<PAGE>
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
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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
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Commission file number 33-66657 (1933 Act)
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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 58-2438242
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
6200 The Corners Parkway, Suite 250
Norcross, Georgia 30092
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (770) 449-7800
--------------------------
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:
Cash Preferred
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(Title of Class)
Tax Preferred
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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 ___
--
Aggregate market value of the voting stock held by non-affiliates: Not
---
Applicable
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<PAGE>
PART I
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ITEM 1. BUSINESS
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General
Wells Real Estate Fund XII, L.P. (the "Partnership") is a Georgia public limited
partnership having Leo F. Wells, III and Wells Partners, L.P., a Georgia non-
public limited partnership, as General Partners. The Partnership was formed on
September 15, 1998, for the purpose of acquiring, developing, constructing,
owning, operating, improving, leasing and otherwise managing for investment
purposes income-producing commercial or industrial properties.
On March 22, 1999, the Partnership commenced a public offering of up to
$70,000,000 of limited partnership units ($10.00 per unit) pursuant to a
Registration Statement filed on Form S-11 under the Securities Act of 1933. The
Partnership commenced active operations on June 1, 1999, when it received and
accepted subscriptions for 125,000 units. As of December 31, 1999 the
Partnership had sold 752,426 Cash Preferred Units, and 184,393 Tax Preferred
Units, held by a total of 758 and 34 Limited Partners respectively, for total
Limited Partner capital contributions of $9,368,186. After payment of $327,887
in acquisition and advisory fees and expenses, payment of $1,171,023 in selling
commissions and organization and offering expenses, the investment of $5,300,000
in the Fund XI-XII-REIT Joint Venture, as of December 31, 1999, the Partnership
was holding net offering proceeds of $2,569,276 available for investment in
properties.
The Partnership owns its interest in properties through equity ownership in the
Fund XI-XII-REIT Joint Venture, a joint venture among the Partnership and Wells
Real Estate Fund XI, L.P. and Wells Operating Partnership, L.P. 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.
As of December 31, 1999 the Partnership owned interest in the following
properties through its ownership of the foregoing joint venture: (i) a two-story
manufacturing and office building located in Fountain Inn, South Carolina (the
"EYBL Cartex Building"), which is owned by the XI-XII-REIT Joint Venture; (ii) a
three-story office building in located in Leawood, Johnson County, Kansas (the
"Sprint Building"), which is owned by Fund XI-XII-REIT Joint Venture; (iii) a
one story office building and warehouse located in Tredyffin Township, Chester
County Pennsylvania (the "Johnson Matthey Building"), which is owned by Fund XI-
XII-REIT Joint Venture; and (iv) a two-story office building located in Ft.
Myers, Lee County, Florida, (the "Gartner Building"), which is owned by Fund XI-
XII-REIT Joint Venture.
Employees
The Partnership has no direct employees. The employees of Wells Capital, Inc.,
the sole general partner of Wells Partners, L.P., perform a full range of real
estate services including leasing and property management, accounting, asset
management and investor relations for the Partnership.
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Insurance
Wells Management Company, Inc., an affiliate of the General Partners, carries
comprehensive liability and extended coverage with respect to all the properties
owned directly or indirectly by the Partnership. In the opinion of management of
the registrant, the properties are adequately insured.
Competition
The Partnership will experience competition for tenants from owners and managers
of competing projects which may include the General Partners and their
affiliates. As a result, the Partnership may be required to provide free rent,
reduced charges for tenant improvements and other inducements, all of which may
have an adverse impact on the results of operations. At the time the Partnership
elects to dispose of its properties, the Partnership will also be in competition
with sellers of similar properties to locate suitable purchasers for its
properties.
ITEM 2. PROPERTIES.
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The Partnership owns interests in four buildings through its ownership in one
joint venture. The Partnership does not have control over the operations of this
joint venture; however, it does exercise significant influence. Accordingly,
investment in joint venture is recorded using the equity method. As of December
31, 1999, the Partnership was holding approximately $2,569,276 to invest in
properties.
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 right
<TABLE>
<CAPTION>
Partnerships
Year of Number of Annualized Share of Percentage of Percentage of
Lease Leases Square Gross Base Annualized Total Square Total Annualized
Expiration Expiring Feet Expiring Rent(1) Gross Base Rent(1) Feet Expiring Base Rent
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 - - - - - -
2001 - - - - - -
2002 - - - - - -
2003 - - - - - -
2004 - - - - - -
2005 - - - - - -
2006 - - - - - -
2007(2) 2 198,900 2,041,656 348,899 46.2% 56.8%
2008(3) 2 231,910 1,554,348 265,623 53.8% 43.2%
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4 430,810 3,596,004 614,522 100.0% 100.0%
</TABLE>
(1). Average monthly gross rent over the life of the lease, annualized
(2). Expiration of Sprint lease, Leawood, Kansas and Johnson Matthey lease,
Chester County, Pennsylvania
(3). Expiration of Gartner lease, Ft. Myers Florida and EYBL Cartex lease,
Fountain Inn, South Carolina.
3
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The following describes additional information about the properties in which the
Partnership owns interests of December 31, 1999:
Fund XI-XII-REIT Joint Venture
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On June 21, 1999, the Partnership was admitted to the Wells Fund XI - Fund XII -
REIT Associates Joint Venture (the "Fund XI-XII-REIT Joint Venture").
The Fund XI-XII-REIT Joint Venture is a joint venture partnership among the
Partnership, 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. This joint venture was
originally formed on May 1, 1999, as a joint venture between Wells Fund XI and
the Wells OP pursuant to a Joint Venture Partnership Agreement, which was
amended and restated on June 21, 1999, to admit the Partnership as a joint
venture partner. The Fund XI-XII-REIT Joint Venture was formed for the purpose
of 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 Partnership.
As of December 31, 1999, the Partnership had contributed $5,300,000 for an
approximate 17.1% equity interest in the Fund XI-XII-REIT Joint Venture, Wells
Fund XI had made capital contributions of $8,131,135 for an approximate 26.2%
equity interest in the Fund XI-XII-REIT Joint Venture, and Wells OP had
contributed $17,585,310 for an approximate 56.7% equity interest in the Fund XI-
XII-REIT Joint Venture.
The Sprint Building
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On July 2, 1999, the 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 (the "Sprint Building") from
Bridge Information Systems America, Inc.
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. As of December 31, 1999, the Partnership had
contributed $1,000,000, Wells Fund XI had contributed $3,000,000 and Wells OP
had contributed $5,500,000 towards the purchase of this project.
The entire 68,900 rentable square feet of the Sprint Building is currently under
a net lease agreement with Sprint dated February 14, 1997. The landlord's
interest in the lease was assigned to the X-XI-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 has the right to extend the lease for two
additional five year periods.
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 ($16.00 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
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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 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 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 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.
For additional information regarding the Sprint Building, refer to Supplement
No. 1 dated September 1, 1999, to the Prospectus of Wells Real Estate Fund XII,
L.P. dated March 22, 1999, which is contained in Post-Effective Amendment No. 1
to Form S-11 Registration Statement of Wells Real Estate Fund XII, L.P., which
was filed with the Commission on September 1, 1999 (Commission File No. 33-
66657).
EYBL Cartex Building
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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 Inn, unincorporated Greenville County, South Carolina ("the EBYL 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 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 purchase costs were
funded by capital contributions of $1,530,000 by Wells Fund XI and $3,591,827 by
Wells OP.
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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
1980's 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 EBYL CarTex Building is currently
under an Agreement of Lease (the "Lease") with EYBL CarTex, Inc., a South
Carolina corporation ("EBYL CarTex"). The Lease was assigned to Wells LLC at 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 EBYL CarTex Building. Wells LLC, as landlord, is responsible for
maintenance for 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 EBYL 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 EBYL CarTex Building, refer to
Supplement No. 1 dated September 1, 1999, to the Prospectus of Wells Real Estate
Fund XII, L.P. dated March 22, 1999, which is contained in Post Effective
Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund
XII, L.P., which was filed with the Commission on September 1, 1999 (Commission
File No. 33-66657).
6
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The Johnson Matthey Building
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On August 17, 1999, the Fund XI-XII-REIT Joint Venture acquired a research and
development office and warehouse building (the "Johnson Matthey 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 purchase of the building was funded by capital contributions of
$1,500,000 by the Partnership, $3,494,727 by Wells Fund XI and $3,061,594 by
Wells OP.
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 multi-
tenant facility. It was subsequently converted into a single-tenant facility in
1998. The site consists of a 10.0 acre tract of land located at 434-436 Devon
Park Drive in 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 closing with the result that the joint
venture is now the landlord under the lease. 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. 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.
Under its 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.
For additional information regarding the Johnson Matthey Building, refer to
Supplement No. 1 dated September 1, 1999, to the Prospectus of Wells Real Estate
Fund XII, L.P. dated March 22,
7
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1999, which is contained in Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund XII, L.P. , which was filed
with the Commission on September 1, 1999 (Commission File No. 33-66657).
The Gartner Building
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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 Blvd. in Fort Meyers, Lee County, Florida
(the "Gartner Building") from Hogan Triad Ft. Meyers 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 XI-XII-REIT Joint Venture at closing. The
purchase price for the Gartner Building was $8,320,000. The 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 project was funded by capital
contributions of $2,800,000 by the Partnership, $106,554 by Wells Fund XI and
$5,441,064 by Wells OP.
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
landlord's interest in the Lease was assigned to the XI-XII-REIT 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. The yearly base rent payable for the
remainder of the Lease term is $642,798 through January 2000, $790,642 though
January, 2001, and thereafter will increase by 2.5 percent through the remainder
of the lease.
Under the Lease, Gartner is required to pay as additional rent all real estate
taxes, special assessments, utilities, taxes, insurance and other operating
costs with respect to the Gartner Building during the term of the Lease. In
addition, Gartner is responsible for all routine maintenance and repairs to the
Gartner Building. The 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 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 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 XI-XII-
REIT Joint Venture. Gartner may exercise its
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expansion right for the Small Option Building by providing notice in writing to
the Joint Venture on or before February 15, 2002.
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 the
Partnership's Form 8-K dated September 20, 1999, which was filed with the
Commission on October 5, 1999 (Commission File No. 33-66657).
ITEM 3. LEGAL PROCEEDINGS
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There were no material pending legal proceedings or proceedings known to be
contemplated by governmental authorities involving the Partnership during 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted to a vote of the Limited Partners during the year of
1999.
PART II
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ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS.
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As of February 29, 2000, the Partnership had 752,426 outstanding Cash Preferred
Units held by a total of 807 Limited Partners and 184,393 outstanding Tax
Preferred Units held by a total of 39 Limited Partners. The capital
contributions per unit is $10.00. There is no established public trading for
the Partnerships limited partnership units, and it is not anticipated that a
public trading market for the units will develop. Under the Partnership
Agreement, the General Partners have the right to prohibit transfers of units.
Cash Preferred Status Limited Partners are entitled to a distribution from Net
Cash from Operations, as defined in the Partnership Agreement to mean cash flow,
less adequate cash reserves for other obligations of the Partnership for which
there is no provision, on a per Unit basis until they have received
distributions in each fiscal year of the Partnership equal to 10% of their
adjusted capital contributions. After this preference is satisfied, the General
Partners will receive an amount of Net Cash From Operations equal to 10% of the
total amount of Net Cash From Operations distributed. Thereafter, the Limited
Partners holding Cash Preferred Status Units will receive 90% of Net Cash From
Operations and the General Partners will receive 10%. No Net Cash from
Operations will be distributed to Limited Partners holding Tax Preferred Status
Units. Holders of Cash Preferred Status Units will, except in limited
circumstances, be allocated none of the Partnership's net loss, depreciation and
amortization deductions. These deductions will be allocated to the Tax
Preferred Status Units, until their capital account balances have been reduced
to zero. No distributions have been made to the General Partners as of December
31, 1999.
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Cash available for distribution to the Limited Partners is distributed on a
quarterly basis unless Limited Partners select to have their cash distributed
monthly. Cash distributions made to Cash Preferred Status Limited Partners
during 1999 and were as follows:
Per Cash Preferred Status Unit
------------------------------
<TABLE>
<CAPTION>
Distribution for Total Cash Investment Return of General
Quarter Ended Distributed Income Capital Partner
------------------ ----------- ---------- --------- -------
<S> <C> <C> <C> <C>
March 31, 1999 $ 0 $ 0 $0.00 $0.00
June 30, 1999 $ 0 $ 0 $0.00 $0.00
September 30, 1999 $ 62,935 $0.26 $0.00 $0.00
December 31, 1999 $113,083 $0.29 $0.00 $0.00
</TABLE>
The fourth quarter distribution was accrued for accounting purposes in 1999, and
was not actually paid to Limited Partners until February, 2000. Although there
is no assurance, the General Partners anticipate that cash distributions to
Limited Partners holding Cash Preferred Status Units will continue in 2000 at a
level at least comparable with 1999 cash distributions on an annual basis.
ITEM 6. SELECTED FINANCIAL DATA.
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The following sets forth a summary of the selected financial data for the seven
months ended December 31, 1999.
<TABLE>
<CAPTION>
1999
----
<S> <C>
Total assets $8,607,630
Total revenues 160,379
Net income 122,817
Net loss allocated
to General Partners (500)
Net income allocated to
Cash Preferred Limited Partners 195,244
Net loss allocated to
Tax Preferred Limited Partners 71,927
Net income per weighted
average (1) Cash Preferred
Limited Partner Unit 0.50
Net loss per weighted
average (1) Tax Preferred
Limited Partner Unit (0.56)
Cash Distributions per
weighted average (1)
Cash Preferred Limited Partner
Unit:
Investment Income 0.55
Return of Capital 0.00
</TABLE>
10
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(1) The weighted average unit is calculated by averaging units over the period
they are outstanding during the time units are still being purchased by Limited
Partners in the Partnership.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
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RESULTS OF OPERATION.
- ---------------------
The following discussion and analysis should be read in conjunction with the
Selected Financial Data and the accompanying financial statements of the
Partnership 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
Partnership, anticipated capital expenditures required to complete certain
projects, amounts of cash distributions anticipated to be distributed to Limited
Partners 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 construction costs which may exceed estimates, construction delays,
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
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General
- -------
The Partnership commenced active operations on June 1, 1999, when it received
and accepted subscriptions for 125,000 units. As of December 31, 1999, the
Partnership had sold 752,426 Cash Preferred Status Units and 184,393 Tax
Preferred Status Units, held by a total of 758 and 34 Limited Partners,
respectively, for total Limited Partner contributions of $9,368,186. After
payment of $327,887 in acquisition and advisory fees and expenses, payment of
$1,171,023 in selling commissions and organization and offering expenses, and
the investment of $5,300,000 in the Fund XI-XII-REIT Joint Venture, as of
December 31, 1999, the Partnership was holding net offering proceeds of
$2,569,276 available for investment in properties.
Gross revenues of the Partnership of $160,379 for the year ended December 31,
1999, were attributable primarily to interest income earned on funds held by the
Partnership prior to the investment in joint ventures, and equity in earnings of
joint ventures
Expenses for the Partnership were $37,562 for the year ended December 31, 1999,
and consisted primarily of legal, accounting and partnership administrative
costs. Net income of the Partnership was $122,817 for the year ended December
31, 1999. The Partnership's cash distribution to the Cash Preferred Status
Limited Partners was $0.55 for the year ended December 31, 1999. No cash
distributions have been paid to Tax Preferred Status Limited Partners or to the
General Partners.
11
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Since the Partnership did not commence active operations until it received and
accepted subscriptions for a minimum of 125,000 Units on June 1, 1999, there is
no comparative financial data available from the prior fiscal year.
Property Operations
- -------------------
As of December 31, 1999, the Partnership owned interests in the following
operational properties:
EYBL CarTex Building/Fund XI-XII-REIT Joint Venture
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<TABLE>
<CAPTION>
Eight Months Ended
December 31, 1999
-------------------
<S> <C>
Revenues:
Rental income $350,221
--------
Expenses:
Depreciation 133,072
Management & leasing expenses 20,384
Operating costs, net of reimbursements 10,868
--------
164,324
--------
Net income $185,897
========
Occupied % 100%
Partnership ownership % 17.1%
Cash distributed to the Partnership $ 33,482
Net income allocated to the Partnership $ 22,856
</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 acquisition costs.
The building is 100% occupied by EBYL 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
$50,853.00 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 EBYL CarTex Building was purchased in May of 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.
12
<PAGE>
The Sprint Building / Fund X-XII-REIT Joint Venture
- ---------------------------------------------------
Six Months Ended
December 31, 1999
-----------------
Revenues:
Rental income $ 531,993
-------
Expenses:
Depreciation 163,553
Management & leasing expenses 18,732
Operating costs, net of reimbursements 6,069
-------
188,354
-------
Net income $ 343,639
=======
Occupied % 100%
Partnership ownership % 17.1%
Cash distributed to the Partnership $ 67,386
Net income allocated to the Partnership $ 48,939
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, (the "Sprint Building") for the purchase price of
$9,546,210.
The entire Sprint Building is currently under a net lease with Sprint
Communications, Inc., 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 lease 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.
13
<PAGE>
Johnson Matthey Building / Fund XI-XII-REIT Joint Venture
- ---------------------------------------------------------
Five Months Ended
December 31, 1999
-----------------
Revenues:
Rental income $ 325,368
-------
Expenses:
Depreciation 106,461
Management & leasing expenses 11,846
Operating costs, net of reimbursements 4,841
-------
123,148
-------
Net income $ 202,220
=======
Occupied % 100%
Partnership ownership % 17.1%
Cash distributed to the Partnership $ 48,178
Net income allocated to the Partnership $ 32,015
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 10 acre tract of land located in Tredyfrim Township,
Chester County, Pennsylvania, for a purchase price of $8,000,000, excluding
acquisition costs.
The entire Johnson Mathey 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 lease rent payable under the Johnson Matthey lease for the remainder
of the lease term is $65,812.50 through June 30, 2000; $67,437.54 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; $74,750.00 through 2005; $76,375.00 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 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.
Since the Johnson Matthey Building was purchased in August 1999, comparative
income and expense figures are not available for the prior year.
14
<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
- -----------------------------------------------------
Four Months Ended
December 31, 1999
-----------------
Revenues:
Rental income $ 235,863
-------
Expenses:
Depreciation 103,496
Management & leasing expense 8,268
Other operating expenses, net of reimbursements 2,783
-------
114,547
-------
Net income $ 121,316
=======
Occupied % 100%
Partnership ownership % 17.1%
Cash distributed to the Partnership $ 28,693
Net income allocated to the Partnership $ 20,732
On September 20, 1999, the Fund XI-XII-REIT Joint Venture acquired a two story
office building containing approximately 62,400 rentable square feet located on
a 4.9 acre tract of land located in Fort Meyers, Florida for a purchase price of
$8,320,000 excluding acquisition costs.
The entire 62,400 rentable square feet of the Gartner Building is currently
under a net lease agreement with Gartner and was assigned to the Fund XI-XII-
REIT Joint Venture at the 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 lease rent payable under the Gartner lease for the remainder of the
lease term is $53,566.50 through January 31, 2000; $65,866.83 through January
31, 2001; $67,534.00 through January 31, 2002; $69,222.35 through January 31,
2003; $70,952.89 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 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.
15
<PAGE>
Since the Gartner Building was purchased in September, 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.
Liquidity and Capital Resources
- -------------------------------
The Partnership commenced active operations on June 1, 1999, when it received
and accepted subscriptions for 125,000 Units.
After payment of $327,887 in acquisition and advisory fees and expenses, payment
of $1,171,023 in selling commissions and organizational and offering expenses,
and the investment of $5,300,000 in the Fund XI-XII-REIT Joint Venture, as of
December 31, 1999, the Partnership was holding net offering proceeds of
$2,569,276 available for investment in the Partnership.
The Partnership had net cash provided by operating activities of $3,782 due
primarily to interest income earned on funds held by the Partnership prior to
investment in properties. Net cash used in investing activities of $5,553,776
is primarily the result of the payment of acquisition and advisory fees and
investment in the Fund XI-XII-REIT Joint Venture. The net cash provided by
financing activities of $8,134,128 is the result of raising $9,368,186 in
Limited Partners contributions less commissions and organizational and offering
expenses and, therefore, increasing cash and cash equivalents from $600 of
General Partners' contribution at the beginning of the year to $2,584,734 as of
December 31, 1999.
The Partnership's distributions to holders of Cash Preferred Status Units for
the 4/th/ quarter ended December 31, 1999 have been paid from net cash from
operations February, 2000. Although there is no assurance, the Partnership
anticipates that distributions will continue to be paid on a quarterly basis
from such sources on a level at least consistent with 1999. No cash
distributions were paid to holders of Tax Preferred Status Units in 1999.
The Partnership expects to continue to meet its short-term liquidity
requirements generally through net cash provided by operations which the
Partnership believes will continue to be adequate to meet both operating
requirements and distributions to limited partners. At this time, given the
nature of the joint venture and properties in which the Partnership has
invested, there are no known improvements or renovations to the properties
expected to be funded from cash flow from operations.
The Partnership expects to make future real estate investments, directly or
through investments in joint ventures, from Limited Partners Capital
contributions. As of December 31, 1999, the Partnership was holding net
offering proceeds of $2,569,276 for this purpose.
Since properties are acquired on an all-cash basis, the Partnership has no
permanent long-term liquidity requirements.
16
<PAGE>
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 Partnership from the impact of
inflation. Most 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 Partnership's
exposure to increases in costs and operating expenses resulting from inflation.
Year 2000
- ----------
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 Partnership's accountants or other
reportable events during 1999.
17
<PAGE>
PART III
--------
Item 10. General Partners of the Partnership.
- ---------------------------------------------
Wells Partners, L.P. Wells Partners, L.P. is a private Georgia limited
--------------------
partnership formed on October 25, 1990. The sole General Partner of Wells
Partners, L.P. is Wells Capital, Inc., a Georgia corporation. The executive
offices of Wells Capital, Inc. are located at 6200 The Corners Parkway Suite
250, Norcross, Georgia 30092.
Leo F. Wells, III. Mr. Wells is a resident of Atlanta, Georgia, is 56
-----------------
years of age and holds a Bachelor of Business Administration Degree in Economics
from the University of Georgia. Mr. Wells is the President and sole Director of
Wells Capital, Inc. Mr. Wells is the President of Wells & Associates, Inc., a
real estate brokerage and investment company formed in 1976 and incorporated in
1978, for which he serves as principal broker. He is also the President, sole
Director and sole shareholder of Wells Real Estate Investment Funds, Inc., the
parent corporation of Wells Capital, Inc. Mr. Wells is also currently the sole
Director and President of Wells Management Company, Inc., a property management
company he founded in 1983. In addition, Mr. Wells is the President and
Chairman of the Board of Wells Investment Securities, Inc., Wells & Associates,
Inc., and Wells Management Company, Inc. which are affiliates of the General
Partners. From 1980 to February 1985, Mr. Wells served as vice-president of
Hill-Johnson, Inc., a Georgia corporation engaged in the construction business.
From 1973 to 1976, he was associated with Sax Gaskin Real Estate Company and
from 1970 to 1973, he was a real estate salesman and property manager for Roy D.
Warren & Company, an Atlanta real estate company.
Item 11. Compensation of General Partners and Affiliates.
- ---------------------------------------------------------
The following table summarizes the compensation and fees (including
reimbursement of expenses) paid to the General Partners and their affiliates
during the year ended December 31, 1999.
18
<PAGE>
CASH COMPENSATION TABLE
-----------------------
(A) (B) (C)
Name of individual or Capacities in which served - Cash Compensation
number in group Form of Compensation
- --------------------- ---------------------------- -------------------
Wells Capital, Inc. General Partner of Wells $327,886
Partners, L.P.
Acquisition and Advisory Fees
and Expenses
Wells Capital, Inc. General Partner of Wells $281,046
Partners, L.P. Reimbursement
of Organization and Offering
Expenses
Leo F. Wells, III General Partner -0-
Wells Investment Dealer Manager - $889,978(1)
Securities, Inc. Selling Commissions
Wells Management Property Manager - $ 8,268(2)
Company, Inc. Management and Leasing
Fees
(1) This amount includes all selling commissions paid or payable to Wells
Investment Securities, Inc., a substantial portion of which were reallocated to
other broker-dealers.
(2) These fees are not paid directly by the Partnership but are paid by the
joint venture entities which owns the properties for which the property
management and leasing services relate and include management and leasing fees
which were accrued for accounting purposes in 1999, but not actually paid until
January, 2000.
19
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------------------------------------------------------------------------
No Limited Partner is known by the Partnership to own beneficially more than 5%
of the outstanding units of the Partnership.
Set forth below is the security ownership of management as of February 29, 2000.
(1) (2) (3) (4)
Amount and Nature
Name of of Beneficial
Title of Class Beneficial Owner Ownership Percent of Class
- -------------- ---------------- ------------------ ----------------
Cash Preferred Leo F. Wells, III 23.501 Units (IRA, less than 1%
Status Units 401 (k) Plan
No arrangements exist which would, upon operation, result in a change in control
of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
The compensation and fees paid or to be paid by the Partnership to the General
Partners and their affiliates in connection with the operation of the
Partnership are as follows:
Interest in Partnership Cash Flow and Net Sales Proceeds.
--------------------------------------------------------
The General Partners will receive a subordinated participation in
net cash flow from operations equal to 10% of net cash flow after
the Limited Partners holding Cash Preferred Status Units have
received preferential distributions equal to 10% of their
adjusted capital accounts in each fiscal year. The General
Partners will also receive a subordinated participation in net
sales proceeds and net financing proceeds equal to 20% of
residual proceeds available for distribution after Limited
Partners holding Cash Preferred Status Units have received a
return of their adjusted capital contributions plus a 10%
cumulative return on their adjusted capital contributions and
Limited Partners holding Tax Preferred Units have received a
return of their adjusted capital contributions plus a 15%
cumulative return on their adjusted capital contributions;
provided, however, that in no event shall the General Partners
receive in the aggregate in excess of 15% of net sales proceeds
and net financing proceeds remaining after payments to Limited
Partners from such proceeds of amounts equal to the sum of their
adjusted capital contributions plus a 6% cumulative return on
their adjusted capital contributions. The General Partners did
not receive any distributions from net cash flow from operations
or net sales proceeds for the year ended December 31, 1999.
20
<PAGE>
Property Management and Leasing Fees. Wells Management Company,
------------------------------------
Inc., an affiliate of the General Partners, will receive
compensation for supervising the management of the Partnership
properties equal to the lessor 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
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.
Management and leasing fees are not paid directly by the
Partnership but by the joint venture entity which owns the
properties. The Partnership's share of these fees were $8,268 for
the year ended December 31, 1999.
Real Estate Commissions. In connection with the sale of
-----------------------
Partnership properties, the General Partners or their affiliates
may receive commissions not exceeding the lesser of (A) 50% of
the commissions customarily charged by other brokers in arm's-
length transactions involving comparable properties in the same
geographic area or (B) 3% of the gross sales price of the
property, and provided that payments of such commissions will be
made only after Limited Partners have received prior
distributions totaling 100% of their capital contributions plus a
6% cumulative return on their adjusted capital contributions. No
real estate commissions were paid to the General Partners or
affiliates for the year ended December 31, 1999.
Deferred Project Costs
----------------------
The Partnership pays Acquisition and Advisory Fees and
Acquisition Expenses to Wells Capital, Inc., the General Partner
of Wells Partners, L.P., for acquisition and advisory services as
a reimbursement for acquisition expenses. These payments, as
provided by the Partnership Agreement, may not exceed 3.5% of the
Limited Partners' capital contributions. Acquisition and Advisory
Fees and Acquisition Expenses paid as of December 31, 1999,
amounted to $327,886 and represented approximately 3.5% of the
Limited Partners' capital contributions. These fees are allocated
to specific properties as they are purchased.
Deferred Offering Costs
-----------------------
Wells Capital, Inc. (the "Company"), the General Partner of Wells
Partners, L.P., pays all the offering expenses for the
Partnership. The Company may be reimbursed by the Partnership to
the extent that such offering expenses do not exceed 3% of total
Limited Partners' capital contributions. As of December 31, 1999,
the Partnership had reimbursed the Company for $281,046 in
offering expenses, which amounted to approximately 3% of Limited
Partners' capital contributions.
21
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
(a) 1. Financial Statements
The Financial Statements are contained on pages F-2 through F-50 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 Partnership 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.
22
<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 Fund XII, L.P.
(Registrant)
By: /s/ Leo F. Wells, III
------------------------
Leo F. Wells, III
Individual General Partner and as President
and Chief Financial Officer of Wells
Capital, Inc., the General Partner of Wells
Partners, L.P.
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.
Signature Title
- --------- -----
/s/ Leo F. Wells, III Individual General Partner, March 27, 2000
- -------------------------
Leo F. Wells, III President and Sole Director
of Wells Capital, Inc., the
General Partner of Wells
Partners, L.P.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.
23
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Financial Statements Page
- -------------------- ----
Independent Auditors' Report F-2
Balance Sheets as of December 31, 1999 and 1998 F-3
Statements of Income for the Year Ended December 31, 1999 F-4
Statements of Partners' Capital for the Years Ended December 31, 1999
and 1998 F-5
Statements of Cash Flows for the Years Ended December 31, 1999 and 1998 F-6
Notes to Financial Statements for December 31, 1999 and 1998 F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund XII, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND XII,
L.P. (a Georgia public limited partnership) as of December 31, 1999 and 1998,
the related statement of income for the year ended December 31, 1999, and the
related statements of partners' capital 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 Partnership's
management. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Wells Real Estate Fund XII,
L.P. as of December 31, 1999 and 1998, the results of its operations for the
year ended December 31, 1999, and the results of its 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 FUND XII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
---------- --------
<S> <C> <C>
INVESTMENT IN JOINT VENTURE $5,467,634 $ 0
CASH 2,584,734 600
DEFERRED PROJECT COSTS 107,051 0
DEFERRED OFFERING COSTS 331,953 109,139
DUE FROM AFFILIATE 116,258 0
---------- --------
Total assets $8,607,630 $109,739
========== ========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable $ 5,507 $ 0
Due to affiliate 344,578 109,139
Partnership distributions payable 113,084 0
---------- --------
463,169 109,139
---------- --------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
General partners 0 500
Limited partners:
Cash preferred--752,426 units as of December 31, 1999 6,602,953 0
Tax preferred--184,393 units as of December 31, 1999 1,541,508 0
Original limited partner 0 100
---------- --------
Total partners' capital 8,144,461 600
---------- --------
Total liabilities and partners' capital $8,607,630 $109,739
========== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
WELLS REAL ESTATE FUND XII, L.P.
(A Georgia Public Limited Partnership)
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
REVENUES:
Equity in income of joint venture $124,542
Interest income 35,837
--------
160,379
--------
EXPENSES:
Partnership administration 12,517
Legal and accounting 11,439
Operating costs, net of reimbursements 8,431
Computer costs 5,175
--------
37,562
--------
NET INCOME $122,817
========
NET LOSS ALLOCATED TO GENERAL PARTNERS $ (500)
========
NET INCOME ALLOCATED TO CASH PREFERRED LIMITED PARTNERS $195,244
========
NET LOSS ALLOCATED TO TAX PREFERRED LIMITED PARTNERS $(71,927)
========
NET INCOME PER WEIGHTED AVERAGE CASH PREFERRED LIMITED
PARTNER UNIT $ 0.50
========
NET LOSS PER WEIGHTED AVERAGE TAX PREFERRED LIMITED
PARTNER UNIT $ (0.56)
========
CASH DISTRIBUTION PER WEIGHTED AVERAGE CASH PREFERRED
LIMITED PARTNER UNIT $ 0.55
========
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
WELLS REAL ESTATE FUND XII, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Limited Partners Total
------------------------------------------------------------------
Cash Preferred Tax Preferred General Partners'
------------------------ ------------------------
Original Units Amount Units Amount Partners Capital
---------- ---------- ----------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT, December 31, 1997 $ 0 0 $ 0 0 $ 0 $ 0 $ 0
Original partner contribution 100 0 0 0 0 0 100
General partners' contributions 0 0 0 0 0 500 500
---------- ---------- ----------- ---------- ---------- -------- ----------
BALANCE AT, December 31, 1998 100 0 0 0 0 500 600
Net income (loss) 0 0 195,244 0 (71,927) (500) 122,817
Partnership distributions 0 0 (176,018) 0 0 0 (176,018)
Limited partner contributions 0 752,426 7,524,260 184,393 1,843,926 0 9,368,186
Sales commissions and discounts 0 0 (714,805) 0 (175,173) 0 (889,978)
Other offering expenses 0 0 (225,728) 0 (55,318) 0 (281,046)
Return of capital (100) 0 0 0 0 0 (100)
---------- ---------- ----------- ---------- ---------- -------- ----------
BALANCE AT, December 31, 1999 $ 0 752,426 $6,602,953 184,393 $1,541,508 $ 0 $8,144,461
========== ========== =========== ========== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
WELLS REAL ESTATE FUND XII, L.P.
(A Georgia Public Limited Partnership)
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 $ 122,817 $ 0
Adjustments to reconcile net income to net cash provided by operating ----------- ----------
activities:
Equity in income of joint venture (124,542) 0
Changes in assets and liabilities:
Accounts payable 5,507 0
Deferred offering costs 0 0
Due to affiliates 0 0
----------- ----------
Total adjustments (119,035) 0
----------- ----------
Net cash provided by operating activities 3,782 0
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint venture 61,485 0
Investment in joint venture (5,300,000) 0
Deferred project costs paid (315,261) 0
----------- ----------
Net cash used in investing activities (5,553,776) 0
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
General partner's contribution 0 100
Limited partners' contributions 9,368,186 500
Sales commissions and discounts paid (889,978) 0
Offering costs paid (281,046) 0
Distributions to partners from accumulated earnings (62,934) 0
Return of capital (100) 0
----------- ----------
Net cash provided by financing activities 8,134,128 600
----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,584,134 600
CASH AND CASH EQUIVALENTS, beginning of year 600 0
----------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 2,584,734 $ 600
=========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Deferred project costs contributed to joint venture $ 220,835 $ 0
=========== ==========
Deferred project costs due to affiliate $ 12,625 $ 0
=========== ==========
Deferred offering costs due to affiliate $ 222,814 $ 109,139
=========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
WELLS REAL ESTATE FUND XII, L.P.
(A Georgia Public Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund XII, L.P. (the "Partnership") is a public limited
partnership organized on September 15, 1998 under the laws of the state of
Georgia. The general partners are Leo F. Wells, III and Wells Partners, L.P.
The Partnership has two classes of limited partnership units. Upon
subscription for units, each limited partner must elect whether to have their
units treated as cash preferred units or tax preferred units. Thereafter,
limited partners shall have the right to change their prior elections to have
some or all of their units treated as cash preferred units or tax preferred
units one time during each quarterly accounting period. Limited partners may
vote to, among other things: (a) amend the partnership agreement, subject to
certain limitations, (b) change the business purpose or investment objectives
of the Partnership, (c) remove a general partner, (d) elect a new general
partner, (e) dissolve the Partnership, and (f) approve a sale of assets,
subject to certain limitations. The majority vote on any of the described
matters will bind the Partnership, without the concurrence of the general
partners. Each limited partnership unit has equal voting rights, regardless
of which class of unit is selected. The Partnership commenced operations as
of June 1, 1999.
The Partnership was formed to acquire and operate commercial real estate
properties, including properties which are either to be developed, currently
under construction, newly constructed, or have operating histories. The
Partnership owns an interest in several properties through a joint venture
between Wells Real Estate Fund XI, L.P. ("Wells Fund XI"), the Partnership,
and Wells Operating Partnership, L.P. (the "Operating Partnership"), a
Delaware limited partnership having Wells Real Estate Investment Trust, Inc.
("Wells REIT"), a Maryland corporation, as its general partner, which is
referred to as Wells Funds XI, XII, and REIT Joint Venture.
Through its investment in Wells Fund XI, XII, and REIT Joint Venture, the
Partnership owns interests in the following properties: (i) a two-story
manufacturing and office building in Greenville County, South Carolina (the
"EYBL CareTex Building"), (ii) a three-story office building in Leawood,
Kansas (the "Sprint Building"), (iii) an office and warehouse building in
Chester County, Pennsylvania (the "Johnson Matthay Building"), and (iv) a
two-story office building in Fort Myers, Florida (the "Gartner Building").
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.
F-7
<PAGE>
The carrying values of the real estate assets are based on management's
current intent to hold the real estate assets as long-term investments. The
success of the Partnership's future operations and the ability to realize the
investment in its assets will be dependent on the Partnership's ability to
maintain an appropriate level of rental rates, occupancy, and operating
expenses in future years. Management believes that the steps it is taking
will enable the Partnership to realize its investment in its assets.
Income Taxes
The Partnership is not subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying financial
statements. The partners are required to include their respective shares of
profits and losses in their individual income tax returns.
Distributions of Net Cash From Operations
Cash available for distribution, as defined by the partnership agreement,
will be distributed to the limited partners on a quarterly basis. In
accordance with the partnership agreement, distributions are paid first to
limited partners holding cash preferred units until they have received a 10%
per annum return on their net capital contributions, as defined. Then, such
distributions are paid to the general partners until they have received 10%
of the total amount distributed thus far. Any remaining cash available for
distribution is split 90% to the limited partners holding cash preferred
units and 10% to the general partners. No such distributions will be made to
the limited partners holding tax preferred units.
Distribution of Sale Proceeds
Upon the sale of properties, the net sale proceeds will be distributed in the
following order:
. To limited partners holding units which at any time have been
treated as tax preferred units until they receive an amount
necessary to equal the net cash available for distribution
received by the limited partners holding cash preferred units;
. To limited partners on a per unit basis until each limited partner
has received 100% of their net capital contributions, as defined;
. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their net capital
contributions, as defined;
. To limited partners on a per unit basis until they receive an
amount equal to their preferential limited partner return (defined
as the sum of a 10% per annum cumulative return on net capital
contributions for all periods during which the units were treated
as cash preferred units and a 15% per annum cumulative return on
net capital contributions for all periods during which the units
were treated as tax preferred units);
. To the general partners until they have received 100% of their
capital contributions, as defined;
. Then, if limited partners have received any excess limited partner
distributions (defined as distributions to limited partners over
the life of their investment in the Partnership in excess of their
net capital contributions, as defined, plus their preferential
limited partner return), to the general partners until they have
received distributions equal to 20% of the sum of any such excess
limited partner distributions plus distributions made to the
general partners pursuant to this provision;
F-8
<PAGE>
. Thereafter, 80% to the limited partners on a per unit basis and
20% to the general partners.
Allocation of Net Income, Net Loss, and Gain on Sale
Net income is defined as net income recognized by the Partnership, excluding
deductions for depreciation, amortization, and cost recovery. Net income, as
defined, of the Partnership will be allocated each year in the same
proportion that net cash from operations is distributed to the partners. To
the extent the Partnership's net income in any year exceeds net cash from
operations, it will be allocated 99% to the limited partners holding cash
preferred units and 1% to the general partners.
Net loss, depreciation, amortization, and cost recovery deductions for each
fiscal year will be allocated as follows: (a) 99% to the limited partners
holding tax preferred units and 1% to the general partners until their
capital accounts are reduced to zero; (b) then to any partner having a
positive balance in his capital account in an amount not to exceed such
positive balance; and (c) thereafter to the general partners.
Gain on the sale or exchange of the Partnership's properties will be
allocated generally in the same manner that the net proceeds from such sale
are distributed to partners after the following allocations are made, if
applicable: (a) allocations made pursuant to the qualified income offset
provisions of the partnership agreement; (b) allocations to partners having
negative capital accounts until all negative capital accounts have been
restored to zero; and (c) allocations to limited partners holding tax
preferred units in amounts equal to the deductions for depreciation,
amortization, and cost recovery previously allocated to them with respect to
the specific partnership property sold, but not in excess of the amount of
gain on sale recognized by the Partnership with respect to the sale of such
property.
Investment in Joint Venture
Basis of Presentation. The Partnership does not have control over the
operations of the joint venture; however, it does exercise significant
influence. Accordingly, the Partnership's investment in joint venture is
recorded using the equity method of accounting.
Real Estate Assets. Real estate assets held by the joint venture are stated
at cost less accumulated depreciation. Major improvements and betterments are
capitalized when they extend the useful life of the related asset. All
ordinary 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 that
indicate 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 real estate assets held by the joint
venture as of December 31, 1999.
Depreciation for buildings 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.
F-9
<PAGE>
Revenue Recognition. All leases on real estate assets held by the joint
venture are classified as operating leases, and the related rental income is
recognized on a straight-line basis over the terms of the respective leases.
Partner's Distributions and Allocations of Profit and Loss. Cash available
for distribution and allocations of profit and loss to the Partnership by the
joint venture are made in accordance with the terms of the joint venture
agreement. Generally, these items are allocated in proportion to the
partners' respective ownership interests. Cash is paid from the joint venture
to the Partnership quarterly.
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.
2. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner contributions to Wells
Capital, Inc. (the "Company"), the general partner of Wells Partners, for
acquisition and advisory services. These payments, as stipulated by the
partnership agreement, can be up to 5% of the limited partner contributions,
subject to certain overall limitations contained in the partnership
agreement. Aggregate fees paid through December 31, 1999 were $327,886 and
amounted to 3.5% of the limited partners' contributions received. These fees
are allocated to specific properties as they are purchased or developed and
are included in capitalized assets of the joint venture. Deferred project
costs at December 31, 1999 represent fees not yet applied to properties. As
of December 31, 1999 $12,625 of fees had not yet been paid and were included
in due to affiliate in the accompanying balance sheet.
3. DEFERRED OFFERING COSTS
Organization and offering expenses, to the extent they exceed 3% of gross
offering proceeds, will be paid by the Company and not by the Partnership.
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 Company paid organization and offering expenses
on behalf of the Partnership in the aggregate amount of $612,999, of which
the Company was reimbursed $281,046, which did not exceed the 5% limitation.
The unpaid portion of deferred offering costs is $331,953 and is included in
due to affiliate in the accompanying balance sheet.
4. RELATED-PARTY TRANSACTIONS
Due from affiliate at December 31, 1999 represents the portion of 1999
fourth-quarter distributions to be paid to the Partnership by Fund XI, XII,
and REIT Joint Venture.
The Partnership entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of the general
partners. In consideration for supervising the management and leasing of the
Partnership's properties, the 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
F-10
<PAGE>
leased on a long-term net basis (ten or more years), 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 Partnership incurred management and leasing fees and lease acquisition
costs, at the joint venture level, of $8,268 and $0 for the years ended
December 31, 1999 and 1998, respectively, which were paid to Wells
Management.
The Company performs certain administrative services for the Partnership,
such as accounting and other partnership administration, and incurs the
related expenses. Such expenses are allocated among 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 reasonable
estimation of such expenses.
The general partners are also general partners in other Wells Real Estate
Funds. As such, there may exist conflicts of interest where the general
partners in the capacity as general partners for other Wells Real Estate
Funds may be in competition with the Partnership for tenants in similar
geographic markets.
5. INVESTMENT IN JOINT VENTURE
The Partnership's investment and percentage ownership in Fund XI, XII and
REIT at December 31, 1999 are summarized as follows:
Amount Percent
---------- ---------
Fund XI, XII, and REIT $5,467,634 17%
The following is a rollforward of the Partnership's investment in joint
ventures for the years ended December 31, 1999:
Investment in joint venture, beginning of year $ 0
Equity in income of joint venture 124,542
Contributions to joint venture 5,520,835
Distributions from joint venture (177,743)
-----------
Investment in joint venture, end of year $5,467,634
===========
Fund XI, XII, and REIT Joint Venture
On May 1, 1999, the Partnership entered into a joint venture with Wells Fund
XI and the Operating Partnership. 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-11
<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>
<CAPTION>
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-12
<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-13
<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>
<CAPTION>
<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 Partnership's income tax basis net income for the year ended December 31,
1999 is recalculated as follows:
<TABLE>
<S> <C>
Financial statement net income $122,817
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes in excess of
amounts for income tax purposes 27,541
Rental income accrued for financial reporting purposes in excess of
amounts for income tax purposes (20,250)
------------
Income tax basis net income $130,108
============
</TABLE>
F-14
<PAGE>
The Partnership's income tax basis partners' capital at December 31, 1999 is
computed as follows:
<TABLE>
<CAPTION>
<S> <C>
Financial statement partners' capital $8,144,461
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes in excess of
amounts for income tax purposes 27,541
Capitalization of syndication costs for income tax purposes, which are
accounted for as cost of capital for financial reporting purposes 1,171,024
Accumulated rental income accrued for financial reporting purposes in
excess of amounts for income tax purposes (20,250)
Partnership's distributions payable 113,084
------------
Income tax basis partners' capital $9,435,860
============
</TABLE>
7. RENTAL INCOME
The future minimum rental income due from the Partnership's respective
ownership interest in the joint venture under noncancelable operating leases
at December 31, 1999 is as follows:
Year ended December 31:
2000 $ 527,288
2001 535,855
2002 559,495
2003 575,460
2004 587,940
Thereafter 1,659,250
------------
$ 4,445,288
============
Four tenants contributed 40%, 26%, 26%, and 15% of rental income. In
addition, four tenants will contribute 30%, 27%, 22%, and 18% of future
minimum rental income.
The future minimum rental income due Fund XI, XII and REIT under
noncancellable operating leases at December 31, 1999 is as 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-15
<PAGE>
8. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the year ended December 31, 1999:
<TABLE>
<CAPTION>
1999 Quarters Ended
-----------------------------------------------------------
March 31 June 30 September 30 December 31
------------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues $ 0 $ 0 $ 61,667 $ 98,712
Net (loss) income 0 (2,615) 45,786 79,646
Net loss allocated to general partners 0 (26) (231) (243)
Net income allocated to cash preferred
limited partners 0 0 68,910 126,334
Net loss allocated to tax preferred limited
partners 0 (2,589) (22,893) (46,445)
Net income per weighted average cash
preferred limited partner unit
outstanding (a) $0.00 $ 0.00 $ 0.28 $ 0.20
Net loss per weighted average tax preferred
limited partner unit outstanding (a) 0.00 (0.02) (0.21) (0.36)
Cash distribution per weighted average cash
preferred limited partner unit outstanding 0.00 0.00 0.26 0.29
</TABLE>
(a) The totals of the four quarterly amounts for the year ended
December 31, 1999 do not equal the totals for the year. This
difference results from the use of a weighted average to
compute the number of units outstanding for each quarter and
the year.
9. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-16
<PAGE>
WELLS REAL ESTATE FUND XII, L.P.
(A Georgia Public Limited Partnership)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Initial Cost Costs of
----------------------------
Buildings and Capitalized
Description Ownership Encumbrances Land Improvements Improvements
- ----------------------------------- --------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
EYBL CARTEX PROPERTY (a) 17% None $ 330,000 $ 4,791,828 $ 211,962
SPRINT BUILDING (b) 17% None 1,696,000 7,850,726 397,783
JOHNSON MATTHEY (c) 17% None 1,925,000 6,131,392 335,686
GARTNER PROPERTY (d) 17% None 895,844 7,451,760 347,820
----------- ------------- ------------
Total $ 4,846,844 $26,225,706 $ 1,293,251
=========== ============ ============
<CAPTION>
Gross Amount at Which Carried at December 31, 1999
---------------------------------------------------------------
Buildings and Construction
Description Land Improvements in Progress Total
- ----------------------------------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
EYBL CARTEX PROPERTY (a) $343,750 $ 4,990,040 $ 0 $ 5,333,790
SPRINT BUILDING (b) 1,766,667 8,177,842 0 9,944,509
JOHNSON MATTHEY (c) 2,005,209 6,386,868 0 8,392,077
GARTNER PROPERTY (d) 933,171 7,762,253 0 8,695,424
---------- ------------ ------------ -----------
Total $5,048,797 $ 27,317,003 $ 0 $32,365,800
========== ============ ============ ===========
<CAPTION>
Life on Which
Accumulated Date of Date Depreciation
Description Depreciation Construction Acquired Is Computed (e)
- ---------------------------------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C>
EYBL CARTEX PROPERTY (a) $133,072 1998 05/18/99 20 to 25 years
SPRINT BUILDING (b) 163,553 1998 07/02/99 20 to 25 years
JOHNSON MATTHEY (c) 106,461 1973 08/17/99 20 to 25 years
GARTNER PROPERTY (d) 103,496 1998 08/20/99 20 to 25 years
----------
Total $ 506,582
==========
</TABLE>
(a) 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.
(b) The Sprint Building consists of a three-story
office building located in Leawood, Kansas. It is
owned by Fund XI-XII-REIT Joint Venture.
(c) The Johnson Matthey Property consists of one-story
research and development office and warehouse
building located in Chester County, Pennsylvania.
It is owned by Fund XI-XII-REIT Joint Venture.
(d) 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.
(e) Depreciation lives used for buildings are 25 years.
Depreciation lives used for land improvements are
20 years.
S-1
<PAGE>
WELLS REAL ESTATE FUND XII, L.P.
(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, 1998 $ 0 $ 0
1999 additions 32,365,800 506,582
-------------- ------------
BALANCE AT DECEMBER 31, 1999 $ 32,365,800 $ 506,582
-------------- ------------
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
-------------
(Wells Real Estate Fund XII, L.P.)
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(a) Amended and Restated Agreement of Limited Partnership of Wells Real
Estate Fund XII, L.P. (Exhibit 3.1 to Form S-11 Registration Statement
of Wells Real Estate Fund XII, L.P., as amended to date, Commission
File No. 33-66657)
*3(b) Certificate of Limited Partnership of Wells Real Estate Fund XII, L.P.
(Exhibit 3.2 to Form S-11 Registration Statement of Wells Real Estate
Fund XII, L.P., as amended to date, Commission File No. 33-66657)
*10(a) Leasing and Tenant Coordinating Agreement with Wells Management
Company, Inc. (Exhibit 10.2 to Form S-11 Registration Statement of
Wells Real Estate Fund XII, L.P., as amended to date, Commission File
No. 33-66657)
*10(b) Management Agreement with Wells Management Company, Inc. (Exhibit 10.3
to Form S-11 Registration Statement of Wells Real Estate Fund XII,
L.P., as amended to date, Commission File No. 33-66657)
*10(c) Amended and Restated Joint Venture Partnership Agreement of The Wells
Fund XI - Fund XII - REIT Joint Venture (Exhibit 10.29 to Form S-11
Registration Statement of Wells Real Estate Investment Trust, Inc., as
amended to date, Commission File No. 333-83933)
*10(d) 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)
<PAGE>
*10(e) Agreement of Purchase and Sale for 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(f) Agreement of Sale and Purchase for 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)
*10(g) 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(h) 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(i) 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)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,584,734
<SECURITIES> 5,467,634
<RECEIVABLES> 116,258
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
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0
0
<COMMON> 0
<OTHER-SE> 8,144,461
<TOTAL-LIABILITY-AND-EQUITY> 8,607,630
<SALES> 0
<TOTAL-REVENUES> 160,379
<CGS> 0
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<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 122,817
<INCOME-TAX> 122,817
<INCOME-CONTINUING> 122,817
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 122,817
<EPS-BASIC> .50
<EPS-DILUTED> 0
</TABLE>
