assessments, utilities, insurance, and other
operating costs associated with the Motorola Building during the term of the
Lease. In addition, Motorola's 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.
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 statement of revenues over certain operating expenses is
presented on the accrual basis. This statement has been prepared in accordance
with the applicable rules and regulations of the Securities and Exchange
Commission for real estate properties acquired. Accordingly, the statement
excludes certain historical expenses, such as depreciation, interest, and
management fees, not comparable to the operations of the Motorola Building after
acquisition by Wells OP.
F-9
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet as of December 31, 1999 has been
prepared to give effect to the acquisition of the Dial Building, the ASML
Building, and the Motorola Building by the Wells Operating Partnership, L.P.
("Wells OP"), as if each acquisition occurred as of December 31, 1999. The
following unaudited pro forma statement of income for the year ended December
31, 1999 has been prepared to give effect to the acquisition of the Dial
Building, the ASML Building, and the Motorola Building by the Wells OP as if
each acquisition occurred on January 1, 1999.
Wells OP 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 OP.
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 acquisitions been consummated at
the beginning of the period presented.
As of December 31, 1999, the date of the accompanying pro forma balance sheet,
Wells OP held cash of $2,929,804. The additional cash used to purchase the Dial
Building, the ASML Building, and the Motorola Building, including deferred
project costs paid to Wells Capital Inc. (an affiliate of the Wells OP), were
raised through the issuance of additional shares subsequent to December 31,
1999, but prior to the acquisition date of March 29, 2000. This balance is
reflected in due to affiliate in the accompanying pro forma balance sheet.
F-10
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
PRO FORMA BALANCE SHEET
DECEMBER 31, 1999
(Unaudited)
assets
<TABLE>
<CAPTION>
Wells Real
Estate Pro Forma Adjustments Pro
------------------------------------------------
Investment Dial ASML Motorola Forma
Trust, Inc. Building Building Building Total
------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REAL ESTATE ASSETS, at cost:
Land $ 14,500,822 $ 3,500,000(a) $ 0 $ 0 $ 18,146,772
145,950(b)
Buildings less accumulated depreciation of
$1,726,103 81,507,040 10,785,712(a) 17,403,875(a) 16,036,622(a) 127,577,482
449,764(b) 725,742(b) 668,727(b)
Construction in progress 12,561,459 0 0 0 12,561,459
------------ -------------- ------------- ------------ -----------
Total real estate assets 108,569,321 14,881,426 18,129,617 16,705,349 158,285,713
INVESTMENT IN JOINT VENTURES 29,431,176 0 0 0 29,431,176
CASH AND CASH EQUIVALENTS 2,929,804 (878,941)(a) (1,054,729)(a) (996,134)(a) 0
DEFERRED OFFERING COSTS 964,941 0 0 0 964,941
DEFERRED PROJECT COSTS 28,093 (8,428)(b) (10,113)(b) (9,552)(b) 0
DUE FROM AFFILIATES 648,354 0 0 0 648,354
PREPAID EXPENSES AND OTHER ASSETS 1,280,601 0 0 0 1,280,601
------------ -------------- ------------- ------------ ------------
Total assets $143,852,290 $13,994,057 $17,064,775 $15,699,663 $190,610,785
============ ============== ============= ============ ============
liabilities and shareholders' equity
LIABILITIES:
Accounts payable and accrued expenses $ 461,300 $ 0 0 0 461,300
Notes payable 23,929,228 12,150,000(a) $14,580,000(a) 13,770,000(a) 64,429,228
Dividends payable 2,166,701 0 0 0 2,166,701
Due to affiliate 1,079,466 1,256,771(a) 1,769,146(a) 1,270,488(a) 7,337,961
587,266(b) 715,629(b) 659,175(b)
------------ -------------- ------------- ------------ ------------
Total liabilities 27,636,695 13,994,057 17,064,775 15,699,663 74,395,190
------------ -------------- ------------- ------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF UNIT HOLDER IN
OPERATING PARTNERSHIP 200,000 0 0 0 200,000
------------ -------------- ------------- ------------ ------------
SHAREHOLDERS' EQUITY:
Common shares, $.01 par value;
40,000,000 shares authorized,
13,471,085 shares issued and
outstanding 134,710 0 0 0 134,710
Additional paid-in capital 115,880,885 0 0 0 115,880,885
Retained earnings 0 0 0 0 0
------------ -------------- ------------- ------------ ------------
Total shareholders' equity 116,015,595 0 0 0 116,015,595
------------ -------------- ------------- ------------ ------------
Total liabilities and shareholders' $143,852,290 $13,994,057 $17,064,775 $15,699,663 $190,610,785
equity ============ ============== ============= ============ ============
(a) Reflects Wells Real Estate Investment Trust Inc.'s
purchase price for the building.
(b) Reflects deferred project costs allocated to the building
at approximately 4.17% of the purchase price.
</TABLE>
F-11
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Wells Real
Estate Pro Forma Adjustments Pro
-------------------------------------------
DIAL
Investment ASML Motorola Forma
Trust, Inc. Building Building Building Total
------------ ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Rental income $4,735,184 $1,388,868(a) $1,849,908(a) $1,817,366 (a) $9,791,326
Equity in income of joint ventures 1,243,969 0 0 0 1,243,969
Interest income 502,993 0 0 0 502,993
Other income 13,249 0 0 0 13,249
---------- ---------- ---------- ---------- -----------
6,495,395 1,388,868 1,849,908 1,817,366 11,551,537
---------- ---------- ---------- ---------- -----------
EXPENSES:
Depreciation 1,726,103 449,419(b) 724,185 (b) 668,214 (b) 3,568,921
Interest 442,029 944,055(c) 1,132,866 (c) 681,429 (c) 3,650,379
450,000 (d)
Operating costs, net of reimbursements (74,666) 0 (25,890)(e) (34,510)(e) (135,066)
Management and leasing fees 257,744 83,332(f) 104,114 (f) 94,670 (f) 539,860
General and administrative 123,776 0 0 0 123,776
Legal and accounting 115,471 0 0 0 115,471
Computer costs 11,368 0 0 0 11,368
Amortization of organizational costs 8,921 0 0 0 8,921
---------- ---------- ---------- ---------- -----------
2,610,746 1,476,806 1,936,275 1,859,803 7,883,630
---------- ---------- ---------- ---------- -----------
NET INCOME $3,884,649 $ (87,938) $ (86,367) $ (42,437) $3,667,907
========== ========== ========== ========== ===========
HISTORICAL EARNINGS PER SHARE
(BASIC AND DILUTED) $ 0.50
==========
PRO FORMA EARNINGS PER SHARE
(BASIC AND DILUTED) $ 0.23(g)
===========
</TABLE>
(a) Rental income recognized on a straight-line basis.
(b) Depreciation expense on the building using the straight-line
method and a 25-year life.
(c) Interest expense on the $9,000,000 line-of-credit with
SouthTrust Bank, N.A. and the $26,500,000 line-of-credit with
Bank of America N.A., which bear interest at 7.77%. Total
proceeds from both lines-of-credit and the seller financing
have been allocated based on the properties' pro-rata portion
of the total purchase price.
(d) Interest expense on the $5,000,000 note payable with Ryan
Companies U.S. Inc., the seller, which bears interest at 9%.
The seller financing specifically relates to the Motorola
Building; consequently, all of the related interest expense
is allocated to the Motorola Building.
(e) Consists of ground lease and insurance expense, which total
$216,253 (ASML) and $255,777 (Motorola), net of tenant
reimbursements.
(f) Management and leasing fees equal approximately 6% of rental
income.
(g) As of the property acquisition date of March 29, 2000, Wells
Real Estate Investment Trust, Inc. had 16,104,224 shares of
common stock outstanding; pro forma earnings per share is
calculated as if these shares were outstanding for the entire
year ended December 31, 1999.
F-12
