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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 2, 1999
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Wells Real Estate Fund XII, L.P.
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(Exact name of registrant as specified in its charter)
Georgia
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(State or other jurisdiction of incorporation)
33-66657 58-2438242
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(Commission File Number) (IRS Employer Identification No.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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________________________________________________________________________________
(Former name or former address, if changed since last report)
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Item 2. Acquisition of Assets
Purchase of the Sprint Building. On July 2, 1999, The Wells Fund XI-XII-REIT
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Joint Venture (the "Joint Venture") acquired a three story office building with
approximately 68,900 rentable square feet located in Leawood, Johnson County,
Kansas (the "Sprint Building") from Bridge Information Systems America, Inc.
("the Seller"), pursuant to that certain Agreement for the Purchase and Sale of
Property (the "Contract") between the Seller and Wells Capital, Inc., an
affiliate of Wells Real Estate Fund XII, L.P. (the "Registrant"), a Georgia
limited partnership. The Seller is not in any way affiliated with the Registrant
or its General Partners.
The Joint Venture is a joint venture partnership among the Registrant,
Wells Real Estate Fund XI, L.P. ("Wells Fund XI"), an affiliated Georgia limited
partnership, 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 "Wells
REIT"), an affiliated Maryland corporation. The Joint Venture was originally
formed on May 1, 1999 as a joint venture between Wells Fund XI and the Wells
REIT pursuant to a Joint Venture Partnership Agreement, which was amended and
restated on June 21, 1999 to admit the Registrant as a joint venture partner.
The Joint Venture was formed for the purpose of the acquisition, ownership,
development, leasing, operation, sale and management of real properties. The
investment objectives of Wells Fund XI and the Wells REIT are substantially
identical to those of the Registrant.
The rights under the Contract were assigned by Wells Capital, Inc, the
original purchaser under the Contract, to the Joint Venture at closing. The
purchase price for the Sprint Building was $9,500,000. The Joint Venture also
incurred additional acquisition expenses in connection with the purchase of the
Sprint Building, including attorneys' fees, recording fees and other closing
costs, of approximately $46,210.
The Registrant contributed $1,000,000, Wells Fund XI contributed $3,000,000
and Wells OP contributed $5,546,210 to the Joint Venture for their respective
share of the acquisition costs for the Sprint Building. All income, loss,
profit, net cash flow, resale gain and sale proceeds of the Joint Venture are
allocated and distributed between the Registrant, Wells Fund XI and Wells OP
based upon their respective capital contributions to the Joint Venture.
The Registrant has made total capital contributions to the Joint Venture of
$1,000,000 and currently has an equity percentage interest in the Joint Venture
of 6.82%; Wells Fund XI has made total capital contributions to the Joint
Venture of $4,530,000 and currently has an equity percentage interest in the
Joint Venture of 30.88%; and Wells OP has made total capital contributions to
the Joint Venture of $9,138,038 and currently has an equity percentage interest
in the Joint Venture of 62.30%.
Description of the Building and the Site. As set forth above, the Sprint
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Building is a three story office building containing approximately 68,900
rentable square feet. The Sprint Building, which was completed in 1992, is a
steel frame structure with a pre-cast concrete panel exterior.
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An independent appraisal of the Sprint Building was prepared by CB Richard
Ellis, Inc., real estate appraisers, as of June 14, 1999, pursuant to which the
market value of the land and the leased fee interest subject to the Lease
(described below) was estimated to be $10,100,000, in cash or terms equivalent
to cash. This value estimate was based upon a number of assumptions, including
that the Sprint Building will continue operating at a stabilized level with
Sprint Communications Company L.P. ("Sprint") occupying 100% of the rentable
area, and is not necessarily an accurate reflection of the fair market value of
the property. The Joint Venture also obtained an environmental report prior to
closing evidencing that the environmental condition of the land and the Sprint
Building were satisfactory.
The Sprint Building is adjacent to the Leawood Country Club and near the
affluent Overland Park suburb of Kansas City. The location is within walking
distance to Ward Parkway Mall and offers convenient access to downtown Kansas
City and I-435, the interstate loop around Kansas City. Hewlett Packard and John
Deere are a few of the corporations located within the immediate vicinity of the
Sprint Building.
The site is a 7.12 acre tract of heavily wooded land located in Leawood,
Johnson County, Kansas. There are approximately 2.35 acres of excess land area
which has the potential for the development of an additional 45,000 square feet
of office space.
The Lease. The entire 68,900 rentable square feet of the Sprint Building is
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currently under a net Lease Agreement with Sprint dated February 14, 1997 (the
"Lease"). The landlord's interest in the Lease was assigned to the Joint Venture
at the closing.
The initial term of the Lease is ten years which commenced on May 19, 1997
and expires on May 18, 2007. Sprint 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 270 days, but no earlier than 365 days,
prior to the expiration date of the then current lease term.
The monthly base rent payable under the Lease will be $83,254.17 ($14.50
per square foot) through May 18, 2002 and $91,866.67 ($16.00 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. If
the parties are unable to agree upon the "current market rate" within 30 days of
the date negotiations begin, the current market rate shall be determined by
three licensed real estate brokers, one of which will be selected by Sprint, one
of which will be selected by the Joint Venture and the final appraiser shall be
selected by the two appraisers previously selected.
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
2
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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 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 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
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.
Sprint must give written notice to the Joint Venture of its election to
exercise each expansion option at least 270 days prior to the date Sprint will
require delivery of the expansion space.
If Sprint exercises either expansion option, the Joint Venture will be
required to construct the expansion improvements in accordance with the specific
drawings and plans attached as an exhibit to the Lease. The Joint Venture will
be required to fund the expansion improvements and to fund to Sprint a tenant
finish allowance of $10 per square foot for the expansion space.
The base rental per square foot for the expansion space shall be determined
by the Joint Venture taking into consideration the value of the Joint Venture's
work related to such expansion space and the base rental rate increase per
square foot applicable at the end of year five of the Lease term. The expansion
space base rental rate shall be presented to Sprint no later than 45 days after
delivery to the Joint Venture of each expansion notice. In no event shall such
rental rate be greater than the base rental rate for the Sprint Building as of
the date of the expansion space commencement date.
Property Management Fees. Wells Management Company, Inc. ("Wells Management"),
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an affiliate of the Registrant, has been retained to manage and lease the Sprint
Building. The Joint Venture shall pay management and leasing fees to Wells
Management in the amount of 4.5% of gross revenues from the Sprint Building.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements. The following financial statements relating to
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the real property acquired by the Joint Venture are submitted at the end of this
Current Report and are filed herewith and incorporated herein by reference:
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Report of Independent Public Accountants F-1
Statement of Revenues Over Certain Operating
Expenses for the year ended December 31, 1998 (Audited)
and for the three month period ended March 31, 1999 (Unaudited) F-2
Notes to Statement of Revenues Over Certain
Operating Expenses for the year ended December 31, 1998 (Audited)
and for the three month period ended March 31, 1999 (Unaudited) F-3
</TABLE>
(b) Pro Forma Financial Information. The following unaudited pro forma
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financial statements of the Registrant relating to the real property acquired
are submitted at the end of this Current Report and are filed herewith and
incorporated herein by reference:
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Summary of Unaudited Pro Forma Financial Statements F-5
Pro Forma Balance Sheet as of March 31, 1999 F-6
Pro Forma Statement of Income for the period from
inception (September 15, 1998) to December 31, 1998 F-7
Pro Forma Statement of Income for the three months
ended March 31, 1999 F-8
</TABLE>
After reasonable inquiry, the Registrant is not aware of any material
factors relating to the real property described in this Current Report that
would cause the financial information reported herein not to be necessarily
indicative of future operating results.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WELLS REAL ESTATE FUND XII, L.P.
Registrant
By: /s/ Leo F. Wells, III
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Leo F. Wells, III, as General Partner and
as President and sole Director of Wells
Capital, Inc., the General Partner of
Wells Partners, L.P., General Partner
Date: July 12, 1999
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund XI, L.P.,
Wells Real Estate Fund XII, L.P., and
Wells Real Estate Investment Trust, Inc.:
We have audited the accompanying statement of revenues over certain operating
expenses for the SPRINT 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 Sprint
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 Sprint 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 Sprint Building for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
Atlanta, Georgia
July 12, 1999
F-1
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SPRINT BUILDING
STATEMENTS OF REVENUES OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999
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<CAPTION>
1998 1999
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(Unaudited)
<S> <C> <C>
RENTAL REVENUES $ 1,050,725 $ 262,681
OPERATING EXPENSES, net of reimbursements 19,410 2,250
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REVENUES OVER CERTAIN OPERATING EXPENSES $ 1,031,315 $ 260,431
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</TABLE>
The accompanying notes are an integral part of these statements.
F-2
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SPRINT BUILDING
NOTES TO STATEMENTS OF REVENUES
OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE THREE MONTHS ENDED MARCH 31, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Real Estate Property Acquired
On July 2, 1999, the Wells Fund XI-XII-REIT Joint Venture (the "Joint
Venture") acquired a three-story office building with approximately 68,900
rentable square feet located in Leawood, Johnson County, Kansas (the
"Sprint Building"). The Joint Venture is a joint venture partnership
between Wells Real Estate Fund XI, L.P. ("Wells Fund XI"), Wells Real
Estate Fund XII, L.P. ("Wells Fund XII"), 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 "Wells REIT"). Wells Fund XI contributed
$3,000,000, Wells Fund XII contributed $1,000,000 and Wells OP contributed
$5,546,210 to the Joint Venture for their respective share of the purchase
of the Sprint Building.
The entire 68,900 rentable square feet of the Sprint Building is currently
under a net lease agreement dated February 14, 1997 (the "Lease") with
Sprint. The Lease was assigned to the 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 has the right to extend the Lease for 2
additional five-year periods. Each extension option must be exercised by
giving notice to the landlord at least 270 days, but no earlier than 365
days, prior to the expiration date of the then current lease term. The
monthly base rent payable under the Lease will be $83,254.17 through May
18, 2002 and $91,866.67 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 interior mechanical and electrical, HVAC, parking lot,
and landscaping to the Sprint Building. The
F-3
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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 Sprint has not exercised its
expansion option, as described below. The early termination requires nine
months' notice and a termination payment to the Joint Venture 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 phases, which involves 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.
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 fees, not comparable to the operations of the Sprint Building
after acquisition by the Joint Venture.
F-4
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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 March 31, 1999 and the pro
forma statements of income for the period from inception (September 15, 1998) to
December 31, 1998 and the three-month period ended March 31, 1999 have been
prepared to give effect to the acquisition of the Sprint Building by The Wells
Fund XI - Fund XII - REIT Joint Venture (a joint venture between the Wells
Operating Partnership, Wells Real Estate Fund XI, L.P., and Wells Real Estate
Fund XII, L.P.) as if the acquisition occurred as of March 31, 1999 with respect
to the balance sheet and on September 15, 1998 with respect to the statements of
income. Wells Operating Partnership, L.P. is a Delaware limited partnership that
was organized to own and operate properties on behalf of the Wells Real Estate
Investment Trust, Inc. Wells Real Estate Investment Trust, Inc. is the general
partner of the Wells Operating Partnership, L.P.
These unaudited pro forma financial statements are prepared for informational
purposes only and are not necessarily indicative of future results or of actual
results that would have been achieved had the acquisition been consummated at
the beginning of the period presented.
F-5
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WELLS REAL ESTATE FUND XII, L.P.
BALANCE SHEET
MARCH 31, 1999
(Unaudited)
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ASSETS
Wells Real Pro
Estate Pro Forma Forma
Fund XII, L.P. Adjustments Total
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<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS $ 600 $ (600)(a) $ 0
INVESTMENT IN JOINT VENTURE 0 1,041,670 (b) 1,041,670
DEFERRED PROJECT COSTS 126,246 (41,670)(c) 84,576
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Total assets $ 126,846 $ 999,400 $ 1,126,246
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</TABLE>
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<S> <C> <C> <C>
DUE TO AFFILIATES $ 126,246 $ 999,400(a) $ 1,125,696
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LIMITED PARTNERS 100 100
ORIGINAL LIMITED PARTNER 500 0 500
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Total partners' capital 600 0 600
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Total liabilities and partners' capital $ 126,846 $ 999,400 $ 1,126,246
========= ============= ============
</TABLE>
(a) Reflects Wells Real Estate Fund XII, L.P.'s portion of the
purchase price related to the Sprint Building
(b) Reflects Wells Real Estate Fund XII, L.P.'s contribution to
the Wells XI-XII-REIT Joint Venture
(c) Reflects deferred project costs contributed to the Wells XI-
XII-REIT Joint Venture
F-6
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WELLS REAL ESTATE FUND XII, L.P.
STATEMENT OF INCOME
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 15, 1998) TO DECEMBER 31, 1998
(Unaudited)
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<CAPTION>
Wells Real Pro
Estate Pro Forma Forma
Fund XII, L.P. Adjustment Total
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<S> <C> <C> <C>
REVENUES:
Equity in income of joint venture $ 0 $ 12,681(a) $ 12,681
EXPENSES 0 0 0
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NET INCOME $ 0 $ 12,681 $ 12,681
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NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS
$ 0 $ 19,574 $ 19,574
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NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ 0 $ (6,893) $ (6,893)
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</TABLE>
(a) Reflects Wells Real Estate Fund XII, L.P.'s equity in income
of the Wells XI-XII-REIT Joint Venture.
F-7
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WELLS REAL ESTATE FUND XII, L.P.
STATEMENT OF INCOME
FOR THE THREE-MONTH PERIOD ENDING MARCH 31, 1999
(Unaudited)
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<CAPTION>
Wells Real Pro
Estate Pro Forma Forma
Fund XII, L.P. Adjustment Total
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<S> <C> <C> <C>
REVENUES:
Equity in income of joint venture $ 0 $ 11,047(a) $ 11,047
EXPENSES 0 0 0
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NET INCOME $ 0 $ 11,047 $ 11,047
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NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 0 $ 16,955 $ 16,955
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NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ 0 $ (5,908) $ (5,908)
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</TABLE>
(a) Reflects Wells Real Estate Fund XII, L.P.'s equity in income
of the Wells XI-XII-REIT Joint Venture.
F-8
