<PAGE>
FILED PURSUANT TO
RULE 424(b)(3)
FILE NO: 333-66657
WELLS REAL ESTATE FUND XII, L.P.
SUPPLEMENT NO. 2 DATED OCTOBER 10, 1999 TO THE PROSPECTUS
DATED MARCH 22, 1999
This document supplements, and should be read in conjunction with, the
prospectus of Wells Real Estate Fund XII, L.P. dated March 22, 1999, as
supplemented and amended by Supplement No. 1 dated September 1, 1999. If we
refer to the "prospectus" in this supplement, we are also referring to any and
all supplements to the prospectus. Unless otherwise defined in this supplement,
capitalized terms used in this supplement shall have the same meanings as set
forth in the prospectus.
The purpose of this supplement is to describe the following:
(i) The status of the offering of units of limited partnership interest
in the partnership;
(ii) The acquisition of an interest in an office building in Fort Meyers,
Florida (Gartner Building);
(iii) Revisions to the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of the prospectus; and
(iv) Financial statements relating to the Gartner Building and unaudited
pro forma financial statements of the partnership.
Status of the Offering
Pursuant to the prospectus, the offering of units in the partnership
commenced on March 22, 1999. The partnership commenced operations on June 1,
1999, upon the acceptance of subscriptions for the minimum offering of
$1,250,000 (125,000 units). As of October 4, 1999, the partnership had raised a
total of $7,069,956 in offering proceeds (706,996 units).
The Gartner Building
Purchase of the Gartner Building. On September 20, 1999, The Wells Fund XI -
- --------------------------------
Fund XII - REIT Joint Venture (XI-XII-REIT Joint Venture), a joint venture among
the partnership, Wells Real Estate Fund XI, L.P. (Wells Fund XI) and Wells
Operating Partnership, L.P. (Wells OP), acquired a two story office building
with approximately 62,400 rentable square feet located in Fort Myers, Lee
County, Florida (Gartner Building) from Hogan Triad Ft. Myers I, Ltd. (Hogan)
pursuant to that certain Agreement of Purchase and Sale of Property between
Hogan and Wells Capital, Inc. Hogan is not in any way affiliated with the
partnership or its general partners.
The rights under the agreement were assigned by Wells Capital, Inc, the
original purchaser under the agreement, to the XI-XII-REIT Joint Venture at
closing. The purchase price paid for the Gartner Building was $8,320,000. The
joint venture also incurred additional acquisition expenses in connection with
the purchase of the Gartner Building, including attorneys' fees, recording fees
and other closing costs, of approximately $27,600.
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The partnership contributed $2,800,000, Wells Fund XI contributed $106,550
and Wells OP contributed $5,441,050 to the XI-XII-REIT Joint Venture for their
respective shares of the acquisition costs for the Gartner Building.
As of October 1, 1999, the partnership had made total capital contributions
to the XI-XII-REIT Joint Venture of $5,300,000 and held an equity percentage
interest in the joint venture of approximately 17.06%; Wells Fund XI had made
total capital contributions to the XI-XII-REIT Joint Venture of $8,131,351 and
held an equity percentage interest in the joint venture of approximately 26.17%;
and Wells OP had made total capital contributions to the XI-XII-REIT Joint
Venture of $17,634,796 and held an equity percentage interest in the joint
venture of approximately 56.77%.
Description of the Building and the Site. The Gartner Building is a two story
- ----------------------------------------
office building containing approximately 62,400 rentable square feet. The
Gartner Building, which was completed in 1998, is a reinforced concrete
structure with curtained glass.
An independent appraisal of the Gartner Building was prepared by CB Richard
Ellis, Inc., real estate appraisers, as of September 1, 1999, pursuant to which
the market value of the land and the leased fee interest subject to the Gartner
lease (described below) was estimated to be $8,350,000, in cash or terms
equivalent to cash. This value estimate was based upon a number of assumptions,
including that the Gartner Building will continue operating at a stabilized
level with Gartner Group, Inc. (Gartner) occupying 100% of the rentable area,
and is not necessarily an accurate reflection of the fair market value of the
property or the net proceeds which would result from an immediate sale of this
property. The XI-XII-REIT Joint Venture also obtained an environmental report
prior to closing evidencing that the environmental condition of the land and the
Gartner Building were satisfactory.
The Gartner Building is located on a 4.9 acre tract of land located at
12600 Gateway Boulevard within the Gateway development in Fort Myers, Florida.
Gateway, which is about ten miles southeast of the Fort Meyers central business
district, is a mixed use development with over 3,000 acres planned for
residential purposes and over 800 acres planned for commercial purposes. Sony
Electronics and Ford Motor Credit Company are two of the commercial tenants in
this development.
The recent growth of the Fort Meyers area is primarily due to the opening
of Interstate 75 in the eastern portion of the metro area and the relatively new
Southwest Florida Regional Airport, which is located just south of Gateway and
is easily accessible by a two lane road. Another major expansion to the local
economy is the new Florida Gulf Coast University, which is part of the State of
Florida University system. The enrollment at this university is expected to
increase to between 10,000 and 15,000 in the next few years.
The Lease. 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
landlord's interest in the Gartner lease was assigned to the XI-XII-REIT Joint
Venture at the closing.
The Gartner Building will be occupied by Gartner's Financial Services
Division. Gartner, which was founded in 1979, is the world's leading independent
provider of research and analysis related to information and technology
solutions. Gartner serves as a consultant to
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business clients for their information technology purchasing decisions. Gartner
has over 80 locations worldwide and over 12,000 clients. Gartner, which is
headquartered in Stamford, Connecticut, had net income of over $98 million and a
net worth of over $530 million for its fiscal year ended September 30, 1998.
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 lease for two additional five year periods of time. Each extension
option must be exercised by giving at least one year's notice to the landlord
prior to the expiration date of the then current lease term.
The base rent payable for the remainder of the lease term is as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Lease Year Yearly Base Rent Monthly Base Rent
--------------------------------------------------------------------------------------
<S> <C> <C>
2/1999-1/2000 $642,798 $53,566.50
--------------------------------------------------------------------------------------
2/2000-1/2001 $790,642 $65,886.83
--------------------------------------------------------------------------------------
2/2001-1/2002 $810,408 $67,534.00
--------------------------------------------------------------------------------------
2/2002-1/2003 $830,668 $69,222.35
--------------------------------------------------------------------------------------
2/2003-1/2004 $851,435 $70,952.89
--------------------------------------------------------------------------------------
2/2004-1/2005 $872,721 $72,726.74
--------------------------------------------------------------------------------------
2/2005-1/2006 $894,539 $74,544.92
--------------------------------------------------------------------------------------
2/2006-1/2007 $916,902 $76,408.54
--------------------------------------------------------------------------------------
2/2007-1/2008 $939,825 $78,318.71
--------------------------------------------------------------------------------------
</TABLE>
The monthly base rent payable for each extended term of the Gartner lease will
be equal to the lesser of (i) the prior rate increased by 2.5%, or (ii) 95% of
the then current market rate which is calculated as a full-service rental rate
less anticipated annual operating expenses on a rentable square foot basis
charged for space of comparable location, size and conditions in comparable
office buildings in the Fort Myers area.
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
lease. In addition, Gartner is responsible for all routine maintenance and
repairs to the Gartner Building. The 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 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 XI-XII-
REIT Joint Venture. Gartner may exercise its expansion right for the Small
Option Building by providing notice in writing to the joint venture on or before
February 15, 2002. In the event that Gartner exercises its expansion option, the
parties shall enter into a separate lease within 30 days of such notice by
Gartner with a guaranteed ten year lease term and yearly base rent to be
determined by mutual agreement of the parties.
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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 XI-XII-
REIT Joint Venture. Gartner may exercise its expansion right for the Small
Option Building by providing notice in writing to the joint venture on or before
February 15, 2002. In the event that Gartner exercises its expansion option, the
parties shall enter into a separate lease within 30 days of such notice by
Gartner with a guaranteed ten year lease term and yearly base rent to be
determined by mutual agreement of the parties.
Property Management Fees. Wells Management Company, Inc. (Wells Management), an
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affiliate of the general partners, has been retained to manage and lease the
Gartner Building. The XI-XII-REIT Joint Venture will pay management and leasing
fees to Wells Management in the amount of 4.5% of gross revenues from the
Gartner Building.
Management's Discussion and Analysis of Financial Condition and Results of
Operation
The information contained on page 76 in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of the
prospectus is revised as of the date of this supplement by the deletion of the
first paragraph of that section and the insertion of the following paragraph in
lieu thereof:
The partnership commenced operations on June 1, 1999, upon the
acceptance of subscriptions for the minimum offering of $1,250,000 (125,000
units). As of October 4, 1999, the partnership had raised a total of
$7,069,956 in offering proceeds (706,996 units), and had paid $247,448 in
acquisition and advisory fees and acquisition expenses and $883,745 in
selling commissions and organizational and offering expenses. As of October
4, 1999, the partnership had invested $5,300,000 in properties as its
capital contribution to the XI-XII-REIT Joint Venture and was holding net
offering proceeds of $638,763 available for investment in additional
properties.
Financial Statements and Exhibits.
The Statements of Revenues over Certain Operating Expenses of the Gartner
Building for the year ended December 31, 1998, included in this supplement, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included in reliance
upon the authority of said firm as experts in giving said report. The Statements
of Revenues over Certain Operating Expenses of the Gartner Building for the six
months ended June 30, 1999, and the pro forma financial information for Wells
Real Estate Fund XII,L.P. as of June 30, 1999, for the period from inception
(September 15, 1998) to December 31, 1998 and for the six months ended June 30,
1999, have not been audited.
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INDEX TO FINANCIAL STATEMENTS
Page
----
Gartner Building
Audited Financial Statements
Report of Independent Public Accountants 6
Statements of Revenues Over Certain Operating Expenses
for the year ended December 31, 1998 (Audited) and for the
six months ended June 30, 1999 (Unaudited) 7
Notes to Statements of Revenues Over Certain Operating
Expenses for the year ended December 31, 1998 (Audited)
and for the six months ended June 30, 1999 (Unaudited) 8
Wells Real Estate Fund XII, L.P.
Unaudited Pro Forma Financial Statements
Summary of Unaudited Pro Forma Financial Statements 10
Pro Forma Balance Sheet as of June 30, 1999 11
Pro Forma Income Statement for the period from Inception
(September 15, 1998) to December 31, 1998 12
Pro Forma Income Statement for the six month period
ended June 30, 1999 13
5
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[LETTERHEAD OF ARTHUR ANDERSEN LLP APPEARS HERE]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Investment Trust, Inc.,
and Wells Real Estate Fund XII, L.P.:
We have audited the accompanying statement of revenues over certain operating
expenses for the GARTNER BUILDING for the year ended December 31, 1998. This
financial statement is the responsibility of management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues over certain operating
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement of
revenues over certain operating expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
As described in Note 2, this financial statement excludes certain expenses that
would not be comparable with those resulting from the operations of the Gartner
Building after acquisition by the Wells Fund XI-Fund XII-REIT Joint Venture (a
joint venture between the Wells Operating Partnership, L.P. [on behalf of Wells
Real Estate Investment Trust, Inc.], Wells Real Estate Fund XI, L.P., and Wells
Real Estate Fund XII, L.P.). The accompanying statement of revenues over certain
operating expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and is not intended to be
a complete presentation of the Gartner Building's revenues and expenses.
In our opinion, the statement of revenues over certain operating expenses
presents fairly, in all material respects, the revenues over certain operating
expenses of the Gartner Building for the year ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
September 24, 1999
6
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GARTNER BUILDING
STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
1998 1999
--------- -----------
(Unaudited)
<S> <C> <C>
RENTAL REVENUES $738,074 $402,590
OPERATING EXPENSES, net of reimbursements 8,505 75
-------- --------
REVENUES OVER CERTAIN OPERATING EXPENSES $729,569 $402,515
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
7
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GARTNER BUILDING
NOTES TO STATEMENTS OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Real Estate Property Acquired
On September 20, 1999, the Wells Fund XI-Fund XII-REIT Joint Venture (the
"Joint Venture") acquired a two story office building with approximately
62,400 rentable square feet located in Fort Myers, Lee County, Florida (the
"Gartner Building").
The Joint Venture is a partnership between Wells Real Estate Fund XII, L.P.
("Wells Fund XII"), Wells Real Estate Fund XI, L.P. ("Wells Fund XI"), and
Wells Operating Partnership, L.P. ("Wells OP"), a Delaware limited
partnership formed to acquire, own, lease, operate, and manage real
properties on behalf of Wells Real Estate Investment Trust, Inc.
The purchase price for the Gartner Building was $8,320,000. The Joint
Venture also incurred additional acquisition expenses in connection with
the purchase of the Gartner Building, including attorneys' fees, recording
fees and other closing costs, of $27,600.
The Wells Fund XII contributed $2,800,000, Wells Fund XI contributed
$106,550, and Wells OP contributed $5,441,050 to the Joint Venture for
their respective share of the acquisition costs for the Gartner Building.
The entire 62,400 rentable square feet of the Gartner Building is currently
under a net lease agreement with Gartner dated July 30, 1997 (the "Lease").
The Lease was assigned to the Joint Venture at the closing.
The initial term of the Lease is ten years which commenced on February 1,
1998 and expires on January 31, 2008. Gartner has the right to extend the
Lease for two additional five year periods of time. Each extension option
must be exercised by giving at least one year's notice to the landlord
prior to the expiration date of the then current lease term.
Under the Lease, Gartner is required to pay as additional rent all real
estate taxes, special assessments, utilities, taxes, insurance, and other
operating costs with respect to the Gartner Building during the term of the
Lease. In addition, Gartner
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is responsible for all routine maintenance and repairs to the Gartner
Building. The Joint Venture, as landlord, is responsible for repair and
replacement of the roof, structure, and paved parking areas.
Rental Revenues
Rental income from the lease is recognized on a straight-line basis over
the life of the lease.
2. BASIS OF ACCOUNTING
The accompanying statements of revenues over certain operating expenses are
presented on the accrual basis. These statements have been prepared in
accordance with the applicable rules and regulations of the Securities and
Exchange Commission for real estate properties acquired. Accordingly, the
statements exclude certain historical expenses, such as depreciation and
management and leasing fees, not comparable to the operations of the
Gartner Building after acquisition by the Joint Venture.
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WELLS REAL ESTATE FUND XII, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet as of June 30, 1999 and the pro
forma statements of income (loss) for the period from inception (September 15,
1998) to December 31, 1998 and the six-month period ending June 30, 1999 have
been prepared to give effect to the acquisition of the Gartner Building by the
Wells Fund XI-Fund XII-REIT Joint Venture (a joint venture between the Wells
Operating Partnership, L.P., Wells Real Estate Fund XI, L.P., and Wells Real
Estate Fund XII, L.P.) as if the acquisition had occurred as of June 30, 1999
with respect to the balance sheet and on September 15, 1998 with respect to the
statements of income (loss).
These unaudited pro forma financial statements are prepared for informational
purposes only and are not necessarily indicative of future results or of actual
results that would have been achieved had the acquisition been consummated at
the beginning of the period presented.
10
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WELLS REAL ESTATE FUND XII, L.P.
PRO FORMA BALANCE SHEET
JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
Wells Real
Estate Pro Forma Pro Forma
Fund XII, L.P. Adjustments Total
-------------- --------------- ----------
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS $ 2,457,166 $(2,457,166)(a) $ 0
INVESTMENT IN JOINT VENTURE 0 2,916,676 (b) 2,916,676
DEFERRED PROJECT COSTS 94,370 (94,370)(c) 0
DEFERRED OFFERING COSTS 117,543 0 117,543
-------------- --------------- ----------
Total assets $ 2,669,079 $ 365,140 $3,034,219
============== =============== ==========
LIABILITIES AND PARTNERS' CAPITAL
SALE COMMISSIONS PAYABLE $ 147,259 $ 0 $ 147,259
DUE TO AFFILIATES 164,579 342,834 (a) 507,413
22,306 (c) 22,306
-------------- --------------- ----------
Total liabilities 311,838 365,140 676,978
-------------- --------------- ----------
PARTNERS' CAPITAL:
General partners 474 0 474
Original limited partner 100 0 100
Limited partners:
Class A--164,341 units outstanding 1,437,987 0 1,437,987
Class B--105,288 units outstanding 918,680 0 918,680
-------------- --------------- ----------
Total partners' capital 2,357,241 0 2,357,241
-------------- --------------- ----------
Total liabilities and partners' capital $ 2,669,079 $365,140 $3,034,219
============== =============== ==========
</TABLE>
(a) Reflects Wells Real Estate Fund XII, L.P.'s
portion of the purchase price.
(b) Reflects Wells Real Estate Fund XII, L.P.'s
contribution to the Wells Fund XI-Fund XII-REIT
Joint Venture.
(c) Reflects deferred project costs contributed to
the Wells Fund XI-Fund XII-REIT Joint Venture.
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<PAGE>
WELLS REAL ESTATE FUND XII, L.P.
PRO FORMA STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 15, 1998) TO DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Wells Real Pro
Estate Pro Forma Forma
Fund XII, L.P. Adjustment Total
-------------- ------------ ---------
<S> <C> <C> <C>
REVENUES:
Equity in income of joint venture $ 0 $ 19,759(a) $ 19,759
EXPENSES 0 0 0
-------------- ------------ ---------
NET INCOME $ 0 $ 19,759 $ 19,759
-------------- ------------ ---------
NET LOSS ALLOCATED TO GENERAL PARTNERS $ 0 $ (154) $ (154)
-------------- ------------ ---------
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 0 $ 35,200 $ 35,200
-------------- ------------ ---------
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ 0 $(15,287) $(15,287)
-------------- ------------ ---------
</TABLE>
(a) Reflects Wells Real Estate Fund XII, L.P.'s equity
in income of the Wells Fund XI-Fund XII-REIT Joint
Venture related to the Gartner Building. The pro
forma adjustment results from rental revenues less
operating expenses, management and leasing fees,
and depreciation.
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WELLS REAL ESTATE FUND XII, L.P.
PRO FORMA STATEMENT OF INCOME (LOSS)
FOR THE SIX-MONTH PERIOD ENDING JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Wells Real Pro
Estate Pro Forma Forma
Fund XII, L.P. Adjustment Total
-------------- ----------- --------
<S> <C> <C> <C>
REVENUES:
Equity in income of joint venture $ 0 $ 40,139(a) $ 40,139
EXPENSES 2,615 0 2,615
-------------- ----------- --------
NET (LOSS) INCOME $ (2,615) $ 40,139 $ 37,524
-------------- ----------- --------
NET LOSS ALLOCATED TO GENERAL PARTNERS $ (26) $ (265) $ (291)
-------------- ----------- --------
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 0 $ 66,609 $ 66,609
-------------- ----------- --------
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ (2,589) $(26,205) $(28,794)
-------------- ----------- --------
NET INCOME PER CLASS A WEIGHTED AVERAGE LIMITED PARTNER UNIT $ 0.00 $ 0.86 $ 0.86
-------------- ----------- --------
NET LOSS PER CLASS B WEIGHTED AVERAGE LIMITED PARTNER UNIT $ (0.02) $ (0.35) $ (0.37)
-------------- ----------- --------
</TABLE>
(a) Reflects Wells Real Estate Fund XII, L.P.'s
equity in income of the Wells Fund XI-Fund XII-
REIT Joint Venture related to the Gartner
Building. The pro forma adjustment results
from rental revenues less operating expenses,
management and leasing fees, and depreciation.
13
