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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
For Registration of Certain Classes of Securities
Pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934
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 of incorporation or organization) (IRS Employer
Identification No.)
6200 The Corners Parkway, Suite 250
Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
If this form relates to If this form relates to the
the registration of a registration of a class of
class of securities securities pursuant to Section
pursuant to Section 12(b) 12(g) of the Exchange Act and is
of the Exchange Act and effective pursuant to General
is effective pursuant to Instruction A.(d), please check
General Instruction the following box. [ ]
A.(c), please check the
following box. [ ]
Securities Act registration statement file number to
which this form relates: 33-66657
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(If applicable)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class it to be Registered
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_________________________________ __________________________________
_________________________________ __________________________________
Securities to be registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
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Item 1. Description of Registrant's Securities to be Registered.
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For a description of the securities being registered under Section 12(g) of
the Securities Exchange Act of 1934, see the "Description of the Units" section
on pages 67 through 69, the "Distributions and Allocations" section on pages 69
through 75, the "Summary of Partnership Agreement" section on pages 78 through
87, and the "Reports to Investors" section on pages 116 through 117 of the
Prospectus of Wells Real Estate Fund XII, L.P. dated March 22, 1999, contained
in Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells
Real Estate Fund XII, L.P. filed with the Commission on September 1, 1999 (File
No. 33-66657), which are incorporated herein by reference.
Item 2. Exhibits.
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Below are the exhibits filed as a part of this Registration Statement:
1. (a) Amended and Restated Agreement of Limited Partnership of Wells
Real Estate Fund XII, L.P., which was included as Exhibit A to the Prospectus
dated March 22, 1999, contained in Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund XII, L.P. filed with the
Commission on September 1, 1999 (File No. 33-66657), which is incorporated
herein by reference pursuant to Rule 12b-32 under the Securities Exchange Act of
1934;
(b) Subscription Agreement of Wells Real Estate Fund XII, L.P., which
was included as Exhibit B to the Prospectus dated March 22, 1999, contained in
Post-Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real
Estate Fund XII, L.P. filed with the Commission on September 1, 1999 (File No.
33-66657), which is incorporated herein by reference pursuant to Rule 12b-32
under the Securities Exchange Act of 1934; and
2. Pages 67 through 69, pages 69 through 75, pages 78 through 87, and
pages 116 through 117 of the Prospectus dated March 22, 1999, contained in Post-
Effective Amendment No. 1 to Form S-11 Registration Statement of Wells Real
Estate Fund XII, L.P. filed with the Commission on September 1, 1999 (File No.
33-66657) (filed herewith pursuant to Rule 12b-23(a)(3) under the Securities
Exchange Act of 1934).
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized.
Date: April 7, 2000 WELLS REAL ESTATE FUND XII, L.P.
(Registrant)
By: Wells Partners, L.P.
A Georgia limited partnership
General Partner
By: Wells Capital, Inc.
A Georgia corporation
General Partner
By: /s/ Leo F. Wells, III
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Leo F. Wells, III
President
By: /s/ Leo F. Wells, III
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LEO F. WELLS, III
General Partner
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registration Statement has been signed below by the following
person on behalf of the Registrant and in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Title Date
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<S> <C> <C>
/s/ Leo F. Wells, III Individual General Partner and President April 7, 2000
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Leo F. Wells, III (Chief Executive Officer), Treasurer (Chief
Financial Officer) and Sole Director of Wells
Capital, Inc., the sole general partner of
Wells Partners, L.P.
</TABLE>
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EXHIBIT INDEX
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 exhibit identified by an asterisk, there is
shown below a description of the previous filing.
<TABLE>
<CAPTION>
Exhibit Number
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<S> <C>
1(a)* Amended and Restated Agreement of Limited Partnership of Wells Real Estate Fund XII,
L.P. (Exhibit A to the Prospectus dated March 22, 1999, contained in Post-Effective
Amendment No. 1 to Form S-11 Registration Statement of Wells Real Estate Fund XII, L.P.
filed with the Commission on September 1, 1999, File No. 33-66657)
1(b)* Subscription Agreement of Wells Real Estate Fund XII, L.P. (Exhibit B to the Prospectus
dated March 22, 1999, contained in Post-Effective Amendment No. 1 to Form S-11
Registration Statement of Wells Real Estate Fund XII, L.P. filed with the Commission on
September 1, 1999, File No. 33-66657)
2 Pages 67 through 69, pages 69 through 75, pages 78 through 87 and pages 116 through 117
of the Prospectus dated March 22, 1999, contained in Post-Effective Amendment No. 1 to
Form S-11 Registration Statement of Wells Real Estate Fund XII, L.P. filed with the
Commission on September 1, 1999 (File No. 33-66657)
</TABLE>
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DESCRIPTION OF THE UNITS
Election of Cash Preferred Units or Tax Preferred Units
Initial Election
Upon subscription for units being offered hereby, investors must elect
whether such units will be initially treated as cash preferred units or tax
preferred units. Regardless of which status is selected for the unit, each unit
shall have a purchase price of $10.00 per unit, less any discounts which are
specifically authorized by the "Plan of Distribution" section of this
prospectus. The choice of cash preferred units or tax preferred units is merely
an election of the status of units that entitles the investors to different
rights and priorities as to distributions of cash from operations and
liquidating distributions and as to the allocation of deductions for
depreciation and other tax losses. In all other respects, the units have the
same rights and privileges. Each unit, when issued, will be fully paid and
nonassessable, which means it cannot be assessed to pay any debts of the
partnership.
Right to Change Election
Investors' elections of cash preferred units or tax preferred units made in
the initial Subscription Agreements shall be effective immediately upon
acceptance. Thereafter, unless prohibited by applicable state law or otherwise
limited as set forth below, investors have the right to change their prior
election one time during each quarterly accounting period by mailing or
delivering written notice to the partnership which will be executed by the
trustee or authorized agent in the case of retirement plans. Any such changed
election shall be effective the first day of the next quarterly accounting
period following the receipt by the partnership of written notice of such
election. In order to assist investors in determining whether to change their
election of cash preferred units or tax preferred units, investors may obtain
information as to the current levels of units outstanding designated as cash
preferred units and tax preferred units at any time from the general partners at
the address or toll free telephone number set forth on the first page of this
prospectus. Pursuant to the partnership agreement, units acquired and held by
the general partners or their affiliates shall at all times be treated as cash
preferred units, and the general partners and their affiliates shall not have
the right to elect to have units beneficially owned by them treated as tax
preferred units.
Limitations Imposed in Connection with Deferred Commission Option
Subscribers for units may agree with their participating broker-dealers and
Wells Investment Securities, Inc. to have sales commissions due with respect to
the purchase of their units paid over a seven year period pursuant to a
"deferred commission option" rather than payment in full at the time of sale.
Any investor purchasing units pursuant to the deferred commission option must
elect upon subscription to have a sufficient number of units treated as cash
preferred units, in the discretion of the general partners, to generate at least
the amount of net cash from operations distributable with respect to such units
needed to satisfy the deferred commission obligations each year with respect to
the total number of units purchased by such investor. In addition, investors
purchasing units pursuant to the deferred commission option will have limited
rights to elect to have the status of their units changed from cash preferred
units to tax preferred units for a period of six years following the year of
purchase since investors owning units purchased pursuant to the deferred
commission option must at all times own a sufficient number of units designated
as cash preferred units, in the discretion of the general partners, to generate
enough net cash from operations to allow the partnership to satisfy
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the deferred commission obligations with respect to the total number of units
purchased pursuant to the deferred commission option. (See "Plan of
Distribution.")
Cash Preferred Units
Limited partners electing cash preferred units are entitled to an annual
10% noncumulative distribution preference as to distributions of net cash from
operations. However, investors electing cash preferred units will, except in
limited circumstances, be allocated none of the partnership's net loss,
depreciation or amortization deductions for tax purposes. Thus, tax benefits
resulting from deductions for net loss, depreciation and amortization will not
be available to investors electing cash preferred units during the initial
period of partnership operations.
Upon a distribution of proceeds from the sale of properties, each limited
partner electing tax preferred units is first entitled to a distribution of an
amount which, when added to any net cash from operations previously distributed
to such limited partner, will equal the amount of net cash from operations
previously paid to the investors electing cash preferred units. Thereafter,
investors electing both cash preferred units and tax preferred units are
entitled to an amount equal to their net capital contributions. Thereafter,
investors electing cash preferred units are entitled to a 10% cumulative
noncompounded return on their net capital contributions. (See "Distributions and
Allocations.")
Because deductions for depreciation and other tax losses will initially be
allocated to investors electing tax preferred units, cash preferred units will
be generally more suitable for investors which are qualified retirement plans,
including IRAs, or are otherwise not income tax sensitive and which are
primarily interested in current distributions of net cash from operations and
the potential appreciation in value of the partnership's real estate
investments.
Tax Preferred Units
Limited partners electing tax preferred units will receive a
disproportionately larger share of partnership income tax deductions because all
of the limited partners' share of partnership net loss, depreciation and
amortization deductions will be allocated to investors electing tax preferred
units until their capital account balances have been reduced to zero. Since the
allocations of net loss, depreciation and amortization deductions to investors
electing tax preferred units will reduce their capital account balances, and
since liquidation proceeds of the partnership will be distributed among the
partners in accordance with their capital account balances, investors electing
tax preferred units bear substantially greater risk of loss of their capital
contributions than do investors electing cash preferred units.
Limited partners electing tax preferred units will not receive any net cash
from operations. Since the preferential allocation of net cash from operations
to investors electing cash preferred units is intended to be a timing preference
only, each investor electing tax preferred units is entitled to a distribution
of proceeds from the sale of properties in an amount which, when added to any
net cash from operations previously distributed to such limited partner, will
equal the amount of net cash from operations previously paid to the investors
electing cash preferred units. Following such distributions to investors
electing tax preferred units, all limited partners are entitled to a return of
their net capital contributions. Then, limited partners electing tax preferred
units are entitled to a 15% cumulative noncompounded return on their net capital
contributions. Since limited partners electing cash
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preferred units only receive a 10% cumulative noncompounded return, investors
electing tax preferred units receive a higher return upon distribution of
proceeds from the sale of properties. (See "Distributions and Allocations.")
Accordingly, tax preferred units will be generally more suitable for
investors who are not seeking current cash flow distributions but have a desire
to participate to a greater extent in "passive" losses expected to be generated
by the partnership's operations or have a desire to participate to a greater
extent in the potential appreciation of the partnership's real estate
investments. (See "Federal Income Tax Consequences -- Passive Loss
Limitations.") Each prospective investor should carefully consider the
distribution and allocation information contained in the "Distributions and
Allocations" section of the prospectus before determining whether to elect cash
preferred units or tax preferred units, or some combination of each.
Effect of Change of Status of Units
A limited partner who changes the status of his units from cash preferred
units to tax preferred units will, upon the effective date of such change and
until the limited partner changes back to cash preferred units, be entitled to
the benefits associated with electing tax preferred units. A limited partner who
changes the status of his units from tax preferred units to cash preferred units
will, from the effective date of such change until the limited partner changes
back to tax preferred units, be entitled to the benefits associated with
electing cash preferred units. Distributions of proceeds from the sale of
properties will be prorated to each limited partner for each calendar quarter in
which his units were treated as cash preferred units, during which time he will
be entitled to an annual return of 10% on his net capital contribution. For each
calendar quarter in which such units were treated as tax preferred units, each
investor will be entitled to an annual return of 15% on his net capital
contribution.
DISTRIBUTIONS AND ALLOCATIONS
Distributions of Net Cash From Operations
Net cash from operations, defined in the partnership agreement to mean
generally the partnership's cash flow from operations, after payment of all
operating expenses and adjustments for reserves, if any, will be distributed in
each year as follows and in the following priority:
. first, to limited partners electing cash preferred units on a per unit
basis until they have received a 10% annual return on their net
capital contributions, defined in the partnership agreement to mean
generally the amount of cash contributed to the partnership reduced by
prior distributions of net proceeds from any sale of partnership
properties;
. then, to the general partners until they have received an amount equal
to 10% of the total amount thus far distributed; and
. then, 90% to limited partners electing cash preferred units and 10% to
the general partners.
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Notwithstanding the foregoing, limited partners electing cash preferred units
who have purchased units pursuant to the deferred commission option shall for a
period of six years following the year of purchase, or longer if required to
satisfy the outstanding commission obligation, have deducted and withheld from
distributions of net cash from operations otherwise payable to such limited
partners an annual amount equal to $0.10 per unit purchased pursuant to the
deferred commission option, which amounts shall instead be used by the
partnership to pay commissions due with respect to such units. (See "Plan of
Distribution.")
It is anticipated that distributions of net cash from operations will be
made on a quarterly basis, unless limited partners elect to receive
distributions on a monthly basis. (See "Monthly Distributions" below.)
Distributions of net cash from operations will be allocated among the limited
partners based on the ratio which the number of units owned by each limited
partner electing cash preferred units as of the last day of the preceding
quarter bears to the total number of units designated as cash preferred units
outstanding. A transferee of units will be deemed the owner of such units as of
the first day of the quarter following the quarter during which the transfer
occurred and, therefore, will not participate in distributions made with respect
to the quarter in which such transfer occurs.
Distribution of Net Sale Proceeds
Nonliquidating net sale proceeds, defined in the partnership agreement to
mean generally the net proceeds from any sale or exchange of partnership
properties, will be distributed generally as follows and in the following
priority:
. first, to limited partners electing units which have at any time been
treated as tax preferred units on a per unit basis until each such
limited partner has received an amount which, when added to any net
cash from operations previously distributed to such limited partner,
will equal the amount of net cash from operations previously paid or
deemed paid to limited partners electing units which at all times have
been treated as cash preferred units;
. then, to the limited partners on a per unit basis until each limited
partner has received or has been deemed to have received an amount
equal to his net capital contribution;
. then, to the limited partners on a per unit basis until each limited
partner has received or has been deemed to have received aggregate
distributions equal to a 10% annual cumulative, noncompounded return
on his net capital contribution;
. then, to limited partners on a per unit basis until each limited
partner has received or has been deemed to have received aggregate
distributions equal to his Preferential Limited Partner Return,
defined as the sum of (1) a 10% annual cumulative return on his net
capital contribution with respect to such unit for all periods during
which such unit was treated as a cash preferred unit, and (2) a 15%
annual cumulative return on his net capital contribution with respect
to such unit for all periods during which such unit was treated as a
tax preferred unit;
. then, to the general partners until they have received an amount equal
to their capital contributions;
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. then, if and only in the event that limited partners have received any
Excess Limited Partner Distributions, to the general partners until
they have received an amount equal to 20% of the sum of any such
Excess Limited Partner Distributions plus the amount distributed to
the general partners pursuant to this provision; and
. then, 80% to the limited partners on a per unit basis and 20% to the
general partners;
provided, however, that in no event will the general partners receive in the
aggregate more than 15% of the amount remaining after limited partners have
received a return of their net capital contributions plus a 6% annual return. It
is the intent of the foregoing limitation that the general partners receive no
more of the net proceeds from the sale of partnership properties than is allowed
pursuant to applicable provisions of the NASAA Guidelines. Any such excess
amounts otherwise distributable to the general partners will instead be
reallocated and distributed to the limited partners on a per unit basis.
Notwithstanding the foregoing, in the event the partnership sells any
partnership property at a net sale price which is less than the purchase price
originally paid for such property, prior to the foregoing distribution of
nonliquidating net sale proceeds, limited partners electing cash preferred units
shall first receive distributions of nonliquidating net sale proceeds in an
amount equal to the following: the excess of the original purchase price of the
partnership's property sold over the sale price of such partnership property,
but not greater than the amount of special allocations of deductions for
depreciation, amortization and cost recovery with respect to such partnership
property previously made to limited partners electing tax preferred units. The
general partners have included the foregoing provision in the partnership
agreement for distributions of nonliquidating net sale proceeds in favor of
limited partners electing cash preferred units in order to ensure that limited
partners electing tax preferred units will bear the actual economic risk of loss
in the event a partnership property is sold at a loss, in order to support the
special allocation of depreciation, amortization and cost recovery deductions to
limited partners electing tax preferred units.
Potential limited partners should be aware that their share of
distributions of proceeds from the sale of properties may be less than their net
capital contributions unless the partnership's aggregate proceeds from the sale
of properties are sufficient to fund the sum of (1) the required payments to
each limited partner holding units which have been treated as tax preferred
units in an amount which, when added to any net cash from operations previously
distributed to such limited partner, will equal the amount of net cash from
operations previously paid to limited partners holding units which at all times
were treated as cash preferred units on a per unit basis, plus (2) the amount
required to repay aggregate net capital contributions to all limited partners.
Liquidating Distributions
Liquidating distributions, defined in the partnership agreement to mean
generally the distribution of the net proceeds from a dissolution and
termination of the partnership or from the sale of substantially all of the last
remaining assets of the partnership, will be distributed among the general
partners and the limited partners in accordance with each such partner's
positive capital account balance, after the allocation of gain on sale and other
appropriate capital account adjustments.
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Return of Unused Capital Contributions
Funds not expended, committed or reserved for working capital purposes by
the later of the second anniversary of the effective date of the registration
statement or one year after the termination of the offering will be returned to
limited partners, without reduction for front-end fees or selling commissions
relating to such uncommitted funds, and without interest thereon. For purposes
of the foregoing, funds will be deemed to have been committed and will not be
returned to the extent that such funds would be required to complete the
acquisition of partnership properties with respect to which contracts,
agreements in principle or letters of understanding have been executed,
regardless of whether such property is actually acquired. Any funds reserved in
order to make contingent payments in connection with the acquisition of any
partnership property will be classified as committed whether or not any such
payments are actually made.
Partnership Allocations
Since the partnership does not intend to borrow funds, no partner's capital
account will be allocated items that will cause the capital account to have a
deficit balance. This means that investors electing tax preferred units cannot
be allocated aggregate tax deductions in excess of their aggregate capital
contributions to the partnership. (See "Federal Income Tax Consequences --
Deductibility of Losses - Limitations -- Basis Limitation.")
Net Loss
Net loss, defined in the partnership agreement to mean generally the net
losses of the partnership for federal income tax purposes, but excluding
deductions for depreciation, amortization and cost recovery, which will be
allocated separately as set forth below, for each fiscal year shall be allocated
as follows:
. first, 99% to limited partners electing tax preferred units and 1% to
the general partners until the capital accounts of all such partners
have been reduced to zero;
. then, to any partner having a positive balance in his capital account
in an amount not to exceed such positive balance as of the last day of
the fiscal year; and
. then, 100% to the general partners.
Notwithstanding the foregoing, in any fiscal year with respect to which the
partnership incurs an aggregate net loss, interest income of the partnership
shall be specially allocated to limited partners electing cash preferred units
and the net loss of the partnership for such fiscal year shall be determined
without regard to such interest income.
All deductions for depreciation, amortization and cost recovery for each
fiscal year shall be allocated as follows:
. first, 99% to limited partners electing tax preferred units and 1% to
the general partners until the capital accounts of all such partners
have been reduced to zero;
. then, to any partner having a positive balance in his capital account
in an amount not to exceed such positive balance as of the last day of
the fiscal year; and
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. then, 100% to the general partners.
Net Income
Net income, defined in the partnership agreement to mean generally the net
income of the partnership for federal income tax purposes, including any income
exempt from tax, but excluding all deductions for depreciation, amortization and
cost recovery and gain on sale, for each fiscal year shall be allocated as
follows:
. to limited partners electing cash preferred units and to the general
partners in the same proportion as and to the extent that net cash
from operations is distributed or deemed distributed; and
. to the extent net income exceeds distributions of net cash from
operations with respect to such fiscal year, such excess net income
shall be allocated 99% to limited partners electing cash preferred
units and 1% to the general partners.
Gain on Sale
Gain on sale, defined in the partnership agreement to mean generally the
taxable income or gain from the sale or exchange of partnership properties, for
each fiscal year shall be allocated as follows:
. first, pursuant to the qualified income offset provision described
below;
. then, to partners having negative capital accounts until all negative
capital accounts have been restored to zero;
. then, to limited partners holding units which at any time have been
treated as 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, the sale or
other disposition of which resulted in gain on sale being allocated,
but not in excess of the amount of gain on sale recognized by the
partnership pursuant to the sale or other disposition of said
partnership property;
. then, to the limited partners in amounts equal to the deductions for
depreciation, amortization and cost recovery previously allocated to
said limited partners with respect to the specific partnership
property, the sale or other disposition of which resulted in gain on
sale being allocated;
. then, to limited partners holding units which at any time have been
treated as tax preferred units on a per unit basis until each such
limited partner has received an amount which, when added to any net
cash from operations previously distributed to such limited partner,
will equal the amount of net cash from operations previously paid to
limited partners holding units which at all times have been treated as
cash preferred units;
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. then, to limited partners on a per unit basis in amounts equal to the
excess of each limited partner's net capital contribution over all
prior distributions to such limited partner of net proceeds from the
sale of partnership properties;
. then, to the limited partners on a per unit basis until each limited
partner has been allocated an amount equal to the excess of a 10%
cumulative, noncompounded return on his net capital contribution over
prior distributions to such limited partner of net cash from
operations;
. then, to the limited partners on a per unit basis until each limited
partner has been allocated an aggregate amount equal to the excess of
his Preferential Limited Partner Return over prior distributions to
such limited partner of net cash from operations;
. then, to the general partners in an amount equal to their capital
contributions;
. then if and only to the extent that limited partners have received any
Excess Limited Partner Distributions, to the general partners until
the general partners have been allocated gain on sale equal to 20% of
the sum of any such Excess Limited Partner Distributions plus any gain
on sale allocated to the general partners pursuant to this provision;
and
. then, 80% to the limited partners and 20% to the general partners;
provided, however, that in no event will the general partners be allocated gain
on sale which would result in distributions to the general partners of more than
15% of the amount remaining after limited partners have received a return of
their net capital contributions plus a 6% annual return. It is the intent of the
foregoing limitation that the general partners receive no more of the net
proceeds from the sale of partnership properties than is allowed pursuant to
applicable provisions of the NASAA Guidelines. Any such excess allocations of
gain on sale will instead be reallocated to the limited partners on a per unit
basis.
The partnership agreement contains a "qualified income offset" provision
which provides that in the event that any partner receives an adjustment,
allocation or distribution of certain items which causes a deficit or negative
balance in such partner's capital account, such partner will be allocated items
of income or gain consisting of a pro rata portion of each item of partnership
income, including gross income, and gain for such year in an amount and manner
sufficient to eliminate such deficit balance as quickly as possible. The intent
of the foregoing provision is to prohibit allocations of losses or distributions
of cash to a limited partner which would cause his capital account to become
negative. An investor's capital account would become negative in the event that
the aggregate amount of losses allocated and cash distributed to such limited
partner exceeded the sum of his capital contributions plus any income allocated
to him, and, in the event such allocation or distribution did cause his capital
account to become negative, such limited partner would be allocated income or
gain in an amount necessary to bring his capital account back to zero. (See
"Federal Income Tax Consequences -- Allocations of Profit and Loss.")
The qualified income offset provision may result in income being specially
allocated to limited partners even in a fiscal year when the partnership has a
net loss from operations or from the sale of property.
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Income, losses and distributions of cash relating to units which are
acquired directly from the partnership during the offering will be allocated
among the limited partners on a pro rata basis based on the number of days such
units have been owned by such limited partners.
Monthly Distributions
Limited partners electing cash preferred units may, at their option, elect
to receive distributions of net cash from operations, if any, on a monthly
basis. This program is called the monthly distribution option (MDO). It should
be understood, however, that limited partners electing the MDO will in all
likelihood receive lower distributions per unit, on an annual basis, than
limited partners receiving their distributions on a quarterly basis due to the
fact that income received by the partnership during the early portion of a
quarter will be invested and will earn interest until distribution shortly after
the end of the quarter. This compounding effect will be available to limited
partners selecting the MDO to a lesser degree due to the greater frequency of
their distributions. A limited partner electing cash preferred units may elect
the MDO by sending a completed MDO form to the partnership, which form may be
obtained by calling or writing the partnership.
A limited partner electing cash preferred units who elects the MDO will
begin receiving his distributions on a monthly basis with respect to the
calendar quarter following the calendar quarter in which the general partners
receive the limited partner's written election along with a check for the MDO
fee, described below. Monthly distributions will be paid to the limited partner
during the month following the month to which the distribution is attributable.
For example, if a limited partner elects the MDO during the first calendar
quarter of a year, his election is effective at the beginning of the second
calendar quarter (i.e., April 1). Accordingly, the limited partner would receive
a distribution, if at all, for the first calendar quarter of the year, and
beginning in April, the limited partner electing the MDO would receive monthly
distributions for the remainder of the year, with the first monthly distribution
being paid during the month of May.
There is an annual fee of $20 per limited partner electing the MDO. This
annual fee is designed to cover additional administrative expenses, postage and
handling costs associated with more frequent distributions and will in no event
result in any additional compensation to the general partners or their
affiliates. In the event the actual administrative expenses, postage and
handling costs are less than $20 per limited partner per year, which is not
anticipated, any such savings will be reimbursed to limited partners electing
the MDO. The first fee payment is due at the time of the initial election, and
each subsequent fee payment is due by each December 31. Each limited partner
electing the MDO will receive a bill for the annual fee in conjunction with his
November distribution. Limited partners may elect to have the partnership deduct
subsequent annual MDO fees from their distributions.
A limited partner electing cash preferred units may withdraw from the MDO
by either notifying the general partners in writing or by simply failing to pay
the annual fee on a timely basis, and he will then begin to receive his
distributions on a quarterly basis at the beginning of the following calendar
year. If payment is not received by the due date, then the MDO with respect to
that limited partner is canceled. To reinstate the MDO, the limited partner may
make his $20 payment, and the MDO will again be effective at the beginning of
the calendar quarter following the calendar quarter in which payment is made.
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The general partners are in the process of confirming with the
partnership's vendors, including third-party service providers such as banks,
that their systems will be Year 2000 compliant. Based on the information
received thus far, the primary third-party service providers with which the
partnership has relationships have confirmed their Year 2000 readiness.
The partnership and the general partners rely on computers and operating
systems provided by equipment manufacturers, and also on application software
designed for use with its accounting, property management and investment
portfolio tracking. The partnership and the general partners have preliminarily
determined that any costs, problems or uncertainties associated with the
potential consequences of Year 2000 issues are not expected to have a material
impact on the future operations or financial condition of the partnership. The
general partners will perform due diligence as to the Year 2000 readiness of
each property contemplated for purchase by the partnership.
The partnership's reliance on embedded computer systems (i.e.,
microcontrollers) is limited to facilities related matters, such as office
security systems and environmental control systems.
The partnership and the general partners are currently formulating
contingency plans to cover any areas of concern. Alternate means of operating
the business are being developed in the unlikely circumstance that the computer
and phone systems are rendered inoperable. An off-site facility from which the
partnership could operate is being sought as well as alternate means of
communication with key third-party vendors. A written plan is being developed
for testing and dispensation to each staff member of the general partners and
their affiliates.
The general partners believe that the partnership's risk of Year 2000
problems is minimal. In the unlikely event there is a problem, the worst case
scenarios would include the risks that the elevator or security systems within
the partnership's properties would fail or the key third-party vendors upon
which the partnership relies would be unable to provide accurate investor
information. In the event that the elevator shuts down, the general partners
have devised a plan for each building whereby the tenants will use the stairs
until the elevators are fixed. In the event that the security system shuts down,
the general partners have devised a plan for each building to hire temporary on-
site security guards. In the event that a third-party vendor has Year 2000
problems relating to investor information, the general partners intend to
perform a full system back-up of all investor information as of December 31,
1999 so that the partnership will have accurate hard-copy investor information.
SUMMARY OF PARTNERSHIP AGREEMENT
The rights and obligations of investors will be governed by the Amended and
Restated Agreement of Limited Partnership, the form of which is set out in its
entirety as Exhibit "A" to this prospectus. The partnership agreement will be
executed and become effective as of the effective date of this prospectus.
Prospective investors should study the partnership agreement carefully before
making any investment decision with regard to a potential purchase of units. The
following statements are intended to supplement other statements in this
prospectus concerning the partnership agreement and related matters. The
following statements are intended to be a summary only and, since they do not
purport to be complete, are qualified in their entirety by reference to the
partnership agreement itself.
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Powers of the General Partners
The general partners have complete authority and discretion in the
management and control of the business of the partnership. Limited partners have
no right or power to take part in the management of the partnership. (Articles
XI and XVI.)
Liabilities of the Limited Partners; Nonassessability of Units
The partnership was organized as a limited partnership under the Georgia
Revised Uniform Limited Partnership Act (GRULPA). Investors whose subscriptions
are accepted by the general partners will be admitted to the partnership as
limited partners. Under GRULPA, limited partners have no personal liability for
partnership debts or obligations in excess of their capital contributions.
Units acquired by investors will be fully paid and nonassessable. (Section
8.5(d).) No investor has the right to withdraw all or any portion of his capital
contribution until the full and complete winding up and liquidation of the
business of the partnership. (Section 8.10(b).) No investor will be liable for
any debts or obligations of the partnership in excess of his capital
contribution. (Section 16.3.)
Other Activities of the General Partners
The general partners may participate in other business ventures including,
without limitation, the syndication, ownership or management of other real
estate. They shall not be liable to the partnership, or to the limited partners,
as a result of engaging in any other business or venture.
Rights and Obligations of Limited Partners
Limited partners are not permitted to participate in the management and
control of the business of the partnership and may not transact any business in
the name of the partnership.
Voting Rights of the Limited Partners
Limited partners may, with the affirmative vote of those limited partners
holding more than 50% of the units in the aggregate, take action on the
following matters:
. the approval or disapproval of any sale, exchange or pledge of all or
substantially all of the partnership's real properties;
. dissolution of the partnership;
. removal of a general partner or any successor general partner;
. election of a new general partner upon the retirement, withdrawal or
removal of a general partner or upon the death or the occurrence of
another event of withdrawal of a general partner;
. change in the business purpose or investment objectives of the
partnership; and
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. amendment to the partnership agreement, except as to certain matters
specified in Section 11.2(b) which the general partners alone may
amend without a vote of the limited partners. (Section 16.1(a).)
In addition, limited partners holding a majority of the units have the right to
authorize a proposed merger or consolidation of the partnership under certain
circumstances. (Section 11.3(u).) Except as otherwise provided in the
partnership agreement in connection with a "partnership roll-up" transaction as
described in "Mergers and Consolidations" below, limited partners not voting
with the majority on such transactions will nonetheless be bound by the majority
vote and will have no right to dissent from the majority vote and obtain fair
value for their units. (See "Risk Factors.")
The partnership agreement may not be amended to change the limited
liability of the limited partners without the vote or consent of all limited
partners. If the rights or benefits of the limited partners are to be
diminished by an amendment to the partnership agreement, the limited partners
holding a majority of the units who would be adversely effected must consent to
such amendment. (Section 16.2.)
Amendments to the partnership agreement receiving the requisite vote will
be executed by a general partner on behalf of all limited partners acting
pursuant to the power of attorney contained in the partnership agreement.
(Section 19.1.)
Mergers and Consolidations
The partnership agreement prohibits the general partners from initiating
any transaction in which the partnership is merged or consolidated with any
other partnership or corporation, which type of transaction is commonly referred
to as a "partnership roll-up."
The partnership agreement further provides that the general partners shall
not be authorized to merge or consolidate the partnership with any other
partnership or corporation or to convert the partnership into a real estate
investment trust, which is often referred to as a "REIT," unless (1) the
partnership obtains a current appraisal of all of the partnership's assets by an
independent appraiser, and (2) limited partners owning more than 50% of the
units consent in writing to such transaction. (Section 11.3(u).)
Limited partners who vote against or dissent from the proposal have the
choice of: (1) accepting the securities offered in the proposed roll-up; or (2)
one of the following: (a) remaining as limited partners in the partnership and
preserving their interests in the partnership on the same terms and conditions
as existed previously; or (b) receiving cash in an amount equal to their pro
rata share of the appraised value of the net assets of the partnership. (Section
11.3(u).)
Special Partnership Provisions
Leo F. Wells, III owns 100% of the issued and outstanding stock of Wells
Real Estate Funds, Inc., which owns all of the issued and outstanding stock of
Wells Capital, Inc., the sole general partner of Wells Partners, L.P. Mr. Wells
has agreed that he will not sell or otherwise voluntarily transfer or convey a
majority or controlling interest in the outstanding stock of Wells Real Estate
Funds, Inc. to any non-affiliated person or entity unless limited partners
owning more than 50% of the units consent in writing to any such sale, transfer
or conveyance. (Section 17.1(a).)
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The general partners and their affiliates may not receive any rebates or
give-ups or participate in any reciprocal business arrangements which would
circumvent the provisions of the partnership agreement. (Section 12.7(a).)
Removal of General Partners
A general partner may be removed by a vote of limited partners holding a
majority of the units. (Section 17.1(d).) If a general partner is removed, the
fair market value of the interest of the removed general partner will be
determined by independent appraisers and paid to him or it as provided in
Section 20.4 of the partnership agreement. The partnership may pay this amount
in annual installments over a period of five years or more commencing on the
first anniversary of the date of the promissory note. Such promissory note shall
bear an annual interest rate of 9%.
The partnership may, with the consent of a majority in interest of the
limited partners, sell the former general partner's interest to an affiliate of
the remaining general partners, and admit such person to the partnership as a
substitute general partner. However, the purchase price to be paid to the
partnership for the partnership interest of the former general partner shall be
at least the fair market value determined by the appraisal described above. Such
substitute general partner or partners may pay the purchase price in
installments in the manner set forth above.
Assignability of General Partners' Interests
A general partner may designate a successor or additional general partner
provided that the interests of the limited partners are not adversely affected
and provided such general partner gives 90 days written notice to all partners.
The remaining general partners and limited partners holding a majority of the
units must consent to such designation. Generally, except in connection with
such a designation, no general partner shall have the right to retire or
withdraw voluntarily from the partnership or to sell, transfer or assign his or
its interest without the consent of the limited partners holding a majority of
the units. (Section 17.1.)
Books and Records; Rights to Information; Annual Audits
The general partners are required to maintain at the partnership's
principal office full and accurate books and records for the partnership.
Limited partners have the right to inspect, examine and obtain copies of such
books and records at reasonable times and at their expense. An alphabetical list
of the names, addresses and business telephone numbers of all limited partners,
along with the number of units owned by each of them, shall be available for
inspection and copying by the limited partners or their designated
representatives. (Section 15.1.) Annual audits of the partnership's affairs will
be conducted by the independent certified public accountants selected by the
partnership. (Section 15.2(b).)
Meetings of Limited Partners
There will not be any annual or periodic meetings of limited partners.
However, the general partners are required to call a meeting of the limited
partners upon the written request of limited partners holding 10% or more of the
outstanding units. In such event, a detailed statement of the action proposed, a
statement of the wording of any resolution proposed for adoption by the limited
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partners and any proposed amendment to the partnership agreement shall be
included with the notice of the meeting. (Section 16.4.)
Transferability of Units
There are a number of restrictions on the transferability of units,
including the following:
. except in certain limited circumstances, the proposed transferee must
meet the minimum suitability standards set forth in this prospectus;
. investors may only transfer a number of units such that, after the
transfer, both the transferor and transferee shall own at least the
minimum number of units required to be purchased by an investor. There
is no such requirement for transfers made on behalf of a retirement
plan, or by gift, inheritance, divorce, or to an affiliate;
. investors who desire to transfer their units must pay a transfer fee
in an amount sufficient to cover transfer costs;
. all transfers of units must be made pursuant to documentation
satisfactory in form and substance to the general partners, including,
without limitation, confirmation by the transferee that the transferee
has been informed of all pertinent facts relating to the liquidity and
marketability of the units;
. no unit may be sold, assigned or exchanged if the sale of such unit,
when added to the total of all other sales or exchanges of units
within the period of 12 consecutive months prior to the proposed date
of sale or exchange, would, in the opinion of counsel for the
partnership, result in the termination of the partnership under
Section 708 of the Internal Revenue Code, unless the partnership
receives a ruling from the IRS that the proposed sale or exchange will
not cause such a termination; and
. investors owning units purchased pursuant to the deferred commission
option will have limited rights to transfer their units for a period
of six years following the year of purchase, or longer if required to
satisfy the outstanding commission obligation. (Section 17.3(a).)
Additional restrictions on transfers of units are imposed on the residents
of various states under the securities laws of such states. In addition to the
above restrictions, the partnership agreement contains substantial restrictions
on the transfer or assignment of units in order to prevent the partnership from
being deemed a "publicly traded partnership." These provisions are based on
restrictions contained in the Section 7704 Regulations described in the "Federal
Income Tax Consequences" section of this prospectus. The most significant
transfer restriction prohibits the transfer during any taxable year of more than
2% of the total interests in the partnership's capital or profits excluding
transfers by gift, transfers at death, transfers between family members,
distributions from a qualified retirement plan and block transfers. The
partnership agreement also provides that any transfer or assignment of units
which the general partners believe will cause the partnership to be treated as a
publicly traded partnership will be void from the beginning and will not be
recognized by the partnership. (See "Federal Income Tax Consequences -- Publicly
Traded Partnerships" and Section 17.3(g) of the partnership agreement.)
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Transferees of units are not eligible to participate in the partnership's
distribution reinvestment plan with respect to investment of their distributions
in additional units of this partnership. Transferees are not disqualified,
however, from participation in the partnership's distribution reinvestment plan
with respect to investment of their distributions in units issued by subsequent
Wells programs, if (1) such plan is established, and (2) the transferee meets
the plan's requirements for participation. (See "Distribution Reinvestment
Plan.")
An assignee of units shall not become a substituted limited partner in
place of his assignor unless the assignee shall have expressly agreed to become
a party to the partnership agreement. (Section 17.4.) An assignee of units who
does not become a substituted limited partner shall be recognized by the
partnership not later than the last day of the calendar month following receipt
of notice of the assignment and all required documentation and shall be entitled
to receive distributions attributable to the units properly transferred to him.
(Section 17.5.) Any such assignee shall not have any of the other rights of a
limited partner, including the right to vote as a limited partner and the right
to inspect and copy the partnership's books. Assignments of units are restricted
in the same manner as transfers of units.
Repurchase of Units
After a period of one year following the termination of the offering of
units, the partnership may establish a repurchase reserve of up to 5% of cash
flow in any year, subject to the various restrictions and limitations set forth
below. (Sections 8.11 and 11.3(h).) The general partners have the sole
discretion whether to establish or terminate the repurchase reserve.
If a repurchase reserve is established, the partnership may, in the sole
discretion of the general partners and upon the request of a limited partner,
repurchase the units held by such limited partner. However, no such repurchase
may be made if either (1) following the repurchase such limited partner's
interests would not be fully redeemed but such limited partner would hold less
than the minimum investment in the offering (100 units) or (2) such repurchase
would impair the capital or operations of the partnership. In no event will a
limited partner be permitted to have his units repurchased prior to termination
of the offering. Units owned by the general partners or their affiliates may not
be repurchased by the partnership. Further, in order to prevent the partnership
from being deemed a "publicly traded partnership" under the Internal Revenue
Code, the opportunity of limited partners to have their units repurchased has
been substantially restricted, as described above.
A limited partner wishing to have units repurchased must mail or deliver a
written request to the partnership, executed by his or its trustee or authorized
agent in the case of qualified profit sharing, pension and other retirement
trusts, indicating his or its desire to have such units repurchased. Such
requests will be considered by the general partners in the order in which they
are received.
If the general partners decide to honor a request, they will notify the
requesting limited partner in writing of such fact, of the purchase price for
the units to be repurchased and of the effective date of the repurchase
transaction, which will be not less than 60 nor more than 75 calendar days
following the receipt of the written request by the partnership. For the first
three full fiscal years following the year in which the offering of units
terminates, the purchase price under the repurchase reserve will be $8.50 per
unit. Thereafter, the purchase price per unit will be equal to
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90% of the fair market value of the units. The fair market value utilized for
purposes of establishing the purchase price per unit will be the estimated value
of units to be determined annually for ERISA purposes. (See "Investment by Tax-
Exempt Entities and ERISA Considerations -- Annual Valuations"). The fair market
value will be based on annual appraisals of partnership properties performed by
the general partners and not by an independent appraiser. The general partners
will, however, obtain an opinion of an independent third party annually that
their estimate of the fair market value of each unit for such year is reasonable
and was prepared in accordance with appropriate methods for valuing real estate.
The partnership will, as soon as possible following return of properly
executed documents from the limited partner, repurchase the units of the limited
partner. If insufficient amounts are then available in the repurchase reserve
to repurchase all of such units, only a portion of such units will be
repurchased. The partnership may not repurchase less than all of the units of
any limited partner if as a result thereof the limited partner would own less
than the minimum investment in the offering (100 units). In the event that
insufficient funds are available in the repurchase reserve to repurchase all of
such units, the limited partner requesting such repurchase will be deemed to
have priority for subsequent partnership repurchases over other limited partners
who request repurchases thereafter. Units repurchased by the partnership will be
canceled.
In addition to the other restrictions described herein, the partnership
agreement provides that:
. repurchases out of the repurchase reserve may not exceed in the
aggregate more than 2% of total gross offering proceeds throughout the
life of the partnership excluding repurchases of units relating to the
death or legal incapacity of the owner or a substantial reduction in
the owner's net worth or income, defined to mean an involuntary loss
of not less than 50% in income or net worth during the year in which
such repurchase occurs; and
. not more than 2% of the outstanding units may be purchased in any
year, provided in each case that the partnership has sufficient cash
to make the purchase and that the purchase will not be in violation of
any other applicable legal requirements. (Section 8.11(k).)
Prospective investors should not, under any circumstances, assume that they will
be able to resell their units to the partnership due to the various restrictions
and limitations relating to the potential establishment of a repurchase reserve
by the partnership. (See "Risk Factors.") In addition, prospective investors
should consider that a resale of their units to the partnership may result in
adverse tax consequences. (See "Federal Income Tax Consequences -- Sales of
Limited Partnership Units.")
Distribution Reinvestment Plan
It is anticipated that a distribution reinvestment plan will be available
which will be designed to enable investors electing cash preferred units to have
their distributions of net cash from operations from the partnership invested in
additional units of the partnership during the offering period or in units
issued by subsequent Wells programs which have substantially identical
investment objectives as the partnership. (Section 8.15.) In addition, in the
event the distribution reinvestment plan is made available, it is anticipated
that investors in Wells Fund III and investors holding Class A Units in
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Wells Fund IV, Wells Fund V, Wells Fund VI, Wells Fund VII, Wells Fund VIII,
Wells Fund IX, Wells Fund X, Wells Fund XI, and shares of the Wells REIT will
have the opportunity to have their distributions of net cash from operations
invested in units in the partnership during the offering period.
Units to be issued by the partnership pursuant to the distribution
reinvestment plan will be available only until the termination of this offering.
The general partners have the discretion to elect not to provide a distribution
reinvestment plan or to terminate any existing distribution reinvestment plan.
Investors will not be eligible to participate in the distribution reinvestment
plan with respect to units designated as tax preferred units since no
distributions of net cash from operations are payable with respect to such
units.
Investors participating in the distribution reinvestment plan may purchase
fractional units and shall only be subject to certain minimum investment
requirements and other restrictions imposed by the general partners. Investors
electing to participate in the distribution reinvestment plan will receive with
each confirmation a notice advising such investor that he is entitled to change
his election with respect to subsequent distributions by returning a notice to
the partnership. If sufficient units are not available for purchase pursuant to
the distribution reinvestment plan, the partnership will remit excess
distributions of net cash from operations to the participants.
Net cash from operations may only be reinvested in units issued by
subsequent Wells program if:
. prior to the time of such reinvestment, the limited partner has
received the final prospectus and any supplements thereto offering
interests in the subsequent Wells program and such prospectus allows
investment pursuant to a distribution reinvestment plan;
. a registration statement covering the interests in the subsequent
Wells program has been declared effective under the Securities Act of
1933;
. the offer and sale of such interests is qualified for sale under the
applicable state securities laws;
. the participant executes the subscription agreement included with the
prospectus for the subsequent Wells program;
. the participant qualifies under applicable investor suitability
standards as contained in the prospectus for the subsequent Wells
program; and
. the subsequent Wells program has substantially identical investment
objectives as the partnership.
Investors who invest in subsequent Wells programs pursuant to a distribution
reinvestment plan will become, and will be treated as, limited partners in such
subsequent Wells program in all respects and, as such, will receive the same
applicable reports as other limited partners in the subsequent Wells program as
required by the then applicable NASAA Guidelines.
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Each limited partner electing to participate in the distribution
reinvestment plan agrees that if at any time he fails to meet the applicable
real estate limited partnership investor suitability standards or cannot make
the other investor representations or warranties set forth in the then current
real estate limited partnership prospectus, the subscription agreement or
partnership agreement relating thereto, he will promptly notify the general
partners in writing.
Subscribers should note that affirmative action must be taken to withdraw
from participation in the distribution reinvestment plan. A withdrawal from
participation in the distribution reinvestment plan shall be effective only with
respect to distributions made more than 30 days following receipt by the general
partners of written notice. In the event a limited partner transfers his units,
such transfer shall terminate the limited partner's participation in the
distribution reinvestment plan as of the first day of the quarter in which the
transfer is effective.
Selling commissions not to exceed 7% and dealer management fees not to
exceed 2.5% may be paid by the partnership with respect to units purchased
pursuant to the distribution reinvestment plan. Each holder of units is
permitted to identify, change or eliminate the name of his account executive at
a participating dealer with respect to distributions reinvested. In the event
that no account executive is identified, or in the event that the account
executive is not employed by a broker-dealer having a valid selling agreement
with the Dealer Manager, no selling commission will be paid with respect to
distributions which are then being reinvested. The partnership will retain for
additional investment in real estate amounts which would otherwise have been
paid as selling commissions. Accordingly, the economic benefit to investors who
do not identify account executives will be shared with all investors, including
those for whose contributions the partnership has paid selling commissions.
Unless the general partners are otherwise notified in writing, units issued
pursuant to the distribution reinvestment plan will initially be treated as cash
preferred units. Limited partners purchasing units pursuant to the distribution
reinvestment plan will have the same rights and be treated in the same manner as
if such units were issued pursuant to the offering.
Following the reinvestment, each participant will be sent a statement and
accounting showing the distributions received, the number and price of units
purchased, and the total amount of units acquired under the distribution
reinvestment plan. Taxable participants will incur tax liability for
partnership income allocated to them even though they shall have elected not to
receive their distributions in cash but rather to have their distributions held
in their account under the distribution reinvestment plan. (See "Risk Factors
- -- Federal Income Tax Risks.")
The partnership reserves the right to amend any aspect of the distribution
reinvestment plan effective with respect to any distribution paid subsequent to
the notice, provided that the notice is sent to participants in the distribution
reinvestment plan at least 10 days before the record date for a distribution.
The partnership also reserves the right to terminate the distribution
reinvestment plan for any reason at any time, by sending written notice of
termination to all participants.
Proxy to Liquidate
At any time commencing eight years after the termination of the offering,
limited partners holding 10% of the outstanding units may direct in writing that
the general partners formally proxy the limited partners to determine whether
the assets of the partnership should be liquidated. In such
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event, the general partners will send a proxy to liquidate to each limited
partner. The general partners shall not be required to send proxies to liquidate
to the limited partners more frequently than once during every two year period.
If the proxy to liquidate results in limited partners owning more than 50% of
the units, without regard to units owned or controlled by the general partners,
voting in favor of a liquidation of the partnership, the assets of the
partnership will be fully liquidated within 30 months. (Section 20.2.)
Dissolution and Termination
The partnership is to continue until December 31, 2030, but may be
dissolved earlier as provided in the partnership agreement or by law. (Article
VI.) The partnership will also be dissolved upon:
. the decision by holders of more than 50% of the units to dissolve and
terminate the partnership;
. the retirement, withdrawal or removal of a general partner unless
within 90 days from the date of such event:
(1) the remaining general partner, if any, elects to continue the
business of the partnership; or
(2) if there is no remaining general partner, a majority in interest
of the limited partners elect to continue the business of the
partnership;
. the sale or disposition of all interests in real property and other
assets of the partnership;
. the effective date of the occurrence of an event of withdrawal of the
last remaining general partner unless, within 120 days from such
event, a majority in interest of the limited partners elect to
continue the business of the partnership; or
. the happening of any other event causing the dissolution of the
partnership under the laws of the State of Georgia. (Section 20.1.)
In addition to the above events, the general partners may also terminate
the offering, compel a termination and dissolution of the partnership, or
restructure the partnership's affairs, upon notice to all limited partners and
without the consent of any limited partner, if upon the advice of counsel to the
partnership, either (1) the partnership's assets constitute "plan assets," as
such term is defined for purposes of ERISA, or (2) any of the transactions
contemplated in the partnership agreement constitute "prohibited transactions"
under ERISA. (Section 20.1(h).)
In the event the partnership is dissolved, the assets of the partnership
shall be converted to cash. The general partners shall be given a reasonable
amount of time to collect any notes receivable with respect to the sale of
partnership assets and to collect any other outstanding debts. Partnership cash
shall be distributed first to creditors to satisfy debts and liabilities of the
partnership, other than loans or advances made by partners. The general partners
may also establish reserves deemed reasonably necessary to satisfy contingent or
unforeseen liabilities or obligations of the partnership.
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REPORTS TO INVESTORS
Within 75 days after the end of each fiscal year of the partnership, the
general partners will deliver to each investor and any assignee such information
as is necessary for the preparation of his federal income tax return and state
income or other tax returns with regard to jurisdictions in which partnership
properties are located. Within 120 days after the end of the partnership's
fiscal year, the general partners will deliver to each investor and any assignee
an annual report which includes financial statements of the partnership, audited
by independent certified public accountants and prepared in accordance with
generally accepted accounting principles. Such financial statements will include
a profit and loss statement, a balance sheet of the partnership, a cash flow
statement and a statement of changes in partners' capital. The notes to the
annual financial statements will contain a detailed reconciliation of the
partnership's net income for financial reporting purposes to net income for tax
purposes for the periods covered by the report. The annual report for each year
will report on the partnership's activities for that year, identify the source
of partnership distributions, set forth the compensation paid to the general
partners and their affiliates and a statement of the services performed in
consideration therefor, provide a category-by-category breakdown of the general
and administrative expenses incurred, including a breakdown of all costs
reimbursed to the general partners and their affiliates in accordance with
Section 11.4(b) of the partnership agreement, and contain such other information
as is deemed reasonably necessary by the general partners to advise the
investors of the affairs of the partnership.
For as long as the partnership is required to file quarterly reports on
Form 10-Q with the Securities and Exchange Commission, financial information
substantially similar to the financial information contained in each such report
shall be sent to the investors within 60 days after the end of such quarter.
Whether or not such reports are required to be filed, each investor will be
furnished, within 60 days after the end of each of the first three quarters of
the partnership's fiscal year, an unaudited financial report for that period
including a profit and loss statement, a balance sheet and a cash flow
statement. The foregoing reports for any period in which fees are paid to the
general partners or their affiliates for services shall set forth the fees paid
and the services rendered. In addition, until all of the net proceeds from the
offering are expended or committed, or in the discretion of the general partners
used to establish a working capital reserve or returned to the partners, each
investor shall be furnished, at least quarterly within 60 days after the end of
each quarter during which the partnership has acquired real property, an
acquisition report describing the properties acquired since the prior special
report and including a description of locations and of the market upon which the
general partners are relying in projecting successful operation of the
properties. The acquisition report shall include:
. a description of the present or proposed use of the property and its
suitability or adequacy for such use and the terms of any material
lease affecting the property;
. a statement of the appraised value, purchase price, terms of purchase,
all costs related to the acquisition, and an estimate of all proposed
subsequent expenditures for development or other improvements of the
property;
. a statement that title insurance and any required performance bonds or
other assurances in accordance with Section 11.3(k) of the partnership
agreement with respect to builders have been or will be obtained on
the property; and
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. a statement regarding the amount of proceeds in both dollar amount and
as a percentage of the total amount of the offering held by the
partnership which remain unexpended or uncommitted.
In addition, the acquisition report will identify any real property which the
general partners presently intend to be acquired by or leased to the
partnership, providing its location and a description of its general character.
The appraisal received by the partnership at the time of each acquisition
of property shall be maintained in its records for at least five years
thereafter and, during such time, shall be made available to investors for
inspection and duplication at reasonable times.
The partnership will distribute annually to investors a report on the
estimated value of each unit in the next annual or quarterly report on Form 10-K
or Form 10-Q sent to investors following the valuation process. Such estimated
value will be based upon annual appraisals of partnership properties performed
by the general partners and not by an independent appraiser. The general
partners are, however, required under the partnership agreement to obtain the
opinion of an independent third party that their estimate of the value of each
unit is reasonable and was prepared in accordance with appropriate methods for
valuing real estate. For the first three full fiscal years following the year in
which the offering of units terminates, the value of the units will be deemed to
be their initial purchase price of $10.00, and no valuation of partnership
properties will be performed. (See "Investment by Tax-Exempt Entities and ERISA
Considerations -- Annual Valuation.")
The general partners shall cause to be filed with appropriate federal and
state regulatory and administrative bodies all reports to be filed with such
entities under then currently applicable laws, rules and regulations. Such
reports shall be prepared on the accounting or reporting basis required by such
regulatory bodies. The partnership will provide without charge a copy of any
such report upon request by a limited partner. In addition, upon request from
any prospective investor or limited partner, the partnership will provide
without charge a copy of the NASAA Guidelines, as referred to elsewhere in this
prospectus.
PLAN OF DISTRIBUTION
A minimum of 125,000 units and a maximum of 7,000,000 units are being
offered to the public through Wells Investment Securities, Inc., the Dealer
Manager, a registered broker-dealer affiliated with the general partners. (See
"Conflicts of Interest" and "Management.") The units are being offered at a
price of $10.00 per unit on a "best efforts" basis, which means generally that
the Dealer Manager will be required to use only its best efforts to sell the
units and it has no firm commitment or obligation to purchase any of the units.
Except as provided below, the Dealer Manager will receive selling
commissions of 7% of the gross offering proceeds. The Dealer Manager will also
receive 2.5% of the gross offering proceeds in the form of a dealer manager fee
as compensation for acting as the Dealer Manager and for expenses incurred in
connection with coordinating sales efforts, training of personnel and generally
performing "wholesaling" functions. In addition, the partnership may reimburse
the expenses incurred by nonaffiliated dealers for actual due diligence purposes
in the maximum amount of .5% of the gross offering proceeds. The partnership
will not pay referral or similar fees to any accountants,
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