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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1999 or
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[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to _____________________ to ____________________
Commission file number 0-25739
WELLS REAL ESTATE INVESTMENT TRUST, INC.
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(Exact name of registrant as specified in its charter)
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Georgia 58-2328421
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<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
6200 The Corners Parkway, 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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Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK
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(Title of Class)
COMMON STOCK
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(Title of Class)
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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Aggregate market value of the voting stock held by nonaffiliates: ______________
While there is no established market for the Registrant's shares of voting
stock, the Registrant has offered and sold shares of its voting stock pursuant
to a Form S-11 Registration Statement under the Securities Act of 1933 at a
price of $10 per share. The number of shares of common stock outstanding as of
February 29, 2000 was 15,385,335.
Documents Incorporated by Reference:
Registrant incorporates by reference portions of the Wells Real Estate
Investment Trust, Inc. Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders (Items 10, 11, 12, and 13 of Part III) to be filed no later than
April 30, 2000.
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PART I
ITEM 1. BUSINESS
General
Wells Real Estate Investment Trust, Inc. (the "Company") is a Maryland
corporation formed on July 3, 1997. The Company is the sole general partner of
Wells Operating Partnership, L.P. ("Wells OP"), a Delaware limited partnership
organized for the purpose of acquiring, developing, owning, operating,
improving, leasing, and otherwise managing for investment purposes, income
producing commercial properties on behalf of the Company.
On January 30, 1998, the Company commenced a public offering of up to 16,500,000
shares of common stock at $10 per share pursuant to a Registration Statement on
Form S-11 under the Securities Act of 1933. The Company commenced active
operations on June 5, 1998, when it received and accepted subscriptions for
125,000 shares. The Company terminated its initial public offering on December
19, 1999, and on December 20, 1999, the Company commenced a second follow-on
public offering of up to 22,200,000 shares of common stock at $10 per share. As
of December 31, 1999, the Company had sold 13,471,085 shares for total capital
contributions of $134,710,850. After payment of $4,714,880 in Acquisition and
Advisory Fees and Expenses, payment of $16,838,857 in selling commissions and
organization and offering expenses, and capital contributions and acquisition
expenditures by Wells OP of $112,287,969 in property acquisitions, the Company
was holding net offering proceeds of $869,144 available for investment in
properties.
Wells OP owns interests in properties through equity ownership in the following
joint ventures: (i) The Fund IX-X-XI-REIT Joint Venture, a joint venture among
Wells OP and Wells Real Estate Fund IX, L.P., Wells Real Estate Fund X, L.P.,
and Wells Real Estate Fund XI, L.P. (the "Fund IX-X-XI-REIT Joint Venture"),
(ii) Wells/Fremont Associates (the "Fremont Joint Venture"), a joint venture
between Wells OP and Fund X and Fund XI Associates, which is a joint venture
between Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P. (the
"Fund X-XI Joint Venture"), (iii) Wells/Orange County Associates (the "Cort
Joint Venture"), a joint venture between Wells OP and the Fund X-XI Joint
Venture, and (iv) the Fund XI-XII-REIT Joint Venture, a joint venture among
Wells OP, Wells Real Estate Fund XI, L.P., and Wells Real Estate Fund XII, L.P.
(the "Fund XI-XII-REIT Joint Venture").
As of December 31, 1999, Wells OP owned interests in the following properties
either directly or through its interest in joint ventures: (i) a three story
office building in Knoxville, Tennessee (the "ABB-Knoxville Building"); (ii) a
two story office building in Louisville, Colorado (the "Ohmeda Building); (iii)
a three story office building in Broomfield, Colorado (the "360 Interlocken
Building"); (iv) a one story office building in Oklahoma City, Oklahoma (the
"Lucent Technologies Building"); (v) a one story warehouse and office building
in Ogden, Utah (the "Iomega Building"), all five of which are owned by the Fund
IX-X-XI-REIT Joint Venture; (vi) a two story warehouse office building in
Fremont, California (the "Fremont Building"), which is owned by the Fremont
Joint Venture; (vii) a one story warehouse and office building in Fountain
Valley, California (the "Cort Building"), which is owned by the Cort Joint
Venture; (viii) a four story office building in Tampa, Florida (the "PWC
Building"); (ix) a four-story office building in Harrisburg, Pennsylvania (the
"AT&T Building"), which are owned directly by Wells OP; (x) a two-story
manufacturing and office building located in Fountain Inn, South Carolina (the
"EYBL CarTex Building"); (xi) a three-story office building located in Leawood,
Kansas (the "Sprint Building"); (xii) a one-story office building and warehouse
in Tredyffrin Township, Pennsylvania (the "Johnson Matthey Building"); (xiii) a
two-story office building in Ft. Meyers, Florida (the "Gartner
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Building), all four of which are owned by Fund XI-XII-REIT Joint Venture; (xiv)
a two-story office building under construction located in Lake Forest,
California (the "Matsushita Project"); (xv) a four-story office building under
construction in Richmond, Virginia (the "ABB-Richmond Building"); (xvi) a two-
story office building and warehouse in Wood Dale, Illinois (the "Marconi
Building"); and (xvii) a five-story office building in Plano, Texas (the
"Cinemark Building"), all four of which are owned directly by Wells OP.
Employees
The Company has no direct employees. The employees of Wells Capital, Inc., the
Company's Advisor, perform a full range of real estate services including
leasing and property management, accounting, asset management and investor
relations for the Company.
See Item II "Compensation of Advisor and Affiliates", for a summary of the fees
paid to the Advisor and affiliates during the fiscal year ended December 31,
1999.
Insurance
Wells Management Company, Inc., an affiliate of the Company and the Advisor,
carries comprehensive liability and extended coverage with respect to all the
properties owned directly or indirectly by the Company. In the opinion of
management of the registrant, the properties are adequately insured.
Competition
The Company will experience competition for tenants from owners and managers of
competing projects which may include its affiliates. As a result, the Company
may be required to provide free rent, reduced charges for tenant improvements
and other inducements, all of which may have an adverse impact on results of
operations. At the time the Company elects to dispose of its properties, the
Company will also be in competition with sellers of similar properties to locate
suitable purchasers for its properties.
ITEM 2. PROPERTIES
The Company owns interest in 15 office buildings and 2 office buildings under
construction through its ownership in Wells OP which owns properties directly or
through its interest in four joint ventures. The Company does not have control
over the operations of the joint ventures; however, it does exercise significant
influence. Accordingly, investment in joint venture is recorded on the equity
method. As of December 31, 1999, these properties were 99.9% occupied.
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The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1999, assuming no exercise of renewal options
or termination rights:
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<CAPTION>
Partnership Percentage Percentage
Number Share of of Total of Total
Year of of Square Annualized Annualized Square Annualized
Lease Leases Feet Gross Base Gross Base Feet Gross Base
Expiration Expiring Expiring Rent (1) Rent (1) Expiring Rent
- ----------- -------- -------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
2000 0 0 $ 0 $ 0 0.0% 0.0%
2001 2 20,739 328,620 12,258 1.7 2.1
2002 3 12,606 248,508 9,269 1.0 1.6
2003(2) 2 69,146 1,078,252 357,870 5.5 6.8
2004(3) 2 61,005 946,050 701,427 4.9 6.0
2005(4) 1 106,750 1,107,000 41,291 8.5 7.0
2006(5) 1 52,253 1,412,160 0 4.2 8.9
2007(6) 3 253,900 2,851,584 1,189,115 20.3 18.0
2008(7) 5 501,045 5,752,791 4,481,215 40.0 36.3
2009(8) 2 174,105 2,098,188 1,427,305 13.9 13.3
----- --------- ----------- ---------- ----- -----
21 1,251,549 $15,823,153 $8,219,750 100.0% 100.0%
===== ========= =========== ========== ===== =====
</TABLE>
(1) Average monthly gross rent over the life of the lease,
annualized.
(2) Expiration of Cort building lease--52,000 square feet.
(3) Expiration of Fairchild building lease--58,424 square feet.
(4) Expiration of Ohmeda building lease--106,750 square feet.
(5) Expiration of Coca Cola lease at the Cinemark building--52,253
square feet.
(6) Expiration of Johnson Matthey building lease--130,000 square
feet, expiration of ABB building lease--55,000 square feet and
expiration of Sprint building lease--68,900 square feet.
(7) Expiration of PWC building lease--130,090 square feet; expiration
of Gartner building lease--62,400 square feet; expiration of EYBL
CarTex building lease--169,510 square feet; expiration of Lucent
building lease--57,186 square feet; expiration of AT&T building
lease--81,859 square feet.
(8) Expiration of Iomega building lease--108,250 square feet and
expiration of Cinemark building lease--65,855 square feet.
The following describes the properties in which the Company owns an interest as
of December 31, 1999:
Fund IX-X-XI-REIT Joint Venture
On June 11, 1998, Fund IX and Fund X Associates (the "Joint Venture"), a
joint venture between the Wells Real Estate Fund IX, L.P. ("Wells Fund
IX"), a Georgia public limited partnership, and Wells Real Estate Fund X,
L.P. ("Wells Fund X"), a Georgia public limited partnership, was amended
and restated to admit Wells Real Estate Fund XI, L.P. ("Wells Fund XI") a
Georgia public limited partnership, and Wells OP. Wells Fund IX, Wells
Fund X and Wells Fund XI are all Affiliates of the Company and the Advisor.
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The Joint Venture, which changed its name to the Fund IX-X-XI-REIT Joint
Venture, had previously acquired and owned the following three properties:
(i) the ABB-Knoxville Building located in Knoxville, Knox County,
Tennessee, (ii) the Ohmeda Building located in Louisville, Boulder County,
Colorado, and (iii) the 360 Interlocken Building located in Broomfield,
Boulder County, Colorado. On June 24, 1998, the Fund IX-X-XI-REIT Joint
Venture purchased the Lucent Technologies Building located in Oklahoma
City, Oklahoma County, Oklahoma. On July 1, 1998, Wells Fund X contributed
the Iomega Building located in Ogden, Weber County, Utah to the Fund IX-X-
XI-REIT Joint Venture.
As of December 31, 1999, Wells OP had contributed approximately $1,421,466
for an approximate 3.7% equity interest in the Fund IX-X-XI-REIT Joint
Venture. As of December 31, 1999, Wells Fund IX had an approximate 39.1%
equity interest, Wells Fund X had an approximate 48.3% equity interest, and
Wells Fund XI had an approximate 8.9% equity interest in the Fund IX-X-XI-
REIT Joint Venture.
The ABB Building
On March 20, 1997, the Fund IX-X Joint Venture began construction on a
three-story office building containing approximately 83,520 rentable square
feet (the "ABB-Knoxville Building") on a 5.62 acre tract of real property
in Knoxville, Knox County, Tennessee. The land purchase and construction
costs totaling approximately $8,012,711 were funded by capital
contributions of $4,177,711 by Wells Fund IX and $3,835,000 by Wells Fund
X.
ABB Environmental Systems, a subsidiary of ABB, Inc., occupied its lease
space of 55,000 rentable square feet comprising approximately 67% of the
building in December 1997. The initial term of the lease is 9 years and 11
months commencing in December 1997. ABB has the option under its lease to
extend the initial term of the lease for two consecutive five year periods.
The annual base rent payable during the initial term is $646,250 payable in
equal monthly installments of $53,854 during the first five years and
$728,750 payable in equal monthly installments of $60,729 during the last
four years and 11 months of the initial term. The annual base rent for
each extended term will be at market rental rates. In addition to the base
rent, ABB is required to pay additional rent equal to its share of
operating expenses during the lease term.
Commencing December 1, 1999, ABB Environmental exercised its right of first
refusal to lease an additional 23,992 square feet of space vacated by the
Associates in September 1999. This addition increases their rentable floor
area from 57,831 square feet to 81,823 square feet. ABB will pay base rent
at the same terms and conditions of their original terms.
It is currently anticipated that the remaining cost to complete this
project which includes the final buildout of remaining space will be
approximately $89,000, which it is anticipated will be contributed by Wells
Fund IX.
The average effective annual rental per square foot at the ABB Building was
$11.82 for 1999, $9.97 for 1998 and $8.16 for 1997, the first year of
occupancy. The occupancy rate at year end was 98% for 1999, 95% for 1998,
and 67% for 1997.
Ohmeda Building
On February 13, 1998, the Fund IX-X Joint Venture acquired a two story
office building that was completed in 1988 with approximately 106,750
rentable square feet (the "Ohmeda Building") on a 15-acre tract of land
located in Louisville, Boulder County, Colorado. The purchase price for
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the Ohmeda Building was $10,325,000. The Fund IX-X Joint Venture also
incurred additional acquisition expenses in connection with the purchase of
the Ohmeda Building, including attorneys' fees, recording fees and other
closing costs. As of December 31, 1999, Wells Fund IX had contributed
$3,460,192 and Wells Fund X had contributed $6,900,878 toward the purchase
of this building.
The entire 106,750 rentable square feet of the Ohmeda Building is currently
under a net lease date February 26, 1987, as amended by First Amendment to
Lease dated December 3, 1987, as amended by Second Amendment to Lease dated
October 20, 1997 (the "Lease") with Ohmeda, Inc., a Delaware corporation.
The lease was assigned to the Joint Venture at the closing. The lease
currently expires in January 2005, subject to (i) Ohmeda's right to
effectuate an early termination of the lease under the terms and conditions
described below, and (ii) Ohmeda's right to extend the lease for two
additional five year periods of time at the then current market rental
rates.
The monthly base rental payable under the lease is $83,709.79 through
January 31, 2003; $87,890.83 from February 1, 2003 through January 31,
2004; and $92,249.79 from February 1, 2004 through January 31, 2005. Under
the lease, Ohmeda is responsible for all utilities, taxes, insurance and
other operating costs with respect to the Ohmeda Building during the term
of the lease. In addition, Ohmeda shall pay a $21,000 per year management
fee for maintenance and administrative services of the Ohmeda Building.
The Fund IX-X-XI-REIT Joint Venture, as landlord, is responsible for
maintenance of the roof, exterior and structural walls, foundations, other
structural members and floor slab, provided that the landlord's obligation
to make repairs specifically excludes items of cosmetic and routine
maintenance such as the painting of walls.
The average effective annual rental per square foot at the Ohmeda Building
was $9.62 for 1999 and 1998, the first year of occupancy. The occupancy
rate at year end was 100% for 1999 and 1998.
360 Interlocken Building
On March 20, 1998, the Fund IX-X Joint Venture acquired a three-story
multi-tenant office building containing approximately 51,974 rentable
square feet (the "360 Interlocken Building") on a 5.1 acre tract of land in
Broomfield, Boulder County, Colorado for a purchase price of $8,275,000.
excluding acquisition costs. The purchase was funded by capital
contributions of $6,642,466 by Wells Fund IX and $1,632,584 by Wells Fund
X.
The 360 Interlocken Building was completed in December 1996. The first
floor has multiple tenants and contain 15,599 rentable square feet; the
second floor is leased to ODS Technologies, L.P. and contains 17,146
rentable square feet; and the third floor is leased to Transecon, Inc. and
contains 19,229 rentable square feet. As stated, the entire third floor of
the Interlocken Building containing 19,229 rentable square feet is
currently under lease to Transecon and expires in October 2001, subject to
Transecon's right to extend for one additional term of five years upon 180
days notice. The monthly lease rent payable under the Transecon lease is
approximately $24,000 for the initial term of the lease. Under the lease,
Transecon is responsible for its share of utilities, taxes, insurance and
other operating expenses with respect to the Interlocken building. In
addition, Transecon has a right of first refusal under the lease for any
second floor space proposed to be leased by the landlord.
The entire second floor of the Interlocken building containing 17,146
rentable square feet is currently under lease to ODS and expires in
September 2003 subject to ODS's right to extend for
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one additional term of three years. The monthly base rent payable under the
ODS lease is $22,100 through January 1998; $22,150 through January 1999;
$22,600 through January 2000; $23,100 through January 2001; $23,550 through
January 2002; $24,050 through January 2003 and $24,550 through September
2003. The rental payments to be made by the tenant under the ODS lease are
also secured by the assignment of a $275,000 letter of credit which may be
drawn upon by the landlord in the event of a tenant default under the
lease. Under the lease, ODS is responsible for its share of utilities,
taxes, insurance and other operating costs with respect to the Interlocken
building.
The average effective annual rental per square foot at the 360 Interlocken
Building was $15.97 for 1999 and 1998, the first year of occupancy. The
occupancy rate at year end was 100% for 1999 and 1998.
Lucent Technologies Building
On May 30, 1997, the Fund IX-X Joint Venture entered into an agreement for
the purchase and sale of real property with Wells Development Corporation
("Wells Development"), an affiliate of the Company and the Advisor, for the
acquisition and development of a one-story office building containing
57,186 net rentable square feet on 5.3 acres of land (the "Lucent
Technologies Building"). On June 24, 1998, the Fund IX-X-XI-REIT Joint
Venture purchased this property for a purchase price of $5,504,276. The
purchase price was funded by capital contributions of $1,421,466 by the
Company, $657,804 by Wells Fund IX, $950,392 by Wells Fund X and $2,482,810
by Wells Fund XI.
Lucent Technologies has occupied the entire Lucent Technologies Building.
The initial term of the lease is ten years commencing January 5, 1998.
Lucent Technologies has the option to extend the initial term of the lease
for two additional five year periods. The annual base rent payable during
the initial term is $508,383 payable in equal monthly installments of
$42,365 during the first five years and $594,152 payable in equal monthly
installments of $49,513 during the second five years of the lease term.
The annual base rent for each extendable term will be at market rental
rates. In addition to the base rent, Lucent Technologies will be required
to pay additional rent equal to its share of operating expenses during the
lease term.
The average effective annual rental per square foot at the Lucent
Technologies Building was $10.19 for 1999 and 1998, the first year of
occupancy. The occupancy rate at year end was 100% for 1999 and 1998.
Iomega Building
On July 1, 1998, Wells Real Estate Fund X, L.P. ("Wells Fund X")
contributed a single story warehouse and office building with 108,250
rentable square feet (the "Iomega Building") and was credited with making a
capital contribution to the IX-X-XI-REIT Joint Venture in the amount of
$5,050,425, which represents the purchase price of $5,025,000 plus
acquisition expenses of $25,425 originally paid by the Partnership for the
Iomega Building on April 1, 1998.
The building is 100% occupied by one tenant with a ten year lease term that
expires on July 31, 2006. The monthly base rent payable under the lease is
$40,000 through November 12, 1999. Beginning on the 40/th/ and 80/th/
months of the lease term, the monthly base rent payable under the lease
will be increased to reflect an amount equal to 100% of the increase in the
Consumer Price Index (as defined in the lease) during the preceding 40
months; provided however, that in no event shall the base rent be increased
with respect to any one year by more than 6% or by less
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than 3% per annum, compounded annually, on a cumulative basis from the
beginning of the lease term. The lease is a triple net lease, whereby the
terms require the tenant to reimburse the IX-X-XI-REIT Joint Venture for
certain operating expenses, as defined in the lease, related to the
building.
On March 22, 1999, the Fund IX-X-X-REIT Joint Venture purchased a four-acre
tract of vacant land adjacent to the Iomega Corporation Building located in
Ogden, Utah. This site is being used for additional parking and a loading-
dock area, which includes 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 Fund XI 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.
The average effective annual rental per square foot at the Iomega Building
was $5.18 for 1999 and $4.60 for 1998, the first year of occupancy. The
occupancy rate at year end was 100% for 1999 and 1998.
Wells/Fremont Joint Venture - Fairchild Building
On July 15, 1998, Wells OP entered into a joint venture agreement known as
Wells/Fremont Associates ("Fremont Joint Venture") with Wells Development
Corporation, a Georgia Corporation ("Wells Development"). Wells
Development is an affiliate of the Company and the Advisor. On July 21,
1998, the Fremont Joint Venture acquired the Fairchild Building, a 58,424
square-foot warehouse and office building located in Fremont, California
(the "Fairchild Building"), for a purchase price of $8,900,000 plus
acquisition expenses of approximately $60,000. The purchase was funded by
capital contributions of $6,900,000 by the Company, $1,000,000 by Wells
Fund X and $1,000,000 by Wells Fund XI.
The Fairchild Building is 100% occupied by one tenant with a seven-year
lease term that commenced on December 1, 1997 (with an early possession
date of October 1, 1997) and expires on 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.
On July 17,1998 a joint venture between Wells Fund X and Wells Fund XI (the
"Fund X-XI Joint Venture") entered into an Agreement for the Purchase and
Sale of Joint Venture Interest (the "Fremont JV Contract") with Wells
Development. Pursuant to the Fremont JV Contract, the Fund X-XI Joint
Venture contracted to acquire Wells Development's interest in the Fremont
Joint Venture. On October 8, 1998, the Fund X-XI Joint Venture exercised
its rights under the Fremont Joint Venture Contract and purchased Wells
Development's interest in the Fremont Joint Venture and became a joint
venture partner with Wells OP in the ownership of the Fairchild Building.
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As of December 31, 1999, Wells OP had contributed $6,983,111 and held an
approximate 78% equity percentage interest in the Fremont Joint Venture,
and the Fund X-XI Joint Venture held an approximate 22% equity percentage
interest in the Fremont Joint Venture.
The average effective annual rental per square foot at the Fairchild
Building was $15.46 for 1999 and 1998, the first year of occupancy. The
occupancy rate at year end was 100% for 1999 and 1998.
Wells/Cort Joint Venture
In July of 1998, Wells OP entered into a joint venture agreement known as
Wells/Orange County Associates ("Cort Joint Venture") with Wells
Development Corporation. On July 31, 1998, the Cort Joint Venture
acquired the Cort Furniture Building for a purchase price of $6,400,000
plus acquisition expenses of approximately $150,000. The Company
contributed $2,871,430, Wells Fund X contributed $2,296,233 and Wells Fund
XI contributed $1,398,767 toward the purchase of this building.
The Cort Furniture Building is a 52,000 square-foot warehouse and office
building located in Fountain Valley California. The 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 require the
tenant to reimburse the Cort Joint Venture for certain operating expenses,
as defined in the lease, related to the building.
On July 30, 1998, the Fund X-XI Joint Venture entered into the Agreement
for the Purchase and Sale of Joint Venture Interest (the "Cort JV
Contract") with Wells Development. Pursuant to the Cort JV Contract, the
Fund X-XI Joint Venture contracted to acquire Wells Development's interest
in the Cort Joint Venture. On September 1, 1998, the Fund X-XI Joint
Venture exercised its rights under the Cort JV Contract and purchased Wells
Development's interest in the Cort Joint Venture and became a joint venture
partner with Wells OP in the ownership of the Cort Furniture Building.
As of December 31, 1999, Wells OP had made total capital contributions of
$2,871,430 and held an approximate 44% equity percentage interest in the
Cort Joint Venture, and the Fund X-XI Joint Venture held an approximate 56%
equity percentage interest in the Cort Joint Venture.
The average effective annual rental per square foot at the Cort Building
was $15.30 for 1999 and 1998, the first year of occupancy. The occupancy
rate at year end was 100% for 1999 and 1998.
The PWC Building
On December 31, 1998, Wells OP acquired a four-story office building
containing approximately 130,090 rentable square feet (the "PWC Building")
which was recently developed and constructed on an approximately 9 acre
tract of real property located in Tampa, Hillsborough County, Florida. The
total purchase price for the PWC Building pursuant to the Purchase
Agreement was $21,127,854. At the closing, Wells OP paid a purchase price
of $20,707,854 to the Seller plus $98,609.30 for closing costs.
Wells OP purchased the PWC Building subject to a loan from SouthTrust Bank,
National Association ("SouthTrust") in the outstanding principal of
$14,132,537.87 (the "SouthTrust
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Loan"). The SouthTrust Loan consists of a revolving credit facility whereby
SouthTrust agreed to loan up to $15.2 million. The SouthTrust Loan 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. As of December 31, 1999, the
interest rate was 7.44% and the outstanding principal balance of the
SouthTrust Loan was $12,498,532. The SouthTrust Loan is secured by a first
mortgage against the PWC Building.
On December 31, 1998, the Seller assigned all of its rights pursuant to the
Lease Agreement dated as of March 30, 1998 between the Seller, as landlord,
and Price Waterhouse LLP, which has subsequently merged with Coopers &
Lybrand to form PriceWaterhouseCoopers ("PWC"), as tenant (such agreement,
as assigned, is referred to herein as the "PWC Lease"). The PWC lease
currently expires in December 2008, subject to PWC's right to extend the
lease for two additional five year periods of time.
The annual base rent payable under the PWC Lease is $1,915,741.13 during
the first year of the initial lease term. The base rent escalates at the
rate of 3% per year throughout the ten year lease term. In addition, PWC
is required to pay a "reserve " of all property taxes, operating expenses,
and other repair and maintenance work relating to the PWC Building. PWC is
also required to reimburse the landlord the cost of casualty insurance for
the property. Wells OP, as landlord, is responsible for all maintenance,
repairs and replacements to the roof and structural components of the PWC
Building, including without limitation, the roof system, exterior walls,
load bearing walls, foundations, glazing and curtain wall systems.
The average effective annual rental per square foot at the PWC Building was
$16.98 for 1999 and 1998. The occupancy rate at year end was 100% for 1999
and 1998.
AT&T Building
On February 4, 1999, Wells OP, a Georgia limited partnership formed to
acquire and hold real estate properties on behalf of the Company, acquired
a four-story office building containing approximately 81,859 rentable
square feet (the "AT&T Building), which was recently developed on an
approximately 10.5 acre tract of real property located in Harrisburg,
Pennsylvania for a purchase price of $12,291,200 excluding closing costs.
Wells OP expended cash proceeds in the amount of $6,332,100 and obtained a
loan in the amount of $6,450,000 from Bank of America, the net proceeds of
which were used to fund the remainder of the purchase price of the AT&T
Building. The Bank of America Loan matures on January 4, 2002. The
interest rate on the Bank of America Loan is a fixed rate equal to the rate
appearing on Telerate Page 3750 as the London InterBank Offered Rate plus
200 basis points over a six-month period. A principal installment in the
amount of $6,150,000 was paid by Wells OP on July 22, 1999. Thereafter,
Wells OP is required to make quarterly installments of principal in an
amount to one-ninth of the outstanding principal balance which began
October 1, 1999.
The AT&T Building is leased to Pennsylvania Cellular Telephone Corp., a
North Carolina corporation. At the closing of the AT&T Building, the
seller assigned all of its right to the AT&T Lease to Wells OP. The
initial term of the AT&T Lease is ten years which commenced on November 17,
1998.
Pennsylvania Telephone has the option to extend the initial term of the
AT&T Lease for three additional five-year periods and one additional four-
year and eleven-month period. The first
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annual base rent payable under the lease is $880,264. The second year
annual base rent payable will be $1,390,833. The base rent escalates at the
rate of 2% per year throughout the remainder of the ten-year lease term.
Under the AT&T Lease, Pennsylvania Telephone is required to pay as
additional rent all real estate taxes, special assessments, water rates and
charges, sewer rates and charges, public utilities, insurance premiums,
street lighting, excise levies, licenses, permits, governmental inspection
fees and other governmental charges and all other charges incurred in the
use, occupancy, operation, leasing, or possession of the AT&T Building. In
addition, Pennsylvania Telephone is responsible for all routine maintenance
and repairs relating to the AT&T Building. Wells OP, as landlord, is
responsible for (i) maintenance, repairs and replacements to the structural
components of the AT&T Building, including without limitations, the roof,
floor slabs, foundation walls, and footing, structural steel, exterior
walls, driveways, roadways, sidewalks, curbs, parking areas, and loading
areas, and (ii) making necessary capital replacements of heating,
ventilation and air conditioning systems, electrical, plumbing, fire
protection, and other mechanical systems in the building.
The average effective annual rental per square foot at the AT&T Building
was $18.21 for 1999. The occupancy rate at year end was 100% for 1999, the
first year of ownership.
The Marconi Building
On September 10, 1999, Wells OP acquired an office, assembly, and
manufacturing building containing approximately 250,354 rentable square
feet on a 15.3-acre tract of land located in Wood Dale, DuPage County,
Illinois. Wells OP acquired the Marconi (formerly Videojet) Building from
Sun-Pla, a California limited partnership, pursuant to the agreement of
purchase and sale (the "Contract"). The rights under the Contract were
assigned by Wells Capital, Inc., the original purchaser under the Contract,
to Wells OP at closing. The cash purchase price for the Marconi Building
was $32,630,940. In addition, Wells OP paid brokerage commissions of
$500,000 at closing. Wells OP incurred acquisition expenses in connection
with the purchase of the Marconi Building, including attorneys' fees,
appraisers' fees, environmental consultants' fees, and other closing costs,
of approximately $27,925.
The Marconi Building is a two-story corporate headquarters facility with
128,247 square feet of office space and 122,107 square feet of assembly and
distribution space. The Marconi Building was completed in 1991 and is
located at 1500 Mittel Boulevard in the Chancellory Business Park in Wood
Dale, Illinois.
The entire Marconi Building is currently under a net lease agreement with
Marconi dated May 31, 1991 (the "Marconi Lease"). The initial term of the
Marconi Lease is 20 years which commenced in November 1991 and expires
November 2011. Marconi has the right to extend the Marconi 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 annual base rent payable
for the remainder of the Marconi Lease term is $2,838,952 through November
2001, then $3,376,746 thereafter.
Under its lease, Marconi is responsible for repairs and maintenance of the
roof, walls, 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.
-11-
<PAGE>
The average effective annual rental per square foot at the Marconi Building
was $13.08. The occupancy rate at year end was 100%, the first year of
ownership.
For additional information regarding the Marconi Building, refer to the
Form 8-K of Wells Real Estate Investment Trust, Inc. dated September 10,
1999, which was filed with the Commission on September 24, 1999 (Commission
File No. 0-25739).
The Cinemark Building
On December 21, 1999, Wells OP purchased a five-story office building with
approximately 118,108 rentable square feet located on a 3.52 acre tract of
land in Plano, Collin County, Texas from CNMRK HQ Investors, L.P., a Texas
limited partnership.
The purchase price paid for the Cinemark Building was $21,800,000. Wells
OP also incurred additional acquisition expenses in connection with the
purchase of the Cinemark Building, including attorneys' fees, appraisal
fees, and other closing costs, of approximately $26,900.
The entire 118,108 rentable square feet of the Cinemark Building is
currently leased to two tenants. Cinemark USA, Inc. ("Cinemark") occupies
66,024 rentable square feet of the Cinemark Building, and The Coca-Cola
Company ("Coca-Cola") occupies the remaining 52,084 rentable square feet of
the Cinemark Building.
The initial term of the Cinemark lease is ten years which commenced on
December 21, 1999 and expires on December 20, 2009. Cinemark has the right
to renew the lease for two additional periods of time upon 180 days notice.
The first renewal term shall be for five years and the second renewal term
shall be for ten years.
The base rent payable for the Cinemark lease and first renewal term is as
follows:
Lease Year Yearly Base Rent Monthly Base Rent
---------- ---------------- -----------------
1-7 $1,366,491.25 $113,874.27
8-10 1,481,737.50 123,478.13
11-15 1,567,349.00 130,612.42
Under the Cinemark lease, Cinemark is required to pay as additional monthly
rent its pro rata share of all electricity costs and all operating costs,
including, but not limited to, garbage and waste disposal, janitorial
service, security, insurance premiums, real estate taxes, assessments and
other governmental levies, and such other operating costs with respect to
the Cinemark Building as are consistent with other owners of first-class
office buildings in Plano, Texas. In addition, Cinemark is responsible for
all routine maintenance and repairs to its portion of the Cinemark
Building. Wells OP, as landlord, is responsible for maintaining the common
and service areas of the Cinemark Building and the repair and replacement
of the roof, foundation, exterior windows, load bearing items, exterior
surface walls, plumbing, pipes and conduits located in the common and
service areas, central heating, ventilation and air conditioning systems,
and electrical, mechanical, and plumbing systems of the Cinemark Building.
The initial term of the Coca Cola lease is seven years which commenced on
December 1, 1999 and expires on November 30, 2006. Coca-Cola has the right
to renew the lease for one additional five-year period of time. Coca-Cola
must give written notice of its intention to exercise the renewal option at
least 240 days before the expiration of the lease term.
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<PAGE>
The base rent payable for the Coca-Cola lease term is as follows:
Lease Year Yearly Base Rent Monthly Base Rent
---------- ---------------- -----------------
1 $1,250,016 $104,168.00
2 1,302,100 108,508.33
3 1,354,184 112,848.66
4 1,406,268 117,189.00
5 1,458,352 121,529.33
6 1,510,436 125,869.66
7 1,562,520 130,210.00
Under the Coca-Cola lease, Coca-Cola is required to pay as additional
monthly rent its pro rata share of all electricity costs and all operating
costs, including, but not limited to, garbage and waste disposal,
janitorial service, security, insurance premiums, real estate taxes,
assessments and other governmental levies, and such other operating costs
with respect to the Cinemark Building as are consistent with other owners
of first-class office buildings in Plano, Texas. In addition, Coca-Cola is
responsible for all routine maintenance and repairs to its portion of the
Cinemark Building. Wells OP, as landlord, is responsible for maintaining
the common and service areas of the Cinemark Building and the repair and
replacement of the roof, foundation, exterior windows, load bearing items,
exterior surface walls, plumbing, pipes and conduits located in the common
and service areas, central heating, ventilation and air conditioning
systems, and electrical, mechanical, and plumbing systems of the Cinemark
Building.
Fund XI-XII-REIT Joint Venture
On June 21, 1999, Fund XI-REIT Joint Venture, a joint venture between Wells
OP and Wells Real Estate Fund XI, L.P. ("Wells Fund XI") a Delaware limited
partnership, was amended and restated to admit the Wells Real Estate Fund
XII, L.P. ("Wells Fund XII"), a Georgia public limited partnership. Wells
Fund XI and Wells Fund XII are all affiliates of the Company and its
advisors. The Joint Venture which changed its name to Wells Fund XI-XII-
REIT Joint Venture had previously acquired and owned the EYBL CarTex
Building located in Greenville, South Carolina. As of December 31, 1999,
the Company had contributed $17,585,310 for an approximate 56.8% equity
interest in the Fund XI-XII-REIT Joint Venture, Wells Fund XII has made
capital contributions of $5,300,000 for an approximate 17.1% equity
interest, and Wells Fund XI contributed $8,131,351 for an approximate 26.1%
interest in the Fund XI-XII-REIT Joint Venture.
EYBL CarTex Building
On May 18, 1999, Wells Real Estate, LLC-SC I ("Wells LLC"), a Georgia
limited liability company wholly owned by the Wells Fund XI-XII-REIT Joint
Venture (the "Joint Venture"), acquired a manufacturing and office building
located in Fountain In, unincorporated Greenville County, South Carolina
(the "EYBL CarTex Building"). Wells LLC purchased the EYBL CarTex Building
from Liberty Property Limited Partnership, a Pennsylvania limited
partnership (the "Seller").
The rights under the Contract were assigned by Wells Capital, Inc., an
affiliate of the Partnership and the original purchaser under the Contract,
to Wells LLC at closing. The purchase price for the EYBL CarTex Building
was $5,085,000. Wells LLC also incurred additional acquisitions
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<PAGE>
expenses in connection with the purchase of the EYBL CarTex Building,
including attorney's fees, recording fees and other closing costs, of
approximately $37,000.
The EYBL CarTex Building is a manufacturing and office building consisting
of a total of 169,510 square feet comprised of approximately 140,580 square
feet of manufacturing space, 25,300 square feet of two-story office space,
and 3,360 square feet of cafeteria/training space. An addition was
constructed to the EYBL CarTex Building in 1989, which consisted of an
additional 64,000 square feet of warehouse space.
The property, located at 111 SouthChase Boulevard, was developed in the
early 1980s on a site of approximately 11.94 acres. The site is located in
the SouthChase Industrial Park, which is located adjacent to I-385 in
southwest Greenville with easy access to I-85. The current configuration
of the parking lot allows for approximately 252 spaces for vehicles, which
has proven adequate for current tenant. The landscaping at the facility is
in good condition and is consistent with the quality level of the entire
complex.
The entire 169,510 rentable square feet of the EYBL CarTex Building is
currently under an Agreement of Lease (the "Lease") with EYBL CarTex, Inc.,
a South Carolina corporation ("EYBL CarTex"). The Lease was assigned to
Wells LLC a the closing.
The initial term of the Lease is ten years which commenced on March 1, 1998
and expires in February 2008. EYBL CarTex has the right to extend the
Lease for two additional five-year periods of time. Each extension option
must be exercised by giving notice to the landlord at least 12 months
prior to the expiration date of the then current lease term.
The annual lease rent payable during the first four years of the lease is
$508,530 in equal monthly installments of $42,377.50. The annual lease
rent for years five and six is $550,907.50, year seven and eight is
$593,285, and years nine and ten is $610,236.
Under the Lease, EYBL CarTex is required to pay as additional rent all real
estate taxes, special assessments, utilities, taxes, insurance, and other
operating costs with respect to the EYBL CarTex Building during the term of
the Lease. In addition, EYBL CarTex is responsible for all routine
maintenance and repairs to the EYBL CarTex Building. Wells LLC, as
landlord, is responsible for maintenance of the footings and foundations
and the structural steel columns and girders associated with the building.
Pursuant to a lease commission agreement dated February 12, 1998 between
Seller and the McNamara Company, Inc., Wells LLC is required to pay on or
before March 1 of each year an amount equal to $13,787 as a brokerage fee
to the McNamara Company, Inc. through March 1, 2007.
The average effective annual rental per square foot at the EYBL CarTex
Building was $3.31 the first year of occupancy. The occupancy rate at year
end was 100% for 1999.
For additional information regarding the EYBL CarTex Building, refer to
Supplement No. 8 dated June 15, 1999, to the Prospectus of Wells Real
Estate Investment Trust, Inc. dated January 30, 1998, which is contained in
Post-Effective Amendment No. 6 to Form S-11 Registration statement of Wells
Real Estate Investment Trust, Inc. filed with the Commission on July 15,
1999 (Commission File No. 333-32099).
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<PAGE>
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 attorney's
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 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 as the right to extend the lease for two additional five-
year periods of times. 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 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 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.
The average effective annual rental per square foot at the Sprint Building
was $15.44 the first year of occupancy. The occupancy rate at year end was
100% for 1999.
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<PAGE>
For additional information regarding the Sprint Building, refer to Form 8-K
of Wells Real Estate Investment Trust, Inc. dated July 2, 1999, which was
filed with the Commission on July 16, 1999 (Commission File No. 0-25739).
Johnson Mathey 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.
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.
The average effective annual rental per square foot at the Johnson Matthey
Building was $6.67 the first year of occupancy. The occupancy rate at year
end was 100% for 1999.
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<PAGE>
For additional information regarding the Johnson Matthey Building, refer to
Supplement No. 10 dated October 10, 1999, to the Prospectus of Wells Real
Estate Investment Trust, Inc. dated January 30, 1998, contained in Post
Effective Amendment No. 7 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc. which was filed with the Commission on
October 14, 1999 (Commission File No. 333-32099).
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 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.
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<PAGE>
The average effective annual rental per square foot at the Gartner Building
was $13.68 the first year of occupancy. The occupancy rate at year end was
100% for 1999.
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).
ITEM 3. LEGAL PROCEEDINGS
There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Company during 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders for the year 1999.
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PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
As of February 29, 2000, the Company had 15,385,335 shares of common stock
outstanding held by a total of 4,211 shareholders. The current offering price
per share is $10. There is no established public trading mark for the Company's
common stock. Under the Company's Articles of Incorporation, restrictions are
imposed on ownership and transfer of shares.
The Company will make distributions each taxable year (not including a return of
capital for federal income tax purposes) equal to at least 95% of its real
estate investment trust taxable income. The Company intends to make regular
quarterly dividend distributions to holders of the shares. Dividends will be
made to those shareholders who are shareholders as of the record dates selected
by the Directors. Dividends will be paid on a quarterly basis.
Dividend distributions made to the shareholders during 1999 and 1998 (the first
year of operations) were as follows:
<TABLE>
<CAPTION>
Distribution Total
for Quarter Cash Investment Return of
Ended Distributed Income Capital
- ------------------ ----------- ----------- ----------
<S> <C> <C> <C>
March 31, 1998 $ 0 $0.000 $0.00
June 30, 1998 0 0.000 0.00
September 30, 1998 102,987 0.150 0.00
December 31, 1998 408,176 0.160 0.00
March 31, 1999 628,385 0.174 0.00
June 30, 1999 1,121,457 0.175 0.00
September 30, 1999 1,646,751 0.175 0.00
December 31, 1999 2,168,330 0.175 0.00
</TABLE>
The fourth quarter dividend distributions for 1999 were paid to shareholders in
February 2000. Although there is no assurance, Management of the Company
anticipates that dividend distributions to shareholders will continue in 2000 at
a level at least comparable with 1999 dividend distributions.
ITEM 6. SELECTED FINANCIAL DATA
The Company did not commence active operations until it received and accepted
subscriptions for a minimum of 125,000 shares on June 5, 1998, and accordingly,
there is no comparative financial data available from prior fiscal years. As of
December 31, 1997, the Company's assets totaled approximately $490,073
consisting primarily of the Minority interest of Unit Holders and deferred
offering costs accrued.
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The following sets forth a summary of the selected financial data for the fiscal
year ended December 31, 1999 and 1998.
1999 1998
------------ -----------
Total assets $143,852,290 $42,832,573
Total revenues 6,495,395 395,178
Net income 3,884,649 334,034
Net income allocated to Shareholders 3,884,649 334,034
Earning per share:
Basic and diluted $ 0.50 $ 0.40
Cash distributions 0.70 0.31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Selected Financial Data and the accompanying financial statements of the Company
and notes thereto.
This Report contains forward-looking statements, within the meaning of Section
27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of
1934, including discussion and analysis of the financial condition of the
Company, anticipated capital expenditures required to complete certain projects,
amounts of cash distributions anticipated to be distributed to 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 statement made in the Report, which include
changes in general economic conditions, charges in real estate conditions
construction costs which may exceed estimates, construction delays, increases in
interest rates, 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.
Results of Operations and Changes in Financial Conditions
General
On January 30, 1998, the Company commenced a public offering of up to 16,500,000
shares of common stock at $10 per share pursuant to a Registration Statement on
Form S-11 filed under the Securities Act of 1933. The Company commenced active
operations on June 5, 1998, when it received and accepted subscription for
125,000 shares. The Company terminated its initial public offering on December
19, 1999, and on December 20, 1999, the Company commenced a second follow-on
public offering of up to 22,200,000 shares of common stock at $10 per share. As
of December 31, 1999, the Company had sold a total of 13,471,085 shares for
aggregate capital contributions of $134,710,850. After payment of $4,714,880 in
Acquisition and Advisory Fees and Expenses, payment of $16,838,857 in selling
commissions and organization and offering expenses, and capital contributions to
joint ventures and
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<PAGE>
acquisitions expenditures by Wells OP of $112,287,969, the Company was holding
net offering proceeds of $869,144 available for investment in properties, as of
December 31, 1999.
Gross revenues of the Company of $6,495,395 for the year ended December 31, 1999
were attributable to rental income, interest income earned on funds held by the
Company prior to the investment in properties, and income earned from joint
ventures. Expenses of the Company were $2,610,746 for the year ended December
31, 1999, and consisted primarily of rental expenses, administrative, accounting
fees, and printing expenses. Since the Company did not commence active
operations until it received and accepted subscriptions for a minimum of 125,000
shares on June 5, 1998, there is no comparative financial data available for the
fiscal years prior to 1998.
Net increase in cash and cash equivalents is primarily the result of raising
$103,169,490 in common stock capital contributions offset by acquisition and
advisory fees and expenses, commissions, offering costs, capital contributions
to joint ventures, and distributions received from joint ventures.
Cash dividends of $0.175 per share were paid to shareholders for the fourth
quarter of 1999.
The Company has made an election under Section 856 (C) of the Internal Revenue
Code of 1986, as amended (the "Code"), to be taxed as a REIT under the Code
beginning with its taxable year ended December 31, 1999. As a REIT for federal
income tax purposes, the Company generally will not be subject to Federal income
tax on income that it distributes to its stockholders. If the Company fails to
qualify as a REIT in any taxable year, it will be subject to federal income tax
on its taxable income at regular corporate rates and will not be permitted to
qualify for treatment as a REIT for federal income tax purposes for four years
following the year during which qualification is lost. Such an event could
materially adversely affect the Company's net income. However, the Company
believes that it is organized and operates in such a manner as to qualify for
treatment as a REIT for the year ended December 31, 1999. In addition, the
Company intends to continue to operate the Company so as to remain qualified as
a REIT for federal income tax purposes.
Recent Accounting Pronouncements
Effective April 3, 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities". SOP 98-5 is effective for fiscal years beginning after December
15, 1998, and initial application is required to be reported as a cumulative
effect of change in accounting principle. This SOP provides guidance on the
financial reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as incurred.
Adoption of this Statement by the Company in the first quarter of 1999 may
result in the write-off of certain capitalized organization costs.
-21-
<PAGE>
Property Operations
As of December 31, 1999, the Company owned interests in the following
operational properties:
The ABB Building - IX-X-XI-REIT Joint Venture
<TABLE>
<CAPTION>
For the Year Ended One Month
December 31 Ended
---------------------------
1999 1998 December 31, 1997
---------- -------- -----------------
<S> <C> <C> <C>
Revenues:
Rental income $ 987,327 $836,746 $ 28,512
Interest income 58,768 20,192 0
---------- -------- --------
1,046,095 856,938 28,512
---------- -------- --------
Expenses:
Depreciation 537,799 475,020 36,863
Management and leasing expenses 120,325 107,338 1,711
Operating costs, net of reimbursements (2,532) (40,641) 10,118
---------- -------- --------
655,592 541,717 48,692
---------- -------- --------
Net income (loss) $ 390,503 $315,221 $(20,180)
========== ======== ========
Occupied percentage 98% 95% 67%
========== ======== ========
Company's ownership percentage 3.7% 3.8% 0%
========== ======== ========
Cash distributed to the Company $ 34,965 $ 21,965 $ 0
========== ======== ========
Net income allocated to the Company $ 14,673 $ 9,453 $ 0
========== ======== ========
</TABLE>
Rental income increased in 1999 over 1998 due primarily to the increased
occupancy level of the property. Other operating expenses were negative for
1999 and 1998 due to an offset of tenant reimbursements in operating costs, as
well as management and leasing reimbursements. Tenants are billed an estimated
amount for current year common area maintenance which is then reconciled the
second quarter of the following year and the difference billed to the tenant.
Total expenses increased for 1999 over 1998 due to increased depreciation and
management and leasing fees as the building was leased up.
Cash distributions and net income allocated to the Company increased in 1999
over prior year levels due to the lease up of the project. The Company'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 XI to the Joint Venture in 1999.
The ABB Building incurred property taxes of $47,616 for 1999 and $36,771 for
1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 3. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
The Company was admitted to the Fund IX-X-XI-REIT Joint Venture on June 11, 1998
and began participating in net income and cash distributions in June 1998.
-22-
<PAGE>
The Ohmeda Building/Fund IX-X-XI-REIT Joint Venture
<TABLE>
<CAPTION>
Eleven
Year Months
Ended Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Rental income $1,027,314 $898,901
---------- --------
Expenses:
Depreciation 326,304 299,112
Management and leasing expenses 46,911 41,688
Other operating expenses, net of reimbursements (15,183) 2,863
---------- --------
358,032 343,663
---------- --------
Net income $ 669,282 $555,238
========== ========
Occupied percentage 100% 100%
========== ========
Company ownership percentage 3.7% 3.8%
========== ========
Cash distributed to the Company $ 36,488 $ 21,824
========== ========
Net income allocated to the Company $ 25,103 $ 14,691
========== ========
</TABLE>
The entire Ohmeda Building is currently under a net lease with Ohmeda, Inc. and
was assigned to the Fund IX-X-XI-REIT Joint Venture at closing. The lease
currently expires in January 2005. The monthly base rental payable under the
lease is $83,709.79 through January 31, 2003; $87,890,83 from February 1, 2003
through January 31, 2004; and $92,249.79 from February 1, 2004 through January
31, 2005. Under the lease, Ohmeda is responsible for all utilities, taxes,
insurance and other operating costs with respect to the Ohmeda Building under
the term of the lease.
Since the Ohmeda Building was purchased in February 1998, comparative income and
expense figures are not available. Other operating expenses are negative due to
tenant reimbursements reflected in this category, which includes management and
leasing expense reimbursement. Tenants are billed an estimated amount for
current year common area maintenance which is then reconciled the following year
and the difference is billed to the tenant. The Ohmeda Building incurred
property taxes of $249,707 for 1999 and $143,962 for 1998.
The Company was admitted to the Fund IX-X-XI-REIT Joint Venture on June 11, 1998
and began participating in net income and cash distributions in June 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
-23-
<PAGE>
The 360 Interlocken Building/Fund IX-X-XI-REIT Joint Venture
<TABLE>
<CAPTION>
Ten Months
Year Ended Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Rental income $829,827 $655,405
Interest income 0 246
-------- --------
829,827 $655,651
-------- --------
Expenses:
Depreciation 286,680 238,299
Management and leasing expenses 73,129 55,130
Other operating expenses, net of reimbursements 42,431 (65,654)
-------- --------
402,240 227,775
-------- --------
Net income $427,587 $427,876
======== ========
Occupied percentage 100% 100%
======== ========
Company ownership percentage 3.7% 3.8%
======== ========
Cash distribution to the Company $ 26,570 $ 18,126
======== ========
Net income allocated to the Company $ 16,041 $ 12,577
======== ========
</TABLE>
The 360 Interlocken Building was completed in December 1996. The first floor
has multiple tenants and contains 15,599 rentable square feet; the second floor
is leased to ODS Technologies, L.P. and contains 17,146 rentable square feet;
and the third floor is leased to Transecon, Inc. and contains 19,229 rentable
square feet.
Since the 360 Interlocken Building was purchased in March 1998, comparable
income and expense figures for the prior year are available for only ten months.
Other operating expenses for 1998 are negative due to an offset of tenant
reimbursements in operating costs as well as management and leasing expense
reimbursement. Tenants are billed an estimated amount for current year common
area maintenance which is then reconciled in the following year and the
difference is billed to the tenant. The 360 Interlocken Building incurred
property taxes of $244,025 for 1999 and $96,747 for 1998.
The Company was admitted to the Fund IX-X-XI-REIT Joint Venture on June 11, 1998
and began participating in net income and cash distributions in June 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
-24-
<PAGE>
Lucent Technologies Building/Fund IX-X-XI-REIT Joint Venture
<TABLE>
<CAPTION>
Seven Months
Year Ended Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Rental income $583,009 $291,508
-------- --------
Expenses:
Depreciation 183,204 106,871
Management and leasing expenses 21,479 11,281
Other operating expenses, net of reimbursements 15,809 9,883
-------- --------
220,492 128,035
-------- --------
Net income $362,517 $163,473
========= ========
Occupied percentage 100% 100%
========= ========
Company ownership percentage 3.7% 3.8%
========= ========
Cash distribution to the Company $ 18,746 $ 15,279
========= ========
Net income allocated to the Company $ 13,600 $ 6,313
========= ========
</TABLE>
The Lucent Technologies Building was completed in January 1998 with Lucent
Technologies occupying the entire building. Under the terms of the lease, the
tenant is responsible for all utilities, property taxes and other operating
expenses.
Since the Lucent Technologies Building was purchased by the IX-X-XI REIT Joint
Venture in June 1998, comparable income and expense figures for the prior year
are available for only seven months.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-25-
<PAGE>
Iomega Building/Fund IX-X-XI-REIT Joint Venture
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Rental income $560,906 $373,420
-------- --------
Expenses:
Depreciation 204,925 145,975
Management and leasing expenses 24,295 16,808
Other operating expenses, net of reimbursements 9,368 (4,579)
-------- --------
238,588 158,204
-------- --------
Net income $322,318 $215,216
======== ========
Occupied percentage 100% 100%
======== ========
Company ownership percentage 3.7% 3.8%
======== ========
Cash distribution to the Company $ 19,188 $ 9,048
======== ========
Net income allocated to the Company $ 12,085 $ 5,838
======== ========
</TABLE>
Since the Iomega Building was purchased in April 1998, comparative income and
expense figures for the prior year are available for only nine months. Other
operating expenses for 1998 are negative due to tenant reimbursements reflected
in this category which include management and leasing expense reimbursement.
Tenants are billed an estimated amount for current year common area maintenance
which is then reconciled in the following year and the difference is billed to
the tenant. The Iomega Building incurred property taxes of $73,020 for 1999 and
$44,559 for 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-26-
<PAGE>
Wells/Orange County Joint Venture (Cort)
<TABLE>
<CAPTION>
Five Months
Year Ended Ended
December 31, December 31,
1999 1998
<S> ------------ ------------
Revenues: <C> <C>
Rental income
Interest income $795,545 $331,477
0 448
-------- --------
795,545 331,925
Expenses: -------- --------
Depreciation
Management and leasing expenses 186,565 92,087
Interest expense 30,360 12,734
Other operating expenses, net of reimbursements 0 29,472
27,667 6,218
-------- --------
244,592 140,511
Net income -------- --------
$550,953 $191,414
======== ========
Occupied percentage
100% 100%
======== ========
Company ownership percentage
43.7% 43.7%
======== ========
Cash distribution to the Company
$306,090 $124,435
======== ========
Net income allocated to the Company
$240,586 $ 91,978
======== ========
</TABLE>
On July 31, 1998, the Cort Joint Venture acquired a one-story office and
warehouse building containing approximately 52,000 rentable square feel on a
3.65 acre tract of land in Fountain Valley, California (the "Cort Building") for
a purchase price of $6,400,000, excluding acquisition 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 require the
tenant to reimburse the Cort Joint Venture for certain operating expenses, as
defined in the lease, related to the building.
Since the Cort Building was purchased in July 1988, comparable income and
expense figures for the prior year are available for only five months. The
tenant is responsible for property taxes.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc., refer to Item 2, Properties, page 3.
-27-
<PAGE>
Wells/Fremont Joint Venture (Fairchild)
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Rental income $902,946 $401,058
Interest income 0 3,896
-------- --------
902,946 404,954
-------- --------
Expenses:
Depreciation 285,526 142,720
Management and leasing expenses 37,355 16,726
Interest expense 0 73,919
Other operating expenses, net of reimbursements 20,891 9,670
-------- --------
343,772 243,035
-------- --------
Net income $559,174 $161,919
======== ========
Occupied percentage 100% 100%
======== ========
Company ownership percentage 77.5% 77.5%
======== ========
Cash distribution to the Company $611,855 $229,864
======== ========
Net income allocated to the Company $433,383 $122,470
======== ========
</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 (the "Fairchild Building") for a
purchase price of $8,900,000 excluding acquisition 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. The tenant is responsible for property taxes.
Since the Fairchild Building was purchased in July 1998, comparable income and
expense figures for the prior year are not available.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
-28-
<PAGE>
PWC Building
<TABLE>
<CAPTION>
One Month
Year Ended Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Rental income $2,209,205 $20,994
Interest income 0 14,518
---------- ---------
2,209,205 35,512
Expenses: ---------- ---------
Depreciation 821,492 0
Management and leasing expenses 156,471 0
Other operating expenses, net of reimbursements 83,071 11,033
---------- ---------
1,061,034 11,033
---------- ---------
Net income $1,148,171 $24,479
========== =========
Occupied percentage 100% 100%
========== =========
Company ownership percentage 100% 100%
========== =========
Cash distribution to the Company $1,706,048 $24,479
========== =========
Net income allocated to the Company $1,148,171 $24,479
========== =========
</TABLE>
On December 31, 1998, the Wells OP acquired a four-story office building
containing approximately 130,090 rentable square feel on a 9 acre tract of land
in Tampa, Florida (the "PWC Building") for a purchase price of $21,127,854,
excluding acquisition costs.
The building is 100% leased by PriceWaterhouseCoopers with a lease expiration in
December 2008. The annual base rent payable under the PWC Lease is
$1,915,741.13 during the first year of the initial lease term. The base rent
escalates at the rate of 3% per year throughout the ten year lease term. In
addition, PWC is required to pay a "reserve" of all property taxes, operating
expenses, and other repair and maintenance work relating to the PWC Building.
PWC is also required to reimburse the landlord the cost of casualty insurance
for the property.
Since the PWC Building was purchased in December 1998, comparable income and
expense figures for the prior year are not available. The PWC Building incurred
property taxes of $295,146 for 1999.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc.. refer to Item 2, Properties, page 3.
-29-
<PAGE>
AT&T Building (Formerly Vanguard Cellular)
<TABLE>
<CAPTION>
Eleven Months
Ended
December 31,
1999
-------------
<S> <C>
Revenues:
Rental income $1,366,504
------------
Expenses:
Depreciation 442,724
Management and leasing expenses 48,716
Other operating expenses 223,153
------------
714,593
------------
Net income $ 651,911
============
Occupied percentage 100%
============
Company's ownership percentage 100%
============
Cash distribution to the Company $ 886,439
============
Net income allocated to the Company $ 651,911
============
</TABLE>
On February 4, 1999, Wells OP acquired a four-story office building containing
approximately 81,859 rentable square feet on a 10.5-acre tract of land in
Harrisburg, Pennsylvania, for a purchase price of $12,291,200, excluding
acquisition costs.
The building is 100% occupied by Pennsylvania Cellular Telephone Corporation,
with a lease expiration of November 2008. The first annual base rent payable
under the lease is $880,264. The second year annual base rent payable will
$1,390,833. The base rent escalates at the rate of 2% per year throughout the
remainder of the ten-year lease term.
Since the AT&T Building was purchased in February of 1999, comparable income and
expense figures for the prior year are not available. Under the terms of the
lease, the tenant is responsible for all utilities, property taxes, and other
operating expenses.
On April 27, 1999, Vanguard Cellular Systems, Inc. announced that its
shareholder approved the merger of Vanguard Cellular into a wholly owned
subsidiary of AT&T Corporation ("AT&T") at special meeting of shareholders. The
transaction was closed in May 1999.
For comments on the general competitive conditions to which the property may
been subject, see Item 1, Business, page 2. For additional information on
tenants, etc. refer to Item 2, Properties, page 3.
-30-
<PAGE>
EYBL CarTex Building/Fund XI-XII-REIT Joint Venture
<TABLE>
<CAPTION>
Eight Months
Ended
December 31,
1999
------------
<S> <C>
Revenues:
Rental income $ 350,221
------------
Expenses:
Depreciation 133,072
Management and leasing expenses 20,384
Other operating expenses, net of reimbursements 10,868
164,324
------------
Net income $ 185,897
============
Occupied percentage 100
============
Company's ownership percentage 56.8
============
Cash distribution to the Company $ 169,278
============
Net income allocated to the Company $ 109,724
============
</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 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 1999, comparable income and
expense figures for the prior year are not available.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
-31-
<PAGE>
The Sprint Building/Fund XI-XII-REIT Joint Venture
<TABLE>
<CAPTION>
Six Months
Ended
December 31,
1999
------------
<S> <C>
Revenues:
Rental income $ 531,993
-----------
Expenses:
Depreciation 163,553
Management and leasing expenses 18,732
Other operating expenses, net of reimbursements 6,069
-----------
188,354
-----------
Net income $ 343,639
===========
Occupied percentage 100%
===========
Company's ownership percentage 56.8%
===========
Cash distribution to the Company $ 269,824
===========
Net income allocated to the Company $ 196,425
===========
</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.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc refer to Item 2, Properties, page 3.
-32-
<PAGE>
Johnson Matthey Building/Fund XI-XII-REIT Joint Venture
<TABLE>
<CAPTION>
Five Months
Ended
December 31,
1999
------------
<S> <C>
Revenues:
Rental income $ 325,368
-----------
Expenses:
Depreciation 106,461
Management and leasing expenses 11,846
Other operating expenses, net of reimbursements 4,841
-----------
123,148
-----------
Net income $ 202,220
===========
Occupied percentage 100%
===========
Company's ownership percentage 56.8%
===========
Cash distribution to the Company $ 169,381
===========
Net income allocated to the Company $ 113,483
===========
</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 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 through June 30, 2005, $76,375 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.
-33-
<PAGE>
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc refer to Item 2, Properties, page 3.
The Gartner Building/Fund XI-XII-REIT Joint Venture
<TABLE>
<CAPTION>
Four Months
Ended
December 31,
1999
------------
<S> <C>
Revenues:
Rental income $ 235,863
------------
Expenses:
Depreciation 103,496
Management and leasing expenses 8,268
Other operating expenses, net of reimbursements 2,783
------------
114,547
------------
Net income $ 121,316
============
Occupied percentage 100%
============
Company's ownership percentage 56.8%
============
Cash distribution to the Company $ 95,307
============
Net income allocated to the Company $ 68,863
============
</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 on a
4.9-acre tract of land located in Ft. Myers, Florida, for a purchase price of
$8,320,000, excluding acquisition costs.
The entire 62,400 rentable square feet of the Garter Building is currently under
a net lease 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 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 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.
-34-
<PAGE>
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc refer to Item 2, Properties, page 3.
Marconi Building (formerly Videojet)
<TABLE>
<CAPTION>
Four Months
Ended
December 31,
1999
------------
<S> <C>
Revenues:
Rental income $ 1,090,425
------------
Expenses:
Depreciation 391,134
Management and leasing expenses 52,295
Other operating expenses 6,695
------------
450,124
------------
Net income $ 640,301
============
Occupied percentage 100%
============
Company's ownership percentage 100%
============
Cash distribution to the Company $ 829,259
============
Net income allocated to the Company $ 640,301
============
</TABLE>
On September 10, 1999, Wells OP acquired a two-story corporate headquarters
facility containing approximately 250,354 rentable square feet on a 15.3-acre
tract of land in Wood Dale, Illinois, for a purchase price of $32,630,940,
excluding acquisition costs.
The building is 100% leased by Videojet, with a lease expiration of November
2011. The annual base rent payable under the Videojet Lease is $2,838,952
through November 2001 and then $3,376,746 through November 2011.
Since the Marconi Building was purchased in September 1999, comparable income
and expense figures for the prior year are not available. Under the terms of the
lease, the tenant is responsible for all utilities, property taxes, and other
operating expenses.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
-35-
<PAGE>
Cinemark Building
<TABLE>
<CAPTION>
One Month
Ended
December 31,
1999
------------
<S> <C>
Revenues:
Rental income $ 82,059
------------
Expenses:
Depreciation 70,753
Management and leasing expenses 262
Other operating expenses 35,222
-----------
106,237
-----------
Net loss $ (24,178)
===========
Occupied percentage 100%
===========
Company's ownership percentage 100%
===========
Cash distribution to the Company $ 42,467
===========
Net loss allocated to the Company $ (24,178)
===========
</TABLE>
On December 21, 1999, Wells OP acquired a five-story office building containing
approximately 118,108 rentable square feet on a 3.52-acre tract of land in
Plano, Texas, for a purchase price of 21,800,000, excluding acquisition costs.
The building is 100% leased by Cinemark and Coca-Cola, with lease expirations of
November 2009 and November 2006, respectively.
Since the Cinemark Building was purchased in December of 1999, comparable income
and expense figures for the year are not available. For the partial month of
December ownership, the Cinemark Building incurred property taxes of $6,181.
For comments on the general competitive conditions to which the property may be
subject, see Item 1, Business, page 2. For additional information on tenants,
etc. refer to Item 2, Properties, page 3.
Liquidity and Capital Resources
The Company commenced active operations on June 5,1998, when it received and
accepted subscriptions for 125,000 units. As of December 31, 1999, the Company
raised $134,710,850 in capital through the sale of 13,471,085 shares. After
payment of $21,553,737 in acquisition and advisory fees and expenses, selling
commissions and organizational and offering expenses, and capital contributions
to joint ventures and acquisitions expenditures by Wells OP of $112,287,969, as
of December 31, 1999, the Company was holding net offering proceeds of
approximately $869,144 available for investment in additional properties.
-36-
<PAGE>
The Company's net cash provided by (used in) operating activities was $4,008,275
in 1999 and $(275,549) in 1998. Net cash used in investing activities of
$105,394,956 in 1999 and $33,500,807 in 1998 is primarily the result of
investments in the joint ventures, investments in real estate, deferred project
costs paid offset by distributions received from the joint ventures.
Distribution to partners began in 1998. Net cash provided by financing
activities is the result of raising $103,169,490 in 1999 and $31,540,360 in 1998
in shareholders contributions less commissions and organizational and offering
expenses.
The Company's dividends paid and payable through the fourth quarter of 1999 have
been paid from cash from operations and from distributions received from its
equity investment in joint ventures. The Company anticipates that dividends
will continue to be paid on a quarterly basis from such sources. The Company
expects to meet liquidity requirements and budget demands through cash flow from
operations.
The Company's capital needs and resources are expected to undergo changes as a
result of the completion of the Company's initial public offering in December of
1999, the continuation of its current follow-on offering and the future
acquisition of properties. Operating cash flow is expected to increase as
additional properties are added to the Company's investment portfolio. Dividends
to be distributed to shareholders are determined by the Company's board of
directors and are dependent upon a number of factors, including funds available
for the payment of dividends, the Company's financial condition, the Company's
capital expenditure requirements and the annual distribution requirements in
order to maintain REIT status under the Internal Revenue Code.
On February 18, 1999, as a part of the transaction involving the development of
the Matsushita Project, Wells OP entered into a Rental Income Guaranty Agreement
with the Fund VIII-IX Joint Venture, whereby Wells OP guaranteed the Fund VIII-
IX Joint Venture that the joint venture would receive income on an existing
building previously leased to Matsushita Avionics of at least equal to the
rental income and building expenses that the Fund VIII-IX Joint Venture would
have received over the remaining term of its lease with Matsushita Avionics.
Matsushita Avionics vacated the building owned by the Fund VIII-IX Joint Venture
in January 2000, with the existing lease term scheduled to run until September
2003. Currently rental and billing expenses are approximately $90,000 per month.
The Company's maximum exposure to liability to the Fund VIII-IX Joint Venture
for rental income and building expenses payable pursuant to this Rental Income
Guaranty Agreement was taken into account in the economic analysis performed in
making the determination to go forward with the Company's development of the
Matsushita Project. Management of the Company anticipates that its actual
liability will be less than its maximum exposure; however, management cannot, at
this time, determine the amount of the Company's actual exposure under this
Rental Income Guaranty Agreement. Payments made to the Fund VIII-IX Joint
Venture for rental income and building expenses began in January 2000.
The Company expects to make future real estate investments, directly or through
investments in joint ventures, from shareholder contributions.
Inflation
The real estate market has not been affected significantly by inflation in the
past three years due to the relatively low inflation rate. There are provisions
in the majority of tenant leases to protect the Company from the impact of
inflation. These leases contain common area maintenance charges (CAM charges),
real estate tax and insurance reimbursements on a per square foot bases, or in
some cases, annual reimbursement of operating expenses above a certain per
square foot allowance. These provisions should reduce the Company's exposure to
increases in costs and operating expenses resulting from inflation.
-37-
<PAGE>
The Partnership made the transition into the year 2000 without any information
systems, business operations or facilities related system problems. Management
believes that there are no other Y2K related issues that may require disclosure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements of the Registrant and supplementary data are detailed
under Item 14(a) and filed as part of the report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with the Company's accountants or other reportable
events during 1999.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The information required by this Item is incorporated by reference to the
Company's Definitive Proxy Statement to be filed with the Commission for its
annual stockholders' meeting to be held on June 28, 2000.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Definitive Proxy Statement to be filed with the Commission for its
annual stockholders' meeting to be held on June 28, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Definitive Proxy Statement to be filed with the Commission for its
annual stockholders' meeting to be held on June 28, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Definitive Proxy Statement to be filed with the Commission for its
annual stockholders' meeting to be held on June 28, 2000.
-38-
<PAGE>
PART III
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. The financial statements are contained on pages F-2 through F-43 of this
Annual Report on Form 10-K, and the list of the financial statements
contained herein is set forth on page F-1, which is hereby incorporated by
reference.
(a)2. Financial statement Schedule III
Information with respect to this item begins on page S-1 of this Annual
Report on Form 10-K.
(a)3. The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
(b) On October 5, 1999, the Company filed a Current Report on Form 8-K dated
September 20, 1999, reporting the acquisition of the Gartner Building by
the Fund XI-XII-REIT Joint Venture.
(c) The exhibits filed in response to Item 601 of Regulation S-K are listed on
the Exhibit Index attached hereto.
(d) See (a) 2 above.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
-39-
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 27th day of March
2000.
Wells Real Estate Investment Trust, Inc.
(Registrant)
By: /s/Leo F. Wells, III
-------------------------------
Leo F. Wells, III
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------------- ------------------------------------- ---------------------------
<S> <C> <C>
/s/Leo F. Wells, III
- -----------------------------------------
Leo F. Wells, III President and Director March 27, 2000
(Principal Executive Officer)
/s/Walter W. Sessoms
- -----------------------------------------
Walter W. Sessoms Director March 27, 2000
/s/John L. Bell
- -----------------------------------------
John L. Bell Director March 27, 2000
/s/Richard W. Carpent
- -----------------------------------------
Richard W. Carpenter Director March 27, 2000
/s/Bud Carter
- -----------------------------------------
Bud Carter Director March 27, 2000
/s/Donald S. Moss
- -----------------------------------------
Donald S. Moss Director March 27, 2000
- -----------------------------------------
Neil H. Strickland Director March 27, 2000
- -----------------------------------------
William H. Keogler, J Director March 27, 2000
/s/Douglas P. William
- -----------------------------------------
Douglas P. Williams Executive Vice President March 27, 2000
(Principal Financial and Accounting Officer)
</TABLE>
-40-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Financial Statements Page
- ------------------------------------------------------------------------------ --------
<S> <C>
Independent Auditors' Report F2
Balance Sheets as of December 31, 1999 and 1998 F3
Statements of Income for the Years ended December 31, 1999 and 1998 F4
Statements of Partners' Capital for the Years Ended December 31, 1999 and 1998 F5
Statements of Cash Flows for the Years Ended December 31, 1999 and 1998 F6
Notes to Financial Statements for December 31, 1999 and 1998 F7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying consolidated balance sheets of WELLS REAL
ESTATE INVESTMENT TRUST, INC. (a Maryland corporation) AND SUBSIDIARY as of
December 31, 1999 and 1998 and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the two years in the period
ended December 31, 1999. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements and schedule
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
schedule are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wells Real Estate
Investment Trust, Inc. and subsidiary as of December 31, 1999 and 1998 and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule III--Real Estate Investments and
Accumulated Depreciation as of December 31, 1999 is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 20, 2000
F-2
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
------------ ------------
<S> <C> <C>
REAL ESTATE ASSETS, at cost:
Land $ 14,500,822 $ 1,520,834
Building, less accumulated depreciation of $1,726,103 and $0 at
December 31, 1999 and 1998, respectively 81,507,040 20,076,845
Construction in progress 12,561,459 0
------------ ------------
Total real estate assets 108,569,321 21,597,679
INVESTMENT IN JOINT VENTURES 29,431,176 11,568,677
CASH AND CASH EQUIVALENTS 2,929,804 7,979,403
DEFERRED OFFERING COSTS 964,941 548,729
DEFERRED PROJECT COSTS 28,093 335,421
DUE FROM AFFILIATES 648,354 262,345
PREPAID EXPENSES AND OTHER ASSETS 1,280,601 540,319
------------ ------------
Total assets $143,852,290 $ 42,832,573
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 461,300 $ 187,827
Notes payable 23,929,228 14,059,930
Dividends payable 2,166,701 408,176
Due to affiliate 1,079,466 554,953
------------ ------------
Total liabilities 27,636,695 15,210,886
------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF UNIT HOLDER IN OPERATING PARTNERSHIP 200,000 200,000
------------ ------------
SHAREHOLDERS' EQUITY:
Common shares, $.01 par value; 40,000,000 shares authorized, 13,471,085
shares issued and outstanding at December 31, 1999 and 3,154,136 shares
issued and outstanding at December 31, 1998 134,710 31,541
Additional paid-in capital 115,880,885 27,056,112
Retained earnings 0 334,034
------------ ------------
Total shareholders' equity 116,015,595 27,421,687
------------ ------------
Total liabilities and shareholders' equity $143,852,290 $ 42,832,573
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
F-3
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
REVENUES:
Rental income $4,735,184 $ 20,994
Equity in income of joint ventures 1,243,969 263,315
Interest income 502,993 110,869
Other income 13,249 0
---------- ----------
6,495,395 395,178
---------- ----------
EXPENSES:
Depreciation 1,726,103 0
Interest expense 442,029 11,033
Operating costs, net of reimbursements (74,666) 0
Management and leasing fees 257,744 0
General and administrative 123,776 29,943
Legal and accounting 115,471 19,552
Computer costs 11,368 616
Amortization of organizational costs 8,921 0
---------- ----------
2,610,746 61,144
---------- ----------
NET INCOME $3,884,649 $ 334,034
========== ==========
EARNINGS PER SHARE:
Basic and diluted $ 0.50 $ 0.40
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
F-4
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Retained Shareholders'
-----------------------
Shares Amount Capital Earnings Equity
---------- ---------- ------------- ------------ -------------
<S> <C> <C> <C>
BALANCE, December 31, 1997 100 $ 1 $ 999 $ 0 $ 1,000
Issuance of common stock 3,154,036 31,540 31,508,820 0 31,540,360
Net income 0 0 0 334,034 334,034
Dividends ($.31 per share) 0 0 (511,163) 0 (511,163)
Sales commissions 0 0 (2,996,334) 0 (2,996,334)
Other offering expenses 0 0 (946,210) 0 (946,210)
---------- --------- ------------ ----------- ------------
BALANCE, December 31, 1998 3,154,136 31,541 27,056,112 334,034 27,421,687
Issuance of common stock 10,316,949 103,169 103,066,321 0 103,169,490
Net income 0 0 0 3,884,649 3,884,649
Dividends ($.70 per share) 0 0 (1,346,240) (4,218,683) (5,564,923)
Sales commissions 0 0 (9,801,197) 0 (9,801,197)
Other offering expenses 0 0 (3,094,111) 0 (3,094,111)
---------- --------- ------------ ----------- ------------
BALANCE, December 31, 1999 13,471,085 $ 134,710 $115,880,885 $ 0 $116,015,595
========== ========= ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
F-5
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,884,649 $ 334,034
------------- -------------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Equity in income of joint ventures (1,243,969) (263,315)
Depreciation 1,726,103 0
Amortization of organizational costs 8,921 0
Changes in assets and liabilities:
Prepaid expenses and other assets (749,203) (540,319)
Accounts payable and accrued expenses 273,473 187,827
Due to affiliates 108,301 6,224
------------- -------------
Total adjustments 123,626 (609,583)
------------- -------------
Net cash provided by (used in) operating activities 4,008,275 (275,549)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate (85,514,506) (21,299,071)
Investment in joint ventures (17,641,211) (11,276,007)
Deferred project costs paid (3,610,967) (1,103,913)
Distributions received from joint ventures 1,371,728 178,184
------------- -------------
Net cash used in investing activities (105,394,956) (33,500,807)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 40,594,463 14,059,930
Repayments of notes payable (30,725,165) 0
Dividends paid to shareholders (3,806,398) (102,987)
Issuance of common stock 103,169,490 31,540,360
Sales commissions paid (9,801,197) (2,996,334)
Other offering costs paid (3,094,111) (946,210)
------------- -------------
Net cash provided by financing activities 96,337,082 41,554,759
------------- -------------
NET (DECREASE) increase IN CASH AND CASH EQUIVALENTS (5,049,599) 7,778,403
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 7,979,403 201,000
------------- -------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,929,804 $ 7,979,403
============= =============
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Deferred project costs applied to real estate assets $ 3,183,239 $ 298,608
============= =============
Deferred project costs contributed to joint ventures $ 735,056 $ 469,884
============= =============
Deferred offering costs due to affiliate $ 416,212 $ 0
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
F-6
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Wells Real Estate Investment Trust, Inc. (the "Company") is a Maryland
corporation that qualifies as a real estate investment trust ("REIT"). The
Company is conducting an offering for the sale of a maximum of 40,000,000
(exclusive of 2,200,000 shares available pursuant to the Company's dividend
reinvestment plan) shares of common stock, $.01 par value per share, at a
price of $10 per share. The Company will seek to acquire and operate
commercial properties, including, but not limited to, office buildings,
shopping centers, business and industrial parks, and other commercial and
industrial properties, including properties which are under construction,
are newly constructed, or have been constructed and have operating
histories. All such properties may be acquired, developed, and operated by
the Company alone or jointly with another party. The Company is likely to
enter into one or more joint ventures with affiliated entities for the
acquisition of properties. In connection with this, the Company may enter
into joint ventures for the acquisition of properties with prior or future
real estate limited partnership programs sponsored by Wells Capital, Inc.
(the "Advisor") or its affiliates.
Substantially all of the Company's business is conducted through Wells
Operating Partnership, L.P. (the "Operating Partnership"), a Delaware
limited partnership. During 1997, the Operating Partnership issued 20,000
limited partner units to the Advisor in exchange for $200,000. The Company
is the sole general partner in the Operating Partnership and possesses full
legal control and authority over the operations of the Operating
Partnership; consequently, the accompanying consolidated financial
statements of the Company include the amounts of the Operating Partnership.
The Operating Partnership owns the following properties directly: (i) the
PriceWaterhouseCoopers property (the "PwC Building"), a four-story office
building located in Tampa, Florida; (ii) the AT&T Building, a four-story
office building located in Harrisburg, Pennsylvania; (iii) the Marconi Data
Systems property (the "Marconi Building"), a two-story office building
located in Wood Dale, Illinois; and (iv) the Cinemark Building, a five-
story office building located in Plano, Texas.
The Company also owns interests in several properties through a joint
venture among the Operating Partnership, Wells Real Estate Fund IX, L.P.
("Wells Fund IX"), Wells Real Estate Fund X, L.P. ("Wells Fund X"), and
Wells Real Estate Fund XI, L.P. ("Wells Fund XI"). This joint venture is
referred to as the Fund IX, Fund X, Fund XI, and REIT Joint Venture ("Fund
IX, X, XI, and REIT Joint Venture"). In addition, the Company owns an
interest in several properties through a joint venture between Wells Fund
XI, Wells Real Estate Fund XII, L.P. ("Wells Fund XII"), and the Operating
Partnership, which is referred to as Wells Fund XI, XII and REIT Joint
Venture. The Company owns two properties through a joint venture between
the Operating Partnership and Fund X and XI Associates, a joint venture
between Wells Fund X and Wells Fund XI.
F-7
<PAGE>
Through its investment in the Fund IX, X, XI, and REIT Joint Venture, the
Company owns interests in the following properties: (i) a three-story
office building in Knoxville, Tennessee (the "ABB Building"), (ii) a two-
story office building in Louisville, Colorado (the "Ohmeda Building"),
(iii) a three-story office building in Broomfield, Colorado (the "360
Interlocken Building"), (iv) a one-story warehouse facility in Ogden, Utah
(the "Iomega Building"), and (v) a one-story office building in Oklahoma
City, Oklahoma (the "Lucent Technologies Building").
The following properties are owned by the Company through its investment in
a joint venture with Fund X and XI Associates: (i) a one-story office and
warehouse building in Fountain Valley, California (the "Cort Furniture
Building") owned by Wells/Orange County Associates and (ii) a warehouse and
office building in Fremont, California (the "Fairchild Building") owned by
Wells/Fremont Associates.
Through its investment in the Wells Fund XI, XII, and REIT Joint Venture,
the Company owns interests in the following properties: (i) a two-story
manufacturing and office building in Greenville County, South Carolina (the
"EYBL CarTex Building"), (ii) a three-story office building Leawood, Kansas
(the "Sprint Building"), (iii) an office and warehouse building in Chester
County, Pennsylvania (the "Johnson Matthey Building"), and (iv) a two-story
office building in Ft. Myers, Florida (the "Gartner Building").
Use of Estimates and Factors Affecting the Company
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
The carrying values of real estate are based on management's current intent
to hold the real estate assets as long-term investments. The success of the
Company's future operations and the ability to realize the investment in
its assets will be dependent on the Company's ability to maintain rental
rates, occupancy, and an appropriate level of operating expenses in future
years. Management believes that the steps it is taking will enable the
Company to realize its investment in its assets.
Income Taxes
The Company has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), commencing with the taxable year
ended December 31, 1998. As a result, the Company generally will not be
subject to federal income taxation at the corporate level to the extent it
distributes annually at least 95% of its REIT taxable income, as defined in
the Code, to its shareholders and satisfies certain other requirements.
Additionally, the Operating Partnership is not subject to federal or state
income taxes. Accordingly, no provision has been made for federal or state
income taxes in the accompanying consolidated financial statements for the
years ended December 31, 1999 and 1998.
Real Estate Assets
Real estate assets held by the Company and joint ventures are stated at
cost less accumulated depreciation. Major improvements and betterments are
capitalized when they extend the useful life of the related asset. All
repair and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable,
F-8
<PAGE>
management assesses the recoverability of real estate assets by determining
whether the carrying value of such real estate assets will be recovered
through the future cash flows expected from the use of the asset and its
eventual disposition. Management has determined that there has been no
impairment in the carrying value of real estate assets held by the Company
or the joint ventures as of December 31, 1999.
Depreciation of building and improvements is calculated using the straight-
line method over 25 years. Tenant improvements are amortized over the life
of the related lease or the life of the asset, whichever is shorter.
Investment in Joint Ventures
Basis of Presentation. The Operating Partnership does not have control over
the operations of the joint ventures; however, it does exercise significant
influence. Accordingly, the Operating Partnership's investment in the joint
ventures is recorded using the equity method of accounting.
Partners' Distributions and Allocations of Profit and Loss. Cash available
for distribution and allocations of profit and loss to the Operating
Partnership by the joint ventures are made in accordance with the terms of
the individual joint venture agreements. Generally, these items are
allocated in proportion to the partners' respective ownership interests.
Cash is paid from the joint ventures to the Operating Partnership on a
quarterly basis.
Deferred Lease Acquisition Costs. Costs incurred to procure operating
leases are capitalized and amortized on a straight-line basis over the
terms of the related leases.
Revenue Recognition
All leases on real estate assets held by the Company or the joint ventures
are classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective
leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market
accounts.
Earnings Per Share
Earnings per share is calculated based on the weighted average number of
common shares outstanding during each period. The weighted average number
of common shares outstanding is identical for basic and fully diluted
earnings per share, as there is no dilutive impact created from the
Company's stock option plan (Note 10) using the treasury stock method.
2. DEFERRED PROJECT COSTS
The Company paid a percentage of shareholder contributions to the Advisor
for acquisition and advisory services. These payments, as stipulated in the
prospectus, can be up to 3.5% of shareholder contributions, subject to
certain overall limitations contained in the prospectus. Aggregate fees
paid through December 31, 1999 were $4,714,880 and amounted to 3.5% of
shareholders' contributions
F-9
<PAGE>
received. These fees are allocated to specific properties as they are
purchased or developed and are included in capitalized assets of the joint
ventures or real estate assets. Deferred project costs at December 31, 1999
and 1998 represent fees not yet applied to properties.
3. DEFERRED OFFERING COSTS
Organization and offering expenses, to the extent they exceed 3% of gross
offering proceeds, will be paid by the Advisor and not by the Company.
Organization and offering expenses do not include sales or underwriting
commissions but do include such costs as legal and accounting fees,
printing costs, and other offering expenses.
As of December 31, 1999, the Advisor paid organization and offering
expenses on behalf of the Company in the aggregate amount of $5,005,262, of
which the Advisor was reimbursed $4,040,321, which did not exceed the 5%
limitation. The unpaid portion of deferred offering costs is $964,941 and
is included in due to affiliate in the accompanying balance sheet.
4. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1999 represents the Operating
Partnership's share of the cash to be distributed from its joint venture
investments for the fourth quarter of 1999 and 1998 as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Fund IX, X, XI, and REIT Joint Venture $ 32,079 $ 38,360
Wells/Orange County Associates 75,953 77,123
Wells/Fremont Associates 152,681 146,862
Fund XI, XII, and REIT 387,641 0
--------- ---------
$648,354 $262,345
========= =========
</TABLE>
The Company entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of the Advisor.
In consideration for supervising the management and leasing of the
Operating Partnership's properties, the Operating Partnership will pay
Wells Management management and leasing fees equal to the lesser of (a)
fees that would be paid to a comparable outside firm, or (b) 4.5% of the
gross revenues generally paid over the life of the lease plus a separate
competitive fee for the one-time initial lease-up of newly constructed
properties generally paid in conjunction with the receipt of the first
month's rent. In the case of commercial properties which are leased on a
long-term (ten or more years) net lease basis, the maximum property
management fee from such leases shall be 1% of the gross revenues generally
paid over the life of the leases except for a one-time initial leasing fee
of 3% of the gross revenues on each lease payable over the first five full
years of the original lease term.
The Operating Partnership's portion of the management and leasing fees and
lease acquisition costs paid to Wells Management by the joint ventures was
$336,517 for the year ended December 31, 1999.
The Advisor performs certain administrative services for the Operating
Partnership, such as accounting and other partnership administration, and
incurs the related expenses. Such expenses are allocated among the
Operating Partnership and the various Wells Real Estate Funds based on time
spent on each fund by individual administrative personnel. In the opinion
of management, such allocation is a reasonable basis for allocating such
expenses.
F-10
<PAGE>
The Advisor is a general partner in various Wells Real Estate Funds. As
such, there may exist conflicts of interest where the Advisor, while
serving in the capacity as general partner for Wells Real Estate Funds, may
be in competition with the Operating Partnership for tenants in similar
geographic markets.
5. INVESTMENT IN JOINT VENTURES
The Operating Partnership's investment and percentage ownership in joint
ventures at December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- ------------------------
Amount Percent Amount Percent
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Fund IX, X, XI, and REIT Joint Venture $ 1,388,884 4% $ 1,443,378 4%
Wells/Orange County Associates 2,893,112 44 2,958,617 44
Wells/Fremont Associates 6,988,210 78 7,166,682 78
Fund XI, XII, and REIT Joint Venture 18,160,970 57 0 0
----------- -----------
$29,431,176 $11,568,677
=========== ===========
</TABLE>
The following is a rollforward of the Operating Partnership's investment in
joint ventures for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Investment in joint ventures, beginning of year $11,568,677 $ 0
Equity in income of joint ventures 1,243,969 263,315
Contributions to joint ventures 18,376,267 11,745,890
Distributions from joint ventures (1,757,737) (440,528)
----------- -----------
Investment in joint ventures, end of year $29,431,176 $11,568,677
=========== ===========
</TABLE>
Fund IX, X, XI, and REIT Joint Venture
On March 20, 1997, Wells Fund IX and Wells Fund X entered into a joint
venture agreement. The joint venture, Fund IX and X Associates, was formed
to acquire, develop, operate, and sell real properties. On March 20, 1997,
Wells Fund IX contributed a 5.62-acre tract of real property in Knoxville,
Tennessee, and improvements thereon, known as the ABB Building, to the Fund
IX and X Associates joint venture. A 83,885-square-foot, three-story
building was constructed and commenced operations at the end of 1997.
On February 13, 1998, the joint venture purchased a two-story office
building, known as the Ohmeda Building, in Louisville, Colorado. On March
20, 1998, the joint venture purchased a three-story office building, known
as the 360 Interlocken Building, in Broomfield, Colorado. On June 11, 1998,
Fund IX and X Associates was amended and restated to admit Wells Fund XI
and the Operating Partnership. The joint venture was renamed the Fund IX,
X, XI, and REIT Joint Venture. On June 24, 1998, the new joint venture
purchased a one-story office building, known as the Lucent Technologies
Building, in Oklahoma City, Oklahoma. On April 1, 1998, Wells Fund X
purchased a one-story warehouse facility, known as the Iomega Building, in
Ogden, Utah. On July 1, 1998, Wells Fund X contributed the Iomega Building
to the Fund IX, X, XI, and REIT Joint Venture.
F-11
<PAGE>
Following are the financial statements for the Fund IX, X, XI, and REIT
Joint Venture:
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
Assets
1999 1998
------------- ------------
<S> <C> <C>
Real estate assets, at cost:
Land $ 6,698,020 $ 6,454,213
Building and improvements, less accumulated depreciation of
$2,792,068 in 1999 and $1,253,156 in 1998 29,878,541 30,686,845
Construction in progress 0 990
----------- ------------
Total real estate assets 36,576,561 37,142,048
Cash and cash equivalents 1,146,874 1,329,457
Accounts receivable 554,965 133,257
Prepaid expenses and other assets 526,409 441,128
----------- ------------
Total assets $38,804,809 $39,045,890
=========== ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 704,914 $ 409,737
Due to affiliates 6,379 4,406
Partnership distributions payable 804,734 1,000,127
----------- ------------
Total liabilities 1,516,027 1,414,270
----------- ------------
Partners' capital:
Wells Real Estate Fund IX 14,590,626 14,960,100
Wells Real Estate Fund X 18,000,869 18,707,139
Wells Real Estate Fund XI 3,308,403 2,521,003
Wells Operating Partnership, L.P. 1,388,884 1,443,378
----------- ------------
Total partners' capital 37,288,782 37,631,620
----------- ------------
Total liabilities and partners' capital $38,804,809 $39,045,890
=========== ============
</TABLE>
F-12
<PAGE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Income (Loss)
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
Revenues:
Rental income $3,932,962 $2,945,980 $28,512
Interest income 120,080 20,438 0
---------- ---------- --------
4,053,042 2,966,418 28,512
---------- ---------- --------
Expenses:
Depreciation 1,538,912 1,216,293 36,863
Management and leasing fees 286,139 226,643 1,711
Operating costs, net of reimbursements (43,501) (140,506) 10,118
Property administration expense 63,311 34,821 0
Legal and accounting 35,937 15,351 0
---------- ---------- --------
1,880,798 1,352,602 48,692
---------- ---------- --------
Net income (loss) $2,172,244 $1,613,816 $(20,180)
========== ========== ========
Net income (loss) allocated to Wells Real Estate Fund IX $ 850,072 $ 692,116 $(10,145)
========== ========== ========
Net income (loss) allocated to Wells Real Estate Fund X $1,056,316 $ 787,481 $(10,035)
========== ========== ========
Net income allocated to Wells Real Estate Fund XI $ 184,355 $ 85,352 $ 0
========== ========== ========
Net income allocated to Wells Operating Partnership, L.P. $ 81,501 $ 48,867 $ 0
========== ========== ========
</TABLE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Wells Real Wells Real Wells Real Wells Total
Estate Estate Estate Operating Partners'
Fund IX Fund X Fund XI Partnership, L.P. Capital
---------- ---------- ----------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 0 $ 0 $ 0 $ 0 $ 0
Net loss (10,145) (10,035) 0 0 (20,180)
Partnership contributions 3,712,938 3,672,838 0 0 7,385,776
------------ ----------- ---------- ---------- -----------
Balance, December 31, 1997 3,702,793 3,662,803 0 0 7,365,596
Net income 692,116 787,481 85,352 48,867 1,613,816
Partnership contributions 11,771,312 15,613,477 2,586,262 1,480,741 31,451,792
Partnership distributions (1,206,121) (1,356,622) (150,611) (86,230) (2,799,584)
------------ ----------- ---------- ---------- -----------
Balance, December 31, 1998 14,960,100 18,707,139 2,521,003 1,443,378 37,631,620
Net income 850,072 1,056,316 184,355 81,501 2,172,244
Partnership contributions 198,989 0 911,027 0 1,110,016
Partnership distributions (1,418,535) (1,762,586) (307,982) (135,995) (3,625,098)
------------ ----------- ---------- ---------- -----------
Balance, December 31, 1999 $14,590,626 $18,000,869 $3,308,403 $1,388,884 $37,288,782
============ =========== ========== ========== ===========
</TABLE>
F-13
<PAGE>
The Fund IX, X, XI, and REIT Joint Venture
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $2,172,244 $ 1,613,816 $ (20,180)
---------- ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,538,912 1,216,293 36,863
Changes in assets and liabilities:
Accounts receivable (421,708) (92,745) (40,512)
Prepaid expenses and other assets (85,281) (111,818) (329,310)
Accounts payable 295,177 29,967 379,770
Due to affiliates 1,973 1,927 2,479
---------- ------------ ------------
Total adjustments 1,329,073 1,043,624 49,290
---------- ------------ ------------
Net cash provided by operating
activities 3,501,317 2,657,440 29,110
---------- ------------ ------------
Cash flows from investing activities:
Investment in real estate (930,401) (24,788,070) (5,715,847)
---------- ------------ ------------
Cash flows from financing activities:
Distributions to joint venture partners (3,820,491) (1,799,457) 0
Contributions received from partners 1,066,992 24,970,373 5,975,908
---------- ------------ ------------
Net cash (used in) provided by
financing activities (2,753,499) 23,170,916 5,975,908
---------- ------------ ------------
Net (decrease) increase in cash and cash equivalents (182,583) 1,040,286 289,171
Cash and cash equivalents, beginning of year 1,329,457 289,171 0
---------- ------------ ------------
Cash and cash equivalents, end of year $1,146,874 $ 1,329,457 $ 289,171
========== ============ ============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 43,024 $ 1,470,780 $ 318,981
========== ============ ============
Contribution of real estate assets to joint venture $ 0 $ 5,010,639 $ 1,090,887
========== ============ ============
</TABLE>
Wells/Orange County Associates
On July 27, 1998, the Operating Partnership entered into a joint venture
agreement with Wells Development Corporation, referred to as Wells/Orange County
Associates. On July 31, 1998, Wells/Orange County Associates acquired a
52,000-square-foot warehouse and office building located in Fountain Valley,
California, known as the Cort Furniture Building.
On September 1, 1998, Fund X and XI Associates acquired Wells Development
Corporation's interest in Wells/Orange County Associates which resulted in Fund
X and XI Associates becoming a joint venture partner with the Operating
Partnership in the ownership of the Cort Furniture Building.
F-14
<PAGE>
Following are the financial statements for Wells/Orange County Associates:
Wells/Orange County Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1999 and 1998
Assets
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $2,187,501 $2,187,501
Building, less accumulated depreciation of $278,652 in 1999 and $92,087
in 1998 4,385,463 4,572,028
---------- ----------
Total real estate assets 6,572,964 6,759,529
Cash and cash equivalents 176,666 180,895
Accounts receivable 49,679 13,123
---------- ----------
Total assets $6,799,309 $6,953,547
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 0 $ 1,550
Partnership distributions payable 173,935 176,614
---------- ----------
Total liabilities 173,935 178,164
---------- ----------
Partners' capital:
Wells Operating Partnership, L.P. 2,893,112 2,958,617
Fund X and XI Associates 3,732,262 3,816,766
---------- ----------
Total partners' capital 6,625,374 6,775,383
---------- ----------
Total liabilities and partners' capital $6,799,309 $6,953,547
========== ==========
</TABLE>
F-15
<PAGE>
Wells/Orange County Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Revenues:
Rental income $795,545 $331,477
Interest income 0 448
-------- --------
795,545 331,925
-------- --------
Expenses:
Depreciation 186,565 92,087
Management and leasing fees 30,360 12,734
Operating costs, net of reimbursements 22,229 2,288
Interest 0 29,472
Legal and accounting 5,439 3,930
-------- --------
244,593 140,511
-------- --------
Net income $550,952 $191,414
======== ========
Net income allocated to Wells Operating Partnership, L.P. $240,585 $ 91,978
======== ========
Net income allocated to Fund X and XI Associates $310,367 $ 99,436
======== ========
</TABLE>
Wells/Orange County Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Wells
Operating Fund X Total
Partnership, and XI Partners'
L.P. Associates Capital
------------ ----------- -----------
<S> <C> <C> <C>
Balance, December 31, 1997 $ 0 $ 0 $ 0
Net income 91,978 99,436 191,414
Partnership contributions 2,991,074 3,863,272 6,854,346
Partnership distributions (124,435) (145,942) (270,377)
------------ ----------- -----------
Balance, December 31, 1998 2,958,617 3,816,766 6,775,383
Net income 240,585 310,367 550,952
Partnership distributions (306,090) (394,871) (700,961)
------------ ----------- -----------
Balance, December 31, 1999 $2,893,112 $3,732,262 $6,625,374
============ =========== ===========
</TABLE>
-16-
<PAGE>
Wells/Orange County Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 550,952 $ 191,414
--------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 186,565 92,087
Changes in assets and liabilities:
Accounts receivable (36,556) (13,123)
Accounts payable (1,550) 1,550
--------- -----------
Total adjustments 148,459 80,514
--------- -----------
Net cash provided by operating activities 699,411 271,928
--------- -----------
Cash flows from investing activities:
Investment in real estate 0 (6,563,700)
--------- -----------
Cash flows from financing activities:
Issuance of note payable 0 4,875,000
Payment of note payable 0 (4,875,000)
Distributions to partners (703,640) (93,763)
Contributions received from partners 0 6,566,430
--------- -----------
Net cash (used in) provided by financing activities (703,640) 6,472,667
--------- -----------
Net (decrease) increase in cash and cash equivalents (4,229) 180,895
Cash and cash equivalents, beginning of year 180,895 0
--------- -----------
Cash and cash equivalents, end of year $ 176,666 $ 180,895
========= ===========
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 287,916
========= ===========
</TABLE>
Wells/Fremont Associates
On July 15, 1998, the Operating Partnership entered into a joint venture
agreement with Wells Development Corporation, referred to as Wells/Fremont
Associates. On July 21, 1998, Wells/Fremont Associates acquired a
58,424-square-foot warehouse and office building located in Fremont, California,
known as the Fairchild Building.
On October 8, 1998, Fund X and XI Associates acquired Wells Development
Corporation's interest in Wells/Fremont Associates which resulted in Fund X and
XI Associates becoming a joint venture partner with the Operating Partnership in
the ownership of the Fairchild Building.
-17-
<PAGE>
Following are the financial statements for Wells/Fremont Associates:
Wells/Fremont Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
Assets
1999 1998
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $2,219,251 $2,219,251
Building, less accumulated depreciation of $428,246 in 1999 and
$142,720 in 1998 6,709,912 6,995,439
---------- ----------
Total real estate assets 8,929,163 9,214,690
Cash and cash equivalents 189,012 192,512
Accounts receivable 92,979 34,742
---------- ----------
Total assets $9,211,154 $9,441,944
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 2,015 $ 3,565
Due to affiliate 5,579 2,052
Partnership distributions payable 186,997 189,490
---------- ----------
Total liabilities 194,591 195,107
---------- ----------
Partners' capital:
Wells Operating Partnership, L.P. 6,988,210 7,166,682
Fund X and XI Associates 2,028,353 2,080,155
---------- ----------
Total partners' capital 9,016,563 9,246,837
---------- ----------
Total liabilities and partners' capital $9,211,154 $9,441,944
========== ==========
</TABLE>
-18-
<PAGE>
Wells/Fremont Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Revenues:
Rental income $902,946 $401,058
Interest income 0 3,896
-------- --------
902,946 404,954
-------- --------
Expenses:
Depreciation 285,526 142,720
Management and leasing fees 37,355 16,726
Operating costs, net of reimbursements 16,006 3,364
Interest 0 73,919
Legal and accounting 4,885 6,306
-------- --------
343,772 243,035
-------- --------
Net income $559,174 $161,919
======== ========
Net income allocated to Wells Operating Partnership, L.P. $433,383 $122,470
======== ========
Net income allocated to Fund X and XI Associates $125,791 $ 39,449
======== ========
</TABLE>
Wells/Fremont Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Wells
Operating Fund X Total
Partnership, and XI Partners'
L.P. Associates Capital
------------ ------------ -----------
<S> <C> <C> <C>
Balance, December 31, 1997 $ 0 $ 0 $ 0
Net income 122,470 39,449 161,919
Partner contributions 7,274,075 2,083,334 9,357,409
Partnership distributions (229,863) (42,628) (272,491)
------------ ------------ -----------
Balance, December 31, 1998 7,166,682 2,080,155 9,246,837
Net income 433,383 125,791 559,174
Partnership distributions (611,855) (177,593) (789,448)
------------ ------------ -----------
Balance, December 31, 1999 $6,988,210 $2,028,353 $9,016,563
============ ============ ===========
</TABLE>
-19-
<PAGE>
Wells/Fremont Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 559,174 $ 161,919
---------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 285,526 142,720
Changes in assets and liabilities:
Accounts receivable (58,237) (34,742)
Accounts payable (1,550) 3,565
Due to affiliate 3,527 2,052
---------- -----------
Total adjustments 229,266 113,595
---------- -----------
Net cash provided by operating activities 788,440 275,514
---------- -----------
Cash flows from investing activities:
Investment in real estate 0 (8,983,111)
---------- -----------
Cash flows from financing activities:
Issuance of note payable 0 5,960,000
Payment of note payable 0 (5,960,000)
Distributions to partners (791,940) (83,001)
Contributions received from partners 0 8,983,110
---------- -----------
Net cash (used in) provided by financing activities (791,940) 8,900,109
---------- -----------
Net (decrease) increase in cash and cash equivalents (3,500) 192,512
Cash and cash equivalents, beginning of year 192,512 0
---------- -----------
Cash and cash equivalents, end of year $ 189,012 $ 192,512
========== ===========
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 374,299
========== ===========
</TABLE>
Fund XI, XII, and REIT Joint Venture
On May 1, 1999, the Operating Partnership entered into a joint venture with
Wells Fund XII and Wells Fund XI. On May 18, 1999, the joint venture purchased a
169,510-square-foot, two-story manufacturing and office building, known as EYBL
CarTex, in Fountain Inn, South Carolina. On July 21, 1999, the joint venture
purchased a 68,900 square-foot, three-story-office building, known as the Sprint
Building, in Leawood, Kansas. On August 17, 1999, the joint venture purchased a
130,000 square-foot office and warehouse building, known as the Johnson Matthey
Building, in Chester County, Pennsylvania. On September 20, 1999, the joint
venture purchased a 62,400 square-foot, two-story office building, known as the
Gartner Building, in Fort Myers, Florida.
F-20
<PAGE>
Following are the financial statements for the Fund XI, XII, and REIT Joint
Venture:
The Fund XI, XII, and REIT Joint Venture
(A Georgia Joint Venture)
Balance Sheet
December 31, 1999
<TABLE>
Assets
<S> <C>
Real estate assets, at cost:
Land $ 5,048,797
Building and improvements, less accumulated depreciation of $506,582 26,811,869
------------
Total real estate assets 31,860,666
Cash and cash equivalents 766,278
Accounts receivable 133,777
Prepaid assets and other expenses 26,486
------------
Total assets $ 32,787,207
============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 112,457
Partnership distributions payable 680,294
------------
Total liabilities 792,751
Partners' capital: ------------
Wells Real Estate Fund XI 8,365,852
Wells Real Estate Fund XII 5,467,634
Wells Operating Partnership, L.P. 18,160,970
------------
Total partners' capital 31,994,456
------------
Total liabilities and partners' capital $ 32,787,207
============
</TABLE>
F-21
<PAGE>
The Fund XI, XII, and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Income
for the Year Ended December 31, 1999
Revenues:
Rental income $ 1,443,446
Other income 57
------------
1,443,503
------------
Expenses:
Depreciation 506,582
Management and leasing fees 59,230
Operating costs, net of reimbursements 6,433
Property administration 14,185
Legal and accounting 4,000
------------
590,430
------------
Net income $ 853,073
============
Net income allocated to Wells Real Estate Fund XI $ 240,031
============
Net income allocated to Wells Real Estate Fund XII $ 124,542
============
Net income allocated to Wells Operating Partnership, L.P. $ 488,500
============
The Fund XI, XII, and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Partners' Capital
for the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Wells
Wells Real Wells Real Operating Total
Estate Estate Partnership, Partners'
Fund XI Fund XII L.P. Capital
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998 $ 0 $ 0 $ 0 $ 0
Net income 240,031 124,542 488,500 853,073
Partnership contributions 8,470,160 5,520,835 18,376,267 32,367,262
Partnership distributions (344,339) (177,743) (703,797) (1,225,879)
------------- ----------- ------------ -------------
Balance, December 31, 1999 $8,365,852 $5,467,634 $18,160,970 $31,994,456
============= =========== ============ =============
</TABLE>
F-22
<PAGE>
The Fund XI, XII, and REIT Joint Venture
(A Georgia Joint Venture)
Statement of Cash Flows
for the Year Ended December 31, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 853,073
--------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 506,582
Changes in assets and liabilities:
Accounts receivable (133,777)
Prepaid expenses and other assets (26,486)
Accounts payable 112,457
--------------
Total adjustments 458,776
--------------
Net cash provided by operating activities 1,311,849
--------------
Cash flows from financing activities:
Distributions to joint venture partners (545,571)
--------------
Net increase in cash and cash equivalents 766,278
Cash and cash equivalents, beginning of year 0
--------------
Cash and cash equivalents, end of year $ 766,278
==============
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 1,294,686
==============
Contribution of real estate assets to joint venture $ 31,072,562
==============
</TABLE>
6. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Operating Partnership's income tax basis net income for the years ended
December 31, 1999 and 1998 are calculated as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Financial statement net income $3,884,649 $334,034
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes in excess of
amounts for income tax purposes 949,631 82,618
Rental income accrued for financial reporting purposes in excess of
amounts for income tax purposes (789,599) (35,427)
Expenses deductible when paid for income tax purposes, accrued for
financial reporting purposes 49,906 1,634
----------- ----------
Income tax basis net income $4,094,587 $382,859
=========== ==========
</TABLE>
F-23
<PAGE>
The Operating Partnership's income tax basis partners' capital at December 31,
1999 and 1998 is computed as follows:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Financial statement partners' capital $116,015,595 $27,421,687
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes in excess of
amounts for income tax purposes 1,032,249 82,618
Capitalization of syndication costs for income tax purposes, which
are accounted for as cost of capital for financial reporting
purposes 12,896,312 3,942,545
Accumulated rental income accrued for financial reporting purposes
in excess of amounts for income tax purposes (825,026) (35,427)
Accumulated expenses deductible when paid for income tax purposes,
accrued for financial reporting purposes 51,540 1,634
Dividends payable 2,166,701 408,176
------------ -----------
Income tax basis partners' capital $131,337,371 $31,821,233
============ ===========
</TABLE>
7. Rental Income
The future minimum rental income due from the Operating Partnership's direct
investment in real estate or its respective ownership interest in the joint
ventures under noncancelable operating leases at December 31, 1999 is as
follows:
Year ended December 31:
2000 $ 11,737,408
2001 11,976,253
2002 12,714,291
2003 12,856,557
2004 12,581,882
Thereafter 54,304,092
------------
$116,170,483
============
Three tenants contributed 32%, 16%, and 15% of rental income for the year
ended December 31, 1999. In addition, four tenants will contribute 34%, 20%,
17%, and 11% of future minimum rental income.
The future minimum rental income due the Fund IX, X, XI, and REIT Joint
Venture under noncancelable operating leases at December 31, 1999 is as
follows:
Year ended December 31:
2000 $ 3,666,570
2001 3,595,686
2002 3,179,827
2003 3,239,080
2004 3,048,152
Thereafter 5,181,003
------------
$21,910,318
============
F-24
<PAGE>
Four tenants contributed 25%, 18%, 13%, and 12% of rental income for the year
ended December 31, 1999. In addition, four tenants will contribute 28%, 22%,
15%, and 10% of future minimum rental income.
The future minimum rental income due Wells/Orange County Associates under
noncancelable operating leases at December 31, 1999 is as follows:
Year ended December 31:
2000 $ 758,964
2001 809,580
2002 834,888
2003 695,740
----------
$3,099,172
==========
One tenant contributed 100% of rental income for the year ended December 31,
1999 and will contribute 100% of future minimum rental income.
The future minimum rental income due Wells/Fremont Associates under
noncancelable operating leases at December 31, 1999 is as follows:
Year ended December 31:
2000 $ 869,492
2001 895,577
2002 922,444
2003 950,118
2004 894,833
----------
$4,532,464
==========
One tenant contributed 100% of rental income for the year ended December 31,
1999 and will contribute 100% of future minimum rental income.
The future minimum rental income due from XI, XII and REIT under noncancelable
operating leases at December 31, 1999 is a follows:
Year ended December 31:
2000 $3,085,362
2001 3,135,490
2002 3,273,814
2003 3,367,231
2004 3,440,259
Thereafter 9,708,895
-----------
$26,011,051
===========
Four tenants contributed approximately 34%, 22%, 22%, and 12% of rental income
for the year ended December 31, 1999. In addition, four tenants will
contribute approximately 30%, 27%, 22%, and 18% of future minimum rental
income.
F-25
<PAGE>
8. NOTES PAYABLE
At December 31, 1999, the Operating Partnership had outstanding debt of
$23,929,228. Of this amount, $11,430,696 was borrowed under a construction
loan with Bank of America in order to finance the construction of a new
building for Matsushita Avionics (the "Matsushita Project") and improvements
for the AT&T Building. This loan is secured by the Matsushita Project and
matures on May 10, 2001. The remaining $12,498,532 was borrowed against the
revolving line of credit from SouthTrust Bank, which is collateralized by
the PwC Building and matures on December 31, 2000. Interest is paid monthly
and accrued at a variable rate based on LIBOR plus 200 basis points for both
of these debt instruments. During 1999, the Company paid and capitalized
interest costs of $847,451 and $463,873, respectively. The estimated fair
value of these notes approximates their carrying value.
The Operating Partnership also has a $9,825,000 line of credit from Bank of
America, which bears interest at a variable rate based on LIBOR plus 200
basis points. No balance was outstanding at December 31, 1999 under this
line of credit.
9. COMMITMENTS AND CONTINGENCIES
On February 18, 1999, the Operating Partnership entered into a rental income
guaranty agreement with Fund VIII and IX Associates (the "joint venture"),
whereby the Operating Partnership guaranteed that the joint venture would
receive rental income on the existing Matsushita Building, equal to at least
the rent and building expenses that the joint venture would have received
from Matsushita Avionics over the remaining term of the existing lease.
Matsushita Avionics vacated the building on January 3, 2000, while the
existing lease term extends through September 2003. The Company paid
approximately $61,000 to the joint venture related to the rental income and
building expenses due from Matsushita Avionics for the remainder of January
2000. Such payments are made from the Company's operating cash flow and
reduce cash available for dividends.
On July 22, 1999, the Operating Partnership purchased a 7.49 acre tract of
land located in Midlothian, Chesterfield County, Virginia for the purpose of
constructing a four-story, 100,000 rentable square foot office building (the
"ABB Project"). The Operating Partnership entered into an office lease with
ABB Power Generation, Inc. ("ABB"), pursuant to which ABB has agreed to
lease the ABB Project upon its completion.
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Company, the Operating
Partnership, or the Advisor. In the normal course of business, the Company,
the Operating Partnership, or the Advisor may become subject to such
litigation or claims.
10. COMMON STOCK OPTION PLAN
The Wells Real Estate Investment Trust, Inc. Independent Director Stock
Option Plan ("the Plan") provides for grants of stock to be made to
independent nonemployee directors of the Company. Options to purchase 2,500
shares of common stock at $12 per share are granted upon initially becoming
an independent director of the Company. Of these shares, 20% are exercisable
immediately on the date of grant. An additional 20% of these shares become
exercisable on each anniversary following the date of grant for a period of
four years. Effective on the date of each annual meeting of shareholders of
the Company, beginning in 2000, each independent director will be granted an
option to purchase 1,000 additional shares of common stock. These options
vest at the rate of 500 shares per full year of service thereafter. All
options granted under the Plan expire no later than the date immediately
following the
F-26
<PAGE>
tenth anniversary of the date of grant and may expire sooner in the event of
the disability or death of the optionee or if the optionee ceases to serve
as a director.
The Company has adopted the disclosure provisions in SFAS No. 123,
"Accounting for Stock-Based Compensation." As permitted by the provisions of
SFAS No. 123, the Company applies Accounting Principles Board ("APB")
Opinion No. 25 and the related interpretations in accounting for its stock
option plans and, accordingly, does not recognize compensation cost.
A summary of the Company's stock option activity during 1999 is as follows:
Exercise
Number Price
--------- ----------
Outstanding at December 31, 1998 0 $ 0
Granted 27,500 12
--------- ----------
Outstanding at December 31, 1999 27,500 $ 12
========= ==========
Outstanding options exercisable as of
December 31, 1999 5,500 $ 12
========= ==========
The weighted average remaining contractual life of options outstanding at
December 31, 1999 is approximately 9.5 years. Based on the terms of the
options, the fair value of the options granted during 1999 is $0.
11. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 Quarters Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
----------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues $988,000 $1,204,938 $1,803,352 $2,499,105
Net income 393,438 601,975 1,277,019 1,612,217
Basic and diluted earnings per share $ 0.10 $ 0.09 $ 0.18 $ 0.13
Dividends per share 0.17 0.17 0.18 0.18
<CAPTION>
1998 Quarters Ended
-------------------------------------------------------
March 31 June 30 September 30 December 31
--------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues $ 0 $10,917 $73,292 $310,969
Net income 0 10,899 62,128 261,007
Basic and diluted earnings per share $0.00 $ 0.16 $ 0.06 $ 0.18
Dividends per share 0.00 0.00 0.15 0.16
</TABLE>
F-27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying balance sheet of THE MARCONI BUILDING as of
December 31, 1999 and the related statements of income, partner's capital, and
cash flows for the three-month period from inception (September 10, 1999) to
December 31, 1999. These financial statements are the responsibility of the
building's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Marconi Building as of
December 31, 1999 and the results of its operations and its cash flows for the
three-month period from inception (September 10, 1999) to December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
Atlanta, Georgia
January 20, 2000
F-28
<PAGE>
THE MARCONI BUILDING
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
REAL ESTATE ASSETS:
Land $ 5,208,335
Building and improvements, less accumulated depreciation of $391,134 28,943,943
------------
Total real estate assets 34,152,278
CASH AND CASH EQUIVALENTS 911,108
ACCOUNTS RECEIVABLE 215,081
------------
Total assets $ 35,278,467
============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 252,651
Distributions payable to partner 671,361
------------
924,012
COMMITMENTS AND CONTINGENCIES (Note 4)
PARTNER'S CAPITAL:
Wells Real Estate Investment Trust, Inc. 34,354,455
------------
Total liabilities and partners' capital $ 35,278,467
============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-29
<PAGE>
THE MARCONI BUILDING
STATEMENT OF INCOME
FOR THE THREE-MONTH PERIOD FROM INCEPTION (SEPTEMBER 10, 1999)
TO DECEMBER 31, 1999
REVENUES:
Rental income $1,090,425
----------
EXPENSES:
Depreciation 391,134
Operating costs, net of reimbursements 5,695
Management and leasing fees 52,295
Legal and accounting 1,000
----------
450,124
----------
NET INCOME $ 640,301
==========
The accompanying notes are an integral part of this statement.
F-30
<PAGE>
THE MARCONI BUILDING
STATEMENT OF PARTNER'S CAPITAL
FOR THE THREE-MONTH PERIOD FROM INCEPTION (SEPTEMBER 10, 1999)
TO DECEMBER 31, 1999
Wells Real
Estate
Investment
Trust, Inc.
------------
BALANCE, December 31, 1998 $ 0
Net income 640,301
Contributions 34,543,412
Distributions (829,258)
------------
BALANCE, December 31, 1999 $ 34,354,455
============
The accompanying notes are an integral part of this statement.
F-31
<PAGE>
THE MARCONI BUILDING
STATEMENT OF CASH FLOWS
FOR THE THREE-MONTH PERIOD FROM INCEPTION (SEPTEMBER 10, 1999)
TO DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 640,301
-------------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 391,134
Changes in assets and liabilities:
Accounts receivable (215,081)
Accounts payable and accrued expenses 252,651
-------------
Total adjustments 428,704
-------------
Net cash provided by operating activities 1,069,005
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate assets (34,543,412)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid to partner (157,897)
Contributions from partner 34,543,412
-------------
Net cash provided by financing activities 34,385,515
-------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 911,108
CASH AND CASH EQUIVALENTS, beginning of period 0
-------------
CASH AND CASH EQUIVALENTS, end of period $ 911,108
=============
</TABLE>
The accompanying notes are an integral part of this statement.
F-32
<PAGE>
THE MARCONI BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
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., ("REIT") acquired a two-story corporate office building containing
approximately 250,354 rentable square feet located in Wood Dale, DuPage
County, Illinois ("Marconi"). The purchase price of Marconi was $33,158,865,
including acquisition related expenses. 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. Wells Real Estate Investment Trust, Inc. owned 100%
of the building at December 31, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
Marconi is not deemed to be a taxable entity for federal income tax
purposes.
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation. Major
improvements and betterments are capitalized when they extend the useful
life of the related asset. All repairs and maintenance are expensed as
incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets by
determining whether the carrying value of such real estate assets will be
recovered through the future cash flows expected from the use of the asset
and its eventual disposition. Management has determined that there has been
no impairment in the carrying value of Marconi as of December 31, 1999.
Depreciation is calculated using the straight-line method over 25 years.
F-33
<PAGE>
Revenue Recognition
The lease on Marconi is classified as an operating lease, and the related
rental income is recognized on a straight-line basis over the term of the
lease.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, Marconi considers all highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents. Cash equivalents include cash and short-term
investments. Short-term investments are stated at cost, which approximates
fair value, and consist of investments in money market accounts.
2. RENTAL INCOME
The future minimum rental income due to Marconi under noncancelable operating
leases at December 31, 1999 is as follows:
Year ending December 31:
2000 $ 2,838,952
2001 2,872,768
2002 3,376,746
2003 3,376,746
2004 3,376,746
Thereafter 23,355,827
------------
$ 39,197,785
============
One tenant contributed 100% of rental income for the three-month period from
inception (September 10, 1999) to December 31, 1999 and represents 100% of
the future minimum rental income above.
3. RELATED-PARTY TRANSACTIONS
The REIT entered into a property management agreement with Wells Management
Company, Inc. ("Wells Management"), an affiliate of the REIT. In
consideration for supervising the management of Marconi, the REIT will
generally pay Wells Management management and leasing fees equal to (a) 3% of
the gross revenues for management and 3% of the gross revenues for leasing
(aggregate maximum of 6%) plus a separate fee for the one-time initial lease-
up of newly constructed properties in an amount not to exceed the fee
customarily charged in arm's-length transactions by others rendering similar
services in the same geographic area for similar properties or (b) in the
case of commercial properties which are leased on a long-term net basis (ten
or more years), 1% of the gross revenues except for initial leasing fees
equal to 3% of the gross revenues over the first five years of the lease
term.
Marconi incurred management and leasing fees of $52,295, for the three-month
period from inception (September 10, 1999) to December 31, 1999, which were
paid to Wells Management.
Due from affiliates relates to cash held by the REIT for Marconi.
F-34
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against Marconi or the REIT. In the normal
course of business, Marconi or the REIT may become subject to such litigation
or claims.
F-35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund IX, L.P.,
Wells Real Estate Fund X, L.P.,
Wells Real Estate Fund XI, L.P., and
Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying balance sheets of THE OHMEDA BUILDING as of
December 31, 1999 and 1998 and the related statements of income, partners'
capital, and cash flows for the year ended December 31, 1999 and for the period
from inception (February 13, 1998) to December 31, 1998. These financial
statements are the responsibility of the building's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Ohmeda Building as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for the year ended December 31, 1999 and for the period from inception (February
13, 1998) to December 31, 1998 in conformity with accounting principles
generally accepted in the United States.
Atlanta, Georgia
January 20, 2000
F-36
<PAGE>
THE OHMEDA BUILDING
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
------------- -------------
<S> <C> <C>
REAL ESTATE ASSETS:
Land $ 2,746,894 $ 2,746,894
Building and improvements, less accumulated depreciation of
$625,416 in 1999 and $299,112 in 1998 7,532,186 7,858,490
------------- -------------
Total real estate assets 10,279,080 10,605,384
CASH AND CASH EQUIVALENTS 902,987 983,061
ACCOUNTS RECEIVABLE 198,583 13,969
------------- -------------
Total assets $ 11,380,650 $ 11,602,414
============= =============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 249,707 $ 157,691
Distributions payable to partners 815,107 825,380
------------- -------------
Total liabilities 1,064,814 983,071
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 4)
PARTNERS' CAPITAL:
Wells Real Estate Fund IX, L.P. 3,401,108 3,519,869
Wells Real Estate Fund X, L.P. 6,971,508 7,119,063
Wells Real Estate Fund XI, L.P. (38,262) (12,456)
Wells Real Estate Investment Trust, Inc. (18,518) (7,133)
------------- -------------
Total partners' capital 10,315,836 10,619,343
------------- -------------
Total liabilities and partners' capital $ 11,380,650 $ 11,602,414
============= =============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-37
<PAGE>
THE OHMEDA BUILDING
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
REVENUES:
Rental income $ 1,027,314 $ 898,901
EXPENSES: ----------- ---------
Depreciation 326,304 299,112
Operating costs, net of reimbursements (18,633) 663
Management and leasing fees 46,911 41,688
Legal and accounting 3,450 2,200
----------- ---------
358,032 343,663
----------- ---------
NET INCOME $ 669,282 $ 555,238
=========== =========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND IX, L.P. $ 261,867 $ 243,597
=========== =========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND X, L.P. $ 325,357 $ 271,294
=========== =========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND XI, L.P. $ 56,955 $ 25,656
=========== =========
NET INCOME ALLOCATED TO WELLS REAL ESTATE INVESTMENT TRUST, INC. $ 25,103 $ 14,691
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-38
<PAGE>
THE OHMEDA BUILDING
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Wells Real
Wells Real Wells Real Wells Real Estate Total
Estate Estate Estate Investment Partners'
Fund IX, L.P. Fund X, L.P. Fund XI, L.P. Trust, Inc. Capital
-------------- -------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 $ 0 $ 0 $ 0 $ 0 $ 0
Contributions 3,636,662 7,252,823 0 0 10,889,485
Net income 243,597 271,294 25,656 14,691 555,238
Distributions (360,390) (405,054) (38,112) (21,824) (825,380)
-------------- -------------- ----------- ----------- --------------
BALANCE, December 31, 1998 3,519,869 7,119,063 (12,456) (7,133) 10,619,343
Net income 261,867 325,357 56,955 25,103 669,282
Distributions (380,628) (472,912) (82,761) (36,488) (972,789)
-------------- -------------- ----------- ----------- --------------
BALANCE, December 31, 1999 $ 3,401,108 $ 6,971,508 $ (38,262) $ (18,518) $ 10,315,836
============== ============== =========== =========== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-39
<PAGE>
THE OHMEDA BUILDING
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM INCEPTION
(FEBRUARY 13, 1998) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
1999 1998
---------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 669,282 $ 555,238
---------- ------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 326,304 299,112
Changes in assets and liabilities:
Accounts receivable (184,614) (13,969)
Accounts payable and accrued expenses 92,016 157,691
---------- ------------
Total adjustments 233,706 442,834
---------- ------------
Net cash provided by operating activities 902,988 998,072
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate 0 (10,904,496)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions received from partners 0 10,889,485
Distributions paid to partners (983,062) 0
---------- ------------
Net cash (used in) provided by financing activities (983,062) 10,889,485
---------- ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (80,074) 983,061
CASH AND CASH EQUIVALENTS, beginning of period 983,061 0
---------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 902,987 $ 983,061
========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-40
<PAGE>
THE OHMEDA BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Ohmeda Building ("Ohmeda") is a two-story office building located in
Louisville, Colorado. The building is owned by Fund IX, X, XI, and REIT
Associates, a joint venture between Wells Real Estate Fund IX, L.P. ("Fund
IX"), Wells Real Estate Fund X, L.P. ("Fund X"), Wells Real Estate Fund XI,
L.P. ("Fund XI"), and Wells Real Estate Investment Trust, Inc. ("REIT"). As
of December 31, 1999, Fund IX, Fund X, Fund XI, and REIT owned 39%, 48%, 9%,
and 4% of Ohmeda, respectively. Allocation of net income and distributions
are made in accordance with ownership percentages.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
Ohmeda is not deemed to be a taxable entity for federal income tax purposes.
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation. Major
improvements and betterments are capitalized when they extend the useful life
of the related asset. All repairs and maintenance are expensed as incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets by
determining whether the carrying value of such real estate assets will be
recovered through the future cash flows expected from the use of the asset
and its eventual disposition. Management has determined that there has been
no impairment in the carrying value of Ohmeda as of December 31, 1999.
Depreciation is calculated using the straight-line method over 25 years.
F-41
<PAGE>
Revenue Recognition
The lease on Ohmeda is classified as an operating lease, and the related
rental income is recognized on a straight-line basis over the term of the
lease.
Cash and Cash Equivalents
For the purpose of the statements of cash flow, Ohmeda considers all highly
liquid investments purchased with an original maturity of three months or
less to be cash equivalents. Cash equivalents include cash and short-term
investments. Short-term investments are stated at cost, which approximates
fair value, and consist of investments in money market.
2. RENTAL INCOME
The future minimum rental income due Ohmeda under noncancelable operating
leases at December 31, 1999 is as follows:
Year ending December 31:
2000 $1,004,517
2001 1,004,517
2002 1,004,517
2003 1,050,509
2004 1,102,639
Thereafter 92,250
----------
$5,258,949
==========
One tenant contributed 100% of rental income for the year ended December 31,
1999 and represents 100% of the future minimum rental income above.
3. RELATED-PARTY TRANSACTIONS
Fund IX, Fund X, Fund XI, and REIT Associates entered into a property
management agreement with Wells Management Company, Inc. ("Wells
Management"), an affiliate of Fund IX, Fund X, Fund XI, and REIT Associates.
In consideration for supervising management of the property, Fund IX, Fund X,
Fund XI, and REIT Associates will generally pay Wells Management management
and leasing fees equal to (a) 3% of the gross revenues for management and 3%
of the gross revenues for leasing (aggregate maximum of 6%) plus a separate
fee for the one-time initial lease-up of newly constructed properties in an
amount not to exceed the fee customarily charged in arm's-length transactions
by others rendering similar services in the same geographic area for similar
properties or (b) in the case of commercial properties which are leased on a
long-term net basis (ten or more years), 1% of the gross revenues except for
initial leasing fees equal to 3% of the gross revenues over the first five
years of the lease term.
Ohmeda incurred management and leasing fees of $46,911 and $41,688 for the
years ended December 31, 1999 and 1998, respectively, which were paid to
Wells Management.
F-42
<PAGE>
4. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against Ohmeda or its partners. In the
normal course of business, Ohmeda or its partners may become subject to such
litigation or claims.
F-43
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY
(A Georgia Public Limited Partnership)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Initial Cost Costs of
---------------------------------
Ownership Buildings and Capitalized
Description % Encumbrances Land Improvements Improvements
- -------------------------------------- ---------------- ------------- ---------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
ABB KNOXVILLE PROPERTY (a) 4 None $ 582,897 $ 744,164 $ 6,616,885
LUCENT TECHNOLOGIES (b) 4 None 1,002,723 4,386,374 242,241
360 INTERLOCKEN (c) 4 None 1,570,000 6,733,500 437,266
IOMEGA PROPERTY (d) 4 None 597,000 4,674,624 876,459
OHMEDA PROPERTY (e) 4 None 2,613,600 7,762,481 528,415
FAIRCHILD PROPERTY (f) 78 None 2,130,480 6,852,630 374,300
ORANGE COUNTY PROPERTY (g) 44 None 2,100,000 4,463,700 287,916
PRICEWATERHOUSECOOPERS PROPERTY (h) 100 $12,498,532 1,460,000 19,839,071 825,560
EYBL CARTEX PROPERTY (i) 57 None 330,000 4,791,828 211,962
SPRINT BUILDING (j) 57 None 1,696,000 7,850,726 397,783
JOHNSON MATTHEY (k) 57 None 1,925,000 6,131,392 335,685
GARTNER PROPERTY (l) 57 None 895,844 7,451,760 347,820
AT&T PROPERTY (m) 100 160,797 662,000 11,836,368 265,740
MARCONI PROPERTY (n) 100 None 5,000,000 28,161,665 1,381,747
CINEMARK PROPERTY (o) 100 None 1,456,000 20,376,881 909,711
MATSUSHITA PROJECT (p) 100 11,269,899 4,577,485 0 10,372,801
ABB PROJECT (q) 100 None 948,401 0 2,228,174
------------- ---------------- --------------- -------------
Total $23,929,228 $24,021,544 $142,057,163 $14,039,490
============= ================ =============== =============
<CAPTION>
Gross Amount at Which Carried at December 31, 1999
-------------------------------------------------------------------
Buildings and Construction
Description Land Improvements in Progress Total
- ------------------------------------- ----------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
ABB KNOXVILLE PROPERTY (a) $ 607,930 $ 7,336,016 $ 0 $ 7,943,946
LUCENT TECHNOLOGIES (b) 1,051,138 4,580,200 0 5,631,338
360 INTERLOCKEN (c) 1,650,070 7,090,696 0 8,740,766
IOMEGA PROPERTY (d) 641,988 5,506,095 0 6,148,083
OHMEDA PROPERTY (e) 2,746,894 8,157,602 0 10,904,496
FAIRCHILD PROPERTY (f) 2,219,251 7,138,159 0 9,357,410
ORANGE COUNTY PROPERTY (g) 2,187,501 4,664,115 0 6,851,616
PRICEWATERHOUSECOOPERS PROPERTY (h) 1,520,834 20,603,797 0 22,124,631
EYBL CARTEX PROPERTY (i) 343,750 4,990,040 0 5,333,790
SPRINT BUILDING (j) 1,766,667 8,177,842 0 9,944,509
JOHNSON MATTHEY (k) 2,005,209 6,386,868 0 8,392,077
GARTNER PROPERTY (l) 933,171 7,762,253 0 8,695,424
AT&T PROPERTY (m) 689,584 12,074,525 0 12,764,109
MARCONI PROPERTY (n) 5,208,335 29,335,077 0 34,543,412
CINEMARK PROPERTY (o) 1,516,667 21,225,924 0 22,742,591
MATSUSHITA PROJECT (p) 4,577,485 0 10,372,801 14,950,286
ABB PROJECT (q) 987,918 0 2,188,658 3,176,576
----------------- -------------- ---------------- --------------
Total $25,088,989 $155,029,209 $12,561,459 $180,118,198
================= ============== ================ ==============
<CAPTION>
Life on Which
Accumulated Date of Date Depreciation
Description Depreciation Construction Acquired in Computed (r)
- -------------------------------------- --------------- ---------------- ------------ ------------------
<S> <C> <C> <C> <C>
ABB KNOXVILLE PROPERTY (a) $ 1,049,682 1997 12/10/96 20 to 25 years
LUCENT TECHNOLOGIES (b) 290,075 1998 6/24/98 20 to 25 years
360 INTERLOCKEN (c) $ 1,049,682 1996 3/20/98 20 to 25 years
IOMEGA PROPERTY (d) 301,916 1998 2/15/98 20 to 25 years
OHMEDA PROPERTY (e) 625,416 1998 7/21/98 20 to 25 years
FAIRCHILD PROPERTY (f) 428,246 1998 7/30/98 20 to 25 years
ORANGE COUNTY PROPERTY (g) 278,652 1998 12/31/98 20 to 25 years
PRICEWATERHOUSECOOPERS PROPERTY (h) 821,492 1998 5/16/99 20 to 25 years
EYBL CARTEX PROPERTY (i) 133,072 1998 7/30/99 20 to 25 years
SPRINT BUILDING (j) 163,553 1998 8/17/99 20 to 25 years
JOHNSON MATTHEY (k) 106,461 1993 9/20/99 20 to 25 years
GARTNER PROPERTY (l) 103,496 1998 2/30/99 20 to 25 years
AT&T PROPERTY (m) 442,724 1998 9/10/99 20 to 25 years
MARCONI PROPERTY (n) 391,134 1998 12/21/99 20 to 25 years
CINEMARK PROPERTY (o) 70,753 1999 3/15/99 20 to 25 years
MATSUSHITA PROJECT (p) 0 1999 7/30/99 20 to 25 years
ABB PROJECT (q) 0 1999 7/20/98 20 to 25 years
---------------
Total $ 5,731,651
===============
</TABLE>
(a) The ABB Knoxville Property consists of a three-story office
building located in Knoxville, Tennessee. It is owned by
Fund IX-X-XI-REIT Joint Venture.
(b) The Lucent Technologies property consists of a one-story
office building located in Oklahoma City, Oklahoma. It is
owned by Fund IX-X-XI-REIT Joint Venture.
(c) The 360 Interlocken property consists of a three-story
multi-tenant office building located in Broomfield,
Colorado. It is owned by Fund IX-X-XI-REIT Joint Venture.
(d) The Iomega Property consists of a one-story warehouse and
office building located in Ogden, Utah. It is owned by Fund
IX-X-XI-REIT Joint Venture.
(e) The Ohmeda Property consists of a two-story office building
located in Louisville, Colorado. It is owned by Fund
IX-X-XI-REIT Joint Venture.
(f) The Fairchild Property consists of a two-story warehouse and
office building located in Fremont, California. It is owned
by Wells/Freemont Associates.
(g) The Orange County Property consists of a one-story warehouse
and office building located in Fountain Valley, California.
It is owned by Wells/Orange County Associates.
(h) The PriceWaterhouseCoopers Property consists of a four-story
office building located in Tampa, Florida. It is 100% owned
by the Company.
(i) The EYBL CarTex Property consists of a one-story
manufacturing and office building located in Fountain Inn,
South Carolina. It is owned by Fund XI-XII-REIT Joint
Venture.
(j) The Sprint Building consists of a three-story office
building located in Leawood, Kansas. It is owned by Fund XI-
XII-REIT Joint Venture.
(k) The Johnson Matthew Property consists of a one-story
research and development office and warehouse building
located in Chester County, Pennsylvania. It is owned by Fund
XI-XII-REIT Joint Venture.
(l) The Gartner Property consists of a two-story office building
located in Ft. Myers, Florida. It is owned by Fund XI-XII-
REIT Joint Venture
(m) The AT&T Property consists of a four-story office building
located in Harrisburg, Pennsylvania. It is 100% owned by the
Company.
(n) The Marconi Property consists of a two-story office building
located in Wood Dale, Illinois. It is 100% owned by the
Company.
(o) The Cinemark Property consists of a five-story office
building located in Plano, Texas. It is 100% owned by the
Company.
(p) The Matsushita Project consists of a two-story office
building under development located in Lake Forest,
California. It is 100% owned by the Company.
(q) The ABB Project is a 7.49 acre tract of real property under
construction in Midlothian, Chesterfield County, Virginia.
It is 100% owned by the Company.
(r) Depreciation lives used for buildings are 25 years.
Depreciation lives used for land improvements are 20 years.
S-1
<PAGE>
WELLS REAL ESTATE INVESTMENT TRUST, INC. AND SUBSIDIARY
(A Georgia Public Limited Partnership)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------ -------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1997 $ 0 $ 0
1998 additions 76,201,910 1,487,963
------------ -------------
BALANCE AT DECEMBER 31, 1998 76,201,910 1,487,963
1999 additions 103,916,288 4,243,688
------------- -------------
BALANCE AT DECEMBER 31, 1999 $ 180,118,198 $ 5,731,651
============= =============
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
-------------
(Wells Real Estate Investment Trust, Inc.)
The following documents are filed as exhibits to this report. Those
exhibits previously filed and incorporated herein by reference are identified
below by an asterisk. For each such asterisked exhibit, there is shown below
the description of the previous filing. Exhibits which are not required for
this report are omitted.
Exhibit
Number Description of Document
- ------ -----------------------
*3.1 Amended and Restated Articles of Incorporation of Wells Real Estate
Investment Trust, Inc. (Exhibit 3.1 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-83933)
*3.2 Bylaws of Wells Real Estate Investment Trust, Inc. (Exhibit 3.2 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*3.3 Amendment No. 1 to Bylaws of Wells Real Estate Investment Trust, Inc.
(Exhibit 3.3 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10.1 Agreement of Limited Partnership of Wells Operating Partnership, L.P.
(Exhibit 10.1 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10.2 Advisory Agreement dated January 30, 1999 (Exhibit 10.3 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.3 Management Agreement (Exhibit 10.4 to Form S-11 Registration Statement
of Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-32099)
*10.4 Leasing and Tenant Coordinating Agreement (Exhibit 10.5 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
<PAGE>
*10.5 Amended and Restated Joint Venture Agreement of The Fund IX, Fund X,
Fund XI and REIT Joint Venture dated June 11, 1998 (Exhibit 10.4 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.6 Lease Agreement for the ABB Building dated December 10, 1996
(Exhibit 10(kk) to Form S-11 Registration Statement of Wells Real
Estate Fund VIII, L.P. and Wells Real Estate Fund IX, L.P., as amended
to date, Commission File No. 33-83852)
*10.7 Agreement for the Purchase and Sale of Real Property relating to the
Ohmeda Building dated November 14, 1997 between Lincor Centennial,
Ltd. and Wells Real Estate Fund X, L.P. (Exhibit 10.6 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.8 Agreement for the Purchase and Sale of Property relating to the 360
Interlocken Building dated February 11, 1998 between Orix Prime West
Broomfield Venture and Wells Development Corporation (Exhibit 10.7 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.9 Agreement for the Purchase and Sale of Real Property relating to the
Lucent Technologies Building dated May 30, 1997 (Exhibit 10(k) to Form
S-11 Registration Statement of Wells Real Estate Fund X, L.P. and
Wells Real Estate Fund XI, L.P., as amended to date, Commission File
No. 333-7979)
*10.10 First Amendment to the Agreement for the Purchase and Sale of Real
Property relating to the Lucent Technologies Building dated April 21,
1998 (Exhibit 10.8(a) to Form S-11 Registration Statement of Wells
Real Estate Investment Trust, Inc., as amended to date, Commission
File No. 333-32099)
*10.11 Development Agreement relating to the Lucent Technologies Building
dated May 30, 1997 between Wells Development Corporation and ADEVCO
Corporation (Exhibit 10(m) to Form S-11 Registration Statement of
Wells Real Estate Fund X, L.P. and Wells Real Estate Fund XI, L.P., as
amended to date, Commission File No. 333-7979)
*10.12 Net Lease Agreement for the Lucent Technologies Building dated May 30,
1997 (Exhibit 10(l) to Form S-11 Registration Statement on Form S-11
of Wells Real Estate Fund X, L.P. and Wells Real
<PAGE>
Estate Fund XI, L.P., as amended to date, Commission File No. 333-
7979)
*10.13 First Amendment to Net Lease Agreement for the Lucent Technologies
Building dated March 30, 1998 (Exhibit 10.10(a) to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.14 Purchase and Sale Agreement relating to the Iomega Building dated
February 4, 1998 with SCI Development Services Incorporated (Exhibit
10.11 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10.15 Lease Agreement for the Iomega Building dated April 9, 1996 (Exhibit
10.12 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10.16 Agreement for the Purchase and Sale of Property relating to the
Fairchild Building dated June 8, 1998 (Exhibit 10.13 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.17 Restatement of and First Amendment to Agreement for the Purchase and
Sale of Property relating to the Fairchild Building dated July 1, 1998
(Exhibit 10.14 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10.18 Promissory Note for $5,960,000 from the Fremont Joint Venture to
NationsBank, N.A. relating to the Fairchild Building dated July 16,
1998 (Exhibit 10.15 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10.19 Deed of Trust securing the Fairchild Building dated July 16, 1998
between the Fremont Joint Venture and NationsBank, N.A. (Exhibit 10.16
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.20 Joint Venture Agreement of Wells/Fremont Associates (the "Fremont
Joint Venture") dated July 15, 1998 between Wells Development
Corporation and Wells Operating Partnership, L.P. (Exhibit 10.17 to
Form S-11 Registration Statement of Wells Real
<PAGE>
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10.21 Joint Venture Agreement of Fund X and Fund XI Associates (the "Fund X-
XI Joint Venture") dated July 15, 1998 (Exhibit 10.18 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.22 Agreement for the Purchase and Sale of Joint Venture Interest relating
to the Fremont Joint Venture dated July 17, 1998 between Wells
Development Corporation and Fund X and Fund XI Associates (Exhibit
10.19 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10.23 Lease Agreement for the Fairchild Building dated September 19, 1997
between the Fremont Joint Venture (as successor in interest by
assignment) and Fairchild Technologies USA, Inc. (Exhibit 10.20 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.24 Purchase and Sale Agreement and Joint Escrow Instructions relating to
the Cort Furniture Building dated June 12, 1998 between the Cort Joint
Venture (as successor in interest by assignment) and Spencer Fountain
Valley Holdings, Inc. (Exhibit 10.21 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)
*10.25 First Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions relating to the Cort Furniture Building dated July 16,
1998 between the Cort Joint Venture (as successor in interest by
assignment) and Spencer Fountain Valley Holdings, Inc. (Exhibit 10.22
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.26 Promissory Note for $4,875,000 from the Cort Joint Venture to
NationsBank, N.A. relating to the Cort Furniture Building dated July
30, 1998 (Exhibit 10.23 to Form S-11 Registration Statement of Wells
Real Estate Investment Trust, Inc., as amended to date, Commission
File No. 333-32099)
*10.27 Deed of Trust securing the Cort Furniture Building dated July 30, 1998
between the Fremont Joint Venture and NationsBank, N.A. (Exhibit 10.24
to Form S-11 Registration Statement of Wells Real
<PAGE>
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10.28 Joint Venture Agreement of Wells/Orange County Associates (the "Cort
Joint Venture") dated July 27, 1998 between Wells Development
Corporation and Wells Operating Partnership, L.P. (Exhibit 10.25 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.29 Agreement for the Purchase and Sale of Joint Venture Interest relating
to the Cort Joint Venture dated July 30, 1998 between Wells
Development Corporation and the Fund X-XI Joint Venture (Exhibit 10.26
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.30 Temporary Lease Agreement for remainder of the ABB Building dated
September 10, 1998 between the IX-X-XI-REIT Joint Venture and
Associates Housing Finance, LLC (Exhibit 10.35 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.31 Amended and Restated Purchase Agreement relating to the PWC Building
dated December 4, 1998 between Carter Sunforest, L.P. and Wells
Operating Partnership, L.P. (Exhibit 10.37 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)
*10.32 Assignment and Assumption Agreement relating to the PWC Building dated
December 4, 1998 between TriNet Corporate Realty Trust, Inc. and Wells
Operating Partnership, L.P. (Exhibit 10.38 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)
*10.33 Amended and Restated Loan Agreement dated December 31, 1998 between
Wells Operating Partnership, L.P. and SouthTrust Bank, National
Association (Exhibit 10.39 to Form S-11 Registration Statement of
Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-32099)
*10.34 Amended and Restated Promissory Note for $15,500,000 from Carter
Sunforest, L.P. to SouthTrust Bank, National Association dated
December 31, 1998 (Exhibit 10.40 to Form S-11 Registration Statement
of Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-32099)
<PAGE>
*10.35 Amendment No. 1 to Mortgage and Security Agreement and other Loan
Documents securing the PWC Building dated December 31, 1998 between
Carter Sunforest, L.P. and SouthTrust Bank, National Association
(Exhibit 10.41 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10.36 Lease for the PWC Building dated March 30, 1998 between Wells
Operating Partnership, L.P. (as successor in interest by assignment)
and Price Waterhouse LLP (Exhibit 10.42 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)
*10.37 Promissory Note for $6,425,000 to Bank of America, N.A. relating to
the AT&T Building (formerly the Vanguard Cellular Building) (Exhibit
10.45 to Form S-11 Registration Statement of Wells Real Estate
Investment Trust, Inc., as amended to date, Commission File No. 333-
32099)
*10.38 Open-End Mortgage, Assignment of Leases and Rents, Security Agreement
and Financing Statement securing the AT&T Building (formerly the
Vanguard Cellular Building) (Exhibit 10.46 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)
*10.39 Build-to-Suit Office Lease Agreement for the AT&T Building (formerly
the Vanguard Cellular Building) (Exhibit 10.47 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.40 Amendment No. 1 to Built-To-Suite Office Lease Agreement for the AT&T
Building (formerly the Vanguard Cellular Building) (Exhibit 10.47(a)
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.41 Amendment No. 2 to Build-To-Suit Office Lease Agreement for the AT&T
Building (formerly the Vanguard Cellular Building) (Exhibit 10.47(b)
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
<PAGE>
*10.42 Build-To-Suit Office Lease Agreement Guaranty Payment and Performance
for the AT&T Building (formerly the Vanguard Cellular Building)
(Exhibit 10.48 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10.43 Development Agreement for the Matsushita Project (Exhibit 10.50 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.44 Office Lease for the Matsushita Project (Exhibit 10.51 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.45 Guaranty of Lease for the Matsushita Project (Exhibit 10.52 to Form S-
11 Registration Statement of Wells Real Estate Investment Trust, Inc.,
as amended to date, Commission File No. 333-32099)
*10.46 Rental Income Guaranty Agreement from Wells Operating Partnership,
L.P. to Fund VIII and Fund IX Associates relating to the Bake Parkway
Building (Exhibit 10.53 to Form S-11 Registration Statement of Wells
Real Estate Investment Trust, Inc., as amended to date, Commission
File No. 333-32099)
*10.47 Amended and Restated Joint Venture Partnership Agreement of The Wells
Fund XI - Fund XII - REIT Joint Venture (Exhibit 10.28 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-83933)
*10.48 Agreement of Sale and Purchase relating to the EYBL CarTex Building
(Exhibit 10.54 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32099)
*10.49 Agreement of Purchase and Sale relating to the Sprint Building
(Exhibit 10.5 to Form S-11 Registration Statement of Wells Real Estate
Fund XII, L.P., as amended to date, Commission File No. 33-66657)
*10.50 Agreement of Sale and Purchase relating to the Johnson Matthey
Building (Exhibit 10.6 to Form S-11 Registration Statement of Wells
Real Estate Fund XII, L.P., as amended to date, Commission File No.
33-66657)
<PAGE>
*10.51 Fifth Amendment to Lease for the Johnson Matthey Building (Exhibit
10.7 to Form S-11 Registration Statement of Wells Real Estate Fund
XII, L.P., as amended to date, Commission File No. 33-66657)
*10.52 Agreement of Purchase and Sale relating to the Gartner Building
(Exhibit 10.63 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-32009)
*10.53 Lease Agreement for the Gartner Building (Exhibit 10.64 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32099)
*10.54 Agreement for the Purchase and Sale of Real Property relating to the
ABB Richmond Property (Exhibit 10.58 to Form S-11 Registration
Statement of Wells Real Estate Investment Trust, Inc., as amended to
date, Commission File No. 333-32099)
*10.55 Development Agreement for the ABB Richmond Project (Exhibit 10.59 to
Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.56 Owner-Contractor Agreement for the ABB Richmond Project (Exhibit 10.60
to Form S-11 Registration Statement of Wells Real Estate Investment
Trust, Inc., as amended to date, Commission File No. 333-32099)
*10.57 Lease Agreement for the ABB Richmond Project (Exhibit 10.61 to Form S-
11 Registration Statement of Wells Real Estate Investment Trust, Inc.,
as amended to date, Commission File No. 333-32099)
*10.58 Second Amendment to Lease Agreement for the ABB Richmond Project
(Exhibit 10.34 to Form S-11 Registration Statement of Wells Real
Estate Investment Trust, Inc., as amended to date, Commission File No.
333-83933)
*10.59 Agreement for Purchase and Sale relating to the Marconi Building
(formerly the Videojet Building) (Exhibit 10.62 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-32009)
*10.60 Agreement for the Purchase and Sale of Property relating to the
Cinemark Building (Exhibit 10.38 to Form S-11 Registration Statement
of Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-83933)
<PAGE>
*10.61 Lease Agreement with Cinemark USA, Inc. for a portion of the Cinemark
Building (Exhibit 10.39 to Form S-11 Registration Statement of Wells
Real Estate Investment Trust, Inc., as amended to date, Commission
File No. 333-83933)
*10.62 Lease Agreement with The Coca-Cola Company for a portion of the
Cinemark Building (Exhibit 10.40 to Form S-11 Registration Statement
of Wells Real Estate Investment Trust, Inc., as amended to date,
Commission File No. 333-83933)
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