<PAGE>
As filed with the Securities and Exchange Commission on October 31, 2000
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM S-11
REGISTRATION STATEMENT
Under
The Securities Act of 1933
__________________
WELLS REAL ESTATE FUND XIII, L.P.
(Exact name of registrant as specified in governing instruments)
6200 The Corners Parkway, Suite 250
Norcross, Georgia 30092
(770) 449-7800
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Donald Kennicott, Esq.
Michael K. Rafter, Esq.
Holland & Knight LLP
One Atlantic Center, Suite 2000
1201 West Peachtree Street, N.W.
Atlanta, Georgia 30309-3400
(404) 817-8500
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Agent for Service)
__________________
Georgia 58-2438244
(State or other (I.R.S. Employer
Jurisdiction of Incorporation) Identification Numbers)
__________________
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering._____________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.________________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box.
Approximate date of commencement of proposed sale to the public: As soon as
practicable following effectiveness of this Registration Statement.
__________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Amount Being Offering Price Aggregate Amount of
Securities Being Registered(1) Registered Per Unit Offering Price Registration Fee
--------------------------------------- ------------------ ----------------- ------------------- -------------------
<S> <C> <C> <C> <C>
--------------------------------------- ------------------ ----------------- ------------------- -------------------
Cash Preferred Units
4,500,000 $10.00 $45,000,000 $11,880
Tax Preferred Units
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(1) Cash preferred units and tax preferred units will be offered in
combination, such that the aggregate dollar amount of units sold will
not exceed $45,000,000.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
WELLS REAL ESTATE FUND XIII, L.P.
$1,250,000 Minimum Offering
Up to 4,500,000 units at a purchase price of $10.00 per unit
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Wells Real Estate Fund XIII, L.P. (Wells Fund XIII) is a limited
partnership that will invest in commercial real estate properties primarily
consisting of high grade office buildings leased to large corporate tenants. We
are offering and selling to the public 4,500,000 units of limited partnership
interest for $10 per unit, the proceeds of which will be invested in such real
estate properties. Upon your purchase of units, you will elect to have your
units treated as either cash preferred units or tax preferred units.
. Cash preferred units entitle you to distributions of cash flow from
operations.
. Tax preferred units entitle you to a higher percentage of any growth in the
value of the partnership's real estate properties and allocations of tax
deductions.
You must purchase at least 100 units for $1,000 except in certain states as
described on page __ of this prospectus. Your money will be placed in an
interest-bearing escrow account with Bank of America, N.A. until we receive a
minimum of $1,250,000 (125,000 units). Your money will be promptly returned to
you if we do not sell the minimum amount of units by ___________, 2001.
The most significant risks relating to an investment in Wells Fund XIII include
the following:
. inability to resell or dispose of the units, except at a substantial
discount from the per unit price
. total reliance on the general partners to select properties and conduct our
operations
. authorization of substantial fees to the general partners and their
affiliates
. limited voting rights of investors
. if we only sell 125,000 units, we may buy only one property
. liquidation of the partnership may not occur for over 12 years
. conflicts of interest facing the general partners
. dependence on our tenants for revenue
You should see the complete discussion of the risk factors beginning on page __.
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The Offering:
. We will invest approximately 84% of the offering proceeds raised in real
estate properties, and the balance will be used to pay fees and expenses.
. We will pay selling commissions to broker-dealers of 7% and a dealer
manager fee for reimbursement of marketing expenses of 2.5% out of the
offering proceeds raised.
. Our units will be offered to the public at $10 per unit for a total
offering of $45,000,000.
. We will offer units in Wells Fund XIII until the earlier of __________,
2003, or, the date we sell all $45,000,000 worth of units.
Neither the Securities and Exchange Commission, the Attorney General of the
State of New York nor any other state securities regulator has approved or
disapproved of these securities or determined if this prospectus is truthful or
complete. It is a criminal offense if someone tells you otherwise.
The use of projections or forecasts in this offering is prohibited. No one
is permitted to make any oral or written predictions about the cash benefits or
tax consequences you will receive from your investment.
WELLS INVESTMENT SECURITIES, INC.
______________, 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Questions and Answers About This Offering..................................................................... 1
Summary of the Offering....................................................................................... 6
Risk Factors.................................................................................................. 13
Investment Risks........................................................................................... 13
Special Risks Regarding Status of Units.................................................................... 20
Real Estate Risks.......................................................................................... 21
Federal Income Tax Risks................................................................................... 23
Retirement Plan and Qualified Plan Risks................................................................... 26
Suitability Standards......................................................................................... 28
Investment Objectives and Criteria............................................................................ 32
General.................................................................................................... 32
Acquisition and Investment Policies........................................................................ 33
Development and Construction of Properties................................................................. 35
Acquisition of Properties from Wells Development Corporation............................................... 36
Terms of Leases and Tenant Creditworthiness................................................................ 38
Borrowing Policies......................................................................................... 38
Joint Venture Investments.................................................................................. 39
Disposition Policies....................................................................................... 41
Other Policies............................................................................................. 42
Management.................................................................................................... 42
The General Partners....................................................................................... 42
Affiliated Companies....................................................................................... 45
Estimated Use of Proceeds..................................................................................... 47
Compensation of the General Partners and Affiliates........................................................... 49
Conflicts of Interest......................................................................................... 51
Fiduciary Duty of the General Partners........................................................................ 56
Prior Performance Summary..................................................................................... 58
Publicly Offered Unspecified Real Estate Programs.......................................................... 59
Description Of The Units...................................................................................... 69
Election of Cash Preferred Units or Tax Preferred Units.................................................... 69
Cash Preferred Units....................................................................................... 70
Tax Preferred Units........................................................................................ 70
Effect of Change of Status of Units........................................................................ 71
Distributions and Allocations................................................................................. 71
Distributions of Net Cash From Operations.................................................................. 71
Distribution of Net Sale Proceeds.......................................................................... 72
Liquidating Distributions.................................................................................. 73
Return of Unused Capital Contributions..................................................................... 73
Partnership Allocations.................................................................................... 74
Monthly Distributions...................................................................................... 76
Real Property Investments..................................................................................... 77
Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 78
General.................................................................................................... 78
Summary Of Partnership Agreement.............................................................................. 78
Powers of the General Partners............................................................................. 78
Liabilities of the Limited Partners; Nonassessability of Units............................................. 79
Other Activities of the General Partners................................................................... 79
Rights and Obligations of Limited Partners................................................................. 79
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Voting Rights of the Limited Partners..................................................................... 79
Mergers and Consolidations................................................................................ 80
Special Partnership Provisions............................................................................ 80
Removal of General Partners............................................................................... 80
Assignability of General Partners' Interests.............................................................. 81
Books and Records; Rights to Information; Annual Audits................................................... 81
Meetings of Limited Partners.............................................................................. 81
Transferability of Units.................................................................................. 81
Repurchase of Units....................................................................................... 82
Distribution Reinvestment Plan............................................................................ 84
Proxy to Liquidate........................................................................................ 86
Dissolution and Termination............................................................................... 86
Investment By Tax-Exempt Entities and ERISA Considerations................................................... 87
General................................................................................................... 87
Minimum Distribution Requirements......................................................................... 88
Plan Assets - Generally................................................................................... 88
Plan Assets - Definition.................................................................................. 88
Plan Asset Regulations - Available Exemptions............................................................. 89
Plan Asset Consequences - Prohibited Transaction Excise Tax............................................... 90
Annual Valuation.......................................................................................... 92
Federal Income Tax Consequences.............................................................................. 92
Tax Opinion............................................................................................... 93
Partnership Status Generally.............................................................................. 95
Publicly Traded Partnerships.............................................................................. 96
General Principles of Partnership Taxation................................................................ 97
Anti-Abuse Rules.......................................................................................... 97
Deductibility of Losses - Limitations..................................................................... 98
Allocations of Profit and Loss............................................................................ 99
Taxable Income Without Cash Distributions................................................................. 102
Investment by Qualified Plans and Other Tax-Exempt Entities............................................... 103
Investment by Charitable Remainder Trusts................................................................. 104
Syndication and Organizational Expenses................................................................... 105
Activities Not Engaged in For Profit...................................................................... 105
Taxation of Real Estate Operations........................................................................ 106
Sales of Limited Partnership Units........................................................................ 107
Dissolution and Liquidation of the Partnership............................................................ 107
Capital Gains and Losses.................................................................................. 108
Election for Basis Adjustments............................................................................ 108
Alternative Minimum Tax................................................................................... 108
Penalties................................................................................................. 108
Tax Shelter Registration.................................................................................. 109
Partnership Tax Information; Partner Tax Returns.......................................................... 110
Audits.................................................................................................... 110
Foreign Investors as Limited Partners..................................................................... 111
Tax Legislation and Regulatory Proposals.................................................................. 111
State and Local Taxes..................................................................................... 111
Reports to Investors......................................................................................... 112
Plan of Distribution......................................................................................... 114
Supplemental Sales Material.................................................................................. 119
Legal Opinions............................................................................................... 119
Experts...................................................................................................... 119
</TABLE>
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<TABLE>
<S> <C>
Audited Financial Statements.............................................................................. 119
Unaudited Financial Statements............................................................................ 120
Additional Information....................................................................................... 120
Glossary..................................................................................................... 120
Financial Statements......................................................................................... 122
Prior Performance Tables..................................................................................... 152
Form of Agreement of Limited Partnership
of Wells Real Estate Fund XIII, L.P.................................................................... Exhibit A
Form of Subscription Agreement and Subscription
Agreement Signature Page............................................................................... Exhibit B
</TABLE>
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Questions and Answers About This Offering
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Q: What is Wells Real Estate Fund XIII, L.P.?
A: We are a public real estate program structured as a Georgia limited
partnership formed to acquire commercial real estate properties such as
high grade office buildings and to lease them on a triple-net basis to
large creditworthy companies.
--------------------------------------------------------------------------------
Q: Who will choose which real estate properties to invest in?
A: Our general partners make all of our investment decisions. The general
partners are Leo F. Wells, III and Wells Capital, Inc. (Wells Capital), a
Georgia corporation.
--------------------------------------------------------------------------------
Q: Who is Wells Capital?
A: Wells Capital serves as one of our general partners. As of December 31,
2000, Wells Capital had sponsored public real estate programs which have
raised in excess of $____________ from approximately ________ investors and
which own and operate a total of ___ commercial real estate properties.
--------------------------------------------------------------------------------
Q: Do the general partners use any specific criteria when selecting a
potential property acquisition?
A: Yes. The general partners generally seek to acquire office buildings
located in densely populated suburban markets leased to large corporations
on a triple-net basis. Typically, each of our corporate tenants have a net
worth in excess of $100,000,000. Current tenants of other public real
estate programs sponsored by Wells Capital include The Coca-Cola Company,
Motorola, Fairchild Technologies, Siemens Automotive, IBM, Lucent
Technologies and PricewaterhouseCoopers.
--------------------------------------------------------------------------------
Q. Do you currently own any real estate properties?
A. No. This offering is a "blind pool" offering in that we do not know of any
specific real estate properties that we will acquire with the proceeds from
this offering.
--------------------------------------------------------------------------------
Q: What are the terms of your leases?
A: Our leases are "triple-net" leases, generally having terms of seven to ten
years, many of which have renewal options for an additional five to ten
years. "Triple-net" means that the tenant, not Wells Fund XIII, is
responsible for repairs, maintenance, property taxes, utilities and
insurance. We often enter into leases where we have responsibility for
replacement of specific structural components of a property such as the
roof of the building or the parking lot.
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Q: Do I have to make any elections when I subscribe for units?
A: Yes. You must elect whether to treat your units as cash preferred units or
tax preferred units. Your choice of cash preferred units or tax preferred
units is merely an election of status for your units that entitles you to
different rights and priorities as to distributions of cash from operations
and liquidating distributions and as to the allocation of taxable income
and deductions. In every other respect, all units have the same rights and
privileges.
If you elect to have your units treated as cash preferred units, you will
receive all distributions of cash flow from operations. You will be
allocated your pro rata portion of all taxable income of the partnership
and none of the partnership's net loss, depreciation or amortization
deductions for tax purposes. 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
such as qualified retirement plans, which are primarily interested in
current cash distributions and are not income tax sensitive.
If you elect to have your units treated as tax preferred units, you will
not receive any cash distributions from operations, but you will be
allocated your pro rata portion of substantially all of the partnership's
deductions for depreciation and other tax losses over the initial years of
your investment until your capital account has been reduced to zero. 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 will be entitled to a priority
with respect to the distribution of proceeds from the sale of our real
estate properties.
--------------------------------------------------------------------------------
Q: If I elect cash preferred units, will I receive regular cash distributions
and, if so, how often?
A: We intend to begin making quarterly cash distributions to the limited
partners electing cash preferred units no later than the end of the sixth
full quarter after partnership operations begin. We will not begin
partnership operations until we receive in excess of $1,250,000 from this
offering. The amount of each cash distribution typically depends on the
amount of distributable funds available, current and projected cash
requirements, tax considerations and other factors.
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Q: How will net proceeds from the sale of real estate properties be
distributed to the partners?
A: The net proceeds from the sale of our 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 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
electing an equal number of cash preferred units;
. then, to the limited partners until each limited partner has received an
amount equal to his net capital contribution;
. then, to the limited partners until each limited partner has received
aggregate distributions equal to a 10% annual cumulative, noncompounded
return on his net capital contribution;
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. then, to limited partners until each limited partner has received aggregate
distributions equal to his Preferential Limited Partner Return, defined
generally 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;
. then, if and only in the event that limited partners have received any
Excess Limited Partner Distributions, defined generally as a return of
investor capital plus the Preferred Limited Partner Return, 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 and 20% to the general partners.
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Q: What kind of offering is this?
A: We are offering the public up to 4,500,000 units of limited partnership
interest on a "best efforts" basis.
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Q: How does a "best efforts" offering work?
A: When units are offered to the public on a "best efforts" basis, the brokers
participating in the offering are only required to use their best efforts
to sell the units and have no firm commitment or obligation to purchase any
of the units.
--------------------------------------------------------------------------------
Q: How long will this offering last?
A: The offering will not last beyond _________________, 2003.
--------------------------------------------------------------------------------
Q: Who can buy units?
A: If you receive a copy of this prospectus, you may buy units provided that
you have either (1) a net worth of at least $45,000 and an annual gross
income of at least $45,000, or (2) a net worth of at least $150,000. For
this purpose, net worth does not include your home, home furnishings and
personal automobiles. These minimum levels may be higher in certain states,
so you should carefully read the more detailed description in the
"Suitability Standards" section of this prospectus.
--------------------------------------------------------------------------------
Q: Is there any minimum investment required?
A: Yes. Generally, you must invest at least $1,000. Except in Maine, Minnesota
and Washington, investors who already own our units or who have purchased
units from an affiliated Wells public real estate program can make
purchases for less than the minimum investment. These minimum investment
levels may be higher in certain states, so you should carefully read the
more detailed
3
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description of the minimum investment requirements appearing later in the
"Suitability Standards" section of this prospectus.
--------------------------------------------------------------------------------
Q: How do I subscribe for units?
A: If you choose to purchase units in this offering, you will need to fill out
a Subscription Agreement, like the one contained in this prospectus as
Exhibit B, for a specific number of units and pay for the units at the time
you subscribe. The purchase price will be placed into an escrow account
with Bank of America, N.A., which will hold your funds, along with those of
other subscribers, until we receive the minimum offering of $1,250,000 and
are authorized to withdraw funds for the acquisition of real estate
properties or the payment of fees and expenses.
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Q: If I buy units in this offering, how may I later sell them?
A: We do not expect that your units will ever be listed for trading on any
national securities exchange or over-the-counter market or that there
will be a public market for your units. As a result, you may find it
difficult to find a buyer for your units and realize a return on your
investment.
--------------------------------------------------------------------------------
Q: What will you do with the money raised in this offering?
A: We intend to invest a minimum of 84% of the proceeds from this offering to
acquire real estate properties, and approximately 16% of the proceeds will
be used to pay fees and expenses of this offering and acquisition-related
expenses. The payment of these fees and expenses will not reduce your
invested capital. Your initial invested capital amount will remain $10 per
unit. Until we invest the proceeds of this offering in real estate, we will
invest in short-term, highly liquid investments. These short-term
investments will not earn as high of a return as we expect to earn on our
real estate investments, and we cannot guarantee how long it will take to
fully invest the proceeds in real estate. We intend to invest or commit to
investment substantially all of the money raised in this offering within
one year of the termination of this offering, subject to market conditions.
--------------------------------------------------------------------------------
Q: What steps do you take to make sure you purchase environmentally compliant
property?
A: We always obtain a Phase I environmental assessment of each property
purchased. In addition, we generally obtain a representation from the
seller that, to its knowledge, the property is not contaminated with
hazardous materials.
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Q: Why do you acquire properties in joint ventures?
A: We acquire some of our properties in joint ventures with affiliated Wells
public real estate programs in order to diversify our portfolio of
properties in terms of geographic region, property type and industry group
of our tenants.
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Q: Will I be notified of how my investment is doing?
A: You will receive periodic updates on the performance of your investment
with us, including:
. Four detailed quarterly cash distribution reports;
. Three quarterly financial reports;
. An annual report; and
. An annual IRS Schedule K-1.
--------------------------------------------------------------------------------
Q: When will I get my detailed tax information?
A: Your Schedule K-1 tax information will be placed in the mail by January 31
of each year.
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Q: Who can help answer my questions?
A: If you have more questions about the offering or if you would like
additional copies of this prospectus, you should contact your registered
representative or contact:
Investor Services Department
Wells Capital, Inc.
6200 The Corners Parkway, Suite 250
Norcross, Georgia 30092
(800) 448-1010 or (770) 449-7800
www.wellsref.com
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5
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Summary of the Offering
This summary highlights selected information contained elsewhere in this
prospectus. It is not complete and does not contain all of the information that
is important to your decision whether to invest in the partnership. To
understand this offering fully, you should read the entire prospectus carefully,
including the "Risk Factors" section and the financial statements.
Wells Real Estate Fund XIII, L.P.
Wells Real Estate Fund XIII, L.P. is a Georgia limited partnership. Our
address and registered office is located at the office of the general partners,
6200 The Corners Parkway, Suite 250, Norcross, Georgia 30092. (Telephone: 770-
449-7800 or 800-448-1010 - outside of Georgia.) We refer to Wells Real Estate
Fund XIII, L.P. as Wells Fund XIII in this prospectus.
General Partners
Leo F. Wells, III and Wells Capital, Inc., a Georgia corporation, are the
general partners of Wells Fund XIII and will make all investment decisions for
the partnership. For information regarding the previous experience of the
general partners and their affiliates in the management of real estate programs,
see "Prior Performance Summary." An affiliate of a general partner includes
generally any entity in which a general partner owns 10% or more or otherwise
controls, any person owning, directly or indirectly, 10% or more of a general
partner and any officer, director or partner of a general partner.
Summary of Risk Factors
Following are the most significant risks relating to your investment:
. Our partnership agreement imposes substantial restrictions on transfers of
your units. No public market for the units currently exists or is ever
likely to develop so it will be difficult to sell your units. If you are
able to sell your units at all, you will likely have to sell them for $8.50
per unit or less for at least the first three years following termination
of the offering.
. You must rely on our general partners and entities affiliated with them for
the day-to-day management of our business.
. You will have limited voting rights and, therefore, will have minimal
control over the partnership's operations.
. Our general partners have a net worth that is limited in amount,
substantially illiquid and not readily marketable. Accordingly, we cannot
guarantee that our general partners will have sufficient cash to make any
required payments to Wells Fund XIII.
. The number of properties that we will acquire and the diversification of
our investments will be reduced to the extent that we sell less than all of
the 4,500,000 units. If we only sell the minimum 125,000 units, we may buy
only one property. There is a greater risk that you will lose money in your
investment if we cannot diversify our portfolio of properties by geographic
location and property type.
. We will pay substantial fees to the general partners and their affiliates
regardless of whether we are successful.
6
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. If you elect to have your units treated as cash preferred units, you will
be allocated all of our net income, and substantially lower or no
deductions for depreciation and other tax losses. As a result, we
anticipate you will be allocated taxable income in excess of cash
distributions received from us.
. If you elect to have your units treated as tax preferred units, you will
not receive any cash distributions from operations. You will be allocated a
disproportionately larger share of the partnership's deductions for
depreciation and other tax losses.
. Your receipt of desired benefits upon making your election of cash
preferred units or tax preferred units may vary significantly depending
upon the ratio of investors electing cash preferred units and tax preferred
units.
. Real estate investments are subject to general downturns in the industry as
well as downturns in specific geographic areas. We cannot predict what the
occupancy level will be in a particular building or that any tenant will
remain solvent. We also cannot predict the future value of our properties.
Accordingly, we cannot guarantee that you will receive cash distributions
or appreciation of your investment.
. This is a "blind pool" offering in that we do not own any real property and
we have not identified any properties in which there is a reasonable
probability that we will invest. A reasonable probability exists when we
have entered into a contract for the purchase of a property that does not
contain material contingencies that make the ultimate closing unlikely.
Accordingly, you will not have the opportunity to evaluate the properties
that we acquire before you make your investment in us. You must rely
totally upon the general partners' ability to select properties.
. We may invest some or all of the offering proceeds to acquire vacant land
on which a building will be constructed in the future. This type of
investment involves risks relating to the builder's ability to control
construction costs, failure to perform, or failure to build in conformity
with plan specifications and timetables. We will be subject to cost
overruns and time delays for properties under construction. Increased costs
of newly constructed properties may reduce our returns to you, while
construction delays may delay our ability to distribute cash to you.
. We do not anticipate liquidating Wells Fund XIII until at least 10 to 12
years after the date we acquire our last property or complete construction
of our last building.
Before you invest in Wells Fund XIII, you should see the complete
discussion of the "Risk Factors" beginning on page __ of this prospectus.
Properties to be Acquired
As of the date of this prospectus, we have neither purchased nor contracted
to purchase any properties, nor have the general partners identified any
properties in which there is a reasonable probability that we will invest. Upon
receipt of proceeds of greater than $1,250,000, we will seek to acquire and
operate commercial real estate properties. Although we are authorized to
purchase all types of commercial properties, including without limitation,
office buildings, shopping centers, business and industrial parks, manufacturing
facilities, warehouses and distribution facilities, and other similar real
estate properties, and may in fact acquire any such type of property, we will
primarily seek to invest in high grade commercial office buildings, many of
which will be located in suburban areas. We will purchase properties which are
newly constructed, under construction, or have been constructed and have
operating histories. All such properties may be acquired, developed and operated
by us either alone or
7
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jointly with another party. We are likely to enter into one or more joint
ventures for the acquisition of properties with Wells Real Estate Fund XII, L.P.
(Wells Fund XII) and Wells Real Estate Investment Trust, Inc. (Wells REIT) or
other future Wells programs. We anticipate that most of our properties will be
leased to tenants with a net worth in excess of $100 million on a "triple net"
basis. In other words, the tenant will pay as additional rent substantially all
costs associated with the repair and maintenance of the building, real estate
taxes, insurance and other similar costs associated with a building. Whenever
possible, we intend to execute leases for our properties at or prior to the
closing of the acquisition of such properties.
Possible Leverage of Properties
We will not borrow any money to acquire our real estate properties. While
the general partners have never borrowed funds for Wells public partnerships
sponsored in the past and do not intend to borrow any money for Wells Fund XIII,
they are authorized under our partnership agreement to borrow against properties
we acquire in amounts of up to 25% of the total purchase price of all properties
we acquire for purposes of maintenance, repair or improvement of such
properties. See the "Investment Objectives and Criteria -Borrowing Policies"
section of the prospectus on page __ for a more detailed discussion of our
borrowing policies.
Estimated Use of Proceeds of Offering
We anticipate that we will invest approximately 84% of the proceeds of this
offering in partnership properties. We will use the remainder of the offering
proceeds to pay selling commissions, fees and expenses relating to the selection
and acquisition of properties and the costs of the offering and organizing the
partnership.
Investment Objectives
Our investment objectives are:
. to maximize distributable cash to you;
. to preserve, protect and return your capital contribution; and
. to realize growth in the value of our properties upon our ultimate
sale of such properties.
We may only change these investment objectives upon approval of a majority vote
of the investors. See the "Investment Objectives and Criteria" section of this
prospectus for a more complete description of our business and objectives.
Distributions and Allocations
We expect to distribute cash flow from operations to investors electing
cash preferred units no later than the end of the sixth full quarter of
partnership operations.
Differences between Cash Preferred Units and Tax Preferred Units
Upon subscribing for units in Wells Fund XIII, you must elect to have your
units treated as either cash preferred units or tax preferred units. You may
also change your election one time during each quarterly accounting period,
unless prohibited by applicable state law. Your choice of cash preferred units
or tax preferred units is merely an election of status for your units that
entitles you to different rights
8
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and priorities as to distributions of cash from operations and liquidating
distributions and as to the allocation of taxable income and deductions for
depreciation and other tax losses, as summarized in the table below. In all
other respects, the units have the same rights and privileges.
<TABLE>
<CAPTION>
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Description Cash Tax
Preferred Preferred
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<S> <C> <C>
Distribution of all cash flow from operations X
---------------------------------------------------------------------------------------------------
Allocation of substantially all deductions and tax losses X
---------------------------------------------------------------------------------------------------
Allocation of substantially all income from operations X
---------------------------------------------------------------------------------------------------
Potential for higher return on real estate appreciation X
---------------------------------------------------------------------------------------------------
Initial priority of distribution of net sale proceeds X
---------------------------------------------------------------------------------------------------
</TABLE>
If you elect to have your units treated as cash preferred units, you will
be allocated more taxable income than the amount of cash flow you will receive
because you will be allocated little, if any, of the partnership's deductions
for depreciation and other tax losses. However, we anticipate that you will
receive sufficient cash distributions to pay your income tax liability resulting
from such allocation of income. Our investment objective of maximizing
distributable cash will directly benefit holders of cash preferred units, and
will not benefit holders of tax preferred units.
If you elect to have your units treated as tax preferred units, you will
not receive any cash distributions from operations, but you will be allocated
substantially all of the partnership's deductions for depreciation and other tax
losses over the initial years of your investment until you are allocated
aggregate tax losses equal to the amount of the purchase price paid for your
units. Our investment objective of realizing growth in the value of our
properties upon the ultimate sale of such properties will benefit holders of tax
preferred units to a greater extent than holders of cash preferred units.
If you want to read more about each class of unit, please see the
"Description of the Units" section of the prospectus on page __. If you want to
read more about the allocation and distribution of cash flow from operations and
the net proceeds from the sale or exchange of properties or the allocation of
taxable income and loss, please see the "Distributions and Allocations" section
of the prospectus on page __.
Conflicts of Interest
Our general partners and their affiliates will experience conflicts of
interest in connection with the management of Wells Fund XIII, including the
following:
. our general partners and their affiliates will have to allocate their
time between Wells Fund XIII and other real estate programs and
activities in which they are involved;
. our general partners must determine which of the Wells programs should
acquire and own any specific property;
. our general partners must determine which Wells program or other
entity should enter into a joint venture for the acquisition and
operation of specific properties with affiliates of our general
partners;
. our general partners may compete with other Wells programs for the
same tenants in negotiating leases or in selling similar properties at
the same time; and
9
<PAGE>
. we will pay fees to our general partners and their affiliates in
connection with partnership transactions involving the purchase,
management and sale of our properties regardless of the quality of the
property acquired or the services provided to us.
See the "Conflicts of Interest" section of this prospectus on page __ for a
detailed discussion of the various conflicts of interest relating to your
investment, well as the procedures that we have established to resolve a number
of these potential conflicts.
The following chart indicates the relationship between our general partners
and their affiliates which will be providing services to Wells Fund XIII.
=====================
LEO F. WELLS, III
(General Partner)
=====================
100%
==========================================
Wells Real Estate Funds, Inc.
==========================================
100% 100% 100%
=============== =================== ======================
Wells Wells WELLS CAPITAL, INC.
Management Investment (General Partner)
Company, Inc. Securities, Inc. ======================
(Property (Dealer
Manager) Manager)
===============
===================
100%
===============
Wells
Development
Corporation
===============
Prior Offering Summary
Our general partners and their affiliates have previously sponsored 13
publicly offered real estate limited partnerships and one real estate investment
trust on an unspecified property or "blind pool" basis. As of December 31, 2001,
our general partners have raised approximately $___,___,___ from approximately
__,___ investors in these 14 real estate programs. The "Prior Performance
Summary" on page __ of this prospectus contains a discussion of the Wells
programs sponsored to date. Certain statistical data relating to prior public
limited partnerships with investment objectives similar to ours is also provided
in the "Prior Performance Tables" included at the end of this prospectus.
10
<PAGE>
Compensation to General Partners and Affiliates
Our general partners and their affiliates will receive compensation and
fees for services relating to this offering and the investment and management of
our assets. The most significant items of compensation are included in the
following table:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
$$ Amount for $$ Amount for
Minimum Offering Maximum Offering
Type of Compensation Form of Compensation (125,000 units) (4,500,000 units)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Organizational and Offering Stage
---------------------------------------------------------------------------------------------------------
Sales Commission 7% of gross offering proceeds $87,500 $3,150,000
---------------------------------------------------------------------------------------------------------
Dealer Manager Fee 2.5% of gross offering $31,250 $1,125,000
proceeds
---------------------------------------------------------------------------------------------------------
Organization and 3% of gross offering proceeds $37,500 $1,350,000
Offering Expenses
---------------------------------------------------------------------------------------------------------
Acquisition and Development Stage
---------------------------------------------------------------------------------------------------------
Acquisition and 3% of gross offering proceeds $37,500 $1,350,000
Advisory Fees
---------------------------------------------------------------------------------------------------------
Acquisition .5% of gross offering $6,250 $225,000
Expenses proceeds
---------------------------------------------------------------------------------------------------------
Operational Stage
---------------------------------------------------------------------------------------------------------
Property 4.5% of gross revenues N/A N/A
Management
and Leasing Fees
---------------------------------------------------------------------------------------------------------
Initial Lease-Up Fee Competitive fee for N/A N/A
for Newly geographic location of
Constructed property based on a survey
Property of brokers and agents
(customarily equal to the
first month's rent)
---------------------------------------------------------------------------------------------------------
Cash Distributions 10% of current cash flow N/A N/A
after cash preferred
priority return to limited
partners
---------------------------------------------------------------------------------------------------------
Liquidation Stage
---------------------------------------------------------------------------------------------------------
Real Estate 3% of sale price after N/A N/A
Commission limited partners receive
repayment of capital plus 6%
return on capital
---------------------------------------------------------------------------------------------------------
Liquidating 20% of net sale proceeds N/A N/A
Distribution after cash preferred and tax
preferred priority returns
to limited partners
---------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Provided, that the general partners may not receive compensation in excess
of the maximum amount permitted under the Statement of Policy Regarding Real
Estate Programs of the North American Securities Administrators Association
(NASAA Guidelines).
Our general partners and their affiliates may receive a number of other
smaller items of incidental expense reimbursement during the operation and
liquidation stages of Wells Fund XIII. Please see the "Compensation of the
General Partners and Affiliates" section of this prospectus on page __ for
specific details relating to such compensation.
Depreciation and Cost Recovery Method
For income tax purposes, we intend to use the straight-line method of
depreciation for the real properties to be acquired. (See "Federal Income Tax
Consequences.")
Partnership Agreement
Your rights and obligations in Wells Fund XIII and your relationship with
our general partners will be governed by our partnership agreement. Some of the
significant features of our partnership agreement include the following:
. Voting Rights. A majority of you may vote to:
(1) amend our partnership agreement, subject to certain limitations;
(2) change our business purpose or our investment objectives; and
(3) remove a general partner.
In the event of any such vote, you will be bound by the majority vote even
if you did not vote with the majority.
. Mergers and Consolidations. Our partnership agreement prohibits our general
partners from initiating any merger or consolidation by Wells Fund XIII
with any other partnership or corporation. We may not merge or consolidate
with any other partnership or corporation without approval by a majority of
you.
For a detailed discussion concerning the terms of the partnership
agreement, please see the "Summary of Partnership Agreement" section of this
prospectus on page __. A complete copy of our partnership agreement is attached
as Exhibit "A" to this prospectus.
12
<PAGE>
Risk Factors
Your purchase of our units involves a number of risks. In addition to any
other risks discussed in this prospectus, you should specifically consider the
following:
Investment Risks
Marketability and Transferability Risks
There is no public trading market for your units.
We do not anticipate that a public trading market will ever develop for
your units. In fact, our partnership agreement restricts our ability to
participate in a public trading market or anything substantially equivalent to
one by providing that any transfer which may cause us to be classified as a
"publicly traded partnership" as defined in Section 7704 of the Internal Revenue
Code shall be deemed void and shall not be recognized by us. Because
classification of Wells Fund XIII as a "publicly traded partnership" may
significantly decrease the value of your units, our general partners intend to
use their authority to the maximum extent possible to prohibit transfers of
units which could cause us to be classified as a "publicly traded partnership."
Your units have limited transferability and lack liquidity.
Except for certain intra-family transfers, you are limited in your ability
to transfer your units. Our partnership agreement and certain state regulatory
agencies have imposed restrictions relating to the number of units you may
transfer. In addition, the suitability standards applied to you upon the
purchase of your units may also be applied to persons to whom you wish to
transfer your units. You may not be able to sell your units in the event of an
emergency, and your units are not likely to be accepted as collateral for a
loan. (See "Summary of Partnership Agreement - Transferability of Units.")
This offering is only suitable for long-term investors.
As discussed above, your units lack a public trading market and have
transfer restrictions. In addition, we are limited in our ability to buy back
your units pursuant to the repurchase reserve. We do not anticipate selling any
properties that we acquire until at least 10 to 12 years after the date of
acquisition or completion of construction. (See "Investment Objectives and
Criteria - Disposition Policies.") For each of these reasons, you should view
your investment in units strictly as a long-term investment.
Management Risks
You are participating in a blind pool offering and must rely totally on the
general partners for selection of properties.
This offering is commonly referred to as a "blind pool" offering in that
our general partners have not identified any properties in which there is a
reasonable probability that we will invest. You must rely upon the ability of
our general partners with respect to the investment in and management of
unspecified properties, and you will not have an opportunity to evaluate for
yourself the relevant economic, financial and other information regarding the
specific properties in which the proceeds of this offering will be invested. You
should be aware that the appraisals we are required to obtain for each property
we acquire are merely estimates of value and should not be relied upon as
accurate measures of true worth or
13
<PAGE>
realizable value. We cannot assure you that we will be successful in obtaining
suitable investments or that, if investments are made, our objectives will be
achieved.
You must rely on our general partners for management of our business.
Our general partners will make all decisions with respect to the management
of Wells Fund XIII. As a limited partner, you will have no right or power to
take part in the management of Wells Fund XIII except through the exercise of
your voting rights, which are limited. Therefore, you will be relying almost
entirely on our general partners with respect to the management of Wells Fund
XIII and the operation of its business. (See "Management.") Our general partners
may only be removed under certain conditions, as set forth in our partnership
agreement. If our general partners are removed, they will receive payment equal
to the fair market value of their interests in Wells Fund XIII. (See "Summary of
Partnership Agreement - Voting Rights of the Limited Partners.")
Leo F. Wells, III has a dominant role in determining what is in the best
interest of Wells Fund XIII.
Leo F. Wells, III is one of the two general partners of Wells Fund XIII and
is in control of the other general partner. Therefore, one person has a dominant
role in determining what is in the best interests of Wells Fund XIII and with
regard to the general partner's duty of loyalty and care owed to the other
partners. Since no person other than Mr. Wells has any direct control over
management of Wells Fund XIII, we do not have the benefit of independent
consideration of issues affecting partnership operations. Therefore, Mr. Wells
alone will determine the propriety of his own actions, which could result in a
conflict of interest when he is faced with any significant decision relating to
partnership affairs. (See "Fiduciary Duty of the General Partners.")
We depend on key personnel.
Our success depends to a significant degree upon the continued
contributions of certain key personnel, including Leo F. Wells, III, who would
be difficult to replace. If he were to cease employment, our operating results
could suffer. We also believe that our future success depends, in large part,
upon our ability to hire and retain highly skilled managerial, operational and
marketing personnel. Competition for such personnel is intense, and we cannot
assure you that we will be successful in attracting and retaining such skilled
personnel.
Our general partners have a limited net worth consisting of assets that are
not liquid.
Our general partners have represented that, as of November 30, 2000, they
have a combined net worth on an estimated fair market value basis of
approximately $_,___,___, exclusive of home, automobiles and home furnishings.
The fair market value method of accounting for net worth values assets at their
current values instead of reporting them at historical cost. The net worth of
our general partners consists primarily of interests in real estate, retirement
plans, partnerships, and closely-held businesses, and accordingly such net worth
is not liquid and not readily marketable. The limited net worth of our general
partners may be relevant to you in evaluating the ability of our general
partners to fulfill their financial obligations to Wells Fund XIII. In addition,
our general partners have commitments to the other Wells programs. Specifically,
you should consider these factors when evaluating our general partners'
obligation to advance on an interest-free basis an amount of up to 1% of gross
offering proceeds for maintenance and repairs of our properties to the extent
that we have insufficient funds for such purposes. (See "Management.")
14
<PAGE>
Conflicts of Interest Risks
Our general partners will face conflicts of interest relating to time
management.
Our general partners and their affiliates are also general partners and
sponsors of other real estate programs having investment objectives and legal
and financial obligations similar to Wells Fund XIII. Because our general
partners and their affiliates have interests in other real estate programs and
also engage in other business activities, they will have conflicts of interest
in allocating their time between our business and these other activities. During
times of intense activity in other programs and ventures, our general partners
may devote less time and resources to our business than is necessary or
appropriate. (See "Conflicts of Interest.")
Our general partners will face conflicts of interest relating to the
purchase and leasing of properties.
We may be buying properties at the same time as one or more of the other
Wells programs are buying properties. There is a risk that the general partners
will choose a property that provides lower returns to us than a property
purchased by another Wells program. We may acquire properties in geographic
areas where other Wells programs own properties. If one of the Wells programs
attracts a tenant that we are competing for, we could suffer a loss of revenue
due to delays in locating another suitable tenant. (See "Conflicts of
Interest.")
Our general partners will face conflicts of interest relating to joint
ventures with affiliates.
We are likely to enter into joint ventures with other Wells programs for
the acquisition, development or improvement of properties including Wells Fund
XII and the Wells REIT. We may also purchase and develop properties in joint
ventures or in partnerships, co-tenancies or other co-ownership arrangements
with the sellers of the properties, affiliates of the sellers, developers or
other persons. Such investments may involve risks not otherwise present with an
investment in real estate, including, for example:
. the possibility that our co-venturer, co-tenant or partner in an
investment might become bankrupt;
. that such co-venturer, co-tenant or partner may at any time have
economic or business interests or goals which are or which become
inconsistent with our business interests or goals; or
. that such co-venturer, co-tenant or partner may be in a position to
take action contrary to our instructions or requests or contrary to
our policies or objectives.
Actions by such a co-venturer, co-tenant or partner might have the result of
subjecting the property to liabilities in excess of those contemplated and may
have the effect of reducing your returns.
Our general partners and their affiliates are currently sponsoring a public
offering on behalf of the Wells REIT, an unspecified real estate program which
is a real estate investment trust. (See "Prior Performance Summary.") In the
event that we enter into a joint venture with the Wells REIT, we may face
certain additional risks and potential conflicts of interest. For example, upon
becoming listed on a securities exchange, the Wells REIT will automatically
become a perpetual life entity, which may no longer have similar goals and
objectives with respect to the resale of properties in the future. In addition,
in the event that the Wells REIT is not listed on a securities exchange by
January 30, 2008, the
15
<PAGE>
organizational documents of the Wells REIT provide for an immediate orderly
liquidation of its assets. In the event of such liquidation, any joint venture
between Wells Fund XIII and the Wells REIT may also be required to sell its
properties at such time even though we may not otherwise desire to do so.
Although the terms of any joint venture agreement between Wells Fund XIII and
the Wells REIT would grant us a right of first refusal to buy such properties,
it is unlikely that we would have sufficient funds to exercise our right of
first refusal under these circumstances.
Under certain joint venture arrangements, neither co-venturer may have the
power to control the venture, and an impasse could be reached regarding matters
pertaining to the joint venture, which might have a negative influence on the
joint venture and decrease potential returns to you. In the event that a co-
venturer has a right of first refusal to buy out the other co-venturer, it may
be unable to finance such buy-out at that time. It may also be difficult for us
to sell our interest in any such joint venture or partnership or as a co-tenant
in property. In addition, to the extent that our co-venturer, partner or co-
tenant is an affiliate of the general partners, certain conflicts of interest
will exist. (See "Conflicts of Interest - Joint Ventures with Affiliates of the
General Partners.")
Our general partners may face conflicts of interest if they purchase units.
Pursuant to the terms of the offering, the general partners or their
affiliates may purchase units for their own account. In addition, our general
partners have broad discretion in choosing between investments in various types
of income-producing and non-income-producing properties, which will affect the
relative performance of cash preferred units and tax preferred units. Under
Section 8.16 of our partnership agreement, our general partners and their
affiliates may only elect the status of cash preferred units. If our general
partners or their affiliates do purchase units, they would then have an
incentive to acquire properties which would produce more favorable results for
investors electing cash preferred units, which could adversely affect investors
electing tax preferred units.
Our general partners may face conflicts of interest when they determine the
fair market value of your units pursuant to the repurchase reserve.
In the event that our general partners establish a repurchase reserve,
after three years the purchase price under the repurchase reserve will be 90% of
the fair market value of your units. Our general partners will determine the
fair market value of your units in accordance with the estimated value of units
determined annually for ERISA purposes. Since we would be using funds that would
otherwise be distributed to investors to fund the repurchase reserve, if
established, our general partners may have an incentive to value your units
lower than an independent third party appraiser. This would adversely affect
those investors who desire to resell their units to Wells Fund XIII pursuant to
the repurchase reserve. (See "Summary of Partnership Agreement - Repurchase of
Units.")
General Investment Risks
The Georgia Revised Uniform Limited Partnership Act (GRULPA) does not grant
you any voting rights and your rights are limited under our partnership
agreement.
A vote of a majority in interest of the limited partners is sufficient to
take the following significant partnership actions:
. to amend our partnership agreement;
. to change our business purpose or our investment objectives;
16
<PAGE>
. to remove our general partners; or
. to authorize a merger or a consolidation of Wells Fund XIII.
These are your only significant voting rights granted under our partnership
agreement. In addition, GRULPA does not grant you any specific voting rights.
Therefore, your voting rights in our operations are severely limited. (See
"Summary of Partnership Agreement - Voting Rights of the Limited Partners.")
You are bound by the majority vote on matters on which you are entitled to
vote.
You may approve any of the above actions by majority vote of the limited
partners. Therefore, you will be bound by such majority vote even if you do not
vote with the majority on any of these actions.
The sale of fewer than 4,500,000 units will result in a less diversified
portfolio of properties.
If we sell less than 4,500,000 units, we will purchase fewer properties
resulting in less diversification in terms of the number of properties owned,
the geographic regions in which our properties are located and the types of
properties we invest in. In addition, the likelihood of our profitability being
affected by any one of our investments will increase. For example, in the event
we only raise the minimum amount of $1,250,000, we may only be able to buy one
property and, therefore, would not achieve any diversification of our assets.
Your investment in units will be subject to greater risk to the extent that we
lack a diversified portfolio of properties.
We are limited in our ability to buy back your units pursuant to the
repurchase reserve.
We may establish a repurchase reserve of up to 5% of cash flow annually for
the purpose of repurchasing your units at a discount. Our general partners,
however, will have the sole discretion in determining whether to establish a
repurchase reserve and as to whether to exercise any such repurchase of your
units. The repurchase reserve may be established only after the expiration of
one year following the end of this offering. If established, our general
partners may cancel the repurchase reserve at any time. Since the establishment
of a repurchase reserve is in the sole discretion of our general partners, we
are under no obligation to establish such a reserve or to repurchase any units
from you. Even if a repurchase reserve is established, our partnership agreement
limits repurchases out of the repurchase reserve to an aggregate of 2% of gross
offering proceeds throughout the life of Wells Fund XIII, excluding repurchases
relating to death or legal incapacity of the owner and repurchases relating to a
substantial reduction in the owner's net worth or income. Accordingly, in
considering an investment in units, you should not assume that you will be able
to sell any of your units back to us. In the event that we do establish a
repurchase reserve, the purchase price will be $8.50 per unit until three years
from the termination of the offering. After three years from the termination of
the offering, the price per unit will be 90% of the fair market value of your
units. The fair market value utilized for purposes of establishing the purchase
price per unit will be the estimated value of units determined annually for
ERISA purposes. (See "Investment by Tax-Exempt Entities and ERISA
Considerations-Annual Valuations"). This means that you would receive less by
selling your units back to us than you would receive if our real estate
investments were sold for their estimated values and such proceeds were
distributed in a liquidation of Wells Fund XIII. (See "Summary of Partnership
Agreement - Repurchase of Units.")
17
<PAGE>
We established the offering price on an arbitrary basis.
Our general partners have arbitrarily determined the selling price of the
units and such price bears no relationship to any established criteria for
valuing issued or outstanding units of limited partnership interest or other
ownership interests at the present time.
Payment of fees to our general partners and their affiliates will reduce
cash available for investment and distribution.
Our general partners and their affiliates will perform services for us in
connection with the offer and sale of the units, the selection and acquisition
of our properties, and the management and leasing of our properties. They will
be paid substantial fees for these services, which will reduce the amount of
cash available for investment in properties or distribution to limited partners.
(See "Compensation of the General Partners and Affiliates.")
The availability and timing of cash distributions is uncertain.
We cannot assure you that sufficient cash will be available to make
distributions to you from either net cash from operations or proceeds from the
sale of properties. We bear all expenses incurred in our operations, which are
deducted from cash funds generated by operations prior to computing the amount
of net cash from operations to be distributed to the general and limited
partners. In addition, our general partners, in their discretion, may retain any
portion of such funds for working capital.
Gains and distributions upon resale of our properties are uncertain.
Although gains from the sales of properties typically represent a
substantial portion of any profits attributable to a real estate investment, we
cannot assure you that we will realize gains on the resales of our properties.
In any event, you should not expect distribution of such proceeds to occur
during the early years of our operations. We will generally not sell properties
developed by us until at least 10 years after completion of the development and
construction of the properties, and receipt of the full proceeds of such sales
may be extended over a substantial period of time following the sales. (See
"Investment Objectives and Criteria - Disposition Policies.") In addition, the
amount of taxable gain allocated to you with respect to the sale of a
partnership property could exceed the cash proceeds received from such sale.
Proceeds from the sale of a property will generally be distributed to
investors. The general partners, in their sole discretion, may not make such
distribution if such proceeds are used to:
. purchase land underlying any of our properties;
. buy out the interest of any co-venturer or joint venture partner in a
property which is jointly owned;
. create working capital reserves; or
. make capital improvements in our existing properties.
The reinvestment of proceeds from the sale of properties will not occur,
however, unless sufficient cash will be distributed to pay any federal or state
income tax liability created by the sale of the property assuming you will be
subject to a 30% combined federal and state tax bracket. (See "Federal Income
Tax Consequences - Sales of Partnership Properties.")
18
<PAGE>
We are uncertain of our sources for funding of future capital needs.
Substantially all of the gross proceeds of the offering will be used for
investment in properties and for payment of various fees and expenses. (See
"Estimated Use of Proceeds.") In addition, we do not anticipate that we will
maintain any permanent working capital reserves. Accordingly, in the event that
we develop a need for additional capital in the future for the improvement of
our properties or for any other reason, we have not identified any sources for
such funding, and we cannot assure you that such sources of funding will be
available to us for potential capital needs in the future.
Earnest money deposits made to Wells Development Corporation for
development of properties may not be refunded.
We may enter into one or more contracts, either directly or indirectly
through joint ventures with affiliates, to acquire real property from Wells
Development Corporation (Wells Development), an affiliate of the general
partners. We will acquire properties from Wells Development that are either
existing income-producing properties or properties to be developed or properties
under development. We anticipate that we will be obligated to pay a substantial
earnest money deposit at the time of contracting to acquire properties. In the
case of properties to be developed by Wells Development, we anticipate we will
be required to close the purchase of the property upon completion of the
development of the property by Wells Development and the tenant taking
possession of the property. At the time of contracting and the payment of the
earnest money deposit by us, Wells Development typically will not have acquired
title to any real property. Wells Development will only have a contract to
acquire land, a development agreement to develop a building on the land, and an
agreement with a tenant to lease the property upon its completion. We may enter
into such a contract with Wells Development even if at the time of contracting
we have not yet raised sufficient proceeds in our offering to enable us to close
the purchase of such property. We will not be required to close a purchase from
Wells Development and will be entitled to a refund of our earnest money in the
following circumstances:
. Wells Development fails to develop the property;
. the tenant fails to take possession under its lease for any reason; or
. we are unable to raise sufficient proceeds from our offering to pay
the purchase price at closing.
The obligation of Wells Development to refund our earnest money is unsecured,
and it is unlikely that we would be able to obtain a refund of such earnest
money deposit from it under these circumstances since Wells Development is an
entity without substantial assets or operations. Although Wells Development's
obligation to refund the earnest money deposit to us under these circumstances
will be guaranteed by Wells Management Company, Inc. (Wells Management), an
affiliated entity, Wells Management has no substantial assets other than
contracts for property management and leasing services pursuant to which it
receives substantial monthly fees. Therefore, we cannot assure you that Wells
Management would be able to refund all of our earnest money deposit in a lump
sum. If we were forced to collect our earnest money deposit by enforcing the
guaranty of Wells Management, we will likely be required to accept installment
payments over time payable out of the revenues of Wells Management's property
management and leasing operations. We cannot assure you that we would be able to
collect the entire amount of our earnest money deposit under such circumstances.
(See "Investment Objectives and Criteria - Acquisition of Properties from Wells
Development Corporation.")
19
<PAGE>
Special Risks Regarding Status of Units
If you elect cash preferred units, you will be allocated more income than
cash flow.
Since investors electing cash preferred units will be allocated
substantially all of Wells Fund XIII's net income, while substantially all
deductions for depreciation and other tax losses will be allocated to investors
electing tax preferred units, we expect that those of you electing cash
preferred units will be allocated taxable income in excess of your cash
distributions. We cannot assure you that cash flow will be available for
distribution in any year.
If you elect tax preferred units, you may not be able to use your passive
losses.
Those of you electing tax preferred units will be allocated a
disproportionately larger share of our deductions for depreciation and other tax
losses. All such losses will be treated as "passive" losses, which may only be
used to offset "passive" income and may not be used to offset active or
portfolio income. Accordingly, you may receive no current benefit from your
share of tax losses unless you are currently being allocated passive income from
other sources.
Your decision to elect cash preferred units or tax preferred units will be
impaired by the unspecified nature of our offering.
As set forth above, our general partners have not identified any properties
in which there is a reasonable probability that we will invest. In addition, our
general partners have broad discretion in choosing between investments in
various types of income-producing and non-income-producing properties, which
will have an effect on the relative performance between cash preferred units and
tax preferred units. We anticipate that investors electing cash preferred units
will benefit to a greater extent than investors electing tax preferred units if
the majority of our investments are in properties which generate relatively high
cash flows but have lower potential for appreciation. Conversely, investors
electing tax preferred units will benefit to a greater extent than investors
electing cash preferred units if a greater percentage of our investments is in
properties generating less current cash flow but having greater potential for
appreciation in value. The unspecified nature of the offering may impair your
ability to make an informed decision as to whether to elect cash preferred units
or tax preferred units in light of the different features of each class of unit.
(See "Investment Objectives and Criteria.")
The desired effect of electing cash preferred units or tax preferred units
may be reduced depending on how many investors elect each type of unit.
You will be entitled to different rights and priorities as to distributions
of cash flow from operations and net sale proceeds and as to the allocation of
depreciation and other tax losses depending upon whether you elect cash
preferred units or tax preferred units. However, the effect of any advantage
associated with the election of cash preferred units or tax preferred units may
be significantly reduced or eliminated, depending upon the ratio of cash
preferred units to tax preferred units during any given period. We will not
restrict the ratio of cash preferred units to tax preferred units, and we will
not attempt to establish or maintain any particular ratio. In the experience of
the general partners in prior Wells programs, the ratio of investors has
typically been approximately 70% to 80% electing cash preferred units and
approximately 20% to 30% electing tax preferred units. Below is a set of
hypothetical scenarios showing the net effect of certain ratios of investors
electing cash preferred units and tax preferred units.
Factual Assumptions: For purposes of the following hypotheticals, we have
assumed that Wells Fund XIII sells $25,000,000 in units (2,500,000 units) and
has $1,250,000 of cash available for distribution and $1,000,000 in tax losses
in the relevant year.
20
<PAGE>
Hypotheticals: The following table shows the allocation of cash flow per
cash preferred unit (CPU) and tax losses per tax preferred unit (TPU) in three
scenarios reflecting different ratios of investors electing cash preferred units
and tax preferred units.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Allocations 90% CPU/10% TPU 75% CPU/25% TPU 50% CPU/50% TPU
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flow per CPU $0.55 $0.67 $1.00
--------------------------------------------------------------------------------------
Tax Losses per TPU $4.00 $1.60 $0.80
--------------------------------------------------------------------------------------
</TABLE>
As shown in these hypotheticals, your receipt of desired benefits upon making
your election of cash preferred units or tax preferred units may vary
significantly depending upon the ratio of investors electing cash preferred
units and tax preferred units.
Real Estate Risks
Your investment will be affected by adverse economic and regulatory
changes.
We will be subject to risks generally incident to the ownership of real
estate, including:
. changes in general economic or local conditions;
. changes in supply of or demand for similar or competing properties in
an area;
. changes in interest rates and availability of permanent mortgage funds
which may render the sale of a property difficult or unattractive;
. changes in tax, real estate, environmental and zoning laws; and
. periods of high interest rates and tight money supply.
For these and other reasons, we cannot assure you that we will be profitable or
that we will realize gains from the sale of our properties.
A property that incurs a vacancy could be difficult to sell or re-lease.
A property may incur a vacancy either by the continued default of a tenant
under its lease or the expiration of one of our leases. Most of our properties
are specifically suited to the particular needs of our tenants. Therefore, we
may have difficulty obtaining a new tenant for any vacant space we have in our
properties. If the vacancy continues for a long period of time, we may suffer
reduced revenues resulting in less cash to be distributed to investors electing
cash preferred units. In addition, the resale value of the property could be
diminished because the market value of a particular property will depend
principally upon the value of the leases of such property.
We are dependent on tenants for our revenue.
Most of our properties are occupied by a single tenant and, therefore, the
success of our investments are materially dependent on the financial stability
of our tenants. Lease payment defaults by tenants could cause us to reduce the
amount of distributions to holders of cash preferred units. A default of a
tenant on its lease payments to us would cause us to lose the revenue from the
property. In the event of a default, we may experience delays in enforcing our
rights as landlord and may incur substantial costs in protecting our investment
and re-letting our property. If a lease is terminated, we cannot assure you
21
<PAGE>
that we will be able to lease the property for the rent previously received or
sell the property without incurring a loss.
We may not have funding for future tenant improvements.
When a tenant at one of our properties does not renew its lease or
otherwise vacates its space in one of our buildings, it is likely that, in order
to attract one or more new tenants, we will be required to expend substantial
funds for tenant improvements and tenant refurbishments to the vacated space.
Substantially all of our net offering proceeds available for investment will be
used for investment in partnership properties, and we do not anticipate that we
will maintain permanent working capital reserves. We also have no identified
funding source to provide funds which may be required in the future for tenant
improvements and tenant refurbishments in order to attract new tenants. We
cannot assure you that any such source of funding will be available to us for
such purposes in the future.
Uninsured losses relating to real property may adversely affect your
returns.
Our general partners will attempt to assure that all of our properties are
insured to cover casualty losses. However, in the event that any of our
properties incurs a casualty loss which is not fully covered by insurance, the
value of our assets will be reduced by any such uninsured loss. In addition, we
have no source of funding to repair or reconstruct the damaged property, and we
cannot assure you that any such source of funding will be available to us for
such purposes in the future.
Development and construction of properties may result in delays and
increased costs and risks.
We may invest some or all of the net proceeds available for investment in
the acquisition and development of properties upon which we will develop and
construct improvements at a fixed contract price. We will be subject to risks
relating to the builder's ability to control construction costs or to build in
conformity with plans, specifications and timetables. The builder's failure to
perform may necessitate legal action by us to rescind the purchase or the
construction contract or to compel performance. Performance may also be affected
or delayed by conditions beyond the builder's control. Delays in completion of
construction could also give lessees the right to terminate pre-construction
leases for space at a newly developed project. We may incur additional risks
when we make periodic progress payments or other advances to such builders prior
to completion of construction. Factors such as those discussed above can result
in increased costs of a project or loss of our investment. In addition, we will
be subject to normal lease-up risks relating to newly constructed projects.
Furthermore, we must rely upon projections of rental income and expenses and
estimates of the fair market value of property upon completion of construction
when agreeing upon a price to be paid for the property at the time of
acquisition of the property. If our projections are inaccurate, we may pay too
much for a property.
Competition for investments may increase costs and reduce returns.
We will experience competition for real property investments from
individuals, corporations and bank and insurance company investment accounts, as
well as other real estate limited partnerships, real estate investment trusts,
and other entities engaged in real estate investment activities. Competition for
investments may have the effect of increasing costs and reducing your returns.
Delays in acquisitions of properties may adversely affect your investment.
Delays we encounter in the selection, acquisition and development of
properties could adversely affect your returns. Where properties are acquired
prior to the start of construction or during the early stages of construction,
it will typically take several months to complete construction and rent
available
22
<PAGE>
space. Therefore, you could suffer delays in the distribution of cash
and you could suffer delays in the availability of income tax deductions for
depreciation and other tax losses to be allocated to you.
Uncertain market conditions and the broad discretion of our general
partners relating to the future disposition of properties could adversely affect
the return on your investment.
We generally will hold the various real properties in which we invest
until such time as the general partners determine that the sale or other
disposition thereof appears to be advantageous to achieve our investment
objectives or until it appears that such objectives will not be met. Our general
partners intend to sell properties acquired for development after holding such
properties for a minimum period of 10 years from the date the development is
completed, and intend to sell existing income-producing properties within 10 to
12 years after their acquisition, or as soon thereafter as market conditions
permit. This is the period of time it typically takes to realize significant
appreciation of the type of property we traditionally invest in. However, our
general partners may exercise their discretion as to whether and when to sell a
property, and we will have no obligation to sell properties at any particular
time, except when a majority of you vote to liquidate Wells Fund XIII in
response to a formal proxy to liquidate. (See "Summary of Partnership Agreement
- Proxy to Liquidate.") We cannot predict with any certainty the various market
conditions affecting real estate investments which will exist at any particular
time in the future. Due to the uncertainty of market conditions which may affect
the future disposition of our properties, we cannot assure you that we will be
able to sell our properties at a profit in the future. Accordingly, the timing
of liquidation of Wells Fund XIII and the extent to which you will receive cash
distributions and realize potential appreciation on our real estate investments
will be dependent upon fluctuating market conditions.
If our general partners purchase environmentally hazardous property,
our operating results could be adversely affected.
Under various federal, state and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property may be
liable for the cost of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. Environmental laws also may impose restrictions
on the manner in which property may be used or businesses may be operated, and
these restrictions may require expenditures. Environmental laws provide for
sanctions in the event of noncompliance and may be enforced by governmental
agencies or, in certain circumstances, by private parties. In connection with
the acquisition and ownership of our properties, we may be potentially liable
for such costs. The cost of defending against claims of liability, of compliance
with environmental regulatory requirements or of remediating any contaminated
property could materially adversely affect the business, assets or results of
operations of Wells Fund XIII and, consequently, amounts available for
distribution to you.
Federal Income Tax Risks
The Internal Revenue Service (IRS) may challenge our characterization
of material tax aspects of your investment in us.
An investment in units involves certain material income tax risks, the
character and extent of which are, to some extent, a function of whether you
elect to have your units treated as cash preferred units or tax preferred units.
You are urged to consult with your own tax advisor with respect to the federal,
as well as state and foreign, tax consequences of an investment in units. We
will not seek any rulings from the IRS regarding any of the tax issues discussed
herein. Further, although we have obtained an opinion from Holland & Knight LLP
(Counsel) regarding the material federal income tax issues
23
<PAGE>
relating to an investment in units (Tax Opinion), you should be aware that the
Tax Opinion represents only Counsel's best legal judgment, based upon
representations and assumptions referred to therein and conditioned upon the
existence of certain facts. The Tax Opinion has no binding effect on the IRS or
any court. Accordingly, we cannot assure you that the conclusions reached in the
Tax Opinion, if contested, would be sustained by any court. In addition, Counsel
is unable to form an opinion as to the probable outcome of the contest of
certain material tax aspects of the transactions described in this prospectus.
Counsel also gives no opinion as to the tax consequences to you of tax issues
which impact at the individual or partner level. Accordingly, you are urged to
consult with and rely upon your own tax advisors with respect to tax issues
which impact at the partner or individual level. (For a more complete discussion
of the tax risks and tax consequences associated with an investment in Wells
Fund XIII, see "Federal Income Tax Consequences.")
Investors may realize taxable income without cash distributions.
A partner in a partnership is required to report his allocable share of
Wells Fund XIII's taxable income on his personal income tax return regardless of
whether or not he has received any cash distributions from Wells Fund XIII. For
example, an investor electing cash preferred units will be allocated
substantially all of our net income, defined in the partnership agreement to
mean generally net income for federal income tax purposes, including any income
exempt from tax, but excluding all deductions for depreciation and amortization
and gain or loss from the sale of partnership properties, even if such income is
in excess of any distributions of cash from operations. Further, an investor who
participates in the distribution reinvestment plan will be allocated his share
of our net income and gain on sale, including net income and gain on sale
allocable to units acquired pursuant to the distribution reinvestment plan, even
though such investor would receive no cash distributions from us. In addition,
an investor electing cash preferred units who purchases units pursuant to the
deferred commission option will be allocated his share of our net income with
respect to such units even though net cash from our operations otherwise
distributable to him will instead be paid to third parties to satisfy the
deferred commission obligations with respect to such units for a period of six
years following the year of purchase, or longer if required to satisfy the
outstanding commission obligation. (See "Plan of Distribution.") Investors
electing cash preferred units will likely be allocated taxable income in excess
of any distributions to them, and the amount of cash received by an investor
could be less than the income tax attributable to the net income allocated to
such investor.
We could potentially be characterized as a publicly traded partnership.
Counsel has given its opinion that it is more likely than not we will
not be classified as a "publicly traded partnership," which is defined generally
as a partnership whose interests are publicly traded or frequently transferred.
However, this opinion is based only upon certain representations of our general
partners and the provisions in our partnership agreement which attempt to comply
with certain safe harbor standards adopted by the IRS. We cannot assure you that
the IRS will not challenge this conclusion or that we will not, at some time in
the future, be treated as a publicly traded partnership due to the following
factors:
. the complex nature of the IRS safe harbors;
. the lack of interpretive guidance with respect to such
provisions; and
. the fact that any determination in this regard will necessarily
be based upon facts which have not yet occurred.
24
<PAGE>
If we become classified as a "publicly traded partnership," we could be taxable
as a corporation, and distributions made to you could be treated as portfolio
income to you rather than passive income.
The deductibility of losses will be subject to passive loss
limitations.
Section 469 of the Internal Revenue Code limits the allowance of
deductions for losses attributable to "passive activities," which are defined
generally as activities in which the taxpayer does not materially participate.
Any tax losses allocated to investors electing tax preferred units will be
characterized as passive losses, and accordingly, the deductibility of such
losses will be subject to these limitations.
The IRS may challenge our allocations of profit and loss.
Counsel has given its opinion that it is more likely than not
partnership items of income, gain, loss, deduction and credit will be allocated
among the general partners and the limited partners substantially in accordance
with the allocation provisions of the partnership agreement. We cannot assure
you, however, that the IRS will not successfully challenge the allocations in
the partnership agreement and reallocate items of income, gain, loss, deduction
and credit in a manner which reduces the anticipated tax benefits to investors
electing tax preferred units or increases the income allocated to investors
electing cash preferred units.
We may be characterized as a dealer.
If we were deemed for tax purposes to be a "dealer," defined as one who
holds property primarily for sale to customers in the ordinary course of
business, with respect to one or more of our properties, any gain recognized
upon a sale of such real property would be taxable to you as ordinary income and
would also constitute "unrelated business taxable income" (UBTI) to investors
who are tax-exempt entities. The resolution of our status in this regard is
dependent upon facts which will not be known until the time a property is sold
or held for sale. Accordingly, Counsel is unable to render an opinion as to
whether we will be considered to hold any or all of our properties primarily for
sale to customers in the ordinary course of business.
We may be audited and additional tax, interest and penalties may be
imposed.
Our federal income tax returns may be audited by the IRS. Any audit of
Wells Fund XIII could result in an audit of your tax return causing adjustments
of items unrelated to your investment in us, in addition to adjustments to
various partnership items. In the event of any such adjustments, you might incur
attorneys' fees, court costs and other expenses contesting deficiencies asserted
by the IRS. You may also be liable for interest on any underpayment and certain
penalties from the date your tax was originally due. The tax treatment of all
partnership items will generally be determined at the partnership level in a
single proceeding rather than in separate proceedings with each partner, and the
general partners are primarily responsible for contesting federal income tax
adjustments proposed by the IRS. In this connection, the general partners may
extend the statute of limitations as to all partners and, in certain
circumstances, may bind the partners to a settlement with the IRS. Further, the
general partners may cause us to elect to be treated as an "electing large
partnership." If they do, we could take advantage of simplified flow-through
reporting of partnership items. Adjustments to partnership items would continue
to be determined at the partnership level, however, and any such adjustments
would be accounted for in the year they take effect, rather than in the year to
which such adjustments relate. Accordingly, if you make an election to change
the status of your units between the years in which a tax benefit is claimed and
an adjustment is made, you may suffer a disproportionate adverse impact with
respect to any such adjustment. Further, the general partners will have the
discretion in such circumstances either to pass
25
<PAGE>
along any such adjustments to the partners or to bear such adjustments at the
partnership level, thereby potentially adversely impacting the holders of a
particular class of units disproportionately to holders of the other class of
units.
State and local taxes and a requirement to withhold state taxes may
apply.
The state in which you are a resident may impose an income tax upon
your share of our taxable income. Further, states in which we will own our
properties may impose income taxes upon your share of our taxable income
allocable to any partnership property located in that state. Many states have
also implemented or are implementing programs to require partnerships to
withhold and pay state income taxes owed by non-resident partners relating to
income-producing properties located in their states, and we may be required to
withhold state taxes from cash distributions otherwise payable to you. In the
event we are required to withhold state taxes from your cash distributions, the
amount of the net cash from operations otherwise payable to you may be reduced.
In addition, such collection and filing requirements at the state level may
result in increases in our administrative expenses which would have the effect
of reducing cash available for distribution to you. You are urged to consult
with your own tax advisors with respect to the impact of applicable state and
local taxes and state tax withholding requirements on an investment in units.
Legislative or regulatory action could adversely affect investors.
In recent years, numerous legislative, judicial and administrative
changes have been made in the provisions of the federal income tax laws
applicable to investments similar to an investment in units. Additional changes
to the tax laws are likely to continue to occur in the future, and we cannot
assure you that any such changes will not adversely affect the taxation of a
limited partner. Any such changes could have an adverse effect on an investment
in units or on the market value or the resale potential of our properties. You
are urged to consult with your own tax advisor with respect to the impact of
recent legislation on your investment in units and the status of legislative,
regulatory or administrative developments and proposals and their potential
effect on an investment in units. You should also note that the Tax Opinion
assumes that no legislation will be enacted after the date of this prospectus
which will be applicable to an investment in units.
Retirement Plan and Qualified Plan Risks
There are special considerations that apply to pension or profit
sharing trusts or IRAs investing in units.
If you are investing the assets of a pension, profit sharing, Section
401(k), Keogh or other qualified retirement plan or the assets of an IRA in
units, you should satisfy yourself that:
. your investment is consistent with your fiduciary obligations
under ERISA and the Internal Revenue Code;
. your investment is made in accordance with the documents and
instruments governing your plan or IRA, including your plan's
investment policy;
. your investment satisfies the prudence and diversification
requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA;
. your investment will not impair the liquidity of the plan or IRA;
26
<PAGE>
. your investment will not produce "unrelated business taxable
income" for the plan or IRA;
. you will be able to value the assets of the plan annually in
accordance with ERISA requirements; and
. your investment will not constitute a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Internal
Revenue Code.
For a more complete discussion of the foregoing issues and other risks
associated with an investment in units by retirement plans, see "Investment By
Tax-Exempt Entities and ERISA Considerations" section of this prospectus on page
___.
We may terminate the offering or dissolve Wells Fund XIII if our assets
are deemed to be plan assets or if we engage in prohibited transactions.
If our assets were deemed to be assets of qualified plans investing as
limited partners, i.e., plan assets, the general partners would be considered to
be plan fiduciaries and certain contemplated transactions described herein may
be deemed to be "prohibited transactions" subject to excise taxation under
Section 4975 of the Internal Revenue Code. Additionally, if our assets were
deemed to be plan assets, the standards of prudence and other provisions of
ERISA would extend as to all plan fiduciaries to the general partners with
respect to our investments. We have not requested an opinion of Counsel
regarding whether or not our assets would constitute plan assets under ERISA nor
have we sought any rulings from the U.S. Department of Labor regarding
classification of our assets.
In this regard, U.S. Department of Labor Regulations defining plan
assets for purposes of ERISA contain exemptions which, if satisfied, would
preclude assets of a limited partnership such as ours from being treated as plan
assets. We cannot assure you that the partnership agreement and the offering
have been structured so that the exemptions in such Regulations would apply to
us, and although the general partners intend that an investment by a qualified
plan in units not be deemed an investment in the assets of Wells Fund XIII, we
can make no representations or warranties of any kind regarding the consequences
of an investment in units by qualified plans in this regard. Plan fiduciaries
are urged to consult with and rely upon their own advisors with respect to this
and other ERISA issues which, if decided adversely to Wells Fund XIII, could
result in "prohibited transactions," which would cause the imposition of excise
taxation and the imposition of co-fiduciary liability under Section 405 of ERISA
in the event actions undertaken by us are deemed to be non-prudent investments
or "prohibited transactions."
In the event our assets are deemed to constitute plan assets or certain
transactions undertaken by us are deemed to constitute "prohibited transactions"
under ERISA or the Internal Revenue Code, and no exemption for such transactions
is obtainable by us, the general partners have the right, but not the
obligation, upon notice to all limited partners, but without the consent of any
limited partner to:
. terminate the offering of units;
. compel a termination and dissolution of Wells Fund XIII; or
. restructure our activities to the extent necessary to comply with
any exemption in the Department of Labor Regulations or any
prohibited transaction exemption granted by the Department of
Labor or any condition which the Department of Labor might
27
<PAGE>
impose as a condition to granting a prohibited transaction
exemption. (See "Investment by Tax-Exempt Entities and ERISA
Considerations.")
Adverse tax consequences may result because of minimum distribution
requirements.
If you intend to purchase units through your Individual Retirement
Account (IRA), or if you are a trustee of an IRA or other fiduciary of a
retirement plan considering an investment in units, you must consider the
limited liquidity of an investment in units as it relates to applicable minimum
distribution requirements under the Internal Revenue Code. If units are held and
our properties have not yet been sold at such time as mandatory distributions
are required to begin to an IRA beneficiary or qualified plan participant,
Sections 408(a)(6) and 401(a)(9) of the Internal Revenue Code will likely
require that a distribution in kind of the units be made to the IRA beneficiary
or qualified plan participant. Any such distribution in kind of units must be
included in the taxable income of the IRA beneficiary or qualified plan
participant for the year in which the units are received at the fair market
value of the units without any corresponding cash distributions with which to
pay the income tax liability attributable to any such distribution.
Unrelated business taxable income (UBTI) may be generated with respect
to tax-exempt investors.
We do not intend or anticipate that the tax-exempt investors in Wells
Fund XIII will be allocated income deemed to be derived from an unrelated trade
or business, which is generally referred to as "UBTI." Further, Wells Fund XIII
will never incur indebtedness to acquire its properties, which would cause
recharacterization of a portion of our income allocable to tax-exempt investors
as UBTI. Notwithstanding this prohibition, the general partners do have limited
authority to borrow funds deemed necessary:
. to finance improvements necessary to protect capital previously
invested in a property;
. to protect the value of our investment in a property; or
. to make one of our properties more attractive for sale or lease.
Our general partners have represented that they will not cause Wells Fund XIII
to incur indebtedness unless they obtain an opinion of Counsel or an opinion
from our tax accountants that the proposed indebtedness more likely than not
will not cause the income allocable to tax-exempt investors to be characterized
as UBTI. Any such opinion will have no binding effect on the IRS or any court.
Therefore, some risk remains that we may generate UBTI for our tax-exempt
investors in the event that it becomes necessary for us to borrow funds.
Further, in the event we are deemed to be a "dealer" in real property,
defined as one who holds real estate primarily for sale to customers in the
ordinary course of business, the gain realized on the sale of our properties
which is allocable to tax-exempt investors would be characterized as UBTI. (See
"Federal Income Tax Consequences - Investment by Qualified Plans and Other
Tax-Exempt Entities.")
Suitability Standards
An investment in Wells Fund XIII involves significant risks. It may be
difficult to resell partnership units due to the restrictions on transferability
contained in our partnership agreement and because no public market for the
units currently exists nor is one ever expected to develop. Investors who
28
<PAGE>
are able to sell their units at all will likely be able to sell such units only
at a discount. (See "Summary of Partnership Agreement - Limited Transferability
of Units.") In addition, it is contemplated that properties we purchase will be
held for at least 10 years. Accordingly, the units we are offering are suitable
only as a long-term investment for persons of adequate financial means. Further,
because cash preferred units and tax preferred units have different rights and
priorities with respect to tax allocations and cash distributions from
operations and on sale of our properties, you should consider carefully the
information set forth under "Description of the Units" in determining whether to
elect cash preferred units or tax preferred units, or some combination of each.
If the investor is an individual, including an individual beneficiary
of a purchasing IRA, or if the investor is a fiduciary, such as a trustee of a
trust or corporate pension or profit sharing plan, or other tax-exempt
organization, or a custodian under a Uniform Gifts to Minors Act, such
individual or fiduciary, as the case may be, must represent that he meets
certain requirements. The requirements are set out in the Subscription Agreement
attached as Exhibit "B" to this prospectus, and include the following:
. that such individual, or, in the case of a fiduciary, that the
fiduciary account or the donor who directly or indirectly
supplies the funds to purchase the units, has a minimum annual
gross income of $45,000 and a net worth excluding home,
furnishings and automobiles of not less than $45,000; or
. that such individual, or, in the case of a fiduciary, that the
fiduciary account or the donor who directly or indirectly
supplies the funds to purchase the units, has a net worth
excluding home, furnishings and automobiles of not less than
$150,000.
Transferees will also be required to comply with applicable standards,
except for transfers to family members and transfers made by gift, inheritance
or divorce. In the case of purchases of units by fiduciary accounts in
California, the suitability standards must be met by the beneficiary of the
account or, in those instances where the fiduciary directly or indirectly
supplies the funds for the purchase of units, by such fiduciary.
The minimum purchase is 100 units ($1,000) except in certain states as
described below. You may not transfer less than the minimum required purchase,
nor except in very limited circumstances, transfer, fractionalize or subdivide
such units so as to retain less than such minimum number thereof. For purposes
of satisfying the minimum investment requirement for retirement plans, unless
otherwise prohibited by state law, a husband and wife may jointly contribute
funds from their separate IRAs, provided that they contribute in increments of
at least $25. It should be noted, however, that an investment in Wells Fund XIII
will not, in itself, create a retirement plan as defined in Section 401(a) of
the Internal Revenue Code or an IRA as defined in Section 408(a) of the Internal
Revenue Code for any investor and that, in order to create a retirement plan or
an IRA, an investor must comply with all applicable provisions of the Internal
Revenue Code. Except in Maine, Minnesota, Nebraska and Washington, investors who
have satisfied the minimum purchase requirements and have purchased units in
Wells programs or units or shares in other public real estate programs may
purchase less than the minimum number of units set forth above, but in no event
less than 2.5 units ($25). After an investor has purchased the minimum
investment, any additional investments must be made in increments of at least
2.5 units ($25), except for (1) those made by investors in Maine, who must still
meet the minimum investment requirement for Maine residents of $1,000 for IRAs
and $2,500 for non-IRAs, and (2) purchases of units pursuant to our distribution
reinvestment plan or reinvestment plans of other public real estate programs,
which may be in lesser amounts.
We have listed the suitability standards in the following table for
those states that have any requirements different from those set by Wells Fund
XIII.
29
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Income/Net Worth Minimum
State Requirements Purchase Other Limitations
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona (1) Current annual gross income 100 units ($1,000) N/A
of $60,000 and net worth of
$60,000, or (2) net worth of
$225,000
-------------------------------------------------------------------------------------------------------------------------------
California (1) Current annual gross income 100 units ($1,000) The following legend must be placed on
of $60,000 and net worth of each certificate: "It is unlawful to
$60,000, or (2) net worth of consummate a sale or transfer of this
$225,000 security, or any interest therein, or to
receive any consideration therefor, without the
prior written consent of the Commissioner of
Corporations of the State of California, except
as permitted in the Commissioner's rules."
-------------------------------------------------------------------------------------------------------------------------------
Florida (1) Current annual gross income 100 units ($1,000) Units of subsequent partnership
of $45,000 and net worth of reinvestment plan must be registered or
$45,000, or (2) net worth of exempt from registration in Florida, and
$150,000 such units must be purchased from a
Florida broker.
-------------------------------------------------------------------------------------------------------------------------------
Iowa (1) Current annual gross income 200 units ($2,000) Husband and wife may not jointly
of $45,000 and net worth of contribute from separate IRAs to satisfy
$45,000, or (2) net worth of minimum purchase.
$150,000
-------------------------------------------------------------------------------------------------------------------------------
Maine (1) Current annual gross income 250 units ($2,500); Husband and wife may not jointly
of $50,000 and net worth of 200 units ($2,000) for contribute from separate IRAs to satisfy
$50,000, or (2) net worth of IRAs minimum purchase.
$200,000
-------------------------------------------------------------------------------------------------------------------------------
Massachusetts (1) Current annual gross income 100 units ($1,000) N/A
of $60,000 and net worth of
$60,000, or (2) net worth of
$225,000
-------------------------------------------------------------------------------------------------------------------------------
Michigan (1) Current annual gross income 100 units ($1,000) Investor may not invest more than 10% of
of $45,000 and net worth of net worth.
$45,000, or (2) net worth of
$150,000
-------------------------------------------------------------------------------------------------------------------------------
Minnesota (1) Current annual gross income 250 units ($2,500); 200 N/A
of $45,000 and net worth of units ($2,000) for IRAs
$45,000, or (2) net worth of and qualified retirement
$150,000 plans
-------------------------------------------------------------------------------------------------------------------------------
Mississippi (1) Current annual gross income 100 units ($1,000) N/A
of $60,000 and net worth of
$60,000, or (2) net worth of
$225,000
-------------------------------------------------------------------------------------------------------------------------------
Missouri (1) Current annual gross income 100 units ($1,000) Husband and wife may not jointly
of $60,000 and net worth of contribute from separate IRAs to satisfy
$60,000, or (2) net worth of minimum purchase.
$225,000
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Income/Net Worth Minimum
State Requirements Purchase Other Limitations
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nebraska (1) Current annual gross income 500 units ($5,000) Investments in additional units pursuant
of $45,000 and net worth of except for IRAs and to reinvestment plan must be at least $50
$45,000, or (2) net worth of qualified retirement per year and made through a Nebraska
$150,000 plans broker.
-------------------------------------------------------------------------------------------------------------------------------
New Hampshire (1) Current annual gross income 100 units ($1,000) N/A
of $50,000 and net worth of
$125,000, or (2) net worth of
$250,000
-------------------------------------------------------------------------------------------------------------------------------
New York (1) Current annual gross income 250 units ($2,500) No proceeds from New York investors
of $50,000 and net worth of except for IRAs released from escrow until $2,500,000
$50,000, or (2) net worth of raised in offering.
$150,000
-------------------------------------------------------------------------------------------------------------------------------
North Carolina (1) Current annual gross income 250 units ($2,500) N/A
of $45,000 and net worth of except for IRAs and
$45,000, or (2) net worth of qualified retirement
$150,000 plans
-------------------------------------------------------------------------------------------------------------------------------
Ohio (1) Current annual gross income 250 units ($2,500) Investor may not invest more than 10% of
of $45,000 and net worth of except for IRAs net worth.
$45,000, or (2) net worth of
$150,000
-------------------------------------------------------------------------------------------------------------------------------
Oklahoma (1) Current annual gross income 100 units ($1,000) Husband and wife may not jointly
of $45,000 and net worth of contribute from separate IRAs to satisfy
$45,000, or (2) net worth of minimum purchase.
$150,000
-------------------------------------------------------------------------------------------------------------------------------
Oregon (1) Current annual gross income 100 units ($1,000) N/A
of $60,000 and net worth of
$60,000, or (2) net worth of
$225,000
-------------------------------------------------------------------------------------------------------------------------------
Pennsylvania (1) Current annual gross income 100 units ($1,000) Investor must have a net worth of at least
of $45,000 and net worth of ten times amount of investment in the
$45,000, or (2) net worth of partnership. Subscription proceeds from
$150,000 PA investors held in escrow until
$2,500,000 raised from all investors. If proceeds
held in escrow more than 120 days, funds returned
to investors unless they choose to reinvest.
-------------------------------------------------------------------------------------------------------------------------------
South Carolina (1) Net worth of $150,000, or 250 units ($2,500) N/A
(2) State and federal income except IRAs and
subject to maximum rate of qualified retirement
income tax plans
-------------------------------------------------------------------------------------------------------------------------------
South Dakota (1) Current annual gross income 100 units ($1,000) N/A
of $60,000 and net worth of
$60,000, or (2) net worth of
$225,000
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Income/Net Worth Minimum
State Requirements Purchase Other Limitations
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tennessee (1) Current annual gross income 100 units ($1,000) N/A
of $60,000 and net worth of
$60,000, or (2) net worth of
$225,000
-------------------------------------------------------------------------------------------------------------------------------
Texas (1) Current annual gross income 100 units ($1,000) Investments through reinvestment plan must
of $45,000 and net worth of be made through Texas registered broker.
$45,000, or (2) net worth of
$150,000
-------------------------------------------------------------------------------------------------------------------------------
Wisconsin (1) Current annual gross income 100 units ($1,000) Husband and wife may not jointly
of $45,000 and net worth of contribute from separate IRAs to satisfy
$45,000, or (2) net worth of minimum purchase.
$150,000
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net worth in all cases excludes home, furnishings and automobiles.
By executing the Subscription Agreement and Subscription Agreement
Signature Page (collectively, the "Subscription Agreement"), which is attached
as Exhibit "B" to this prospectus, you represent to our general partners that
you meet the foregoing applicable suitability standards for the state in which
you reside. Our general partners will not accept subscriptions from any person
or entity which does not represent that it meets such standards. Our general
partners have the unconditional right to accept or reject any subscription in
whole or in part.
Our general partners and each person selling units on our behalf are
required to:
. make reasonable efforts to assure that each person purchasing our
units is suitable in light of such person's age, educational
level, knowledge of investments, financial means and other
pertinent factors; and
. maintain records for at least six years of the information used
to determine that an investment in units is suitable and
appropriate for each investor.
The agreements with the selling broker-dealers require such
broker-dealers to (1) make inquiries diligently as required by law of all
prospective investors in order to ascertain whether a purchase of units is
suitable for the investor, and (2) transmit promptly to Wells Fund XIII all
fully completed and duly executed Subscription Agreements.
Investment Objectives and Criteria
General
We invest in commercial real properties, including properties which are
under development or construction, are newly constructed or have been
constructed and have operating histories. Our investment objectives are:
. to maximize net cash from operations;
. to preserve, protect and return capital contributions; and
. to realize capital appreciation upon the ultimate sale of
properties.
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<PAGE>
We cannot assure you that we will attain these objectives or that our capital
will not decrease. We may not change our investment objectives except upon
approval of limited partners holding a majority of the units.
Decisions relating to the purchase or sale of properties will be made
by our general partners. See "Management" for a description of the background
and experience of our general partners.
Acquisition and Investment Policies
We will seek to invest substantially all of the net offering proceeds
available for investment after the payment of fees and expenses on an all cash
basis in the acquisition of high grade commercial office buildings, which are
newly constructed, under construction, or which have been previously constructed
and have operating histories. The general partners are not limited to such
investments, however. The general partners may invest in other commercial
properties such as shopping centers, business and industrial parks,
manufacturing facilities and warehouse and distribution facilities. The general
partners will primarily attempt to acquire commercial properties which are
generally less than five years old, the space in which has been leased or
preleased to one or more large corporate tenants who satisfy the general
partners' standards of creditworthiness. (See "Terms of Leases and Tenant
Creditworthiness.") We may, however, invest in commercial properties which are
not preleased to such tenants or in other types of commercial properties such as
hotels or motels. We will not be actively engaged in the business of operating
hotels, motels or similar properties. The trend of the general partners in the
most recently sponsored Wells programs has been to invest primarily in office
buildings located in densely populated suburban markets. (See "Prior Performance
Summary.")
We will seek to invest in properties that will satisfy the primary
objective of providing distributions of current cash flow to holders of cash
preferred units. However, because a significant factor in the valuation of
income-producing real properties is their potential for future income, the
general partners anticipate that the majority of properties acquired by Wells
Fund XIII will have both the potential for capital appreciation and
distributions of current cash flow to investors. To the extent feasible, the
general partners will strive to invest in a diversified portfolio of properties,
both in terms of geography and type of property, that will satisfy Wells Fund
XIII's investment objectives of maximizing net cash from operations, preserving
investors' capital and realizing capital appreciation upon the ultimate sale of
properties.
We anticipate that a minimum of 84% of the proceeds from the sale of
units will be used to acquire real estate properties and the balance will be
used to pay various fees and expenses. (See "Estimated Use of Proceeds.")
We will not invest more than 15% of the net offering proceeds available
for investment in non-income producing properties. A property which is expected
to produce income within two years of its acquisition will not be considered a
non-income producing property. We will not acquire a property in exchange for
units.
Our investment in real estate generally will take the form of holding
fee title or a leasehold estate having a term, including renewal periods, of at
least 40 years. We will acquire such interest either directly or indirectly
through investments in joint ventures, general partnerships, co-tenancies or
other co-ownership arrangements with the developers of the properties,
affiliates of the general partners or other persons. (See "Joint Venture
Investments" below.) In addition, we may purchase properties and lease them back
to the sellers of such properties. While we will use our best efforts to
structure any such sale-leaseback transaction such that the lease will be
characterized as a "true lease" so that Wells Fund XIII will be treated as the
owner of the property for federal income tax purposes, no assurance can be given
33
<PAGE>
that the IRS will not challenge such characterization. In the event that any
such sale-leaseback transaction is recharacterized as a financing transaction
for federal income tax purposes, deductions for depreciation and cost recovery
relating to such property would be disallowed, and our income therefrom could be
treated as portfolio income, rather than passive income. (See "Federal Income
Tax Consequences - Taxation of Real Estate Operations - Characterization of
Leases.")
We are not limited as to the geographic area where we may conduct our
operations, but we intend to invest in properties located in the United States.
We are not specifically limited on the number or size of properties we
may acquire or on the percentage of net proceeds of this offering which we may
invest in a single property. The number and mix of properties we acquire will
depend upon real estate and market conditions and other circumstances existing
at the time we are acquiring our properties and the amount of proceeds we raise
in this offering.
In making investment decisions for us, we will consider relevant real
estate property and financial factors, including the location of the property,
its suitability for any development contemplated or in progress, its
income-producing capacity, the prospects for long-range appreciation, its
liquidity and income tax considerations. In this regard, we will have
substantial discretion with respect to the selection of our specific
investments.
We will obtain independent appraisals for each property in which we
invest, and the purchase price of each such property will not exceed its
appraised value. However, we will rely on our own independent analysis and not
on such appraisals in determining whether to invest in a particular property. It
should be noted that appraisals are estimates of value and should not be relied
upon as measures of true worth or realizable value. Copies of these appraisals
will be available for review and duplication by investors at our office and will
be retained for at least five years.
Our obligation to close the purchase of any investment will generally
be conditioned upon the delivery and verification of certain documents from the
seller or developer, including, where appropriate:
. plans and specifications;
. environmental reports;
. surveys;
. evidence of marketable title subject to such liens and
encumbrances as are acceptable to our general partners;
. audited financial statements covering recent operations of any
properties having operating histories unless such statements are
not required to be filed with the Securities and Exchange
Commission and delivered to investors; and
. title and liability insurance policies.
We will not close the purchase of any property unless and until we
obtain an environmental assessment, a minimum of a Phase I review, for each
property purchased and are generally satisfied with the environmental status of
the property.
We may also enter into arrangements with the seller or developer of a
property whereby the seller or developer agrees that if during a stated period
the property does not generate a specified cash flow, the
34
<PAGE>
seller or developer will pay in cash to Wells Fund XIII a sum necessary to reach
the specified cash flow level, subject in some cases to negotiated dollar
limitations.
In determining whether to purchase a particular property, we may, in
accordance with customary practices, obtain an option on such property. The
amount paid for an option, if any, is normally surrendered if the property is
not purchased and is normally credited against the purchase price if the
property is purchased.
In purchasing, leasing and developing real estate properties, we will
be subject to risks generally incident to the ownership of real estate,
including:
. changes in general economic or local conditions;
. changes in supply of or demand for similar or competing
properties in an area;
. changes in interest rates and availability of permanent mortgage
funds which may render the sale of a property difficult or
unattractive;
. changes in tax, real estate, environmental and zoning laws;
. periods of high interest rates and tight money supply which may
make the sale of properties more difficult;
. tenant turnover; and
. general overbuilding or excess supply in the market area.
Periods of high interest rates and tight money supply may make the sale
of properties more difficult. We may experience difficulty in keeping the
properties fully leased due to tenant turnover, general overbuilding or excess
supply in the market area.
Development and Construction of Properties
We may invest substantially all of the net proceeds available for
investment in properties on which improvements are to be constructed or
completed although we may not invest in excess of 15% of the net offering
proceeds available for investment in properties which are not expected to
produce income within two years of their acquisition. To help ensure performance
by the builders of properties which are under construction, completion of
properties under construction shall be guaranteed at the price contracted either
by an adequate completion bond or performance bond, or, in appropriate
circumstances, our general partners may rely upon the substantial net worth of
the contractor or developer or a personal guarantee accompanied by financial
statements showing a substantial net worth provided by an affiliate of the
person entering into the construction or development contract as an alternative
to a completion bond or performance bond. Development of real estate properties
is subject to risks relating to a builder's ability to control construction
costs or to build in conformity with plans, specifications and timetables. (See
"Risk Factors - Real Estate Risks.")
We may make periodic progress payments or other cash advances to
developers and builders of our properties prior to completion of construction
only upon receipt of an architect's certification as to the percentage of the
project then completed and as to the dollar amount of the construction then
completed. We intend to use such additional controls on disbursements to
builders and developers as we deem necessary or prudent.
35
<PAGE>
We may directly employ one or more project managers to plan, supervise
and implement the development of any unimproved properties which we may acquire.
Such persons would be compensated directly by Wells Fund XIII and, other than
through such employment, will not be affiliated with our general partners.
Acquisition of Properties from Wells Development Corporation
We may acquire properties, directly or through joint ventures with
affiliated entities, from Wells Development Corporation (Wells Development), a
Georgia corporation formed by Wells Management as a wholly owned subsidiary for
the purposes of (1) acquiring existing income-producing commercial real estate
properties, and (2) acquiring land, developing commercial real properties,
securing tenants for such properties, and selling such properties upon
completion to Wells Fund XIII or other Wells programs. In the case of properties
to be developed by Wells Development and sold to us, we anticipate that Wells
Development will:
. acquire a parcel of land;
. enter into contracts for the construction and development of a
commercial building thereon;
. enter into an agreement with one or more tenants to lease all or
a majority of the property upon its completion; and
. secure a financing commitment from a commercial bank or other
institutional lender to finance the acquisition and development
of the property.
Our contracts with Wells Development will provide for us to acquire the
developed property only upon its completion and upon the tenant taking
possession under its lease. All construction required to develop a parcel of
land acquired by Wells Development will be performed by one or more companies
which are independent of Wells Development, our general partners and their
affiliates.
We will be required to pay a substantial sum to Wells Development at
the time of entering into the contract as a refundable earnest money deposit to
be credited against the purchase price at closing, which Wells Development will
apply to the cost of acquiring the land and initial development costs. We
anticipate that the earnest money deposit will represent approximately twenty to
thirty percent (20-30%) of the purchase price of the developed property set
forth in the purchase contract. The purchase price for the developed property to
be paid by us to Wells Development will not exceed the cost to Wells Development
of the acquisition, construction and development of the project, including
interest and other carrying costs to Wells Development. All profits and losses
during the period any such property is held by Wells Development will accrue to
Wells Fund XIII, and no other benefit will accrue to Wells Development or its
affiliates from the sale of such property except for acquisition and advisory
fees payable to the general partners or their affiliates which are described in
detail elsewhere in this prospectus. (See "Compensation of the General Partners
and Affiliates.")
In the case of properties we acquire from Wells Development that have
already been developed, Wells Development will be required to obtain an
appraisal for the property prior to contracting with us, and the purchase price
we pay under the purchase contract will not exceed the fair market value of the
property as determined by the appraisal. In the case of properties we acquire
from Wells Development which have not yet been constructed at the time of
contracting, Wells Development will be required to obtain an independent "as
built" appraisal for the property prior to contracting with us, and the purchase
36
<PAGE>
price we pay under the purchase contract will not exceed the anticipated fair
market value of the developed property as determined by the appraisal.
We anticipate that Wells Development will use the earnest money deposit
received from Wells Fund XIII upon execution of a purchase contract as partial
payment for the cost of the acquisition of the land and construction
expenditures. Wells Development will borrow the remaining funds necessary to
complete the development of the property from an independent commercial bank or
other institutional lender by pledging the real property, development contracts,
leases and all other contract rights relating to the project as security for
such borrowing. Our contract with Wells Development will require Wells
Development to deliver to us at closing title to the property, as well as an
assignment of leases, free and clear of all encumbrances relating to any such
borrowing. In no event will we take title to the property subject to a mortgage
or otherwise incur indebtedness in connection with the acquisition of such
property. Wells Development will hold the title to the property on a temporary
basis only for the purpose of facilitating the acquisition and development of
the property prior to its resale to us and other affiliates of the general
partners. Wells Development will not hold title to any such property for more
than 12 months prior to reselling to Wells Fund XIII. We may not acquire any
property which is currently owned by Wells Development as of the date of this
prospectus.
We may enter into a contract to acquire property from Wells Development
notwithstanding the fact that at the time of contracting, we have not yet raised
sufficient proceeds to enable us to pay the full amount of the purchase price at
closing. We anticipate that we will be able to raise sufficient additional
proceeds from our offering during the period between any such execution of the
contract and the date provided in the contract for closing. In the case of
properties to be developed by Wells Development, the contract will likely
provide that the closing will occur immediately following the completion of the
development by Wells Development. However, it is likely that the contract will
also provide that we may elect to close the purchase of the property before the
development has been completed, in which case we would obtain an assignment of
the construction and development contracts from Wells Development and would
complete the construction either directly or through a joint venture with an
affiliate. Any contract between Wells Fund XIII, directly or indirectly through
a joint venture with an affiliate, and Wells Development for the purchase of
property to be developed by Wells Development will provide that we will be
obligated to purchase the property only if:
. Wells Development completes the development of the improvements
in accordance with the specifications of the contract, and an
approved tenant takes possession of the building under a lease
satisfactory to Wells Fund XIII; and
. we have sufficient net proceeds available for investment in
properties at closing to pay the balance of the purchase price
remaining after payment of the earnest money deposit.
Our general partners will not cause us to enter into a contract to
acquire property from Wells Development if they do not reasonably anticipate
that funds will be available to purchase the property at the time of closing. If
we enter into a contract to acquire property from Wells Development and, at the
time for closing, are unable to purchase the property because we do not have
sufficient net proceeds available for investment, we will not be required to
close the purchase of the property and will be entitled to a refund of our
earnest money deposit from Wells Development. Because Wells Development is an
entity without substantial assets or operations, however, Wells Development's
obligation to refund our earnest money deposit will be guaranteed by Wells
Management. See the "Management" section of this prospectus for a description of
Wells Management.
If Wells Management is required to make good on its guaranty, we may
not be able to obtain the earnest money deposit from Wells Management in a lump
sum since Wells Management's only
37
<PAGE>
significant assets are its contracts for property management and leasing
services, but would more likely be required to accept installment payments over
some period of time payable out of Wells Management's operating revenues. (See
"Risk Factors - Investment Risks.")
Terms of Leases and Tenant Creditworthiness
The terms and conditions of any lease we enter into with regard to a
tenant may vary substantially from those described herein; however, a majority
of our leases are expected to be what is generally referred to as "triple net"
leases. A "triple net" lease provides that the tenant will be required to pay or
reimburse us for all real estate taxes, sales and use taxes, special
assessments, utilities, insurance and building repairs, in addition to making
its lease payments.
Our general partners have developed specific standards for determining
the creditworthiness of potential tenants of our properties. While authorized to
enter into leases with any type of tenant, our general partners anticipate that
a majority of the tenants of our properties will be corporations or other
entities each of which has a net worth in excess of $100,000,000 or whose lease
obligations are guaranteed by another corporation or entity with a net worth in
excess of $100,000,000. For the fiscal year ended December 31, 2000,
approximately ___% of the aggregate gross rental income of the public real
estate programs sponsored by the general partners and their affiliates was
derived from tenants which are corporations, each of which has a net worth of at
least $100,000,000 or whose lease obligations are guaranteed by another
corporation having a net worth of at least $100,000,000.
In an attempt to limit or avoid speculative purchases, to the extent
possible, our general partners will seek to secure leases with tenants at or
prior to the closing of our acquisition of properties.
We anticipate that tenant improvements required to be funded by the
landlord in connection with newly acquired properties will be funded from our
net proceeds available for investment. However, at such time as a tenant at one
of our properties does not renew its lease or otherwise vacates its space in one
of our buildings, it is likely that, in order to attract new tenants, we will be
required to expend substantial funds for tenant improvements and tenant
refurbishments to the vacated space. Since we do not anticipate maintaining
permanent working capital reserves, we may not have access to funds required in
the future for tenant improvements and tenant refurbishments in order to attract
new tenants to lease vacated space. (See "Risk Factors - Real Estate Risks.")
Borrowing Policies
We will not borrow money to acquire any of our properties. Further, as
a matter of partnership policy, our general partners do not intend to cause us
to borrow any funds subsequent to the acquisition of its properties. However, in
order to give our general partners flexibility in the management of Wells Fund
XIII, section 11.3(e) of our partnership agreement authorizes us to borrow funds
for the following limited purposes:
. for partnership operating purposes in the event of unexpected
circumstances in which our cash resources become insufficient for
the maintenance and repair of our properties or for the
protection or replacement of assets; and
. in order to finance improvement of properties, when our general
partners deem such improvements to be necessary or appropriate to
protect the capital previously invested in the properties, to
protect the value of our investment in a particular property, or
to make a particular property more attractive for sale or lease.
38
<PAGE>
We may not borrow funds for any other purposes. Further, the aggregate
amount of partnership borrowings at any given time may not exceed 25% of the
total purchase price of all of our properties. (See section 11.3(e) of the
partnership agreement.)
Our general partners have also represented that they will not cause
Wells Fund XIII to incur indebtedness unless we first obtain an opinion of
counsel or an opinion from our tax accountants that the indebtedness to be
obtained more likely than not will not cause our income to be characterized by
the IRS as "unrelated business taxable income" as defined in Section 512 of the
Internal Revenue Code. Investors should be aware, however, that any such opinion
would be based upon various representations and assumptions, and would have no
binding effect on the IRS or any court. Accordingly, no assurance can be given
that the conclusions reached in any such opinion, if contested, would be
sustained by a court, or that any such indebtedness to be obtained by Wells Fund
XIII in the future would not cause the income allocated to limited partners that
are tax-exempt entities to be taxed as "unrelated business taxable income." (See
"Federal Income Tax Consequences - Investment by Qualified Plans and Other
Tax-Exempt Entities.") We will not incur debt to fund distributions to
investors.
We may borrow funds from our general partners or their affiliates for
the purposes listed above only if the following qualifications are met:
. any such borrowing cannot constitute a "financing" as that term
is defined under the NASAA Guidelines, i.e., indebtedness
encumbering partnership properties or incurred by the
partnership, the principal amount of which is scheduled to be
paid over a period of not less than 48 months, and not more than
50% of the principal amount of which is scheduled to be paid
during the first 24 months;
. interest and other financing charges or fees must not exceed the
amounts which would be charged by unrelated lending institutions
on comparable financing for the same purpose in the same locality
as our principal place of business; and
. no prepayment charge or penalty shall be required. (See section
11.3(e) of the partnership agreement.)
Our general partners have agreed to advance Wells Fund XIII on an interest-free
basis an aggregate amount of up to 1.0% of gross offering proceeds to the extent
that we have insufficient funds for maintenance and repair of its properties.
Except in connection with a potential borrowing as described above, we
will not issue senior securities.
Joint Venture Investments
We are likely to enter into joint ventures with affiliated entities for
the acquisition, development or improvement of properties for the purpose of
diversifying our portfolio of assets. We may invest some or all of the proceeds
of the offering in such joint ventures under the conditions described below. In
this connection, we will likely enter into joint ventures with Wells Fund XII
and the Wells REIT or other Wells programs. Our general partners also have the
authority to enter into joint ventures, general partnerships, co-tenancies and
other participations with real estate developers, owners and others for the
purpose of developing, owning and operating properties in accordance with our
investment policies. (See "Risk Factors - Conflicts of Interest Risks" and
"Conflicts of Interest.") In determining whether to invest in a particular joint
venture, our general partners will evaluate the real property which such joint
venture
39
<PAGE>
owns or is being formed to own under the same criteria described elsewhere in
this prospectus for the selection of our real estate property investments. (See
generally "Investment Objectives and Criteria.")
At such time as our general partners believe that a reasonable
probability exists that we will enter into a joint venture with another Wells
program for the acquisition or development of a specific property, this
prospectus will be supplemented to disclose the terms of such proposed
investment transaction. Based upon our general partners' experience, in
connection with the development of a property which is currently owned by a
Wells program, this would normally occur upon the signing of legally binding
leases with one or more major tenants for commercial space to be developed on
such property, but may occur before or after any such signing, depending upon
the particular circumstances surrounding each potential investment. It should be
understood that the initial disclosure of any such proposed transaction cannot
be relied upon as an assurance that we will ultimately consummate such proposed
transaction nor that the information provided in any supplement to this
prospectus concerning any proposed transaction will not change after the date of
the supplement.
We may enter into a partnership, joint venture or co-tenancy with
unrelated parties if:
. the management of such partnership, joint venture or co-tenancy
is under our control in that we or one of our affiliates possess
the power to direct or to cause the direction of the management
and policies of any such partnership, joint venture or co-
tenancy;
. we, as a result of such joint ownership of a property, are not
charged, directly or indirectly, more than once for the same
services;
. the joint ownership, partnership or co-tenancy agreement does not
authorize or require us to do anything as a partner, joint
venturer or co-tenant with respect to the property which we or
our general partners could not do directly under our partnership
agreement; and
. our general partners and their affiliates are prohibited from
receiving any compensation, fees or expenses which are not
permitted to be paid under our partnership agreement.
In the event that any such co-ownership arrangement contains a provision giving
each party a right of first refusal to purchase the other party's interest, we
may not have sufficient capital to finance the buy-out. (See "Risk Factors -
Investment Risks.")
We intend to enter into joint ventures with other Wells programs for
the acquisition of properties, but may only do so provided that:
. each such co-venturer has substantially identical investment
objectives as ours;
. we, as a result of such joint ownership of a property, are not
charged, directly or indirectly, more than once for the same
services;
. the compensation payable to our general partners and their
affiliates is substantially identical in each program;
. we will have a right of first refusal to buy if such co-venturer
elects to sell its interest in the property held by the joint
venture; and
. the investment by us and such affiliate are on substantially the
same terms and conditions.
40
<PAGE>
In the event that the co-venturer were to elect to sell property held in any
such joint venture, however, we may not have sufficient funds to exercise our
right of first refusal to buy the other co-venturer's interest in the property
held by the joint venture. In the event that any joint venture with an
affiliated entity holds interests in more than one property, the interest in
each such property may be specially allocated based upon the respective
proportion of funds invested by each co-venturer in each such property. Entering
into joint ventures with other Wells programs will result in certain conflicts
of interest. (See "Risk Factors - Investment Risks" and "Conflicts of Interest -
Joint Ventures with Affiliates of the General Partners.")
Disposition Policies
We anticipate that prior to our termination and dissolution, all of our
properties will be sold. We intend to hold the various real properties in which
we invest until such time as sale or other disposition appears to be
advantageous to achieve our investment objectives or until it appears that such
objectives will not be met. In deciding whether to sell properties, we will
consider factors such as potential capital appreciation, cash flow and federal
income tax considerations, including possible adverse federal income tax
consequences to the investors. Our general partners anticipate that we will sell
existing income-producing properties within 10 to 12 years after acquisition and
will sell property acquired for development within 10 to 12 years from the date
of completion of such development. However, our general partners may exercise
their discretion as to whether and when to sell a property, and we will have no
obligation to sell properties at any particular time, except in the event that
investors holding a majority of the units vote to liquidate Wells Fund XIII in
response to a formal proxy to liquidate. (See "Summary of Partnership Agreement
- Proxy to Liquidate.")
Cash flow from operations will not be invested in the acquisition of
real estate properties. However, in the discretion of our general partners, cash
flow may be held as working capital reserves, or used to make capital
improvements to existing properties. In addition, net sale proceeds generally
will not be reinvested but will be distributed to the partners. Thus, Wells Fund
XIII is intended to be self-liquidating in nature. However, net sale proceeds
need not be so distributed if such proceeds are, in the discretion of the
general partners:
. used to purchase land underlying any of our properties;
. used to buy out the interest of any co-tenant or joint venture
partner in a property which is jointly owned;
. held as working capital reserves; or
. used to make capital improvements to existing properties.
Notwithstanding the above, reinvestment of proceeds from the sale of properties
will not occur unless sufficient cash will be distributed to pay any federal or
state income tax liability created by the sale of the property assuming limited
partners will be subject to a 30% combined federal and state tax bracket.
We will not pay, directly or indirectly, any commission or fee, except
as specifically permitted under Article XII of our partnership agreement, to our
general partners or their affiliates in connection with the reinvestment or
distribution of proceeds from the sale, exchange or financing of our properties.
Although not required to do so, we will generally seek to sell our real
estate properties for all cash. We may, however, accept terms of payment from a
buyer which include purchase money obligations secured by mortgages as partial
payment, depending upon then prevailing economic conditions customary in the
area in which the property being sold is located, credit of the buyer and
41
<PAGE>
available financing alternatives. Some properties we sell may be sold on the
installment basis under which only a portion of the sale price will be received
in the year of sale, with subsequent payments spread over a number of years. In
such event, the full distribution by Wells Fund XIII of the net proceeds of any
sale may be delayed until the notes are paid, sold or financed.
Other Policies
We will not invest as a limited partner in other limited partnerships.
Except in connection with sales of our properties where we may take
purchase money obligations as partial payment, we will not make loans to any
person, nor will we underwrite securities of other issuers, offer securities
except potentially for purchase money obligations to sellers in exchange for
property, or invest in securities of other issuers for the purpose of exercising
control. Notwithstanding the foregoing, we may invest in joint ventures or
partnerships as described above and in a corporation where real estate is the
principal asset and its acquisition can best be effected by the acquisition of
the stock of such corporation, subject to the limitations set forth below.
We will not engage in any of the following activities:
. issue any units after the termination of the offering or issue
units in exchange for property;
. make investments in real estate mortgages except in connection
with the sale or other disposition of a property;
. make loans to our general partners or their affiliates; or
. invest in or underwrite the securities of other issuers except
for permitted temporary investments pending utilization of
partnership funds. We intend to invest the proceeds of the
offering such that we will comply at all times with the existing
exemptions from the definition of "investment company" under the
Investment Company Act of 1940 and the Regulations issued
thereunder.
Management
The General Partners
Our general partners are: Wells Capital, Inc. and Mr. Leo F. Wells,
III, individually.
Wells Capital, Inc. (Wells Capital) is a Georgia corporation formed in
April 1984. The executive office of Wells Capital is located at 6200 The Corners
Parkway, Suite 250, Norcross, Georgia 30092. Financial statements of Wells
Capital are included at the end of this prospectus. Leo F. Wells, III is the
President and sole Director of Wells Capital as well as the sole shareholder,
the President and sole Director of Wells Real Estate Funds, Inc., which is the
sole shareholder of each of Wells Capital, Wells Management Company, Inc. (Wells
Management) and Wells Investment Securities, Inc. (Wells Investment). (See
"Conflicts of Interest.")
As of November 30, 2000, the net worth of Wells Capital was
approximately $ _________ on both an estimated fair market value basis and a
generally accepted accounting principles basis; however, the net worth of Wells
Capital consists almost entirely of ______________________ and, therefore, does
not represent liquid assets.
42
<PAGE>
The directors and executive officers of Wells Capital are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Leo F. Wells, III 56 President, Treasurer and sole director
Douglas P. Williams 50 Senior Vice President and Assistant Secretary
Stephen G. Franklin 53 Senior Vice President
Kim R. Comer 45 Vice President
Linda L. Carson 56 Vice President
</TABLE>
Leo F. Wells, III is the President, Treasurer and sole Director of
Wells Capital. He is also the President, sole shareholder and sole Director of
Wells Real Estate Funds, Inc., the parent corporation of Wells Capital. Mr.
Wells is 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. Mr. Wells is the President, Treasurer and sole Director of:
. Wells Management Company, Inc., our Property Manager;
. Wells Investment Securities, Inc., our Dealer Manager;
. Wells Advisors, Inc., a company he organized in 1991 to act as a
non-bank custodian for IRAs; and
. Wells Development Corporation, a company he organized in 1997 to
develop real properties.
He is also the President and a Director of the Wells REIT
Mr. Wells was a real estate salesman and property manager from 1970 to
1973 for Roy D. Warren & Company, an Atlanta real estate company, and he was
associated from 1973 to 1976 with Sax Gaskin Real Estate Company, during which
time he became a Life Member of the Atlanta Board of Realtors Million Dollar
Club. From 1980 to February 1985 he served as Vice President of Hill-Johnson,
Inc., a Georgia corporation engaged in the construction business. Mr. Wells
holds a Bachelor of Business Administration degree in economics from the
University of Georgia. Mr. Wells is a member of the International Association
for Financial Planning (IAFP) and a registered NASD principal.
Mr. Wells has over 26 years of experience in real estate sales,
management and brokerage services. In addition to being the President and a
Director of the Wells REIT, he is currently a co-general partner in a total of
26 real estate limited partnerships formed for the purpose of acquiring,
developing and operating office buildings and other commercial properties. As of
December 31, 2000, these 26 real estate limited partnerships represented
investments totaling approximately $___________ from approximately _________
investors.
As of November 30, 2000, Mr. Wells' net worth exclusive of home,
automobiles and home furnishings was in excess of $ ____________ on an estimated
fair market value basis. Mr. Wells' net worth consists principally of
investments in partnerships, real estate, interests in retirement plans, notes
receivable and his stock in Wells Real Estate Funds, Inc. and other closely-held
corporations and, therefore, does not represent liquid assets or assets which
are readily marketable. (See "Risk Factors.")
As of November 30, 2000, the combined net worth of the general partners
on an estimated fair market value basis was approximately $ _________. However,
the general partners' net worth consists primarily of ________________ and
interests in other partnerships, real estate and closely-held businesses, and
thus such net worth is not readily marketable. (See "Risk Factors.")
43
<PAGE>
Douglas P. Williams is the Senior Vice President of Wells Capital. Mr.
Williams is a Vice President of:
. Wells Investment Securities, Inc., our Dealer Manager;
. Wells Real Estate Funds, Inc.; and
. Wells Advisors, Inc.
He is also an Executive Vice President, Secretary, Treasurer and a
Director of the Wells REIT.
Mr. Williams previously served as Vice President, Controller of
OneSource, Inc., a leading supplier of janitorial and landscape services, from
1996 to 1999 where he was responsible for corporate-wide accounting activities
and financial analysis. Mr. Williams was employed by ECC International Inc.
("ECC"), a supplier to the paper industry and to the paint, rubber and plastic
industries, from 1982 to 1995. While at ECC, Mr. Williams served in a number of
key accounting positions, including Corporate Accounting Manager, U.S.
Operations, Division Controller, Americas Region and Corporate Controller,
America/Pacific Division. Prior to joining ECC and for one year after leaving
ECC, Mr. Williams was employed by Lithonia Lighting, a manufacturer of lighting
fixtures, as a Cost and General Accounting
Manager and Director of Planning and Control. Mr. Williams started his
professional career as an auditor for KPMG Peat Marwick LLP.
Mr. Williams is a member of the American Institute of Certified Public
Accountants and the Georgia Society of Certified Public Accountants. Mr.
Williams received a bachelor of arts degree from Dartmouth College and a Masters
of Business Administration degree from the Amos Tuck School of Graduate Business
Administration at Dartmouth College.
Stephen G. Franklin, Ph.D. is a Senior Vice President of Wells Capital.
Mr. Franklin is responsible for marketing, sales and broker-dealer relations.
Mr. Franklin also serves as Vice President of Wells Real Estate Funds, Inc.
Prior to joining Wells Capital, Mr. Franklin served as President of Global
Access Learning, an international executive education and management development
firm. From 1997 to 1999, Mr. Franklin served as President, Chief Academic
Officer and Director of EduTrek International, a publicly traded provider of
international post-secondary education that owns the American InterContinental
University, with campuses in Atlanta, Ft. Lauderdale, Los Angeles, Washington,
D.C., London and Dubai. While at EduTrek, he was instrumental in developing the
Masters and Bachelors of Information Technology, International MBA and Adult
Evening BBA programs. Prior to joining EduTrek, Mr. Franklin was Associate Dean
of the Goizueta Business School at Emory University and a former tenured
Associate Professor of Business Administration. He served on the founding
Executive MBA faculty, and has taught graduate, undergraduate and executive
courses in Management and Organizational Behavior, Human Resources Management
and Entrepreneurship. He is also co-founder and Director of the Center for
Healthcare Leadership in the Emory University School of Medicine. Mr. Franklin
was a frequent guest lecturer at universities throughout North America, Europe
and South Africa.
In 1984, Mr. Franklin took a sabbatical from Emory University and
became Executive Vice President and a principal shareholder of Financial Service
Corporation ("FSC"), an independent financial planning broker-dealer. Mr.
Franklin and the other shareholders of FSC later sold their interests in FSC to
Mutual of New York Life Insurance Company.
Kim R. Comer rejoined Wells Capital as National Vice President of
Marketing in April 1997 after working for Wells Capital in similar capacities
from January 1992 through September 1995. Mr. Comer currently serves as Vice
President of Investor Services. In prior positions with Wells Capital, he served
as Vice President of Marketing for the southeast and northeast regions. Mr.
Comer has over ten years experience in the securities industry and is a
registered representative and financial principal with
44
<PAGE>
the NASD. Additionally, he has substantial financial experience including
experience as controller and chief financial officer of two regional broker-
dealers. In 1976, Mr. Comer graduated with honors from Georgia State University
with a BBA degree in accounting.
Linda L. Carson is a Vice President of Wells Capital. She is primarily
responsible for fund, property and corporate accounting, SEC reporting and
coordination of all audits by the independent public accountants. Ms. Carson
also serves as Secretary of Wells Investment Securities, Inc., our Dealer
Manager. Ms. Carson joined Wells Capital in 1989 as Staff Accountant, became
Controller in 1991 and assumed her current position in 1996. Prior to joining
Wells Capital, Ms. Carson was an accountant with an electrical distributor. She
is a graduate of City College of New York and has completed additional
accounting courses at Kennesaw State. She is also a member of the National
Society of Accountants.
The general partners of Wells Fund XIII, Mr. Wells and Wells Capital,
Inc., will be responsible for the direction and management of the partnership,
including acquisition, construction and property management. Any action required
to be taken by the general partners shall be taken only if it is approved, in
writing or otherwise, by both general partners, unless the general partners
agree between themselves to a different arrangement for the approval of actions
of the general partners. The powers and duties of the general partners are
described in Article XI of our partnership agreement. The compensation payable
to the general partners for performance of their duties is set forth in
"Compensation of the General Partners and Affiliates."
A change in management of Wells Fund XIII may be accomplished by
removal of the general partners or the designation of a successor or additional
general partner, in each case in accordance with the provisions of our
partnership agreement. Our partnership agreement provides that a general partner
may be removed and a new general partner elected upon the written consent or
affirmative vote of limited partners owning more than 50% of the units. Our
partnership agreement further provides that a general partner may designate a
successor or additional general partner with the consent of all other general
partners and limited partners holding more than 50% of the units, after
providing 90 days written notice to the general partners and limited partners
and provided that the interests of the limited partners are not adversely
affected. Generally, except in connection with such a designation, no general
partner shall have the right to retire or withdraw voluntarily from Wells Fund
XIII or to sell, transfer or assign his or its interest without the consent of
the limited partners holding more than 50% of the units. (See "Summary of
Partnership Agreement.")
Affiliated Companies
Property Manager
Wells Real Estate Funds, Inc. is the sole shareholder of Wells
Management, and Mr. Wells is the President, Treasurer and sole Director of Wells
Management. (See "Conflicts of Interest.") The other principal officers of Wells
Management are as follows:
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
M. Scott Meadows 36 Senior Vice President and Secretary
Michael C. Berndt 53 Vice President and Chief Investment Officer
Michael L. Watson 55 Vice President
</TABLE>
Our properties will be managed and leased initially by Wells Management
Company, Inc. (Wells Management), our Property Manager. It was organized and
commenced active operations in 1983 to lease and manage real estate projects
which the general partners or their affiliates operate or in which the
45
<PAGE>
general partners or their affiliates own an interest. As of December 31, 2000,
Wells Management was managing in excess of ___,___ square feet of office
buildings and shopping centers.
As compensation for the management and leasing of our commercial
properties, we will pay Wells Management property management and leasing fees
equal to 4.5% of gross revenues. A special one-time initial rent-up or leasing
fee may be paid on the first leases for newly constructed properties. This fee
must be competitive for the geographic area of the property, and the amount of
this fee received by Wells Management will be reduced by any amount paid to an
outside broker. In addition, we may pay to either non-affiliated third party
leasing agents or to Wells Management leasing fees currently ranging from $.50
to $1.50 per square foot for procuring tenants and negotiating the terms of
tenant leases. These leasing fees shall be paid for only leasing services
actually rendered and, if paid to Wells Management, will not exceed the fees
which would customarily be charged in arm's length transactions by others
rendering similar services in the same geographic area for similar properties.
In no event may the aggregate of all property management and leasing fees paid
to affiliates of the general partners exceed 6% of gross revenues. The general
partners believe these terms will be no less favorable to Wells Fund XIII than
those customary for similar services in the relevant geographic area. Depending
upon the location of certain partnership properties and other circumstances,
unaffiliated property management companies may be retained to render property
management services for some partnership properties. (See "Compensation of the
General Partners and Affiliates.")
In the event that Wells Management assists a tenant with tenant
improvements, a separate fee may be charged to the tenant and paid by the
tenant. This fee will not exceed 5% of the cost of the tenant improvements.
Wells Management derives all of its income from its property management
and leasing operations. For the fiscal year ended December 31, 2000, Wells
Management reported $____________ in gross operating revenues and $____________
in net income.
Wells Management will hire, direct and establish policies for employees
who will have direct responsibility for each property's operations, including
resident managers and assistant managers, as well as building and maintenance
personnel. Some or all of the other employees may be employed on a part-time
basis and may also be employed by one or more of the following:
. the general partners;
. Wells Management;
. partnerships organized by the general partners and their
affiliates; and
. other persons or entities owning properties managed by Wells
Management.
Wells Management will also direct the purchase of equipment and supplies and
will supervise all maintenance activity.
The management fees to be paid to Wells Management will cover, without
additional expense to Wells Fund XIII, the property manager's general overhead
costs such as its expenses for rent and utilities. However, certain salaries and
other employee-related expenses, travel and other out-of-pocket expenses of
personnel of Wells Management, other than controlling persons of our general
partners or their affiliates, may be reimbursed by Wells Fund XIII to the extent
such expenses are directly related to the management of a specific partnership
property.
46
<PAGE>
The principal office of Wells Management is located at 6200 The Corners
Parkway, Suite 250, Norcross, Georgia 30092.
Dealer Manager
Wells Investment Securities, Inc., our Dealer Manager, a member firm of
the National Association of Securities Dealers, Inc. (NASD), was organized in
May 1984 for the purpose of participating in and facilitating the distribution
of securities of Wells programs.
Our Dealer Manager will provide certain wholesaling, sales promotional
and marketing assistance services to Wells Fund XIII in connection with the
distribution of the units offered pursuant to this prospectus. It may also sell
a limited number of units at the retail level. (See "Plan of Distribution.")
Wells Real Estate Funds, Inc. is the sole shareholder of our Dealer
Manager, and Mr. Wells is the President and sole Director of our Dealer Manager.
(See "Conflicts of Interest.").
IRA Custodian
Wells Advisors, Inc. (Wells Advisors) was organized in 1991 for the
purpose of acting as a non-bank custodian for IRAs investing in the securities
of Wells real estate programs. Wells Advisors currently charges no fees for such
services. Wells Advisors was approved by the Internal Revenue Service to act as
a qualified non-bank custodian for IRAs on March 20, 1992. In circumstances
where Wells Advisors acts as an IRA custodian, the authority of Wells Advisors
is limited to holding limited partnership units or Wells REIT shares on behalf
of the beneficiary of the IRA and making distributions or reinvestments in such
units or shares solely at the direction of the beneficiary of the IRA. Wells
Advisors is not authorized to vote any of such units or shares held in any IRA
except in accordance with the written instructions of the beneficiary of the
IRA. Mr. Wells is the President and sole Director and owns 50% of the common
stock and all of the preferred stock of Wells Advisors. As of December 31, 2000,
Wells Advisors was acting as the IRA custodian for in excess of $50,000,000 in
Wells real estate program investments.
Estimated Use of Proceeds
The following table sets forth information about how we intend to use
the gross proceeds in this offering. Many of the figures set forth below
represent our general partners' best estimate since they cannot be precisely
calculated at this time. We expect that at least 84.0% of the money you invest
will be used to buy real estate, while the remaining up to 16.0% will be used
for working capital and to pay expenses and fees including the payment of fees
to Wells Capital and Wells Investment Securities, our Dealer Manager.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Gross Offering Proceeds (1) $1,250,000 100% $45,000,000 100%
Less Public Offering Expenses:
Selling Commissions and Dealer Manager Fee (2) 118,750 9.5% 4,275,000 9.5%
Organization and Offering Expenses (3) 37,500 3.0% 1,350,000 3.0%
-------- ------ --------- ------
Amount Available for Investment (4) $1,093,750 87.5% $39,375,000 87.5%
Acquisition and Development:
Acquisition and Advisory Fees (5) $ 37,500 3.0% $ 1,350,000 3.0%
Acquisition Expenses (6) 6,250 0.5% 225,000 0.5%
Initial Working Capital Reserve (7) (7) - (7) -
---------- ------ ----------- ------
Amount Invested in Properties (4)(8) $1,050,000 84% $37,800,000 84%
========== ====== =========== ======
</TABLE>
_________________________
(Footnotes to "Estimated Use of Proceeds")
47
<PAGE>
1. The amounts shown for gross offering proceeds do not reflect the
possible discounts in commissions and other fees as described in "Plan
of Distribution."
2. Includes selling commissions equal to 7.0% of aggregate gross offering
proceeds which commissions may be reduced under certain circumstances
and a dealer manager fee equal to 2.5% of aggregate gross offering
proceeds, both of which are payable to the Dealer Manager, an affiliate
of the general partners. The Dealer Manager, in its sole discretion,
may reallow selling commissions of up to 7.0% of gross offering
proceeds to other broker-dealers participating in this offering
attributable to the units sold by them and may reallow out of its
dealer manager fee up to 1.5% of gross offering proceeds in marketing
fees to broker-dealers participating in this offering based on such
factors as the volume of units sold by such participating broker-
dealers, marketing support provided by such participating broker-
dealers and bona fide conference fees incurred. In no event shall the
total underwriting compensation, including selling commissions, the
dealer manager fee and underwriting expense reimbursements, exceed
10.0% of gross offering proceeds, except for an additional 0.5% of
gross offering proceeds which may be paid as a reimbursement of
expenses incurred for due diligence purposes and which is included in
the organization and offering expenses described in Footnote 3 below.
(See "Plan of Distribution.")
3. Organization and offering expenses consist of estimated legal,
accounting, printing and other accountable offering expenses other than
selling commissions and the dealer manager fee and reimbursements to
our general partners and their affiliates for payments to nonaffiliated
broker-dealers of certain bona fide due diligence expenses in an amount
not to exceed 0.5% of gross offering proceeds. Our general partners and
their affiliates will be responsible for the payment of organization
and offering expenses other than selling commissions and the dealer
manager fee to the extent they exceed 3.0% of gross offering proceeds
without recourse against or reimbursement by Wells Fund XIII.
4. Until required in connection with the acquisition and development of
properties, substantially all of the net proceeds of the offering and,
thereafter, our working capital reserves, may be invested in
short-term, highly-liquid investments including government obligations,
bank certificates of deposit, short-term debt obligations and
interest-bearing accounts.
5. We will pay acquisition and advisory fees, defined generally as the
total of all fees and commissions paid by any party to any person in
connection with the purchase, development or construction of real
properties, to our general partners or their affiliates in connection
with our acquisition of real properties up to a maximum amount of 3.0%
of gross offering proceeds. Acquisition and advisory fees do not
include acquisition expenses.
6. Acquisition expenses include legal fees and expenses, travel expenses,
costs of appraisals, nonrefundable option payments on property not
acquired, accounting fees and expenses, title insurance premiums and
other closing costs and miscellaneous expenses relating to the
selection, acquisition and development of real properties. We
anticipate that substantially all of such items will be directly
related to the acquisition of specific partnership properties and will
be capitalized rather than currently deducted.
7. Because we will purchase properties on an all cash basis and the vast
majority of leases for the properties we acquire will provide for
tenant reimbursement of operating expenses, we do not anticipate that a
permanent reserve for maintenance and repairs of our properties will be
established. However, to the extent that we have insufficient funds for
such purposes, our general partners will advance to Wells Fund XIII on
an interest-free basis an aggregate amount of up to 1.0% of gross
offering proceeds for maintenance and repairs of our properties. Our
general partners also may, but are not required to, establish reserves
from gross offering proceeds, out of
48
<PAGE>
cash flow generated by operating
properties or out of nonliquidating net sale proceeds, defined
generally to mean the net cash proceeds we receive from any sale or
exchange of partnership properties.
8. Includes amounts we anticipate to invest in our properties net of fees
and expenses. We estimate that approximately 84.0% of the proceeds from
the sale of units will be used to acquire properties, which amount is
within the limit imposed by the NASAA Guidelines that at least 80.0% of
proceeds must be invested in properties.
Compensation of the General Partners and Affiliates
The following table summarizes and discloses all of the compensation
and fees including reimbursement of expenses to be paid by Wells Fund XIII to
the general partners and their affiliates during the various phases of the
organization and operation of Wells Fund XIII.
<TABLE>
<CAPTION>
Form of
Compensation and Determination Estimated Maximum
Entity Receiving of Amount Dollar Amount (1)
---------------- --------- -----------------
<S> <C> <C>
Organizational and Offering Stage
Selling Commissions Up to 7.0% of gross offering proceeds before reallowance of $3,150,000 ($87,500 in
-The Dealer Manager commissions earned by participating broker-dealers. The Dealer the event Wells Fund XIII
Manager intends to reallow 100% of commissions earned to sells only the minimum of
participating broker-dealers. 125,000 units)
Dealer Manager Fee - Up to 2.5% of gross offering proceeds before reallowance to $1,125,000 ($31,250 in
The Dealer Manager participating broker-dealers. The Dealer Manager, in its sole the event Wells Fund XIII
discretion, may reallow a portion of its dealer manager fee sells only the minimum of
of up to 1.5% of the gross offering proceeds to be paid to 125,000 units)
such participating broker-dealers as a marketing fee, based
on such factors as the volume of units sold by such
participating broker-dealers, marketing support and bona
fide conference fees incurred.
Reimbursement of Up to 3.0% of gross offering proceeds. All organization and $1,350,000 ($37,500 in
Organization and offering expenses (excluding selling commissions and the dealer the event Wells Fund XIII
Offering Expenses - manager fee) will be advanced by our general partners and their sells only the minimum of
The General Partners affiliates and reimbursed by Wells Fund XIII. 125,000 units)
or Their Affiliates
Acquisition and Development Stage
Acquisition and For the review and evaluation of potential real property $1,350,000 ($37,500 in
Advisory acquisitions, a fee of up to 3.0% of gross offering proceeds. the event Wells Fund XIII
Fees - The General sells only the minimum
Partners of 125,000 units)
or Their Affiliates
Reimbursement of Up to 0.5% of gross offering proceeds for reimbursement of $225,000 ($6,250 in the
Acquisition Expenses expenses related to real property acquisitions, such as legal event the partnership sells
- The General fees, travel expenses, title insurance premium expenses and only the minimum of
Partners or Their other closing costs. 125,000 units)
Affiliates
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Operational Stage
<S> <C> <C>
Property Management and For supervising the management and leasing of the partnership Actual amounts are
Leasing Fees - Wells properties, a fee equal to the lesser of: (A)(1) for dependent upon results
Management Company, Inc. commercial properties which are not leased on a long-term net of operations and
lease basis, 4.5% of gross revenues, and (2) in the case of therefore cannot be
commercial properties which are leased on a long-term (10 or determined at the
more years) net lease basis, 1.0% of gross revenues plus, in present time.
the case of leases to new tenants, initial leasing fees equal
to 3.0% of gross revenues over the first five years of the
lease term, or (B) the amounts charged by unaffiliated persons
rendering comparable services in the same geographic area;
plus, a separate fee for the one-time initial rent-up or
leasing-up of newly constructed properties in an amount not to
exceed the fee customarily charged in arm's-length transactions
by others rendering similar services in the same geographic
area for similar properties as determined by a survey of
brokers and agents in such area (customarily equal to the first
month's rent). In addition, we may pay to either
non-affiliated third party leasing agents or to Wells
Management leasing fees currently ranging from $.50 to $1.50
per square foot for procuring tenants and negotiating the terms
of tenant leases. These leasing fees shall be paid for only
leasing services actually rendered and, if paid to Wells
Management, will not exceed the fees which would customarily be
charged in arm's length transactions by others rendering
similar services in the same geographic area for similar
properties. In no event may the aggregate of all property
management and leasing fees paid to affiliates of the general
partners exceed 6.0% of gross revenues.
Share of Net Cash From A noncumulative amount equal to one-tenth of net cash from Actual amounts are
Operations - The operations subordinated in each fiscal year to distributions of dependent upon results
General Partners net cash from operations to investors electing cash preferred of operations and
units equal to 10.0% of their net capital contributions. therefore cannot be
determined at the
present time.
Liquidation Stage
Subordinated After investors have received a return of their net capital Actual amounts are
Participation in contributions and their Preferential Limited Partner Return, dependent upon results
Nonliquidating Net Sale then our general partners are entitled to receive the following of operations and
Proceeds and Liquidating amounts: therefore cannot be
Distributions - The determined at the
General Partners (a) an amount equal to their capital contributions, present time.
(b) then, if and only in the event that investors have received
any Excess Limited Partner Distributions, 20.0% of the sum
of any such Excess Limited Partner Distributions plus the
amount distributed to our general partners pursuant to this
provision, plus
(c) 20.0% of remaining residual proceeds available for
distribution;
provided, however, that in no event will our general partners
receive in the aggregate more than 15.0% of sale proceedS
remaining after investors have received a return of their
net capital contributions plus a 6.0% annual cumulative
(noncompounded) return on their net capital contributions. (See
Sections 9.2, 9.3 and 9.4 of our partnership agreement.)
</TABLE>
50
<PAGE>
<TABLE>
<S> <C> <C>
Real Estate Commissions - In connection with the sale of our properties, an amount not Actual amounts are
The general partners or exceeding the lesser of: (A) 50% of the reasonable, customary dependent upon results
Their Affiliates and competitive real estate brokerage commissions customarily of operations and
paid for the sale of a comparable property in light of the therefore cannot be
size, type and location of the property, or (B) 3.0% of the determined at
the gross sales price of each property, subordinated to present time.
distributions to investors from sale proceeds of an amount
which, together with prior distributions to the investors, will
equal (1) 100% of their capital contributions plus (2) a 6.0%
annual cumulative (noncompounded) return on their net capital
contributions. (See Section 12.6 of our partnership agreement.)
</TABLE>
_________________________
(Footnotes to "Compensation of the General Partners and Affiliates")
1. The estimated maximum dollar amounts are based on the sale of a maximum
of 4,500,000 units.
In addition, our general partners and their affiliates will be
reimbursed only for the actual cost of goods, services and materials used for or
by Wells Fund XIII as set forth in Section 11.4 of the partnership agreement.
Our general partners may be reimbursed for the administrative services necessary
to the prudent operation of Wells Fund XIII provided that the reimbursement
shall be at the lower of our general partners' actual cost or the amount we
would be required to pay to independent parties for comparable administrative
services in the same geographic location. No payment or reimbursement will be
made for services for which our general partners are entitled to compensation by
way of a separate fee. Excluded from allowable reimbursement shall be: (1) rent
or depreciation, utilities, capital equipment, other administrative items; and
(2) salaries, fringe benefits, travel expenses and other administrative items
incurred by or allocated to any controlling persons of the general partners or
their affiliates.
Since our general partners and their affiliates are entitled to
differing levels of compensation for undertaking different transactions on our
behalf, such as the property management fees for operating our properties and
the subordinated participation in proceeds from the sale of our properties, our
general partners have the ability to affect the nature of the compensation they
receive by undertaking different transactions. However, our general partners are
obligated to exercise good faith and integrity in all their dealings with
respect to partnership affairs pursuant to their fiduciary duties to the limited
partners. (See "Fiduciary Duty of the General Partners.") As noted above, there
are ceilings on certain categories of fees or expenses payable to our general
partners and their affiliates. Because these fees or expenses are payable only
with respect to certain transactions or services, they may not be recovered by
our general partners or their affiliates by reclassifying them under a different
category.
Conflicts of Interest
We are subject to various conflicts of interest arising out of our
relationship with our general partners and their affiliates, including conflicts
related to the arrangements pursuant to which our general partners and their
affiliates will be compensated by Wells Fund XIII. (See "Compensation of the
General Partners and Affiliates.")
Our general partners are Leo F. Wells, III and Wells Capital. Leo F.
Wells, III owns all of the outstanding capital stock of Wells Real Estate Funds,
Inc., a Georgia corporation which owns all of the outstanding capital stock of
Wells Capital, Wells Management and Wells Investment Securities, Inc., our
Dealer Manager. See the flow chart showing the relationship between our general
partners and its affiliates in the "Summary of the Offering" section of this
prospectus.
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Because Wells Fund XIII was organized and will be operated by our
general partners, these conflicts will not be resolved through arm's-length
negotiations but through the exercise of our general partners' judgment
consistent with their fiduciary responsibility to the limited partners and
investment objectives and policies. (See "Fiduciary Duty of the General
Partners" and "Investment Objectives and Criteria.") These conflicts include,
but are not limited to, the following:
Interests in Other Real Estate Programs
Our general partners and their affiliates are general partners of other
Wells programs, including partnerships which have investment objectives similar
to those of Wells Fund XIII, and we expect that they will organize other such
partnerships in the future. Our general partners and such affiliates have legal
and financial obligations with respect to these other partnerships which are
similar to their obligations to Wells Fund XIII. As general partners, they may
have contingent liability for the obligations of such partnerships as well as
those of Wells Fund XIII which, if such obligations were enforced against our
general partners, could result in substantial reduction of the net worth of our
general partners.
In addition, our general partners and their affiliates are currently
sponsoring the third offering of the Wells REIT, a real estate investment trust.
The registration statement for the third offering of the Wells REIT was declared
effective by the Securities and Exchange Commission on __________, 200__ for the
offer and sale to the public of up to 125,000,000 shares of common stock at a
price of $10.00 per share.
As described in the "Prior Performance Summary," the general partners
have sponsored the following 14 other public real estate programs with
substantially identical investment objectives as those of Wells Fund XIII:
1. Wells Real Estate Fund I (Wells Fund I),
2. Wells Real Estate Fund II (Wells Fund II),
3. Wells Real Estate Fund II-OW (Wells Fund II-OW),
4. Wells Real Estate Fund III, L.P. (Wells Fund III),
5. Wells Real Estate Fund IV, L.P. (Wells Fund IV),
6. Wells Real Estate Fund V, L.P. (Wells Fund V),
7. Wells Real Estate Fund VI, L.P. (Wells Fund VI),
8. Wells Real Estate Fund VII, L.P. (Wells Fund VII),
9. Wells Real Estate Fund VIII, L.P. (Wells Fund VIII),
10. Wells Real Estate Fund IX, L.P. (Wells Fund IX),
11. Wells Real Estate Fund X, L.P. (Wells Fund X),
12. Wells Real Estate Fund XI, L.P. (Wells Fund XI),
13. Wells Real Estate Fund XII, L.P. (Wells Fund XII), and
14. Wells Real Estate Investment Trust, Inc. (Wells REIT)
In the event that Wells Fund XIII, or any other Wells program or other
entity formed or managed by our general partners or their affiliates is in the
market for similar properties, our general partners will review the investment
portfolio of Wells Fund XIII and each such affiliated entity. Our general
partners will decide which entity will acquire a particular property on the
basis of such factors as, among others:
. the anticipated cash flow of the property to be acquired and the
cash requirements of each program;
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. the effect of the purchase on diversification of the portfolio of
each such entity in terms of number of investments, types of
commercial properties, geographic area and industry group of the
tenant;
. the estimated income tax effects of the purchase on each such
entity;
. the size of the investment;
. the amount of funds available to each entity and the length of
time such funds have been available for investment; and
. in the case of the Wells REIT, the potential effect of leverage
on such investment.
Our general partners may acquire, for their own account or for private
placement, properties which they deem not suitable for purchase by Wells Fund
XIII, whether because of the greater degree of risk, the complexity of
structuring inherent in such transactions, financing considerations or for other
reasons, including properties with potential for attractive investment returns.
Other Activities of our General Partners and their Affiliates
We rely on our general partners and their affiliates for the day-to-day
operation of Wells Fund XIII and the management of our assets. As a result of
their interests in other partnerships and the fact that they have also engaged
and will continue to engage in other business activities, our general partners
and their affiliates will have conflicts of interest in allocating their time
between Wells Fund XIII and other partnerships and activities in which they are
involved. (See "Risk Factors - Investment Risks.") However, our general partners
believe that they and their affiliates have sufficient personnel to discharge
fully their responsibilities to all partnerships and ventures in which they are
involved.
Our general partners are currently sponsoring an index mutual fund
which invests in various REIT stocks known as the Wells S&P REIT Index Fund
(REIT Fund). The REIT Fund is a mutual fund which seeks to provide investment
results corresponding to the performance of the S&P REIT Index by investing in
the REIT stocks included in the S&P REIT Index.
We will not purchase or lease any property in which the general
partners or any of their affiliates have an interest; provided, however, that
our general partners or any of their affiliates may temporarily enter into
contracts relating to investment in properties to be assigned to us prior to
closing or may purchase property in their own name and temporarily hold title
for us, provided that such property is purchased by us at a price no greater
than the cost of such property, including acquisition and carrying costs, to our
general partners or their affiliates. Further our general partners or such
affiliates may not have held title to any such property on our behalf for more
than 12 months prior to the commencement of this offering; our general partners
or their affiliates shall not sell property to us if the cost of the property
exceeds the funds reasonably anticipated to be available for us to purchase any
such property; and all profits and losses during the period any such property is
held by our general partners or their affiliates will accrue to Wells Fund XIII.
In no event may we:
. sell or lease real property to our general partners or any of
their affiliates;
. loan partnership funds to our general partners or any of their
affiliates; or
. enter into agreements with our general partners or their
affiliates for the provision of insurance covering Wells Fund
XIII or any of our properties.
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Competition
Conflicts of interest will exist to the extent that we may acquire
properties in the same geographic areas where other properties owned by our
general partners and their affiliates are located. In such a case, a conflict
could arise in the leasing of our properties in the event that Wells Fund XIII
and another Wells program were to compete for the same tenants in negotiating
leases, or a conflict could arise in connection with the resale of partnership
properties in the event that Wells Fund XIII and another Wells program were to
attempt to sell similar properties at the same time. (See "Risk Factors -
Investment Risks") Conflicts of interest may also exist at such time as Wells
Fund XIII or affiliates of the general partners managing property on our behalf
seek to employ developers, contractors or building managers as well as under
other circumstances. Our general partners will seek to reduce conflicts relating
to the employment of developers, contractors or building managers by making
prospective employees aware of all such properties seeking to employ such
persons. In addition, our general partners will seek to reduce conflicts which
may arise with respect to properties available for sale or rent by making
prospective purchasers or lessees aware of all such properties. However, these
conflicts cannot be fully avoided in that our general partners may establish
differing compensation arrangements for employees at different properties or
differing terms for resales or leasing of the various properties.
Affiliated Dealer Manager
Since Wells Investment Securities, Inc., our Dealer Manager, is an
affiliate of our general partners, we will not have the benefit of an
independent due diligence review and investigation of the type normally
performed by an unaffiliated, independent underwriter in connection with the
offering of securities. (See "Plan of Distribution.")
Affiliated Property Manager
Since we anticipate that partnership properties we acquire will be
managed and leased by Wells Management, our Property Manager, we will not have
the benefit of independent property management. (See "Management - Affiliated
Companies.")
Lack of Separate Representation
Holland & Knight LLP is counsel to Wells Fund XIII, our general
partners, our Dealer Manager and their affiliates in connection with this
offering and may in the future act as counsel to Wells Fund XIII, our general
partners, our Dealer Manager and their affiliates. There is a possibility that
in the future the interests of the various parties may become adverse. In the
event that a dispute were to arise between Wells Fund XIII, our general
partners, our Dealer Manager or their affiliates, our general partners will
cause Wells Fund XIII to retain separate counsel for such matters as and when
appropriate.
Joint Ventures with Affiliates of the General Partners
We are likely to enter into joint ventures with other Wells programs
for the acquisition, development or improvement of properties. (See "Investment
Objectives and Criteria - Joint Venture Investments.") Our general partners and
their affiliates may have conflicts of interest in determining which Wells
program should enter into any particular joint venture agreement. The
co-venturer may have economic or business interests or goals which are or which
may become inconsistent with our business interests or goals. In addition,
should any such joint venture be consummated, our general partners may face a
conflict in structuring the terms of the relationship between our interest and
the interest of the affiliated co-venturer and in managing the joint venture.
Since our general partners and their affiliates will control both Wells Fund
XIII and the affiliated co-venturer, agreements and transactions between the
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co-venturers with respect to any such joint venture will not have the benefit of
arm's-length negotiation of the type normally conducted between unrelated
co-venturers. (See "Risk Factors - Investment Risks.")
Receipt of Fees and Other Compensation by General Partners and
Affiliates
Partnership transactions involving the purchase and sale of our
properties may result in the receipt of commissions, fees and other compensation
by our general partners and their affiliates, including acquisition and advisory
fees, the dealer manager fee, property management and leasing fees, real estate
brokerage commissions, and participation in distributions of net cash from
operations, nonliquidating net sale proceeds and liquidating distributions.
However, the fees and compensation payable to our general partners and their
affiliates relating to sale of our properties are subordinated to the return to
the limited partners of their capital contributions plus cumulative returns
thereon. Subject to their fiduciary duties and specific restrictions set forth
in our partnership agreement, our general partners have considerable discretion
with respect to all decisions relating to the terms and timing of all
partnership transactions. Therefore, our general partners may have conflicts of
interest concerning certain actions taken on our behalf, particularly due to
the fact that such fees will generally be payable to our general partners and
their affiliates regardless of the quality of our properties acquired or the
services provided to Wells Fund XIII. (See "Compensation of the General Partners
and Affiliates.")
Tax Audit Proceeding
In the event of an audit of the federal income tax returns by the IRS,
it is possible that the interests of our general partners in such tax audit
could become inconsistent with or adverse to the interests of the limited
partners. Further, it is possible that federal income tax adjustments proposed
by the IRS could be adverse to investors electing tax preferred units while
being neutral or potentially advantageous to investors electing cash preferred
units. Expenses of contesting any such audit incurred by Wells Fund XIII may
reduce the amount of net cash from operations available for distribution to
investors electing cash preferred units, which could also result in a conflict
of interest. In this regard, our general partners, who are primarily responsible
for contesting federal income tax adjustments proposed by the IRS, may be
subject to various conflicts of interest in connection with the negotiation and
settlement of issues raised by the IRS in a federal income tax audit. (See
"Federal Income Tax Consequences.")
Guidelines and Limits Imposed by Partnership Agreement
The agreements and arrangements among Wells Fund XIII, our general
partners and their affiliates have been established by our general partners, and
our general partners believe the amounts to be paid thereunder to be reasonable
and customary under the circumstances. In an effort to establish standards for
minimizing and resolving these potential conflicts, our general partners have
agreed to the guidelines and limitations set forth in section 11.3 of our
partnership agreement entitled "Limitations on Powers of the General Partners"
and in Article XIII of our partnership agreement entitled "Transactions Between
the General Partners and Wells Fund XIII." Among other things, these provisions:
. set forth the specific conditions under which we may own or lease
property jointly or in a partnership with an affiliate of the
general partners;
. prohibit us from purchasing or leasing an investment property
from our general partners or their affiliates;
. prohibit loans by Wells Fund XIII to our general partners or
their affiliates;
. prohibit the commingling of partnership funds; and
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. prohibit our general partners from merging or consolidating Wells
Fund XIII with another partnership or a corporation or converting
Wells Fund XIII to a real estate investment trust unless the
transaction complies with certain terms and conditions including
first obtaining a majority vote of the limited partners.
In addition, as described below, our general partners have a fiduciary
obligation to act in the best interests of both the limited partners and the
investors in other Wells programs and will use their best efforts to assure that
we will be treated at least as favorably as any other Wells program.
Fiduciary Duty of the General Partners
Our general partners will be accountable to Wells Fund XIII as
fiduciaries and, consequently, will be required to exercise good faith and
integrity in all their dealings with respect to partnership affairs. Our general
partners shall exercise their fiduciary duty to ensure the safekeeping and
authorized use of all funds and assets, whether or not in their immediate
possession or control, and shall not use or employ, or permit another to use or
employ, such funds or assets in any manner except for the exclusive benefit of
Wells Fund XIII. In addition, we shall not permit our general partners to
contract away the fiduciary duty owed to the limited partners by our general
partners under common law.
Where the question has arisen, courts have held that a limited partner
may institute legal action either (1) on behalf of himself or all other
similarly situated limited partners, referred to as a class action, to recover
damages for a breach by a general partner of his fiduciary duty, or (2) on
behalf of the partnership, referred to as a partnership derivative action, to
recover damages from third parties. The Georgia Revised Uniform Limited
Partnership Act (GRULPA) specifically permits a limited partner of a Georgia
limited partnership to bring a derivative action on behalf of the partnership
if:
. the general partner or partners of the partnership have refused
to bring the action on behalf of the partnership or it is
apparent that an effort to cause such general partner or partners
to bring the action would not be likely to succeed; and
. the limited partner was a partner at the time the transaction
complained of occurred or such partner became a partner by
operation of law or pursuant to the terms of the partnership
agreement by assignment from a person who was a partner at the
time of such transaction.
Under GRULPA, a general partner of a Georgia limited partnership has
the same liabilities to the partnership and the other partners as a partner in a
partnership without limited partners. Accordingly, in any action alleging a
breach of fiduciary duty by the general partners to either the limited partners
or the partnership, it is not anticipated that the general partners would be
able to successfully assert as a defense the general presumption, which is often
referred to as the "business judgment rule," that actions taken by the directors
of a corporation on behalf of the corporation are reasonable. However, since any
such action would likely involve a rapidly developing and changing area of the
law, investors who believe that a breach of fiduciary duty by the general
partners may have occurred should consult with their own counsel.
Under GRULPA, a general partner of a Georgia limited partnership
generally owes a duty of loyalty and a duty of care to his partners except to
the extent of acceptable limitations in the partnership agreement. It is
acceptable under GRULPA to limit the duties and liabilities of a general partner
with the exception that liabilities may not be limited for intentional
misconduct or a knowing violation of law, or for any transaction for which the
general partner received a personal benefit in violation or breach of any
provision of the partnership agreement.
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Our partnership agreement provides that our general partners shall not
be liable to Wells Fund XIII or any partner for any liability arising out of any
act or failure to act which the general partners in good faith determined was in
the best interest of Wells Fund XIII, provided that the general partners shall
be liable for any liabilities resulting from a general partner's:
. own fraud, negligence, misconduct or knowing violation of law;
. breach of fiduciary duty to Wells Fund XIII or any partner; or
. breach of our partnership agreement, regardless of whether or not
any such act was first determined by such general partner, in
good faith, to be in the best interest of Wells Fund XIII.
In the absence of such limitations in a partnership agreement, a
general partner of a limited partnership would generally be liable under state
law for damages caused by a breach of fiduciary duty or a breach of the
partnership agreement, regardless of whether or not such person received any
personal benefit. However, because the limitations on the general partners'
duties and liabilities in the partnership agreement are not as broad as under
state law regarding the duties of fiduciaries generally, limited partners may
have a more limited right of action than they would otherwise have absent the
foregoing provisions in the partnership agreement.
In addition, our partnership agreement provides that we shall indemnify
our general partners and their affiliates from and against liabilities and
related expenses, including attorneys' fees, incurred in dealing with third
parties while acting on behalf of or performing services for Wells Fund XIII
arising out of any act or failure to act which our general partners in good
faith determined was in the best interest of Wells Fund XIII, provided that our
general partners shall not be indemnified by Wells Fund XIII for any liabilities
resulting from a general partner's:
. own fraud, negligence, misconduct or knowing violation of law;
. breach of fiduciary duty to Wells Fund XIII or any partner; or
. breach of our partnership agreement, regardless of whether or not
any such act was first determined by such general partner, in
good faith, to be in the best interest of Wells Fund XIII.
Any indemnification of the general partners is recoverable only out of
the assets of Wells Fund XIII and not from the investors. The indemnification
provisions contained in our partnership agreement are generally consistent with
the provisions of GRULPA, and our general partners will not be indemnified for a
violation of the duty of care to their partners to the extent any such violation
constitutes negligence or misconduct. We will not pay the cost of liability
insurance insuring our general partners against any liability as to which our
general partners may not be indemnified pursuant to our partnership agreement.
Notwithstanding the foregoing, we will not indemnify our general
partners or any person acting as a broker-dealer with respect to the units from
any liabilities incurred by them arising under federal and state securities laws
unless:
. there has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the
particular person seeking indemnification;
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. such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular person
seeking indemnification; or
. a court of competent jurisdiction approves a settlement of the
claims against the particular person seeking indemnification and
finds that indemnification of the settlement and related costs
should be made.
In addition, prior to seeking a court approval for indemnification, the
general partners are required to apprise the court of the position of the
Securities and Exchange Commission and various securities regulatory authorities
with respect to indemnification for securities violations.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Prior Performance Summary
The information presented in this section represents the historical
experience of real estate programs managed by the general partners and their
affiliates. Investors in Wells Fund XIII should not assume that they will
experience returns, if any, comparable to those experienced by investors in such
prior Wells real estate programs.
The individual general partner, Leo F. Wells, III, has served as a
general partner of a total of 13 publicly offered real estate limited
partnerships. These 13 limited partnerships and the year in which each of their
offerings was completed are:
1. Wells Real Estate Fund I (1986)
2. Wells Real Estate Fund II (1988)
3. Wells Real Estate Fund II-OW (1988)
4. Wells Real Estate Fund III, L.P. (1990)
5. Wells Real Estate Fund IV, L.P. (1992)
6. Wells Real Estate Fund V, L.P. (1993)
7. Wells Real Estate Fund VI, L.P. (1994)
8. Wells Real Estate Fund VII, L.P. (1995)
9. Wells Real Estate Fund VIII, L.P. (1996)
10. Wells Real Estate Fund IX, L.P. (1996)
11. Wells Real Estate Fund X, L.P. (1997)
12. Wells Real Estate Fund XI, L.P. (1998)
13. Wells Real Estate Fund XII, L.P. (2001).
The Prior Performance Tables included in the back of this prospectus
set forth information as of the dates indicated regarding certain of these Wells
programs as to (1) experience in raising and investing funds (Table I); (2)
compensation to sponsor (Table II); (3) annual operating results of prior
programs (Table III); and (4) sales or disposals of properties (Table V).
In addition to the foregoing real estate limited partnerships, Wells
Capital and its affiliates sponsored the initial public offering of shares of
common stock of the Wells REIT. The initial public offering began on January 30,
1998 and was terminated on December 19, 1999. The Wells REIT received gross
proceeds of approximately $132,181,919 from the sale of approximately 13,218,192
shares from its initial public offering. The Wells REIT commenced its second
public offering of shares of
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common stock of the Wells REIT on December 20, 1999, which was terminated on
__________, 200_. The Wells REIT received gross proceeds of approximately
$____________ from the sale of approximately ____________ shares from the second
public offering. The Wells REIT commenced its third public offering of the
shares of common stock on __________, 200_. As of ____________, 200_, the Wells
REIT had received gross proceeds of approximately $_________ from the sale of
approximately _____ shares from its third public offering. Accordingly, as of
____________, 200__, the Wells REIT had received gross offering proceeds of
approximately $____________ from the sale of ____________ shares of its common
stock to _______________ investors.
In addition to the real estate programs sponsored by our general
partners discussed above, our general partners are also sponsoring an index
mutual fund which invests in various REIT stocks known as the Wells S&P REIT
Index Fund (REIT Fund). The REIT Fund is a mutual fund which seeks to provide
investment results corresponding to the performance of the S&P REIT Index by
investing in the REIT stocks included in the S&P REIT Index. The REIT Fund began
its offering on January 12, 1998, and as of December 31, 2000, the REIT Fund had
raised $__,___,___ from ___ investors.
Publicly Offered Unspecified Real Estate Programs
Our general partners and their affiliates have previously sponsored the
above listed 13 publicly offered real estate limited partnerships and are
currently sponsoring the Wells REIT offered on an unspecified property or "blind
pool" basis. Each of these 13 publicly offered real estate limited partnerships
had two classes of units, Class A Units, which were essentially equivalent to
the partnership's cash preferred units, and Class B Units, which were
essentially equivalent to the partnership's tax preferred units. The total
amount of funds raised from investors in the offerings of these 13 publicly
offered limited partnerships and the Wells REIT, as of December 31, 2000, was
approximately $___,___,___, and the total number of investors in such programs
was approximately __,___.
The investment objectives of each of the other Wells programs are
substantially identical to our investment objectives. All of the proceeds of the
offerings of Wells Fund I, Wells Fund II, Wells Fund II-OW, Wells Fund III,
Wells Fund IV, Wells Fund V, Wells Fund VI, Wells Fund VII, Wells Fund VIII,
Wells Fund IX, Wells Fund X and Wells Fund XI available for investment in real
properties have been invested or committed for investment in properties. As of
________ __, 200__, approximately __% of the proceeds of the offering of Wells
Fund XII available for investment in real properties had been invested in
properties. For the fiscal year ended December 31, 2000, approximately __% of
the aggregate gross rental income of these 14 publicly offered programs was
derived from tenants which are corporations, each of which has a net worth of at
least $100,000,000 or whose lease obligations are guaranteed by another
corporation having a net worth of at least $100,000,000.
Because of the cyclical nature of the real estate market, decreases in
net income of the public partnerships could occur at any time in the future when
economic conditions decline. Wells Fund I recently sold one of its buildings and
is in the process of marketing the remainder of its properties for sale.
However, none of the other Wells programs has liquidated or sold any of its real
properties to date. Accordingly, no assurance can be made that Wells programs
will ultimately be successful in meeting their investment objectives. (See "Risk
Factors.")
The aggregate dollar amount of the acquisition and development costs of
the properties purchased by the previously sponsored Wells programs, as of
December 31, 2000, was $___,___,___ of which $___,___ (or approximately .__%)
had not yet been expended on the development of certain of the projects which
are still under construction. Of the aggregate amount, approximately __% was or
will be spent on acquiring or developing office buildings, and approximately __%
was or will be spent on
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acquiring or developing shopping centers. Of the aggregate amount, approximately
_% was or will be spent on new properties, __% on existing or used properties
and __% on construction properties. Following is a table showing a breakdown of
the aggregate amount of the acquisition and development costs of the properties
purchased by these 14 Wells programs as of December 31, 2000:
<TABLE>
<CAPTION>
Type of Property New Used Construction
---------------- --- ---- ------------
<S> <C> <C> <C>
Office Buildings ___% ___% ___%
Shopping Centers ___% ___% ___%
</TABLE>
Wells Fund I terminated its offering on September 5, 1986, and received
gross proceeds of $35,321,000 representing subscriptions from 4,895 limited
partners. $24,679,000 of the gross proceeds were attributable to sales of Class
A Units, and $10,642,000 of the gross proceeds were attributable to sales of
Class B Units. Limited partners in Wells Fund I have no right to change the
status of their units from Class A to Class B or vice versa. Wells Fund I owns
interests in the following properties:
. a three-story medical office building in Atlanta, Georgia;
. a commercial office building in Atlanta, Georgia;
. a shopping center in DeKalb County, Georgia having Kroger as the
anchor tenant;
. a shopping center in Knoxville, Tennessee;
. a shopping center in Cherokee County, Georgia having Kroger as
the anchor tenant; and
. a project consisting of seven office buildings and a shopping
center in Tucker, Georgia.
The prospectus of Wells Fund I provided that the properties purchased
by Wells Fund I would typically be held for a period of eight to 12 years, but
that the general partners may exercise their discretion as to whether and when
to sell the properties owned by Wells Fund I and that the general partners were
under no obligation to sell the properties at any particular time. Wells Fund I
recently sold one of two commercial office buildings known as Peachtree Place
located in a suburb of Atlanta, Georgia. Wells Fund I is in the process of
marketing the remainder of its properties for sale pending the outcome of a
proxy solicitation to encourage the Class A Limited Partners of Wells Fund I to
vote in favor of an amendment to the Agreement of Limited Partnership to revise
the method of distribution of net sale proceeds.
Wells Fund II and Wells Fund II-OW terminated their offerings on
September 7, 1988, and received aggregate gross proceeds of $36,870,250
representing subscriptions from 4,659 limited partners. $28,829,000 of the gross
proceeds were attributable to sales of Class A Units, and $8,041,250 of the
gross proceeds were attributable to sales of Class B Units. Limited partners in
Wells Fund II and Wells Fund II-OW have no right to change the status of their
units from Class A to Class B or vice versa. Wells Fund II and Wells Fund II-OW
own all of their properties through a joint venture, which owns interests in the
following properties:
. a shopping center in Cherokee County, Georgia having Kroger as
the anchor tenant;
. a project consisting of seven office buildings and a shopping
center in Tucker, Georgia;
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. a two-story office building in Charlotte, North Carolina leased
to First Union Bank;
. a four-story office building in Houston, Texas leased to The
Boeing Company;
. a restaurant property in Roswell, Georgia leased to Brookwood
Grill of Roswell, Inc.; and
. a combined retail and office development in Roswell, Georgia.
The prospectus of Wells Fund II and Wells Fund II-OW provided that the
properties purchased by Wells Fund II and Wells Fund II-OW would typically be
held for a period of eight to 12 years, but that the general partners may
exercise their discretion as to whether and when to sell the properties owned by
Wells Fund II and Wells Fund II-OW and that the partnerships were under no
obligation to sell their properties at any particular time. Wells Fund II and
Wells Fund II-OW acquired their properties between 1987 and 1989, and although
the general partners are currently marketing some of the properties for sale,
they have not yet liquidated or sold any such properties.
Wells Fund III terminated its offering on October 23, 1990, and
received gross proceeds of $22,206,310 representing subscriptions from 2,700
limited partners. $19,661,770 of the gross proceeds were attributable to sales
of Class A Units, and $2,544,540 of the gross proceeds were attributable to
sales of Class B Units. Limited partners in Wells Fund III have no right to
change the status of their units from Class A to Class B or vice versa. Wells
Fund III owns interests in the following properties:
. a four-story office building in Houston, Texas leased to The
Boeing Company;
. a restaurant property in Roswell, Georgia leased to Brookwood
Grill of Roswell, Inc.;
. a combined retail and office development in Roswell, Georgia;
. a two-story office building in Greenville, North Carolina leased
to International Business Machines Corporation (IBM);
. a shopping center in Stockbridge, Georgia having Kroger as the
anchor tenant; and
. a two-story office building in Richmond, Virginia leased to
General Electric.
The prospectus of Wells Fund III provided that the properties purchased
by Wells Fund III would typically be held for a period of eight to 12 years, but
that the general partners may exercise their discretion as to whether and when
to sell the properties owned by Wells Fund III and that the partnership was
under no obligation to sell its properties at any particular time. Wells Fund
III acquired its properties between 198_ and 199_, and although the general
partners are currently marketing some of the properties for sale, they have not
yet liquidated or sold any such properties.
Wells Fund IV terminated its offering on February 29, 1992, and
received gross proceeds of $13,614,655 representing subscriptions from 1,286
limited partners. $13,229,150 of the gross proceeds were attributable to sales
of Class A Units, and $385,505 of the gross proceeds were attributable to sales
of Class B Units. Limited partners in Wells Fund IV have no right to change the
status of their units from Class A to Class B or vice versa. Wells Fund IV owns
interests in the following properties:
. a shopping center in Stockbridge, Georgia having Kroger as the
anchor tenant;
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<PAGE>
. a four-story office building in Jacksonville, Florida leased to
IBM and Customized Transportation Inc. (CTI);
. a two-story office building in Richmond, Virginia leased to
General Electric; and
. two two-story office buildings in Stockbridge, Georgia, a
substantial portion of which is leased to Georgia Baptist
Hospital.
Wells Fund V terminated its offering on March 3, 1993, and received
gross proceeds of $17,006,020 representing subscriptions from 1,667 limited
partners. $15,209,666 of the gross proceeds were attributable to sales of Class
A Units, and $1,796,354 of the gross proceeds were attributable to sales of
Class B Units. Limited partners in Wells Fund V who purchased Class B Units are
entitled to change the status of their units to Class A, but limited partners
who purchased Class A Units are not entitled to change the status of their units
to Class B. After taking into effect conversion elections made by limited
partners subsequent to their subscription for units, $15,590,210 of units of
Wells Fund V were treated as Class A Units, and $1,415,810 of units were treated
as Class B Units. Wells Fund V owns interests in the following properties:
. a four-story office building in Jacksonville, Florida leased to
IBM and CTI;
. two two-story office buildings in Stockbridge, Georgia, a
substantial portion of which is leased to Georgia Baptist
Hospital;
. a four-story office building in Hartford, Connecticut leased to
Hartford Fire Insurance Company;
. two restaurant properties in Stockbridge, Georgia leased to Apple
Restaurants, Inc. and Glenn's Open Pit Bar-B-Que; and
. a three-story office building in Appleton, Wisconsin leased to
Jaako Poyry Fluor Daniel.
Wells Fund VI terminated its offering on April 4, 1994, and received
gross proceeds of $25,000,000 representing subscriptions from 1,793 limited
partners. $19,332,176 of the gross proceeds were attributable to sales of Class
A Units, and $5,667,824 of the gross proceeds were attributable to sales of
Class B Units. Limited partners in Wells Fund VI are entitled to change the
status of their units from Class A to Class B and vice versa. After taking into
effect conversion elections made by limited partners subsequent to their
subscription for units, $21,877,575 of units of Wells Fund VI were treated as
Class A Units, and $3,122,425 of units were treated as Class B Units. Wells Fund
VI owns interests in the following properties:
. a four-story office building in Hartford, Connecticut leased to
Hartford Fire Insurance Company;
. two restaurant properties in Stockbridge, Georgia leased to Apple
Restaurants, Inc. and Glenn's Open Pit Bar-B-Que;
. a restaurant and retail building in Stockbridge, Georgia;
. a shopping center in Stockbridge, Georgia;
. a three-story office building in Appleton, Wisconsin leased to
Jaako Poyry Fluor Daniel;
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<PAGE>
. a shopping center in Cherokee County, Georgia having Kroger as
the anchor tenant;
. a combined retail and office development in Roswell, Georgia;
. a four-story office building in Jacksonville, Florida leased to
BellSouth Advertising and Publishing Corporation and American
Express Travel Related Services Company, Inc.; and
. a shopping center in Clemmons, North Carolina having Harris
Teeter, Inc. as the anchor tenant.
Wells Fund VII terminated its offering on January 5, 1995, and received
gross proceeds of $24,180,174 representing subscriptions from 1,910 limited
partners. $16,788,095 of the gross proceeds were attributable to sales of Class
A Units, and $7,392,079 of the gross proceeds were attributable to sales of
Class B Units. Limited partners in Wells Fund VII are entitled to change the
status of their units from Class A to Class B and vice versa. After taking into
effect conversion elections made by limited partners subsequent to their
subscriptions for units, $20,095,174 of units in Wells Fund VII were treated as
Class A Units, and $4,085,000 of units were treated as Class B Units. Wells Fund
VII owns interests in the following properties:
. a three-story office building in Appleton, Wisconsin leased to
Jaako Poyry Fluor Daniel;
. a restaurant and retail building in Stockbridge, Georgia;
. a shopping center in Stockbridge, Georgia;
. a shopping center in Cherokee County, Georgia having Kroger as
the anchor tenant;
. a combined retail and office development in Roswell, Georgia;
. a two-story office building in Alachua County, Florida near
Gainesville leased to CH2M Hill, Engineers, Planners, Economists,
Scientists;
. a four-story office building in Jacksonville, Florida leased to
BellSouth Advertising and Publishing Corporation and American
Express Travel Related Services Company, Inc.;
. a shopping center in Clemmons, North Carolina having Harris
Teeter, Inc. as the anchor tenant; and
. a retail development in Clayton County, Georgia.
Certain financial information for Wells Fund VII is summarized below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross Revenues $962,630 $846,306 $816,237 $543,291 $925,246
------------------------------------------------------------------------------------------------------------
Net Income $895,795 $754,334 $733,149 $452,776 $804,043
------------------------------------------------------------------------------------------------------------
</TABLE>
Wells Fund VIII terminated its offering on January 4, 1996, and
received gross proceeds of $32,042,689 representing subscriptions from 2,241
limited partners. $26,135,339 of the gross proceeds were attributable to sales
of Class A Units, and $5,907,350 were attributable to sales of Class B Units.
Limited partners in Wells Fund VIII are entitled to change the status of their
units from Class A to Class
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<PAGE>
B and vice versa. After taking into effect conversion elections made by limited
partners subsequent to their subscriptions for units and certain repurchases
made by Wells Fund VIII, $26,745,845 of units in Wells Fund VIII were treated as
Class A Units, and $5,286,844 of units were treated as Class B Units. Wells Fund
VIII owns interests in the following properties:
. a two-story office building in Alachua County, Florida near
Gainesville leased to CH2M Hill, Engineers, Planners, Economists,
Scientists;
. a four-story office building in Jacksonville, Florida leased to
BellSouth Advertising and Publishing Corporation and American
Express Travel Related Services Company, Inc.;
. a shopping center in Clemmons, North Carolina having Harris
Teeter, Inc. as the anchor tenant;
. a retail development in Clayton County, Georgia;
. a four-story office building in Madison, Wisconsin leased to US
Cellular, a subsidiary of BellSouth Corporation;
. a one-story office building in Farmers Branch, Texas leased to
TCI Valwood Limited Partnership I;
. a two-story office building in Orange County, California leased
to Quest Software, Inc.; and
. a two-story office building in Boulder County, Colorado leased to
Cirrus Logic, Inc.
Certain financial information for Wells Fund VIII is summarized below:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross Revenues $1,360,497 $1,362,513 $1,204,018 $1,057,694 $402,428
------------------------------------------------------------------------------------------------------------
Net Income $1,266,946 $1,269,171 $1,102,567 $ 936,590 $273,914
------------------------------------------------------------------------------------------------------------
</TABLE>
Wells Fund IX terminated its offering on December 30, 1996, and
received gross proceeds of $35,000,000 representing subscriptions from 2,098
limited partners. $29,359,310 of the gross proceeds were attributable to sales
of Class A Units, and $5,640,690 were attributable to sales of Class B Units.
Limited partners are entitled to change the status of their units from Class A
to Class B and vice versa. After taking into effect conversion elections made by
limited partners subsequent to their subscriptions for units, $29,898,750 of
units in Wells Fund IX were treated as Class A Units, and $5,101,250 of units
were treated as Class B Units. Wells Fund IX owns interests in the following
properties:
. a one-story office building in Farmers Branch, Texas leased to
TCI Valwood Limited Partnership I;
. a four-story office building in Madison, Wisconsin leased to US
Cellular, a subsidiary of BellSouth Corporation;
. a two-story office building in Orange County, California leased
to Quest Software, Inc.;
. a two-story office building in Boulder County, Colorado leased to
Cirrus Logic, Inc.;
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<PAGE>
. a two-story office building in Boulder County, Colorado leased to
Ohmeda, Inc.;
. a three-story office building in Knox County, Tennessee leased to
ABB Environmental Systems;
. a one-story office and warehouse building in Weber County, Utah
leased to Iomega Corporation;
. a three-story office building in Boulder County, Colorado leased
to GAIAM, Inc. and ODS Technologies, L.P.; and
. a one-story office building in Oklahoma City, Oklahoma leased to
Lucent Technologies, Inc.
Certain financial information for Wells Fund IX is summarized below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
1999 1998 1997 1996
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Revenues $1,593,734 $1,561,456 $1,199,300 $406,891
-------------------------------------------------------------------------------------------
Net Income $1,490,331 $1,449,955 $1,091,766 $298,756
-------------------------------------------------------------------------------------------
</TABLE>
Wells Fund X terminated its offering on December 30, 1997, and received
gross proceeds of $27,128,912 representing subscriptions from 1,806 limited
partners. $21,160,992 of the gross proceeds were contributable to sales of Class
A Units, and $5,967,920 were attributable to sales of Class B Units. Limited
partners are entitled to change the status of their units from Class A to Class
B and vice versa. After taking into effect conversion elections made by limited
partners subsequent to their subscriptions for units, $21,258,042 of units in
Wells Fund X were treated as Class A Units and $5,870,870 of units were treated
as Class B Units. Wells Fund X owns interests in the following properties:
. a three-story office building in Knox County, Tennessee leased to
ABB Environmental Systems;
. a two-story office building in Boulder County, Colorado leased to
Ohmeda, Inc.;
. a one-story office and warehouse building in Weber County, Utah
leased to Iomega Corporation;
. a three-story office building in Boulder County, Colorado leased
to GAIAM, Inc. and ODS Technologies, L.P.;
. a one-story office building in Oklahoma City, Oklahoma leased to
Lucent Technologies, Inc.;
. a one-story office and warehouse building in Orange County,
California leased to Cort Furniture Rental Corporation; and
. a two-story office and manufacturing building in Alameda County,
California leased to Fairchild Technologies U.S.A., Inc.
65
<PAGE>
Certain financial information for Wells Fund X is summarized below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------
<S> <C> <C> <C>
Gross Revenues $1,309,281 $1,204,597 $372,507
--------------------------------------------------------------------------
Net Income $1,192,318 $1,050,329 $278,025
--------------------------------------------------------------------------
</TABLE>
Wells Fund XI terminated its offering on December 30, 1998, and
received gross proceeds of $16,532,802 representing subscriptions from 1,345
limited partners. $13,029,424 of the gross proceeds were attributable to sales
of Class A Units and $3,503,378 were attributable to sales of Class B Units.
Wells Fund XI owns interests in the following properties:
. a three-story office building in Knox County, Tennessee leased to
ABB Environmental Systems;
. a one-story office building in Oklahoma City, Oklahoma leased to
Lucent Technologies, Inc.;
. a two-story office building in Boulder County, Colorado leased to
Ohmeda, Inc.;
. a three-story office building in Boulder County, Colorado leased
to GAIAM, Inc. and ODS Technologies, L.P.;
. a one-story office and warehouse building in Weber County, Utah
leased to Iomega Corporation;
. a one-story office and warehouse building in Orange County,
California leased to Cort Furniture Rental Corporation;
. a two-story office and manufacturing building in Alameda County,
California leased to Fairchild Technologies U.S.A., Inc.;
. a two-story manufacturing and office building in Greenville
County, South Carolina leased to EYBL CarTex, Inc.;
. a three-story office building in Johnson County, Kansas leased to
Sprint Communications Company L.P.;
. a two-story research and development office and warehouse
building in Chester County, Pennsylvania leased to Johnson
Matthey, Inc.; and
. a two-story office building in Fort Myers, Florida leased to
Gartner Group, Inc.
Certain financial information for Wells Fund XI is summarized below:
<TABLE>
<CAPTION>
---------------------------------------------------------
1999 1998
---------------------------------------------------------
<S> <C> <C>
Gross Revenues $766,586 $262,729
---------------------------------------------------------
Net Income $630,528 $143,295
---------------------------------------------------------
</TABLE>
66
<PAGE>
Wells Fund XII terminated its offering on __________, 2001, and
received gross proceeds of $_________ representing subscriptions from ___
limited partners. $_________ of the gross proceeds were attributable to sales of
cash preferred units and $________ were attributable to sales of tax preferred
units. Wells Fund XII owns interests in the following properties:
. a two-story manufacturing and office building in Greenville
County, South Carolina leased to EYBL CarTex, Inc.;
. a three-story office building In Johnson County, Kansas leased
to Sprint Communications Company L.P.;
. a two-story research and development office and warehouse
building in Chester County, Pennsylvania leased to Johnson
Matthey, Inc.;
. a two-story office building in Fort Myers, Florida leased to
Gartner Group, Inc.; and
. a three-story office building in Troy, Michigan leased to
Siemens Automotive Corporation.
The Wells Fund XII recognized net income of $___________ in 2000.
The Wells REIT terminated its first offering on December 19, 1999, and
received gross proceeds of $132,181,919 representing subscriptions from ______
stockholders. The Wells REIT terminated its second offering on ____________,
200_, and received gross proceeds of $_________ representing subscriptions from
_____ stockholders. The Wells REIT began a third offering on __________, 200_.
As of __________, 200_, the Wells REIT had received, in the aggregate, gross
proceeds of $_________ representing subscriptions from _____ stockholders. The
Wells REIT owns interests in the following properties:
. a three-story office building in Knox County, Tennessee leased
to AAA Flakt, Inc.;
. a one-story office building in Oklahoma City, Oklahoma leased
to Lucent Technologies, Inc.;
. a two-story office building in Boulder County, Colorado leased
to Ohmeda, Inc.;
. a three-story office building in Boulder County, Colorado
leased to GAIAM, Inc. and ODS Technologies, L.P.;
. a one-story office and warehouse building in Weber County,
Utah leased to Iomega Corporation;
. a one-story office and warehouse building in Orange County,
California leased to Fairfield Technologies U.S.A., Inc.;
. a two-story office and manufacturing building in Alameda
County, California leased to Cort Furniture Rental
Corporation;
. a four-story office building in Hillsborough County, Florida
leased to Pricewaterhouse Coopers, LLP;
. a four-story office building in Dauphin County, Pennsylvania
leased to Pennsylvania
67
<PAGE>
Cellular Telephone Corp.;
. a two-story office building in Orange County, California
leased to Matsushita Avionics Systems Corporation;
. a two-story manufacturing and office building in Greenville
County, South Carolina leased to EYBL CarTex, Inc.;
. a three-story office building in Johnson County, Kansas leased
to Sprint Communications Company L.P.;
. a four-story office building in Chesterfield County, Virginia
leased to ABB Power Generation, Inc.;
. a research and development, office and warehouse building in
Chester County, Pennsylvania leased to Johnson Matthey, Inc.;
. a two-story office, assembly and manufacturing building in
Wood Dale, Illinois leased to Marconi Data Systems, Inc.;
. a two-story office building in Fort Myers, Florida leased to
the Gartner Group, Inc.;
. a five-story office building in Collin County, Texas leased to
Cinemark USA, Inc. and The Coca Cola Company;
. a three-story office building in Tulsa County, Oklahoma leased
to Metris Direct, Inc.;
. four two-story office buildings in Maricopa County, Arizona
leased to Dial Corporation, ASM Lithography, Inc., Motorola,
Inc. and Avnet Inc.; and
. two three-story office buildings in Oakland County, Michigan
leased to Siemens Automotive Corporation and Delphi Automotive
Systems, LLC.
Certain financial information for the Wells REIT is summarized below:
---------------------------------------------------------
1999 1998
---------------------------------------------------------
Gross Revenues $6,495,395 $395,178
---------------------------------------------------------
Net Income $3,884,649 $334,034
---------------------------------------------------------
The information set forth above should not be considered in any way
indicative of results to be expected from Wells Fund XIII.
All of the properties acquired by the above Wells programs, except for
those acquired solely by the Wells REIT, were purchased and developed on an all
cash basis.
One of our general partners, Leo F. Wells, III is also the general
partner of 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 Wells Fund XII. Wells
Partners, L.P., a Georgia limited partnership having Wells Capital, Inc. as its
sole general partner, acted as the other general partner of these nine publicly
offered real estate limited partnerships. Wells Capital, Inc. and Leo F. Wells,
III are the general partners of Wells Fund I, Wells
68
<PAGE>
Fund II, Wells Fund II-OW and Wells Fund III, as well as Wells Fund XIII. Wells
Capital, Inc. is also the advisor to the Wells REIT.
Potential investors are encouraged to examine the Prior Performance
Tables included in the back of the prospectus for more detailed information
regarding the prior experience of the general partners. In addition, upon
request, prospective investors may obtain from the general partners without
charge copies of offering materials and any reports prepared in connection with
any of the Wells programs, including a copy of the most recent Annual Report on
Form 10-K filed with the Securities and Exchange Commission. For a reasonable
fee, Wells Fund XIII will also furnish upon request copies of the exhibits to
any such Form 10-K. Any such request should be directed to the general partners.
Additionally, Table VI contained in Part II of the registration statement, which
is not part of this prospectus, gives certain additional information relating to
properties acquired by the Wells programs. Wells Fund XIII will furnish, without
charge, copies of such table upon request.
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 Wells Fund
XIII.
Right to Change Election
Investors' elections of cash preferred units or tax preferred units
made in their 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 Wells Fund XIII, which election must 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 Wells Fund XIII of written notice of
such election. In order to assist limited partners in determining whether to
change their election, limited partners 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 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 our Dealer Manager 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
69
<PAGE>
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 obligation 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 limited partners 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 Wells Fund XIII to satisfy the deferred
commission obligation 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 not,
except in limited circumstances, be allocated any of Wells Fund XIII's net loss,
depreciation or amortization deductions for tax purposes. Thus, tax benefits
resulting from deductions for net losses, 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 a limited partner electing cash preferred units,
on a per unit basis. Thereafter, limited partners electing either cash preferred
units or tax preferred units are entitled to an amount equal to their net
capital contributions. Thereafter, limited partners 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 limited partners 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 Wells Fund XIII'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 Wells Fund XIII 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, however, each investor electing tax preferred units is entitled
to a
70
<PAGE>
distribution of proceeds from the sale of properties in an amount which will
equal the amount of net cash from operations previously paid to the investors
electing cash preferred units, on a per unit basis. 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 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 our operations or have a desire to participate to a greater extent in the
potential appreciation of our 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 our partnership agreement to mean
generally Wells Fund XIII'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 our partnership agreement to mean
generally the amount of cash contributed to the partnership reduced
by prior distributions of net proceeds from any sale of our
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 our general partners.
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<PAGE>
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 them an annual
amount equal to $0.10 per unit purchased pursuant to the deferred commission
option, which amount we will use to pay commissions due with respect to such
units. (See "Plan of Distribution.")
We anticipate 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 at that time. 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 our partnership agreement
to mean generally the net proceeds from any sale or exchange of our 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 on a
per unit basis;
. 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 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 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 our general partners until they have received an amount
equal to their capital contributions;
. 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
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. then, 80% to the limited partners on a per unit basis and 20% to our
general partners;
provided, however, that in no event will our 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 our properties than is allowed
pursuant to applicable provisions of the NASAA Guidelines. Any such excess
amounts otherwise distributable to our general partners will instead be
reallocated and distributed to the limited partners on a per unit basis.
Notwithstanding the foregoing, in the event we sell any 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 such property sold over
the sale price of such property, but not greater than the amount of special
allocations of deductions for depreciation, amortization and cost recovery with
respect to such property previously made to limited partners electing tax
preferred units. Our general partners have included the foregoing provision in
our 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 one of our properties 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 our 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 our partnership agreement to
mean generally the distribution of the net proceeds from a dissolution and
termination of Wells Fund XIII or from the sale of substantially all of our last
remaining assets, 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.
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.
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Partnership Allocations
Since we do 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 Wells Fund XIII. (See "Federal Income Tax Consequences -
Deductibility of Losses - Limitations - Basis Limitation.")
Net Loss
Net loss, defined in our partnership agreement to mean generally our
net losses 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, 99.0% to limited partners electing tax preferred units
and 1.0% to our 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 our general partners.
Notwithstanding the foregoing, in any fiscal year with respect to which we incur
an aggregate net loss, our interest income shall be specially allocated to
limited partners electing cash preferred units and our net loss 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, 99.0% to limited partners electing tax preferred units
and 1.0% to our 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 our general partners.
Net Income
Net income, defined in our partnership agreement to mean generally our
net income 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 our
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 99.0% to limited partners
electing cash preferred units and 1.0% to our general
partners.
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Gain on Sale
Gain on sale, defined in our partnership agreement to mean generally
our taxable income or gain from the sale or exchange of our 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 we recognize 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;
. 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 10.0% 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 our 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 20.0% 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, 80.0% to the limited partners and 20.0% to our general
partners;
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provided, however, that in no event will our general partners be allocated gain
on sale which would result in distributions to our 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 our general partners receive no more of the gain
allocation from the sale of our 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.
Our 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. A limited partner'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 we have a net
loss from operations or from the sale of property.
Income, losses and distributions of cash relating to units which are
acquired directly from Wells Fund XIII 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 our income received 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, which form may be obtained by calling or writing us.
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.
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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 us 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.
Real Property Investments
As of the date of this prospectus, we have not acquired nor contracted
to acquire any specific real estate properties. Our general partners are
continually evaluating various potential property investments and engaging in
discussions and negotiations with sellers, developers and potential tenants
regarding the purchase and development of our properties and the other Wells
programs. At such time during the negotiations for a specific property as the
general partners believe that a reasonable probability exists that we will
acquire such property, this prospectus will be supplemented to disclose the
negotiations and pending acquisition. Based upon our general partners'
experience and acquisition methods, this will normally occur on the signing of a
legally binding purchase agreement for the acquisition of a specific property,
but may occur before or after such signing or upon the satisfaction or
expiration of major contingencies in any such purchase agreement, depending on
the particular circumstances surrounding each potential investment. A supplement
to this prospectus will describe any improvements proposed to be constructed
thereon and other information considered appropriate for an understanding of the
transaction. Further data will be made available after any pending acquisition
is consummated, also by means of a supplement to this prospectus, if
appropriate.
It should be understood that the initial disclosure of any proposed
acquisition cannot be relied upon as an assurance that we will ultimately
consummate such proposed acquisition nor that the information provided
concerning the proposed acquisition will not change between the date of such
supplement and actual purchase.
We intend for the proceeds of this offering to be invested in
properties in accordance with our investment policies. In the event that all of
the units offered hereby are sold, we anticipate that we will invest in six to
eight real estate properties including those properties purchased in joint
ventures. Funds available for investment in our properties which are not
expended or committed to the acquisition or development of specific real
properties on or before the later of the second anniversary of the effective
date of the registration statement or one year after the termination of the
offering and not reserved for working capital purposes will be returned to the
investors. (See "Distributions and Allocations" as to when funds shall be deemed
committed for this purpose.)
Adequate insurance coverage will be obtained for all properties in
which we will invest.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
General
As of the date of this prospectus, we had not yet begun active
operations. We will not begin active operations until we have received and
accepted subscriptions for a minimum of 125,000 units ($1,250,000).
Following achievement of such funding level, subscription proceeds may
be released to us from escrow and applied to the payment or reimbursement of
selling commissions and other organization and offering expenses, leaving
estimated net proceeds available for investment and operations of approximately
$1,050,000 after payment of acquisition and advisory fees and acquisition
expenses. (See "Estimated Use of Proceeds.") Thereafter, we will experience a
relative increase in liquidity as additional subscriptions for units are
received, and a relative decrease in liquidity as net offering proceeds are
expended in connection with the acquisition, development and operation of
properties.
As of the initial date of this prospectus, we have not entered into
any arrangements creating a reasonable probability that any specific property
will be acquired. The number of our properties we acquire will depend upon the
number of units sold and the resulting amount of the net proceeds available for
investment in properties available to us. (See "Risk Factors.")
Until required for the acquisition, development or operation of
properties, net offering proceeds will be kept in short-term, liquid
investments. Because we will purchase properties on an all cash basis and the
vast majority of leases for the properties we acquire will provide for tenant
reimbursement of operating expenses, we do not anticipate that a permanent
reserve for maintenance and repairs of our properties will be established.
However, to the extent that we have insufficient funds for such purposes, our
general partners will advance to us an aggregate amount of up to 1% of gross
offering proceeds for maintenance and repairs of our properties. Our general
partners also may, but are not required to, establish reserves from gross
offering proceeds, out of cash flow generated by operating properties or out of
nonliquidating net sale proceeds.
Our general partners are not aware of any material trends or
uncertainties, favorable or unfavorable, other than national economic conditions
affecting real estate generally, which may be reasonably anticipated to have a
material impact on either capital resources or the revenues or income to be
derived from the operation of real estate properties.
Summary of Partnership Agreement
The rights and obligations of investors will be governed by our
partnership agreement, the form of which is set out in its entirety as Exhibit
"A" to this prospectus. Our partnership agreement will be executed and become
effective as of the effective date of this prospectus. Prospective investors
should study our 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 our
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 our partnership agreement itself.
Powers of the General Partners
Our general partners have complete authority and discretion in the
management and control of our business. Limited partners have no right or power
to take part in our management. (Articles XI and XVI.)
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Liabilities of our Limited Partners; Nonassessability of Units
We were 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 Wells Fund XIII as limited
partners. Under GRULPA, limited partners have no personal liability for our
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 our business. (Section 8.10(b).) No investor will be liable for any of our
debts or obligations in excess of his capital contribution. (Section 16.3.)
Other Activities of the General Partners
Our 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 Wells Fund XIII, or to the limited
partners, as a result of engaging in any other business or venture.
Rights and Obligations of Limited Partners
Our limited partners are not permitted to participate in the
management and control of our business and may not transact any business in the
name of Wells Fund XIII.
Voting Rights of the Limited Partners
Our 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 our real properties;
. dissolution of Wells Fund XIII;
. 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
Wells Fund XIII; and
. amendment to our 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 Wells Fund XIII under certain
circumstances. (Section 11.3(u).) Except as otherwise provided in our
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.")
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Our 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 our 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 our 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 our partnership agreement.
(Section 19.1.)
Mergers and Consolidations
Our partnership agreement prohibits our general partners from
initiating any transaction in which Wells Fund XIII is merged or consolidated
with any other partnership or corporation, which type of transaction is commonly
referred to as a "partnership roll-up."
Our partnership agreement further provides that our general partners
shall not be authorized to merge or consolidate Wells Fund XIII with any other
partnership or corporation or to convert Wells Fund XIII into a real estate
investment trust, which is often referred to as a "REIT," unless (1) we obtain a
current appraisal of all of our assets by an independent appraiser, and (2) our
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 Wells Fund XIII
and preserving their interests in Wells Fund XIII 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 Wells Fund
XIII. (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. (See the organization chart in the "Summary of the
Offering" section of this prospectus.) 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).)
Our 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 our 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 our partnership agreement. We 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% per annum.
We 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 Wells Fund
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XIII as a substitute general partner. However, the purchase price to be paid to
Wells Fund XIII 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 Wells Fund XIII 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
Our general partners are required to maintain at our principal office
full and accurate books and records for Wells Fund XIII. 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 our affairs will be conducted by the independent
certified public accountants that we select. (Section 15.2(b).)
Meetings of Limited Partners
There will not be any annual or periodic meetings of limited partners.
However, our 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
partners and any proposed amendment to our 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; provided, 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
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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 our counsel, result in the termination of Wells Fund XIII
under Section 708 of the Internal Revenue Code, unless we
receive 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, our partnership agreement contains
substantial restrictions on the transfer or assignment of units in order to
prevent us 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 our capital or profits excluding
transfers by gift, transfers at death, transfers between family members,
distributions from a qualified retirement plan and block transfers. Our
partnership agreement also provides that any transfer or assignment of units
which the general partners believe will cause us to be treated as a publicly
traded partnership will be void from the beginning and will not be recognized by
Wells Fund XIII. (See "Federal Income Tax Consequences - Publicly Traded
Partnerships" and Section 17.3(g) of our partnership agreement.)
Transferees of units are not eligible to participate in our
distribution reinvestment plan with respect to investment of their distributions
in our additional units. Transferees are not disqualified, however, from
participation in our 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 our partnership agreement. (Section 17.4.) We shall recognize an
assignee of units who does not become a substituted limited partner 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 our 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, we 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.
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If a repurchase reserve is established, we may, in the sole discretion
of our 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 our
capital or operations. In no event will a limited partner be permitted to have
his units repurchased prior to termination of the offering. We may not
repurchase units owned by our general partners or their affiliates. Further, in
order to prevent us 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 to us a written request, executed by him or a trustee or authorized
agent in the case of qualified profit sharing, pension or other retirement
trust, indicating his or its desire to have such units repurchased. Such
requests will be considered by our general partners in the order in which they
are received.
If our 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 our receipt of the written request. 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 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 our properties performed by the general partners and not by
an independent appraiser. Our 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.
We 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.
We 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 we repurchase will be canceled.
In addition to the other restrictions described herein, our
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 Wells Fund XIII 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 Wells Fund XIII 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).)
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Prospective investors should not, under any circumstances, assume that they will
be able to resell their units to us due to the various restrictions and
limitations relating to the potential establishment of our repurchase reserve.
(See "Risk Factors.") In addition, prospective investors should consider that a
resale of their units to us may result in adverse tax consequences. (See
"Federal Income Tax Consequences - Sales of Limited Partnership Units.")
Distribution Reinvestment Plan
We anticipate 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 our operations invested in additional units
of Wells Fund XIII during the offering period or in units issued by subsequent
Wells programs which have substantially identical investment objectives as ours.
(Section 8.15.) In addition, in the event the distribution reinvestment plan is
made available, it is anticipated that investors in Wells Fund III, investors
holding Class A Units in Wells Fund IV, Wells Fund V, Wells Fund VI, Wells Fund
VII, Wells Fund VIII, Wells Fund IX, Wells Fund X and Wells Fund XI, investors
holding cash preferred units in Wells Fund XII, and investors in shares of the
Wells REIT will have the opportunity to have their distributions of net cash
from operations or dividends invested in units in Wells Fund XIII during the
offering period.
Units to be issued by us pursuant to the distribution reinvestment
plan will be available only until the termination of this offering. Our 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 our 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 us. If sufficient units are not available for purchase
pursuant to the distribution reinvestment plan, we will remit excess
distributions of net cash from operations to the participants.
Net cash from operations may only be reinvested in units issued by a
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;
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. 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 Wells Fund XIII.
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.
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 our general
partners in writing of that fact.
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 our
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 Wells Fund XIII 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. We 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 we have paid selling commissions.
Unless our 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.")
We reserve 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. We
also
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reserve 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 our assets should be liquidated. In such event, the general
partners will send a proxy to liquidate to each limited partner. Our 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 our general partners, voting in favor of
a liquidation of Wells Fund XIII, our assets will be fully liquidated within 30
months. (Section 20.2.)
Dissolution and Termination
Wells Fund XIII is to continue until December 31, 2030, but may be
dissolved earlier as provided in our partnership agreement or by law. (Article
VI.) Wells Fund XIII will also be dissolved upon:
. the decision by holders of more than 50% of the units to
dissolve and terminate Wells Fund XIII;
. 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 Wells Fund XIII; or
(2) if there is no remaining general partner, a majority
in interest of the limited partners elect to continue
the business of Wells Fund XIII;
. the sale or disposition of all interests in real property and
other assets of Wells Fund XIII;
. 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 Wells Fund XIII; or
. the happening of any other event causing the dissolution of
Wells Fund XIII under the laws of the State of Georgia.
(Section 20.1.)
In addition to the above events, our general partners may also
terminate the offering, compel a termination and dissolution of Wells Fund XIII,
or restructure our affairs, upon notice to all limited partners and without the
consent of any limited partner, if upon the advice of our counsel, either (1)
our assets constitute "plan assets," as such term is defined for purposes of
ERISA, or (2) any of the transactions contemplated in our partnership agreement
constitute "prohibited transactions" under ERISA. (Section 20.1(h).)
In the event Wells Fund XIII is dissolved, our assets shall be
converted to cash. Our general partners shall be given a reasonable amount of
time to collect any notes receivable with respect to the sale of our assets and
to collect any other outstanding debts. Partnership cash shall be distributed
first to
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creditors to satisfy debts and liabilities of Wells Fund XIII, other than loans
or advances made by partners. Our general partners may also establish reserves
deemed reasonably necessary to satisfy our contingent or unforeseen liabilities
or obligations. Remaining cash will then be used to repay loans or advances made
by partners and to pay any fees due the general partners. The balance, if any,
shall be distributed among the partners in accordance with the positive balances
in their capital accounts as of the date of distribution. Upon completion of the
foregoing distributions, Wells Fund XIII shall be terminated. (Section 9.3.)
Investment By Tax-Exempt Entities and ERISA Considerations
General
Our general partners have attempted to structure Wells Fund XIII in
such a manner that it will be an attractive investment vehicle for qualified
plans, IRAs and other entities which are tax-exempt under the Internal Revenue
Code. In considering an investment in Wells Fund XIII of a portion of the assets
of a retirement plan, however, the plan's fiduciary should consider all
applicable provisions of the Internal Revenue Code and ERISA. In this regard,
IRAs which are not sponsored or endorsed by an employer or by an employee
organization and Keogh Plans under which only partners or a sole proprietor are
participants generally are not subject to the provisions of ERISA; however,
fiduciaries of such accounts should review carefully the exceptions set forth
below.
In general, qualified plan fiduciaries should consider:
. whether the investment is in accordance with the documents and
instruments governing such qualified plan;
. whether the investment satisfies the prudence and
diversification requirements of Sections 404(a)(1)(B) and
404(a)(1)(C) of ERISA;
. whether the investment will result in "unrelated business
taxable income" to the qualified plan or to an investing IRA,
Keogh Plan or other tax-exempt entity (See "Federal Income Tax
Consequences - Investment by Qualified Plans and Other
Tax-Exempt Entities");
. whether there is sufficient liquidity for the qualified plan
after taking this investment into account;
. the need to value the assets of the qualified plan annually;
and
. whether the investment would constitute or give rise to a
prohibited transaction under either Section 406 of ERISA or
Section 4975 of the Internal Revenue Code.
ERISA also requires generally that the assets of employee benefit
plans be held in trust and that the trustee, or a duly authorized investment
manager within the meaning of Section 3(38) of ERISA, have exclusive authority
and discretion to manage and control the assets of the plan. All fiduciaries of
employee benefit plans subject to ERISA have certain duties imposed on them by
ERISA and, as noted above, certain transactions between an employee benefit plan
and the parties in interest with respect to such plan including fiduciaries are
prohibited. The Internal Revenue Code imposes similar prohibitions on retirement
plans, and IRAs and Keogh Plans covering only self-employed individuals which
are not subject to ERISA are, nevertheless, subject to the "prohibited
transaction" rules under the Internal Revenue Code. For purposes of both ERISA
and the Internal Revenue Code, any person who exercises any authority or control
with respect to the management or disposition of the assets of a retirement plan
is considered to be a fiduciary of such retirement plan subject to certain
exceptions not here relevant.
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Minimum Distribution Requirements
Potential investors who intend to purchase units in their IRAs, and
any trustee of an IRA or other fiduciary of a retirement plan considering an
investment in units, should take into consideration the limited liquidity of an
investment in the units as it relates to applicable minimum distribution
requirements under the Internal Revenue Code for the IRA or other retirement
plan. If the units are still held in the IRA or retirement plan and Wells Fund
XIII properties have not yet been sold at such time as mandatory distributions
are required to commence to the IRA beneficiary or qualified plan participant,
Section 401(a)(9) of the Internal Revenue Code will likely require that a
distribution in kind of the units be made to the IRA beneficiary or qualified
plan participant. Any such distribution in kind of units must be included in the
taxable income of the IRA beneficiary or qualified plan participant for the year
in which the units are received at the then current fair market value of the
units without any corresponding cash distributions with which to pay the income
tax liability arising out of any such distribution. (See "Risk Factors - Federal
Income Tax Risks.") The fair market value of any such distribution in kind will
be only an estimated value per unit and there can be no assurance that such
estimated value could actually be realized by a limited partner because (1)
estimates do not necessarily indicate the price at which units could be sold and
(2) no public market for units exists or is likely to develop. (See "Annual
Valuation" below.)
Plan Assets - Generally
ERISA provides a comprehensive statutory scheme regarding the
investment in and management of a retirement plan's assets. As noted above, any
person who exercises any authority or control over the management or disposition
of a plan's assets is considered to be a fiduciary of such plan. In order to
avoid such characterization, the general partners have used their best efforts
to structure Wells Fund XIII so that the assets of Wells Fund XIII will not be
deemed to be assets of the retirement plans investing as limited partners (Plan
Assets).
In the event that the assets of Wells Fund XIII were deemed to be Plan
Assets, however, the general partners would be deemed fiduciaries of the
retirement plans investing as limited partners and, accordingly, certain
contemplated transactions between Wells Fund XIII and the general partners could
be deemed to be "prohibited transactions." Additionally, if the assets of Wells
Fund XIII were deemed to be Plan Assets, the standards of prudence and other
provisions of Title I of ERISA applicable to investments by retirement plans
would extend as to all plan fiduciaries to the general partners with respect to
investments made by Wells Fund XIII.
Plan Assets - Definition
The definition of Plan Assets is not set forth in ERISA or the
Internal Revenue Code, but was addressed initially by the Department of Labor in
1975 by the adoption of Interpretive Bulletin 75-2. This interpretation provided
that the assets of a corporation or partnership in which an employee benefit
plan invested would not generally be treated as assets of such plan. The
Department stated that:
Generally, investment by a plan in securities (within the
meaning of section 3(20) of the Employee Retirement Income Security
Act of 1974) of a corporation or partnership will not, solely by
reason of such investment, be considered to be an investment in the
underlying assets of such corporation or partnership so as to make
such assets of the entity "plan assets" and thereby make a subsequent
transaction between the party in interest and the corporation or
partnership a prohibited transaction under Section 406 of the Act.
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In 1986, the Department of Labor issued regulations, the Plan Asset
Regulations, relating to the definition of Plan Assets. The Plan Asset
Regulations adopted the general statement set forth in the Interpretive
Bulletin, however, it limited the applicability of such statement by further
providing that the assets of entities in which retirement plans make equity
investments will be treated as Plan Assets unless such investments are (1) in
publicly offered securities, (2) in securities offered by an investment company
registered under the Investment Company Act of 1940, or (3) within one of the
other specific exemptions set forth below. As Wells Fund XIII is not a
registered investment company, the exemptions contained in the Plan Asset
Regulations which may apply to an investment in Wells Fund XIII include that it
may be an investment:
. in "publicly offered securities," defined generally as
interests which are freely transferable, widely-held and
registered with the Securities and Exchange Commission;
. in which equity participation by "benefit plan investors" is
not significant; or
. in a "real estate operating company."
The Plan Asset Regulations provide that equity participation in an entity by
benefit plan investors is "significant" if at any time 25% or more of the value
of any class of equity interest is held by benefit plan investors. The term
"benefit plan investors" is broadly defined for this purpose to include any
employee pension or welfare benefit plan, whether or not subject to ERISA, any
plan described in Section 4975(e)(1) of the Internal Revenue Code and any entity
whose underlying assets include Plan Assets by reason of plan investment in the
entity. Wells programs typically have equity participation by "benefit plan
investors" that is significant, as defined above. Therefore, the general
partners do not anticipate that Wells Fund XIII will qualify for the exemption
for investments in which equity participation by benefit plan investors is not
significant.
Plan Asset Regulations - Available Exemptions
Publicly Offered Securities Exemption
As noted above, if a retirement plan acquires "publicly offered
securities," the assets of the issuer of the securities are not deemed to be
Plan Assets under the Plan Asset Regulations. The definition of publicly offered
securities requires that such securities must be "widely-held," "freely
transferable" and must satisfy certain registration requirements under federal
securities laws. Although Wells Fund XIII should satisfy the registration
requirements under this definition, the determinations of whether a security is
"widely-held" and "freely transferable" are inherently factual matters.
Under the Plan Asset Regulations, a class of securities will be
"widely-held" if it is held by 100 or more persons. The General Partners
anticipate that this requirement will be met; however, even if the units are
deemed to be widely-held, the "freely transferable" requirement must also be
satisfied in order for Wells Fund XIII to qualify for this exemption. In this
regard, the Plan Asset Regulations provide several examples of restrictions on
transferability which, absent unusual circumstances, will not, either alone or
in any combination, cause the rights of ownership to be considered not "freely
transferable." One such example provided in the Plan Asset Regulations is an
offering, such as this offering, in which the minimum investment is $10,000 or
less. The allowed restrictions are based upon restrictions commonly found in
public real estate limited partnerships which are imposed to comply with state
and federal law, to assure continued eligibility for favorable tax treatment and
to avoid certain practical administrative problems. Wells Fund XIII is intended
to satisfy the freely transferable requirement set forth in the Plan Asset
Regulations with respect to the units.
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It should be noted in this regard, however, that because certain
adverse tax consequences can result if Wells Fund XIII were to be characterized
as a "publicly traded partnership" under Section 7704 of the Internal Revenue
Code (See "Federal Income Tax Consequences - Publicly Traded Partnerships"),
certain additional restrictions on the transferability of units have been
incorporated into the partnership agreement which are intended to prevent such
reclassification of Wells Fund XIII (the "Section 7704 Restrictions"). The Plan
Asset Regulations provide specifically that any "restriction on, or prohibition
against, any transfer or assignment which would either result in a termination
or reclassification of the entity for federal or state tax purposes" will
ordinarily not alone or in combination with other restrictions affect a finding
that securities are "freely transferable." The Plan Asset Regulations were
promulgated prior to the enactment of Section 7704 of the Internal Revenue Code,
however, so the incorporation of the Section 7704 Restrictions into the
partnership agreement potentially has the effect of making the freely
transferable requirement, and thus the "publicly offered securities" exemption,
unavailable to Wells Fund XIII.
On the other hand, if the Department of Labor interprets the Section
7704 Restrictions in Wells Fund XIII consistently with the specific exemption
language in the Plan Asset Regulations set forth above, Wells Fund XIII should
qualify for the freely transferable requirement and, thus, the publicly offered
securities exemption contained in the Plan Asset Regulations because the Section
7704 Restrictions in the partnership agreement are intended only to prohibit
transfers which would result in a reclassification of the entity for federal tax
purposes. Because of the factual nature of such a determination, however, and
the lack of further guidance as to the meaning of the term "freely
transferable," particularly in light of the Section 7704 Restrictions, there can
be no assurance that Wells Fund XIII will, in fact, qualify for this exemption.
Real Estate Operating Company Exemption
Even if Wells Fund XIII were not to qualify for the "publicly offered
securities" exemption, the Plan Asset Regulations also provide an exemption with
respect to securities issued by a "real estate operating company." An entity is
a real estate operating company if, during the relevant valuation periods
defined in the Plan Asset Regulations, at least 50% of its assets other than
short-term investments pending long-term commitment or distribution to investors
valued at cost, are invested in real estate which is managed or developed and
with respect to which Wells Fund XIII has the right to participate substantially
in the management or development activities. Wells Fund XIII intends to devote
more than 50% of its assets to the management and development of real estate.
An example in the Plan Asset Regulations indicates, however, that,
although some management and development activities may be performed by
independent contractors, rather than by the entity itself, if over one-half of
an entity's properties are acquired subject to long-term leases under which
substantially all management and maintenance activities with respect to the
properties are the responsibility of the tenants, then the entity may not be
eligible for the real estate operating company exemption. There can be no
assurance that Wells Fund XIII will be able to structure its operations to
satisfy the requirements of this exemption, and due to the uncertainty of the
application of the standards set forth in the examples in the Plan Asset
Regulations and lack of further guidance as to the meaning of the term "real
estate operating company," there can be no assurance as to Wells Fund XIII's
ability to qualify for the real estate operating company exemption.
Plan Asset Consequences - Prohibited Transaction Excise Tax
If Wells Fund XIII were deemed to hold Plan Assets, issues relating to
the "prohibited transaction" concepts of ERISA and the Internal Revenue Code
arise by virtue of (1) the general partners' ownership of interests in Wells
Fund XIII, and (2) the possible recharacterization of the relationship
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between the general partners or Wells Fund XIII and any retirement plan which
may purchase units. Section 406 of ERISA and Section 4975 of the Internal
Revenue Code prohibit retirement plans from engaging in certain transactions
involving Plan Assets with specified parties. The specified parties are referred
to as "parties in interest," as defined in Section 3(14) of ERISA, and as
"disqualified persons," as defined in Section 4975(e)(2) of the Internal Revenue
Code. These definitions include both parties owning threshold percentage
interests in the investment entity and "persons providing services to the plan,"
and certain of their affiliates. Thus, if Wells Fund XIII is deemed to hold Plan
Assets, each general partner could be characterized as a "fiduciary" with
respect to such assets, and would thus be a "party in interest" under ERISA and
a "disqualified person" under the Internal Revenue Code with respect to
investing retirement plans. If the general partners' interest in Wells Fund XIII
were deemed to exceed certain threshold levels set forth in the Internal Revenue
Code and ERISA, Wells Fund XIII, itself, could be deemed to be a disqualified
person and the investment in units by retirement plans could be a prohibited
transaction. The general partners do not believe such thresholds have been
exceeded with respect to their interest in Wells Fund XIII or that Wells Fund
XIII should be deemed to be a party in interest or a disqualified person for
this reason or otherwise.
If a general partner were to be characterized as a fiduciary with
respect to investing retirement plans, various transactions between the general
partners or their affiliates and Wells Fund XIII could constitute prohibited
transactions because a fiduciary may not deal with Plan Assets in its own
interest or represent a person whose interests are adverse to those of the plan
in a transaction involving Plan Assets. In addition, it could be argued that,
because the general partners share in certain partnership distributions and tax
allocations in a manner disproportionate to their capital contributions to Wells
Fund XIII, the general partners are being compensated directly out of Plan
Assets rather than the partnership assets in exchange for the provision of
services, i.e., establishment of Wells Fund XIII and making it available as an
investment to retirement plans. If this were the case, absent a specific
exemption applicable to the transaction, a prohibited transaction could be
deemed to have occurred between investing retirement plans and the general
partners.
If it is determined by the Department of Labor or the IRS that a
prohibited transaction has occurred, the general partners and any party in
interest that has engaged in any such transaction would be required to eliminate
the prohibited transaction by reversing the transaction and making good to the
retirement plan any loss resulting from the prohibited transaction. In addition,
each party in interest would be liable to pay an excise tax equal to 15% of the
amount involved in the transaction for each year in which the transaction
remains uncorrected. Moreover, if the fiduciary or party in interest does not
correct the transaction within a specified period, the party in interest could
also be liable for an additional excise tax in an amount equal to 100% of the
amount involved. Plan fiduciaries who make the decision to invest in units
could, under certain circumstances, be liable as co-fiduciaries for actions
taken by Wells Fund XIII or the general partners.
Special rules apply to an investing IRA. If Wells Fund XIII were
deemed to be a party in interest or disqualified person, as described above,
with respect to an IRA, the tax-exempt status of the IRA could be lost by reason
of such investment because a transaction between Wells Fund XIII and the account
would be deemed under Section 4975 of the Internal Revenue Code to constitute a
prohibited transaction.
It should be noted that even if the assets of Wells Fund XIII are not
deemed to be Plan Assets under the Plan Asset Regulations, as the general
partners anticipate, Interpretive Bulletin 75-2 indicates that in certain
circumstances an investment in Wells Fund XIII by a retirement plan may still be
a prohibited transaction. For example, if a retirement plan may, by reason of
its investment, compel Wells Fund XIII to invest in a property or engage in
transactions which such retirement plan could not enter into directly under the
prohibited transaction rules, then the provisions of Interpretive Bulletin 75-2
and the Plan Asset Regulations would not preclude recharacterization of such
investment as a prohibited
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transaction. The general partners have represented in this regard that no such
arrangements will be entered into with investing retirement plans, and therefore
it is unlikely that these provisions of Interpretive Bulletin 75-2 would be
invoked by the Department of Labor.
Annual Valuation
Fiduciaries of retirement plans are required to determine annually the
fair market value of the assets of such retirement plans, typically, as of the
close of a plan's fiscal year. To enable the fiduciaries of retirement plans
subject to the annual reporting requirements of ERISA to prepare reports
relating to an investment in Wells Fund XIII, the general partners are required
to furnish an annual statement of estimated unit value to the investors. For the
first three full fiscal years following the termination of the offering, the
value of a unit will be deemed to be $10.00, and no valuations will be
performed. Thereafter, the annual statement will report the estimated value of
each unit based upon the estimated amount a unit holder would receive if all
partnership assets were sold as of the close of Wells Fund XIII's fiscal year
for their estimated values and if such proceeds, without reduction for selling
expenses, together with the other funds of Wells Fund XIII, were distributed to
the limited partners in liquidation of Wells Fund XIII. Such estimated values
will be based upon annual valuations of partnership properties performed by the
general partners, and no independent appraisals will be obtained. While the
general partners are required under the partnership agreement to obtain the
opinion of an independent third party stating that their estimates of value are
reasonable, the valuations performed by the general partners may not satisfy the
requirements imposed upon fiduciaries under ERISA for retirement plans.
The estimated value per unit will be reported to limited partners in
our next annual or quarterly report on Form 10-K or 10-Q sent to the limited
partners for the period immediately following completion of the valuation
process. There can be no assurance that:
. the estimated value per unit will actually be realized by
Wells Fund XIII or by the limited partners upon liquidation in
part because estimates do not necessarily indicate the price
at which properties could be sold; or
. limited partners could realize estimated net asset value if
they were to attempt to sell their units, because no public
market for units exists or is likely to develop.
Federal Income Tax Consequences
The following discussion is intended to summarize all of the federal
income tax considerations material to an investment in Wells Fund XIII. This
summary is based upon the Internal Revenue Code, Treasury Regulations, including
Temporary and Proposed Regulations promulgated thereunder ("Regulations"),
current positions of the Internal Revenue Service (IRS) contained in Revenue
Rulings and Revenue Procedures and other administrative actions of the IRS and
existing judicial decisions in effect as of the date of this prospectus.
Investors should note that it is not feasible to comment on all
aspects of federal, state and local tax laws that may affect each limited
partner in Wells Fund XIII. The federal income tax considerations discussed
below are necessarily general in nature, and their application may vary
depending upon a limited partner's particular circumstances. Further, the
discussion below is directed primarily to individual taxpayers who are citizens
of the United States. Accordingly, persons who are trusts, corporate investors
in general, corporate investors that are subject to specialized rules such as
Subchapter S corporations and any potential investor who is not a United States
citizen are cautioned to consult their own personal tax advisors before
investing in Wells Fund XIII.
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No representations are made in this prospectus as to state and local
tax consequences. Wells Fund XIII does not intend to request a ruling from the
IRS with respect to any of the federal income tax matters discussed below, and
on certain matters no ruling could be obtained even if requested.
Investors should also note that a great deal of uncertainty exists
with respect to certain recently enacted and amended provisions of the Internal
Revenue Code. There can be no assurance that the present federal income tax laws
applicable to limited partners and the operation of Wells Fund XIII will not be
further changed prospectively or retroactively by additional legislation, by new
Regulations, by judicial decisions or by administrative interpretations, any of
which could adversely affect a limited partner, nor is there any assurance that
there will not be a difference of opinion as to the interpretation or
application of current federal income tax laws.
For the foregoing reasons, each prospective investor is urged to
consult with his own tax advisor with respect to the federal, state and local
income tax consequences arising from the purchase of units. Nothing in this
prospectus or any prior or subsequent communication from the general partners,
their affiliates, employees or any professional associated with this offering is
or should be construed as legal or tax advice to a potential investor in Wells
Fund XIII. Investors should be aware that the IRS may not agree with all tax
positions taken by Wells Fund XIII and that legislative, administrative or
judicial decisions may reduce or eliminate anticipated tax benefits of an
investment in Wells Fund XIII.
Investors electing cash preferred units are not anticipated to receive
much, if any, of the tax benefits associated with an investment in Wells Fund
XIII. Therefore, any discussion in this prospectus of the availability and
extent of income tax benefits to limited partners will apply principally to
investors electing tax preferred units.
Prospective Investors who are Fiduciaries of Retirement Plans should
Carefully Read "Investment by Tax-Exempt Entities and ERISA Considerations" and
"Investment by Qualified Plans and Other Tax-Exempt Entities" in this section.
Wells Fund XIII will furnish to each partner and any assignee of units
on an annual basis the information necessary for the preparation and timely
filing of his federal income tax return. Investors should note that information
returns filed by Wells Fund XIII will be subject to audit by the IRS and that
the Commissioner of the IRS has announced that the IRS will devote greater
attention to the proper application of the tax laws to partnerships. (See
"Audits" below.)
Tax Opinion
We retained Holland & Knight LLP (Counsel) to render an opinion
concerning the material federal income tax issues relating to an investment in
Wells Fund XIII (Tax Opinion). Potential investors should be aware that the
opinions of Counsel are based upon the accuracy of the facts described in this
prospectus and facts represented to Counsel by our general partners. The
opinions of Counsel assume further that we will be operated strictly in
accordance with our partnership agreement. The accuracy of such facts and
representations is absolutely critical to the accuracy of the Tax Opinion, and
any alteration of the facts may adversely affect the opinions rendered.
Furthermore, the opinions of Counsel are based upon existing law, applicable
Regulations and current published administrative positions of the IRS contained
in Revenue Rulings, Revenue Procedures and judicial decisions, all of which are
subject to change either prospectively or retroactively. Changes in the Internal
Revenue Code and the Regulations subsequent to the date of the Tax Opinion are
not addressed in the Tax Opinion, and any such changes could have a material
adverse effect upon the tax treatment of an investment in Wells Fund XIII.
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In reliance on certain representations and assumptions described in
this prospectus and in the Tax Opinion, and subject to the qualifications set
forth in this prospectus and in the Tax Opinion, Counsel in the Tax Opinion
concludes that, in the aggregate, substantially more than half of the material
federal income tax benefits, in terms of their financial impact on a typical
investor, will more likely than not be realized by an investor in Wells Fund
XIII, and that the following material tax issues are more likely than not to
have a favorable outcome on the merits for federal income tax purposes if
challenged by the IRS, litigated and judicially decided:
. Wells Fund XIII will be classified as a partnership for
federal income tax purposes and not as an association taxable
as a corporation;
. Wells Fund XIII will not be classified as a "publicly traded
partnership" under Section 7704 of the Internal Revenue Code;
. a limited partner's interest in Wells Fund XIII will be
treated as a passive activity;
. partnership items of income, gain, loss, deduction and credit
will be allocated among the general partners and the limited
partners substantially in accordance with the allocation
provisions of the partnership agreement;
. the activities contemplated by Wells Fund XIII will be
considered activities entered into for profit; and
. Wells Fund XIII is not currently required to register as a tax
shelter with the IRS under Section 6111 of the Internal
Revenue Code prior to the offer and sale of the units based
upon the general partners' representation that the "tax
shelter ratio," which is generally determined by dividing an
investor's share of aggregate deductions from the investment,
determined without regard to income, by the amount of the
investor's capital contributions, with respect to an
investment in Wells Fund XIII will not exceed 2 to 1 for any
investor as of the close of any year in Wells Fund XIII's
first five calendar years.
Investors should note that any statement that it is "more likely than
not" that a tax position would be sustained means that in Counsel's judgment at
least a 51% chance of prevailing exists if the IRS were to challenge the
allowability of such tax position and such challenge were to be litigated and
judicially decided.
It should be further noted that Counsel is unable to form an opinion
as to the probable outcome of certain material tax aspects of the transactions
described in this prospectus if challenged by the IRS, litigated and judicially
decided. These aspects include:
. the issue of whether Wells Fund XIII will be considered to
hold any or all of its properties primarily for sale to
customers in the ordinary course of business; and
. the issue of whether Wells Fund XIII will be classified as a
"tax shelter" under Section 6662(d) of the Internal Revenue
Code for purposes of determining certain potential exemptions
from the applicability of the accuracy-related penalty
provisions of the Internal Revenue Code. (See "Risk Factors -
Federal Income Tax Risks.")
In addition, potential investors should note that the IRS may also
attempt to disallow or limit some of the tax benefits derived from an investment
in Wells Fund XIII by applying certain provisions of the Internal Revenue Code
at the individual or partner level rather than at the partnership level. In this
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connection, Counsel gives no opinion or conclusion as to the tax consequences to
limited partners with regard to any material tax issue which impacts at the
individual or partner level and is dependent upon an individual limited
partner's tax circumstances. These issues include, but are not limited to, the
potential imposition of the alternative minimum tax, investment interest
deductibility limitations and the application of Section 183 of the Internal
Revenue Code, limiting deductions attributable to activities not entered into
for profit, at the partner level. Accordingly, potential investors are urged to
consult with and rely upon their own tax advisors with respect to all tax issues
which impact at the partner or individual level.
As of the date of the Tax Opinion, no properties have been acquired by
Wells Fund XIII, nor has Wells Fund XIII entered into any contracts to acquire
any properties. Therefore, it is impossible at this time for Counsel to opine on
the application of the federal income tax law to the specific facts which will
exist when properties are acquired by Wells Fund XIII.
Neither the Tax Opinion nor this description of the tax consequences
of an investment in Wells Fund XIII will have any binding effect or official
status of any kind, and no assurance can be given that the conclusions reached
in the Tax Opinion will be sustained by a court if such conclusions are
contested by the IRS. Accordingly, the Tax Opinion should not be viewed as a
guarantee that the income tax effects described in this prospectus will be
achieved, nor should it be viewed as a guarantee that a court would hold that
there is "substantial authority" for the positions taken by Wells Fund XIII with
respect to any income tax issue.
Partnership Status Generally
The ability to obtain the income tax attributes anticipated from an
investment in units depends upon the classification of Wells Fund XIII as a
partnership for federal income tax purposes and not as an association taxable as
a corporation. Regulations regarding entity classification have been issued
under Section 7701 of the Internal Revenue Code which, in effect, operate to
allow a business entity that is not otherwise required to be classified as a
corporation, i.e., an "eligible entity," to elect its classification for federal
income tax purposes. Under Section 301.7701-3(b) of the Regulations, an
"eligible entity" that has at least two members will be treated as a partnership
in the absence of an election. Accordingly, while the general partners do not
intend to request a ruling from the IRS as to the classification of Wells Fund
XIII for income tax purposes, unless Wells Fund XIII is deemed to be taxable as
a corporation pursuant to the application of the publicly traded partnership
rules discussed below, Wells Fund XIII will qualify as an "eligible entity" and
need not make any election to be treated as a partnership for federal income tax
purposes.
In the event that Wells Fund XIII, for any reason, were to be treated
for federal income tax purposes as an association taxable as a corporation, the
partners of Wells Fund XIII would be treated as stockholders with the following
results, among others: (1) Wells Fund XIII would become a taxable entity subject
to the federal income tax imposed on corporations; (2) items of income, gain,
loss, deduction and credit would be accounted for by Wells Fund XIII on its
federal income tax return and would not flow through to the partners; and (3)
distributions of cash would generally be treated as dividends taxable to the
partners at ordinary income rates, to the extent of Wells Fund XIII's current or
accumulated earnings and profits, and would not be deductible by Wells Fund XIII
in computing its income tax.
Based upon the entity classification Regulations, and IRS rulings and
judicial decisions under Section 7701(a) of the Internal Revenue Code, all of
which are subject to change, and based upon certain representations of the
general partners and other assumptions, Counsel has concluded that Wells Fund
XIII will more likely than not be treated as a partnership for federal income
tax purposes and not as an association taxable as a corporation. In rendering
such opinion, Counsel has also relied upon the fact that
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Wells Fund XIII is duly organized as a limited partnership under the laws of the
State of Georgia and upon the representation by the general partners that Wells
Fund XIII will be organized and operated strictly in accordance with the
provisions of the partnership agreement.
The remaining summary of federal income tax consequences in this
section assumes that Wells Fund XIII will be classified as a partnership for
federal income tax purposes.
Publicly Traded Partnerships
Classification of Wells Fund XIII as a "publicly traded partnership"
could result in (1) Wells Fund XIII being taxable as a corporation (See
"Partnership Status Generally" above), and (2) the treatment of net income of
Wells Fund XIII as portfolio income rather than passive income (See "Passive
Loss Limitations" below).
A publicly traded partnership is generally defined under Section 7704
of the Internal Revenue Code as any partnership whose interests are traded on an
established securities market or are readily tradable on a secondary market or
the substantial equivalent thereof. Regulations have been issued (the "Section
7704 Regulations") which provide guidance with respect to such classification
standards, including certain safe harbor standards which, if satisfied, preclude
classification as a publicly traded partnership.
The Section 7704 Regulations contain definitions of what constitutes
an established securities market and a secondary market or the substantial
equivalent thereof. They also set forth what transfers may be disregarded in
determining whether such definitions are satisfied with respect to the
activities of a partnership. The general partners do not believe that units in
Wells Fund XIII are traded on an established securities market or a secondary
market or a substantial equivalent thereof as defined in the Section 7704
Regulations. The general partners have also represented that they do not intend
to cause the units to be traded on an established securities market or a
secondary market in the future.
Section 7704 Safe Harbors
As noted above, the Section 7704 Regulations provide certain safe
harbors, the "secondary market safe harbors," which, after taking into
consideration all transfers other than those deemed disregarded, may be
satisfied in order to avoid classification of such transfers as being made on a
secondary market or the substantial equivalent thereof. One of the secondary
market safe harbors provides that interests in a partnership will not be
considered tradable on a secondary market or the substantial equivalent thereof
if the sum of the partnership interests transferred during any taxable year,
other than certain disregarded transfers, does not exceed 2% of the total
interest in Wells Fund XIII's capital or profits. Disregarded transfers include,
among other things, transfers by gift, transfers at death, transfers between
family members, distributions from a qualified retirement plan and block
transfers, which are defined as transfers by a partner during any 30 calendar
day period of partnership units representing more than 2% of the total interest
in a partnership's capital or profits.
A second safe harbor from classification as a publicly traded
partnership, dealing with redemption and repurchase agreements, is also provided
in the Section 7704 Regulations. The Section 7704 Regulations also make it clear
that the failure to satisfy a safe harbor provision under the Regulations will
not cause a partnership to be treated as a publicly traded partnership if, after
taking into account all facts and circumstances, partners are not readily able
to buy, sell or exchange their partnership interests in a manner that is
comparable, economically, to trading on an established securities market.
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The partnership agreement limits unit transfers of all types to
transfers of units which satisfy an applicable safe harbor contained in the
Section 7704 Regulations or any other applicable safe harbor from "publicly
traded partnership" status which may be adopted by the IRS. The general partners
have represented that Wells Fund XIII will be operated strictly in accordance
with the partnership agreement, and they have also represented that they will
void any transfers or assignments of units if they believe that such transfers
or assignments will cause Wells Fund XIII to be treated as a publicly traded
partnership under the Section 7704 Regulations or any other guidelines adopted
by the IRS in the future.
Based upon the representations of the general partners, and assuming
Wells Fund XIII will be operated strictly in accordance with the terms of the
partnership agreement, Counsel has concluded that it is more likely than not
Wells Fund XIII will not be classified as a publicly traded partnership under
Section 7704 of the Internal Revenue Code. Due to the complex nature of the safe
harbor provisions contained in the Section 7704 Regulations, however, and
because any determination in this regard will necessarily be based upon future
facts not yet in existence at this time, no assurance can be given that the IRS
will not challenge this conclusion or that Wells Fund XIII will not, at some
time in the future, be deemed to be a publicly traded partnership.
Qualifying Income Exemption
Even if Wells Fund XIII were deemed to be a publicly traded
partnership, however, Section 7704(c) of the Internal Revenue Code provides an
exception to taxation of such an entity as a corporation if 90% or more of the
gross income of such entity for each taxable year consists of "qualifying
income." Qualifying income includes interest, real property rents and gain from
the sale or other disposition of real property, but qualifying income does not
include real property rents which are contingent on the profits of the lessees
or income from the rental or lease of personal property.
The general partners intend to operate Wells Fund XIII in such a
manner as to qualify for the 90% qualifying income exception. (See "Investment
Objectives and Criteria.") Investors should note, however, that even if Wells
Fund XIII satisfies the qualifying income exception, being deemed to be a
publicly traded partnership would result in certain other material adverse tax
consequences to limited partners, including the treatment of net income of Wells
Fund XIII as portfolio income rather than passive income. (See "Passive Loss
Limitations" below.)
General Principles of Partnership Taxation
Under the Internal Revenue Code, no federal income tax is paid by a
partnership. Accordingly, if as anticipated Wells Fund XIII is treated as a
partnership for federal income tax purposes, Wells Fund XIII will not be treated
as a separate taxable entity subject to federal income tax. Each partner will,
instead, be required to report on his federal income tax return for each year
his distributive share of Wells Fund XIII's items of income, gain, loss,
deduction or credit for that year, without regard to whether any actual cash
distributions have been made to him. Investors should note that a partner's
share of the taxable income of Wells Fund XIII, and the income tax liability
resulting therefrom, may exceed such partner's cash distributions from Wells
Fund XIII.
Anti-Abuse Rules
As noted under "General Principles of Partnership Taxation" above,
partnerships are not liable for income taxes imposed by the Internal Revenue
Code. The Regulations set forth broad "anti-abuse" rules applicable to
partnerships, however, which rules authorize the Commissioner of the IRS to
recast transactions involving the use of partnerships either to reflect the
underlying economic arrangement or to prevent the use of a partnership to
circumvent the intended purpose of any provision of the Internal
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Revenue Code. The general partners are not aware of any fact or circumstance
which could cause the Commissioner to exercise his authority under these rules;
however, if any of the transactions entered into by Wells Fund XIII were to be
recharacterized under these rules, or Wells Fund XIII, itself, were to be recast
as a taxable entity under these rules, material adverse tax consequences to all
of the partners would occur as otherwise described in this prospectus.
Deductibility of Losses - Limitations
The deductibility of a limited partner's distributive share of Wells
Fund XIII's items of loss is subject to a series of limitations.
Basis Limitation
A limited partner may not deduct his share of partnership losses and
deductions in excess of the adjusted basis of his partnership interest
determined as of the end of the taxable year. Allocated losses which exceed a
limited partner's basis will not be allowed, however, they may be carried over
indefinitely and claimed as a deduction in a subsequent year to the extent that
such limited partner's adjusted basis in his units has increased above zero. A
limited partner's adjusted basis in his units will include his cash investment
in Wells Fund XIII along with his pro rata share of any partnership liabilities
as to which no partner is personally liable. A limited partner's basis will be
increased by his distributive share of Wells Fund XIII's taxable income and
decreased, but not below zero by his distributive share of Wells Fund XIII's
losses. Cash distributions which are made to a limited partner, if any, will
also decrease the basis in his units and will generally constitute a return of
capital to the extent of such basis. In the event that a limited partner has no
remaining basis in his units, however, cash distributions will generally be
taxable to him as gain from the sale of his units. (See "Sales of Limited
Partnership Units" below.)
Passive Loss Limitation
Section 469 of the Internal Revenue Code substantially restricts the
ability of many taxpayers, including individuals, estates, trusts, certain
closely-held corporations and certain personal service corporations, to deduct
losses derived from so-called "passive activities." Passive activities generally
include any activity involving the conduct of a trade or business in which the
taxpayer does not materially participate, including the activity of a limited
partnership in which the taxpayer is a limited partner, and certain rental
activities, including the rental of real estate. In the opinion of Counsel, it
is more likely than not that a limited partner's interest in Wells Fund XIII
will be treated as a passive activity. Accordingly, income and loss of Wells
Fund XIII, other than interest or other similar income earned on temporary
investments and working capital reserves, which income will constitute portfolio
income, will constitute passive activity income and passive activity loss, as
the case may be, to limited partners.
Losses from passive activities are generally deductible only to the
extent of a taxpayer's income or gains from passive activities and will not be
allowed as an offset against other income, including salary or other
compensation for personal services, active business income or "portfolio
income," which includes nonbusiness income derived from dividends, interest,
royalties, annuities and gains from the sale of property held for investment.
Passive activity losses that are not allowed in any taxable year are suspended
and carried forward indefinitely and allowed in subsequent years as an offset
against passive activity income in future years.
Upon a taxable disposition of a taxpayer's entire interest in a
passive activity to an unrelated party, suspended losses with respect to that
activity will then be allowed as a deduction against:
. first, income or gain from that activity, including gain
recognized on such disposition;
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. then, income or gain for the taxable year from other passive
activities; and
. finally, non-passive income or gain.
Regulations provide, however, that similar undertakings which are under common
control and owned by pass-through entities such as partnerships are generally
aggregated into a single activity. Accordingly, it is unlikely that suspended
passive activity losses derived from a specific partnership property would be
available to limited partners to offset non-passive income from other sources
until the sale or other disposition of all partnership properties has been
consummated.
Section 469(k) of the Internal Revenue Code provides that the passive
activity loss rules will be applied separately with respect to items
attributable to each publicly traded partnership. Accordingly, if Wells Fund
XIII were deemed to be a publicly traded partnership, partnership losses, if
any, would be available only to offset future non-portfolio income of Wells Fund
XIII. In addition, if Wells Fund XIII were deemed to be a publicly traded
partnership which is not treated as a corporation because of the qualifying
income exception, partnership income would generally be treated as portfolio
income rather than passive income. (See "Publicly Traded Partnerships" above.)
At Risk Limitation
The deductibility of partnership losses is limited further by the "at
risk" limitations set forth in Section 465 of the Internal Revenue Code. Limited
partners who are individuals, estates, trusts and certain closely-held
corporations are not allowed to deduct partnership losses in excess of the
amounts which such limited partners are determined to have "at risk" at the
close of Wells Fund XIII's year. Generally, a limited partner's "amount at risk"
will include only the amount of his cash capital contribution to Wells Fund
XIII. A limited partner's "amount at risk" will be reduced by his allocable
share of partnership losses and by partnership distributions and increased by
his allocable share of partnership income. Any deductions which are disallowed
under this limitation may be carried forward indefinitely and utilized in
subsequent years to the extent that a limited partner's "amount at risk" is
increased in those years.
Allocations of Profit and Loss
Allocations of net income, net loss, depreciation, amortization and
cost recovery deductions and gain on sale are described in this prospectus in
the section entitled "Distributions and Allocations." The terms "net income" and
"net loss" are defined in the partnership agreement to mean the net income or
loss realized or recognized by Wells Fund XIII for a fiscal year, as determined
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.
The general partners do not intend to request a ruling from the IRS
with respect to whether the allocations of profits and losses in the partnership
agreement will be recognized for federal income tax purposes. The IRS may
attempt to challenge the allocations of profits and losses made by Wells Fund
XIII, which challenge, if successful, could adversely affect the limited
partners by changing their respective shares of taxable income or loss. No
assurance can be given that the IRS will not also challenge one or more of the
special allocation provisions contained in the partnership agreement.
Section 704(a) of the Internal Revenue Code provides generally that
partnership items of income, gain, loss, deduction and credit are to be
allocated among partners as set forth in the relevant partnership agreement.
Section 704(b) provides, however, that if an allocation to a partner under the
partnership agreement of income, gain, loss, deduction or credit or items
thereof does not have substantial economic
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effect, such allocation will instead be made in accordance with the partner's
interest in Wells Fund XIII determined by taking into account all facts and
circumstances.
Regulations issued under Section 704(b) of the Internal Revenue Code
the "Section 704(b) Regulations" provide complex rules for determining (1)
whether allocations will be deemed to have economic effect, (2) whether the
economic effect of allocations will be deemed to be substantial, and (3) whether
allocations not having substantial economic effect will nonetheless be deemed to
be made in accordance with a partner's interest in Wells Fund XIII.
Economic Effect
The Section 704(b) Regulations provide generally that an allocation
will be considered to have economic effect if the following three requirements
are met:
. partners' capital accounts are determined and maintained in
accordance with the Section 704(b) Regulations;
. upon the liquidation of Wells Fund XIII, liquidating
distributions are made in accordance with the positive capital
account balances of the partners after taking into account all
capital account adjustments for the year during which such
liquidation occurs; and
. the partnership agreement contains a "qualified income offset"
provision and the allocation in question does not cause or
increase a deficit balance in a partner's capital account at
the end of Wells Fund XIII's taxable year.
Our partnership agreement (1) provides for the determination and
maintenance of capital accounts pursuant to the Section 704(b) Regulations, and
(2) provides that liquidation proceeds are to be distributed in accordance with
capital accounts. (See "Distributions and Allocations.") With regard to the
third requirement, Section 1.704-1(b)(2)(ii)(d) of the Regulations provides that
a partnership agreement contains a "qualified income offset" if it provides that
a partner who unexpectedly receives an adjustment, allocation or distribution of
certain items which causes a deficit or negative capital account balance, which
means generally that the sum of losses allocated and cash distributed to a
partner exceeds the sum of his capital contributions to Wells Fund XIII and any
income allocated to such partner, will be allocated items of income and gain in
an amount and manner sufficient to eliminate the deficit balance as quickly as
possible. The partnership agreement contains a qualified income offset
provision. The qualified income offset provision was added to the partnership
agreement to satisfy the test for "economic effect" under the Section 704(b)
Regulations; however, it should be noted in this regard that such qualified
income offset provision will have the effect of prohibiting a limited partner
from being allocated items of loss or deduction which would cause his capital
account to be reduced below zero.
In addition to the allocation provisions described above, the
partnership agreement also contains a provision specially allocating deductions
for depreciation, amortization and cost recovery to limited partners electing
tax preferred units up to the amount which would reduce their capital accounts
to zero. In an attempt to ensure that limited partners electing tax preferred
units will bear the risk of actual economic loss in the event that a partnership
property is sold at a loss, as required under the Section 704(b) Regulations,
the partnership agreement further provides for a special allocation of
nonliquidating net sale proceeds in favor of limited partners electing cash
preferred units, which will apply only if a partnership property is sold for
less than its original purchase price. Under this provision, limited partners
electing cash preferred units are allocated the first proceeds from the sale of
properties in an amount equal to the excess of the original purchase price of
such partnership property over the sale price of the partnership property sold,
but the amount of such allocation shall not exceed the amount of the special
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allocation to limited partners electing tax preferred units of deductions for
depreciation, amortization and cost recovery with respect to the specific
partnership property sold.
Our partnership agreement also provides for a special allocation of
gain on sale to limited partners electing tax preferred units in an amount equal
to the deductions for depreciation, amortization and cost recovery which were
previously allocated to such units. Accordingly, a limited partner who acquires
units from a prior owner should note that this special allocation of gain on
sale attributable to deductions for depreciation, amortization and cost recovery
previously allocated to the prior limited partner could have the effect of
allocating substantial income to him upon a sale or other disposition of a
partnership property, even though such new limited partner would not have
received any benefit from such prior allocation of deductions.
Substantiality
Even if the allocations of profits and losses of a partnership are
deemed to have economic effect under the Section 704(b) Regulations, however, an
allocation will not be upheld unless the economic effect of such allocation is
"substantial." In this regard, the Section 704(b) Regulations generally provide
that the economic effect of an allocation is "substantial" if there is a
reasonable possibility that the allocation will affect the dollar amounts to be
received by partners from a partnership, independent of tax consequences.
Conversely, the economic effect of an allocation is presumed not to be
substantial if there is a strong likelihood that the net adjustments to the
partner's capital account for any taxable year will not differ substantially
from the net adjustments which would have been made for such year in the absence
of such allocation and the total tax liability of the partners for such year is
less than it would have been in the absence of such allocations. The economic
effect will also be presumed not to be substantial where:
. the partnership agreement provides for the possibility that
the allocation will be largely offset by one or more other
allocations;
. the net adjustments to the partners' capital accounts for the
taxable years to which the allocations relate will not differ
substantially from the net adjustments which would have been
recorded in such partners' respective capital accounts for
such years if the original allocations and the offsetting
allocations were not contained in the partnership agreement;
and
. the total tax liability of the partners for such year is less
than it would have been in the absence of such allocations.
With respect to the foregoing rule, the Section 704(b) Regulations state that
original allocations and offsetting allocations will not be deemed to not be
substantial if, at the time the allocations become part of the partnership
agreement, there is a strong likelihood that the offsetting allocations will
not, in large part, be made within five years after the original allocations are
made. The Section 704(b) Regulations further state that for purposes of testing
substantiality, the adjusted tax basis of partnership property will be presumed
to be the fair market value of such property, and adjustments to the adjusted
tax basis of partnership property such as depreciation or cost recovery
deductions will be presumed to be matched by corresponding changes in the
property's fair market value.
There are no assurances that the IRS will not challenge the special
allocation of partnership deductions for depreciation, amortization and cost
recovery to limited partners electing tax preferred units or other allocations
set forth in the partnership agreement on the basis that such allocations are
either "not substantial," within the meaning of the Section 704(b) Regulations,
or otherwise fail to comply with the Section 704(b) Regulations.
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Partners' Interest in Wells Fund XIII
If the allocations of profits and losses set forth in a partnership
agreement are deemed not to have substantial economic effect, the allocations
are then to be made in accordance with the partners' interests in Wells Fund
XIII as determined by taking into account all facts and circumstances. The
Section 704(b) Regulations provide in this regard that a partner's interest in a
partnership will be determined by taking into account all facts and
circumstances relating to the economic arrangement of the partners, including:
. the partners' relative contributions to Wells Fund XIII;
. the interests of the partners in economic profits and losses
(if different from those in taxable income or loss);
. the interests of the partners in cash flow and other
nonliquidating distributions; and
. the rights of the partners to distributions of capital upon
liquidation.
Since the partnership agreement (1) provides for the determination and
maintenance of capital accounts in accordance with the Section 704(b)
Regulations, (2) provides that liquidation proceeds will be distributed to the
partners in accordance with capital accounts, (3) contains a qualified income
offset provision, and (4) shifts the economic risk of loss to the limited
partners electing tax preferred units, Counsel has concluded that it is more
likely than not that partnership items of income, gain, loss, deduction and
credit will be allocated among the general partners and the limited partners
substantially in accordance with the allocation provisions of the partnership
agreement. In reaching this conclusion, Counsel has made the following
assumptions:
. that allocations of deductions for depreciation, amortization
and cost recovery to such limited partners will be matched by
corresponding reductions in the fair market value of Wells
Fund XIII's property; and
. the accuracy of the representations of the general partners,
including that Wells Fund XIII will be operated strictly in
accordance with the terms of the partnership agreement.
Taxable Income Without Cash Distributions
A partner in a partnership is required to report his allocable share
of Wells Fund XIII's taxable income on his personal income tax return regardless
of whether or not he has received any cash distributions from Wells Fund XIII.
For example, a limited partner electing cash preferred units who participates in
the distribution reinvestment plan will be allocated his share of Wells Fund
XIII's net income and gain on sale, including net income and gain on sale
allocable to units acquired pursuant to the distribution reinvestment plan, even
though such partner would receive no cash distributions from Wells Fund XIII. In
addition, a limited partner electing cash preferred units who purchases units
pursuant to the deferred commission option will be allocated his share of Wells
Fund XIII's net income with respect to such units even though net cash from
operations otherwise distributable to such limited partner will instead be paid
to third parties to satisfy the deferred commission obligation with respect to
such units for a period of six years following the year of purchase, or longer
if required to satisfy the outstanding commission obligation. (See "Plan of
Distribution.") The partnership agreement also provides for a "qualified income
offset," as described above, which could result in the allocation of income or
gain to a limited partner in the absence of cash distributions from Wells Fund
XIII. There are no assurances that a limited partner will not be allocated items
of partnership income or gain in an amount which gives rise to
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an income tax liability in excess of cash, if any, received from Wells Fund XIII
for the tax year in question, and investors are urged to consult with their
personal tax advisors in this regard.
Investment by Qualified Plans and Other Tax-Exempt Entities
Unrelated Business Taxable Income (UBTI)
Any person who is a fiduciary of an IRA, Keogh Plan, qualified plan or
other tax-exempt entity, collectively referred to as "Exempt Organizations,"
considering an investment in the units should be aware that there is a risk that
income allocable to units owned by Exempt Organizations may be subject to
federal income tax. This would occur in the event any portion of Wells Fund
XIII's income is deemed to be UBTI, generally defined as income derived from any
unrelated trade or business carried on by a tax-exempt entity or by a
partnership of which it is a member. A trustee of a charitable remainder trust
should be aware that if any portion of the income derived from the trust's
ownership of units is deemed to be UBTI, the trust will lose its exemption from
income taxation with respect to all of its income for the tax year in question.
(See "Investment by Charitable Remainder Trusts" below.) A tax-exempt limited
partner other than a charitable remainder trust which has UBTI in any tax year
from all sources of more than $1,000 will be subject to taxation on such income,
only.
The general partners have used their best efforts to structure Wells
Fund XIII's activities to avoid having any of Wells Fund XIII's income
characterized as UBTI, and the types of partnership income and gain allocable to
investing Exempt Organizations should not generally constitute UBTI. If,
however, Wells Fund XIII were either to be deemed to hold partnership properties
primarily for sale to customers in the ordinary course of business (See
"Property Held Primarily for Sale" below), or Wells Fund XIII were to own
"debt-financed property," i.e., property which is subject to "acquisition
indebtedness," then a portion of such income or gain would constitute UBTI to
investing Exempt Organizations.
The portion of income or gain from "debt-financed property" that will
constitute UBTI to investing Exempt Organizations is based on the ratio borne by
the "average acquisition indebtedness" incurred with respect to such property to
the basis of the property. In computing this ratio, "average acquisition
indebtedness" means the highest amount of the acquisition indebtedness with
respect to such property during the 12 month period ending on the date of sale
and, in determining the portion of income which is UBTI from sources other than
a sale, "average acquisition indebtedness" means the average monthly level of
acquisition indebtedness during the taxable year for the year in which such
income was recognized.
Acquisition indebtedness includes:
. indebtedness incurred in acquiring or improving property;
. indebtedness incurred before the acquisition or improvement of
property if such indebtedness would not have been incurred but
for such acquisition or improvement; and
. indebtedness incurred after the acquisition or improvement of
property if such indebtedness would not have been incurred but
for such acquisition or improvement and the incurrence of such
indebtedness was reasonably foreseeable at the time of such
acquisition or improvement.
We will under no circumstances incur indebtedness to acquire
partnership properties. Thereafter, Wells Fund XIII's authority to incur
indebtedness may be exercised only in limited circumstances. Specifically, the
general partners have the authority to incur indebtedness on behalf of Wells
Fund XIII
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only in the event that they deem such borrowing necessary to finance
improvements of its properties, to protect the capital previously invested in a
property, to protect the value of Wells Fund XIII's investment in a property or
to make a property more attractive for sale or lease. (See "Investment
Objectives and Criteria - Borrowing Policies.") The general partners have
represented, however, that they will not cause Wells Fund XIII to incur
indebtedness unless Wells Fund XIII first receives an opinion of counsel or an
opinion from its tax accountants that the proposed indebtedness more likely than
not will not cause income of Wells Fund XIII to be characterized as UBTI to
investing Exempt Organizations. Investors should be aware, however, that any
such opinion would be based upon various representations and assumptions, and
would have no binding effect on the IRS or any court. Accordingly, no assurance
can be given that the conclusions reached in any such opinion, if contested,
would be sustained by a court, or that any such indebtedness to be obtained by
Wells Fund XIII in the future would not cause the income allocated to limited
partners that are Exempt Organizations to be taxed as UBTI.
Minimum Distribution Requirements
Any person who is a fiduciary of an Exempt Organization considering an
investment in units should also consider the impact of minimum distribution
requirements under the Internal Revenue Code. Section 401(a)(9) of the Internal
Revenue Code provides generally that certain minimum distributions from
retirement plans must be made commencing no later than the April 1st following
the calendar year during which the recipient attains age 70 1/2. Accordingly, if
units are held by retirement plans, and partnership properties have not yet been
sold, at such time as mandatory distributions are required to commence to an IRA
beneficiary or a qualified plan participant, it is likely that a distribution in
kind of the units will be required to be made. A distribution of units will be
includable in the taxable income of said IRA beneficiary or qualified plan
participant for the year in which the units are received at the fair market
value of the units without any corresponding cash distributions with which to
pay the income tax liability arising out of any such distribution.
In certain circumstances, a distribution in kind of units may be
deferred beyond the date set for required distributions, but only upon a showing
of compliance with the minimum distribution requirements of the Internal Revenue
Code by reason of distributions from other retirement plans established for the
benefit of the recipient. Compliance with these requirements is complex,
however, and potential investors are urged to consult with and rely upon their
individual tax advisors with regard to all matters concerning the tax effects of
distributions from retirement plans. No assurances can be given that partnership
properties will be sold or otherwise disposed of in a fashion which would permit
sufficient liquidity in any retirement plan holding units for the retirement
plan to be able to avoid making a mandatory distribution in kind of units. ("See
"Risk Factors.")
Investment by Charitable Remainder Trusts
A charitable remainder trust (CRT) is a trust created to provide
income for the benefit of at least one non-charitable beneficiary for life or a
term of up to 20 years, with the property comprising the trust corpus then
transferred to a charitable beneficiary upon the expiration of the trust. Upon
the creation of a CRT, the grantor would normally be entitled to a charitable
income tax deduction equal to the current fair market value of the remainder
interest which will ultimately pass to charity. A CRT is also exempt from
federal income taxation if the trust is established and maintained in compliance
with highly complex rules contained in the Internal Revenue Code and underlying
Regulations. Among these rules is a provision that if any portion of the income
recognized by a CRT is deemed to be UBTI, all of the CRT's income for the
taxable year in which UBTI is incurred, from whatever sources derived, will be
subject to income taxation at the trust level. As set forth above in "Investment
by Qualified Plans and Other Tax-Exempt Entities," the general partners have
used their best efforts to structure Wells Fund XIII's activities to avoid
having any of Wells Fund XIII's income characterized as UBTI. Accordingly,
unless Wells Fund
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XIII incurs indebtedness for the purpose of acquiring or improving real
properties, and hence is deemed to be holding property subject to "acquisition
indebtedness," or is deemed to hold its properties primarily for sale to
customers in the ordinary course of business, under current law Wells Fund
XIII's income should not be deemed to constitute UBTI to tax-exempt investors.
(See "Investment by Qualified Plans and Other Tax-Exempt Entities" above.)
Syndication and Organizational Expenses
A current deduction is not allowed for expenses incurred in connection
with organizing Wells Fund XIII or syndicating Wells Fund XIII. Amounts which
qualify as organizational expenses, as well as other start-up expenditures, may,
however, if so elected, be amortized ratably over 60 months. Syndication
expenses, which are neither deductible nor amortizable, include costs and
expenses incurred in connection with promoting and marketing the units such as
sales commissions, professional fees and printing costs. There are no assurances
that the IRS will not attempt to recharacterize as nondeductible syndication
expenses certain costs and expenses which the general partners intend to cause
Wells Fund XIII to amortize over 60 months.
Activities Not Engaged in For Profit
Section 183 of the Internal Revenue Code limits deductions
attributable to activities "not engaged in for profit." The term "not engaged in
for profit" describes any activity other than an activity that constitutes a
trade or business or an activity that is engaged in for the production or
collection of income. In general, an activity will be considered as entered into
for profit where there is a reasonable expectation of profit in the future. The
determination of whether an activity is engaged in for profit is based upon the
facts and circumstances of each case.
Based upon the following factors, Counsel has concluded that it is
more likely than not that the activities contemplated by Wells Fund XIII will be
considered activities entered into for profit by Wells Fund XIII:
. the investment objectives of Wells Fund XIII;
. the representations of the general partners that Wells Fund
XIII will be operated in a business-like manner in all
material respects and strictly in accordance with the
partnership agreement and this prospectus; and
. assuming the determination as to whether the activities of
Wells Fund XIII are activities entered into for profit under
Section 183 is made at the partnership level.
Notwithstanding any determination made with respect to Wells Fund XIII in this
regard, however, the IRS may apply Section 183 to limited partners,
individually, and since the determination of whether an activity is deemed to be
engaged in for profit is based upon facts and circumstances that exist from time
to time, no assurance can be given that Section 183 of the Internal Revenue Code
may not be applied in the future at the partner level to limit deductions
allocable to limited partners from partnership operations. Counsel in the Tax
Opinion gives no opinion as to the application of Section 183 of the Internal
Revenue Code at the partner level. Accordingly, prospective investors should
consult with their own tax advisors regarding the impact of Section 183 on their
particular situations.
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Taxation of Real Estate Operations
Characterization of Leases
We have the authority to purchase properties and lease them back to
the sellers of such properties pursuant to "sale-leaseback" transactions as
described in "Investment Objectives and Criteria." The tax benefits described
herein associated with ownership of a property, such as depreciation or cost
recovery deductions, depend on having the lease in any such leaseback
transaction treated as a "true lease," under which Wells Fund XIII is treated as
the owner of the property for federal income tax purposes, rather than having
such transaction treated as a conditional sale of the property or a financing
transaction entered into with the seller of such property.
Our general partners will use their best efforts to structure any such
sale-leaseback transaction to insure that the lease will be characterized as a
"true lease" and Wells Fund XIII will be treated as the owner of the property in
question for federal income tax purposes. Wells Fund XIII will not seek an
advance ruling from the IRS or obtain an opinion of counsel that it will be
treated as the owner of any leased properties for federal income tax purposes,
however, and a determination by the IRS that Wells Fund XIII is not the owner of
leased properties could result in substantial adverse tax consequences.
Investors electing tax preferred units would be deprived of deductions for
depreciation and cost recovery in such case. In addition, if a sale-leaseback
transaction were to be recharacterized as a financing for federal income tax
purposes, any partnership income derived from such leaseback would be treated as
interest which is portfolio income, rather than passive activity income which
may be offset by passive activity losses generated by Wells Fund XIII or from
investments in other passive activities. (See "Passive Loss Limitations" above.)
Depreciation and Cost Recovery
It is currently anticipated that the real property improvements
acquired or constructed by Wells Fund XIII and any personal property acquired by
Wells Fund XIII will be depreciated for tax purposes using the Alternative
Depreciation System set forth in Section 168 of the Internal Revenue Code for
partnerships such as Wells Fund XIII having both taxable and tax-exempt
partners; i.e., real property improvements will be depreciated on a
straight-line basis over a recovery period of 40 years, and personal property
acquired by Wells Fund XIII will be depreciated over a recovery period of 12
years on a straight-line basis.
Property Held Primarily for Sale
Wells Fund XIII has been organized for the purpose of acquiring and
developing real estate for investment and rental purposes. If Wells Fund XIII
were at any time deemed for tax purposes to be a "dealer" in real property,
defined as one who holds real estate primarily for sale to customers in the
ordinary course of business, however, any gain recognized upon a sale of such
real property would be taxable as ordinary income, rather than as capital gain,
and would constitute UBTI to limited partners which are Exempt Organizations.
Under existing law, whether property is held primarily for sale to
customers in the ordinary course of business must be determined from all the
facts and circumstances surrounding the particular property and sale in
question. Wells Fund XIII intends to acquire real estate and construct
improvements thereon for investment and rental only and to engage in the
business of owning and operating such improvements. Wells Fund XIII will sell
such property only as, in the opinion of the general partners, is consistent
with Wells Fund XIII's investment objectives. The general partners do not
anticipate that Wells Fund XIII will be treated as a dealer with respect to its
properties. However, there is no assurance
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that the IRS will not take a contrary position. Because the issue is dependent
upon facts which will not be known until the time a property is sold or held for
sale, and due to the lack of directly applicable judicial authority in this
area, Counsel is unable to render an opinion as to whether Wells Fund XIII will
be considered to hold any or all of its properties primarily for sale to
customers in the ordinary course of business.
Sales of Partnership Properties
Upon the sale of a property, Wells Fund XIII will recognize gain or
loss to the extent that the amount realized is more or less than the adjusted
basis of Wells Fund XIII property sold. The amount realized upon the sale of a
partnership property will generally be equal to the sum of the cash received
plus the amount of indebtedness encumbering the property, if any, assumed by the
purchaser or to which the property remains subject upon the transfer of the
property to the purchaser. The adjusted basis of partnership property will in
general be equal to the original cost of the property less depreciation and cost
recovery allowances allowed to Wells Fund XIII with respect to such property.
Assuming that Wells Fund XIII is not deemed to be a dealer with
respect to its properties (See "Property Held Primarily for Sale" above), such
gain or loss will generally be taxable under Section 1231 of the Internal
Revenue Code. A limited partner's share of the gains or losses resulting from
the sale of partnership properties would generally be combined with any other
Section 1231 gains or losses realized by the limited partner in that year from
sources other than Wells Fund XIII, and the net Section 1231 gain or loss is
generally treated as long-term capital gain subject to depreciation or cost
recovery allowance recapture, if any, or ordinary loss, as the case may be.
Investors should be aware that the amount of taxable gain allocated to a limited
partner with respect to the sale of a partnership property may exceed the cash
proceeds received by such limited partner with respect to such sale. (See "Risk
Factors.")
Sales of Limited Partnership Units
An investor may be unable to sell any of his units by reason of the
nonexistence of any market therefor. In the event that units are sold, however,
the selling investor will realize gain or loss equal to the difference between
the gross sale price or proceeds received from sale and the investor's adjusted
tax basis in his units. Assuming the investor is not a "dealer" with respect to
such units and has held the units for more than 12 months, his gain or loss will
be long-term capital gain or loss, except for that portion of any gain
attributable to such investor's share of Wells Fund XIII's "unrealized
receivables" and "inventory items," as defined in Section 751 of the Internal
Revenue Code, which portion would be taxable as ordinary income. Any recapture
of cost recovery allowances taken previously by Wells Fund XIII with respect to
personal property associated with partnership real properties will be treated as
"unrealized receivables" for this purpose. Investors should note in this regard
that Section 6050K of the Internal Revenue Code requires Wells Fund XIII to
report any sale of units to the IRS if any portion of the gain realized upon
such sale is attributable to the transferor's share of Wells Fund XIII's
"Section 751 property."
Dissolution and Liquidation of Wells Fund XIII
A dissolution and liquidation of Wells Fund XIII will involve the
distribution to the partners of the cash remaining after the sale of its assets,
if any, after payment of all Wells Fund XIII's debts and liabilities. If an
investor receives cash in excess of the adjusted basis of his units, such excess
will be taxable as a gain. If an investor were to receive only cash, he would
recognize a loss to the extent, if any, that the adjusted basis of his units
exceeded the amount of cash received. No loss would be recognized if an investor
were to receive property other than money, unrealized receivables and
"inventory" as defined in Section 751 of the Internal Revenue Code. There are a
number of exceptions to these general rules,
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including but not limited to, (1) the effect of a special basis election under
Section 732(d) of the Internal Revenue Code for an investor who may have
acquired his partnership interest within the two years prior to the dissolution,
and (2) the effects of distributing one kind of property to some partners and a
different kind of property to others, as determined under Section 751(b) of the
Internal Revenue Code.
Capital Gains and Losses
Ordinary income for individual taxpayers is currently taxed at a
maximum marginal rate of 39.6%. Capital gains, however, are taxed at a maximum
marginal rate of 20% i.e., for gains realized with respect to capital assets
----
held for more than 12 months. The Internal Revenue Code also provides, however,
that the portion of long-term capital gain arising from the sale or exchange of
depreciable real property which constitutes depreciation recapture will be taxed
at a maximum marginal rate of 25%, rather than 20%. Capital losses may generally
be used to offset capital gains or may, in the absence of capital gains, be
deductible against ordinary income on a dollar-for-dollar basis up to a maximum
annual deduction of $3,000 ($1,500 in the case of a married individual filing a
separate return).
Election for Basis Adjustments
Under Section 754 of the Internal Revenue Code, a partnership may
elect to adjust the basis of partnership property upon the transfer of an
interest in Wells Fund XIII so that the transferee of a partnership interest
will be treated, for purposes of calculating depreciation and realizing gain, as
though he had acquired a direct interest in Wells Fund XIII's assets. As a
result of the complexities and added expense of the tax accounting required to
implement such an election, the general partners do not intend to cause Wells
Fund XIII to make any such election on behalf of Wells Fund XIII. As a
consequence, depreciation available to a transferee of units will be limited to
the transferor's share of the remaining depreciable basis of properties, and
upon a sale of a property, taxable income or loss to the transferee of the units
will be measured by the difference between his share of the amount realized upon
such sale and his share of Wells Fund XIII's tax basis in the property, which
may result in greater tax liability to him than if a Section 754 election had
been made. The absence of such an election by Wells Fund XIII may result in
investors having greater difficulty in selling their units.
Alternative Minimum Tax
Alternative minimum tax is payable to the extent that a taxpayer's
alternative minimum tax liability exceeds his regular federal income tax
liability for the taxable year. Alternative minimum tax for individual taxpayers
is a percentage of "alternative minimum taxable income" (AMTI) in excess of
certain exemption amounts. The first $175,000 of AMTI in excess of the exemption
amount is taxed currently at 26%, and AMTI in excess of $175,000 over the
exemption amount is taxed currently at 28%. Alternative minimum taxable income
is generally computed by adding what are called "tax preference items" to the
taxpayer's regular taxable income, with certain adjustments. While it is not
anticipated that an investment in Wells Fund XIII will give rise to any specific
tax preference items, the amount of alternative minimum tax imposed depends upon
various factors unique to each particular taxpayer. Accordingly, each investor
should consult with his own personal tax advisor regarding the possible
application of the alternative minimum tax.
Penalties
Under Section 6662 of the Internal Revenue Code, a 20% penalty is
imposed on any portion of an underpayment of tax attributable to a "substantial
understatement of income tax." In general, a "substantial understatement of
income tax" will exist if the actual income tax liability of the taxpayer
exceeds the income tax liability shown on his return by the greater of 10% of
the actual income tax
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liability or $5,000. The amount of an understatement may be reduced by any
portion of such understatement which is attributable to (1) the income tax
treatment of any item shown on the return if there is "substantial authority"
for the taxpayer's treatment of such item on his return, or (2) any item with
respect to which the taxpayer (a) adequately discloses on his return the
relevant facts affecting the item's income tax treatment, and (b) there is a
reasonable basis for the item's tax treatment by the taxpayer, unless the
understatement is attributable to a "tax shelter". A "tax shelter" is defined,
for purposes of Section 6662, to include a partnership (or other entity) that
has as "a significant purpose" the avoidance or evasion of federal income tax.
In the case of a tax shelter, as so defined, a reduction in the understatement
only will result in cases where, in addition to having "substantial authority"
for treatment of the item in question, the taxpayer reasonably believed that the
income tax treatment of that item was more likely than not the proper treatment.
Based on our investment objectives, our general partners believe there
are substantial grounds for a determination that Wells Fund XIII does not
constitute a tax shelter for these purposes; however, it is possible that Wells
Fund XIII may be considered a tax shelter for purposes of Section 6662 of the
Internal Revenue Code and that certain partnership tax items could be considered
tax shelter items within the meaning of Section 6662. Because the issue is
dependent upon facts relating to future partnership operations and other factual
determinations which are not known at this time, and because of the current lack
of administrative and judicial guidance as to what constitutes a "significant
purpose," the interpretation of which term is uncertain, Counsel is unable to
render an opinion as to whether an investment in Wells Fund XIII will be
considered a tax shelter for purposes of Section 6662 of the Internal Revenue
Code.
In addition to the substantial understatement penalty described above,
Section 6662 of the Internal Revenue Code also imposes a 20% penalty on any
portion of an underpayment of tax attributable to (1) any substantial valuation
misstatement, defined generally as a situation where the value or adjusted basis
of a property claimed on a return is 200% or more of the correct value or
adjusted basis, or (2) negligence, defined as any failure to make a reasonable
attempt to comply with the Internal Revenue Code, or a careless, reckless or
intentional disregard of federal income tax rules or regulations.
Tax Shelter Registration
Any entity deemed to be a "tax shelter," as defined in Section 6111 of
the Internal Revenue Code, is required to register with the IRS. Regulations
issued under Section 6111 define a "tax shelter" as an investment in connection
with which an investor can reasonably infer from the representations made that
the "tax shelter ratio" may be greater than 2 to 1 as of the close of any of the
first five years ending after the date in which the investment is offered for
sale. The "tax shelter ratio" is generally determined by dividing the investor's
share of the aggregate deductions derived from the investment, determined
without regard to income, by the amount of the investor's capital contributions.
Wells Fund XIII is not intended to constitute a "tax shelter," as so
defined. Further, the general partners have represented that, in the absence of
events which are unlikely to occur, the aggregate amount of deductions derived
from any limited partner's investment in Wells Fund XIII, determined without
regard to income, will not exceed twice the amount of any such limited partner's
investment in Wells Fund XIII as of the close of any year in Wells Fund XIII's
first five calendar years.
Based upon the authority of the Regulations issued under Section 6111
and the above-described representations of the general partners, Counsel has
concluded that it is more likely than not Wells Fund XIII is not currently
required to register as a tax shelter with the IRS under Section 6111 of the
Internal Revenue Code prior to the offer and sale of the units.
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Partnership Tax Information; Partner Tax Returns
Wells Fund XIII will furnish annually to the limited partners
sufficient information from Wells Fund XIII's tax return for the limited
partners to prepare their own federal, state and local tax returns. The partners
of a partnership either must report partnership items on their returns
consistently with treatment on Wells Fund XIII information return or must file
statements on Form 8082 with their returns identifying and explaining the
inconsistency. Otherwise, the IRS may treat such inconsistency as a
computational error, recompute and assess the tax without the usual procedural
protection applicable to federal income tax deficiency proceedings, and impose
penalties for negligent or intentional failure to pay tax.
Audits
The IRS often conducts audits of a partnership's tax returns. While an
audit of Wells Fund XIII should generally not affect units which are being
treated as cash preferred units, prospective investors intending to elect tax
preferred units should be aware that deductions which are claimed on Wells Fund
XIII's return may be challenged and disallowed by the IRS. Any such disallowance
may deprive investors holding units treated as tax preferred units of some or
all of the tax benefits incidental to an investment in Wells Fund XIII. An audit
of Wells Fund XIII may result in adjustments to the tax return of Wells Fund
XIII which would require adjustments to each limited partner's personal tax
return.
In the event of an audit of Wells Fund XIII's tax return, the general
partners will take primary responsibility for contesting federal income tax
adjustments proposed by the IRS. The general partners may extend the statute of
limitations as to all partners and, in certain circumstances, bind the limited
partners to such adjustments. Although the general partners will attempt to
inform each limited partner of the commencement and disposition of any such
audit or subsequent proceedings, limited partners should be aware that their
participation in administrative or judicial proceedings relating to partnership
items will be substantially restricted. An audit of Wells Fund XIII could result
in substantial legal and accounting fees required to be paid to substantiate the
reporting positions taken, and any such fees would reduce the cash otherwise
available for distribution to the limited partners. Any such audit may result in
adjustments to the tax returns of Wells Fund XIII which would require
adjustments to each limited partner's personal income tax return and may require
such limited partners to pay additional taxes plus interest, compounded daily.
In addition, any audit of a limited partner's return could result in adjustments
of other items of income and deductions not related to Wells Fund XIII.
It should also be noted that in the event the general partners cause
Wells Fund XIII to elect to be treated as an "Electing Large Partnership" under
Section 6240 of the Internal Revenue Code, thereby enabling Wells Fund XIII to
take advantage of simplified flow-through reporting of partnership items, any
adjustments to the tax returns of Wells Fund XIII would be accounted for in the
year such adjustments take effect, rather than the tax year to which such
adjustments relate. Further, the general partners will have the discretion in
such circumstances either to pass along adjustments to the partners, or to cause
such adjustments to be borne at the partnership level, which could reduce the
cash otherwise available for distribution to limited partners. Any penalties and
interest could also be borne at the partnership level. To the extent that
elections to change the status of units are made between the years in which a
tax benefit is claimed and an adjustment is made, holders of a particular class
of units may suffer a disproportionate adverse impact with respect to any such
adjustment. Potential investors are urged to consult their own tax advisors with
regard to the effect of simplified pass-through reporting and the changes to
partnership audit procedures in effect as a consequence thereof.
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Foreign Investors as Limited Partners
Foreign investors may purchase units in Wells Fund XIII. A foreign
investor who purchases units and becomes a limited partner in Wells Fund XIII
will generally be required to file a United States tax return on which he must
report his distributive share of Wells Fund XIII's items of income, gain, loss,
deduction and credit. A foreign investor must pay United States federal income
tax at regular United States tax rates on his share of any net income, whether
ordinary or capital gains. A foreign investor may also be subject to tax on his
distributive share of Wells Fund XIII's income and gain in his country of
nationality or residence or elsewhere. In addition, distributions of net cash
from operations or proceeds from the sale of properties otherwise payable to a
foreign investor from Wells Fund XIII or amounts payable upon the sale of a
foreign investor's units may be reduced by United States tax withholdings made
pursuant to applicable provisions of the Internal Revenue Code.
Foreign investors should consult their own tax advisors with regard to
the effect of both the United States tax laws and foreign laws on an investment
in Wells Fund XIII and the potential that Wells Fund XIII will be required to
withhold federal income taxes from amounts otherwise payable to foreign
investors.
Tax Legislation and Regulatory Proposals
Significant tax legislation has been enacted in recent years
containing provisions which altered the federal income tax laws relating to an
investment in partnerships such as Wells Fund XIII. In addition, legislative
proposals continue to be made which could also significantly change the federal
income tax laws as they relate to an investment in Wells Fund XIII. It is
impossible at this time, however, to predict whether or in what form any such
legislation will be enacted. Further, the interpretation of changes made in
recent years is uncertain at this time. Each prospective investor is urged to
consult his own tax advisor with respect to his own tax situation, the effect of
any legislative, regulatory or administrative developments or proposals on an
investment in units in Wells Fund XIII, or other potential changes in applicable
tax laws.
State and Local Taxes
In addition to the federal income tax aspects described above,
prospective investors should consider potential state and local tax consequences
of an investment in Wells Fund XIII. This prospectus makes no attempt to
summarize the state and local tax consequences to an investor in those states in
which Wells Fund XIII may own properties or carry on activities. Each investor
is urged to consult his own tax advisor on all matters relating to state and
local taxation, including the following:
. whether the state in which he resides will impose a tax upon
his share of the taxable income of Wells Fund XIII;
. whether an income tax or other return must also be filed in
those states where Wells Fund XIII will own properties; and
. whether he will be subject to state income tax withholding in
states where Wells Fund XIII will own properties.
Because we will conduct activities and own properties in different
taxing jurisdictions, an investment in Wells Fund XIII may impose upon a limited
partner the obligation to file annual tax returns in a number of different
states or localities, as well as the obligation to pay taxes to a number of
different states or localities. Additional costs incurred in having to prepare
various state and local tax returns, as
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well as the additional state and local tax which may be payable, should be
considered by prospective investors in deciding whether to make an investment in
Wells Fund XIII.
Many states have implemented or are in the process of implementing
programs to require partnerships to withhold and pay state income taxes owed by
non-resident partners relating to income-producing properties located in their
states. For example, all partnerships which own property or do business within
the State of Georgia are subject to a withholding tax in the amount of 4% of
distributions paid to non-resident partners who are to receive annual
distributions of $1,000 or more. The Georgia withholding requirements apply to
all cash distributions except distributions constituting a return of capital and
may have the effect of reducing the amount of cash which Wells Fund XIII would
otherwise be able to distribute to non-resident limited partners. In addition,
the States of California, Colorado and North Carolina have required certain of
the public real estate programs previously sponsored by the general partners to
withhold and pay state taxes relating to income-producing properties located in
those states. In the event that Wells Fund XIII is required to withhold state
taxes from cash distributions otherwise payable to limited partners, the amount
of the net cash from operations otherwise payable to such limited partners would
likely be reduced. In addition, such collection and filing requirements at the
state level may result in increases in Wells Fund XIII's administrative expenses
which would likely have the effect of reducing returns to the limited partners.
(See "Risk Factors.")
Each prospective purchaser of units is urged to consult with his own
tax advisor with respect to the impact of applicable state and local taxes on
his proposed investment in Wells Fund XIII.
Reports to Investors
Within 75 days after the end of each of the fiscal years of Wells Fund
XIII, our general partners will deliver to each limited partner 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 our properties
are located. Within 120 days after the end of our fiscal year, our general
partners will deliver to each limited partner an annual report which includes
our financial statements, 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 Wells Fund XIII, 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 our 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 our activities for that year, identify the
source of our 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 our partnership agreement, and contain such other information
as is deemed reasonably necessary by the general partners to advise the
investors of our affairs.
For as long as we are 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 limited partners within 60 days after the end of such quarter. Whether or not
such reports are required to be filed, each limited partner will be furnished,
within 60 days after the end of each of the first three quarters of our 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 limited partners, each limited
partner shall be furnished, at least quarterly within
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60 days after the end of each quarter during which we have 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
. a statement regarding the amount of proceeds in both dollar
amount and as a percentage of the total amount of the offering
held by Wells Fund XIII which remain unexpended or
uncommitted.
In addition, the acquisition report will identify any real property which our
general partners presently intend to be acquired by or leased to us, providing
its location and a description of its general character.
The appraisal we receive 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 limited partners for inspection and
duplication at reasonable times.
We will report the estimated value of our units annually to the
limited partners in the next annual or quarterly report on Form 10-K or Form
10-Q sent to limited partners following the valuation process. Such estimated
value will be based upon annual appraisals of our properties performed by the
general partners and not by an independent appraiser. Our general partners are,
however, required under our 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 our properties will
be performed. (See "Investment by Tax-Exempt Entities and ERISA Considerations -
Annual Valuation.")
Our 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. We 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, we will provide without charge a copy of the NASAA
Guidelines, as referred to elsewhere in this prospectus.
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Plan of Distribution
We are offering a minimum of 125,000 units and a maximum of 4,500,000
units to the public through Wells Investment Securities, Inc., the Dealer
Manager, a registered broker-dealer affiliated with our 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, we may reimburse the expenses
incurred by nonaffiliated dealers for actual due diligence purposes in the
maximum amount of .5% of the gross offering proceeds. We will not pay referral
or similar fees to any accountants, attorneys or other persons in connection
with the distribution of the units. Investors who elect to participate in the
distribution reinvestment plan will be charged selling commissions and dealer
manager fees on units purchased pursuant to the distribution reinvestment plan
on the same basis as investors purchasing units other than pursuant to the
distribution reinvestment plan. Units we issue under the distribution
reinvestment plan will be available only until the termination of the offering,
as described above.
The Dealer Manager may authorize certain other broker-dealers who are
members of the NASD to sell units. In the event of the sale of units by such
other broker-dealers, the Dealer Manager may reallow its commissions in the
amount of up to 7% of the gross offering proceeds to such participating
broker-dealers. In addition, the Dealer Manager, in its sole discretion, may
reallow to broker-dealers participating in the offering a portion of its dealer
manager fee in the aggregate amount of up to 1.5% of gross offering proceeds to
be paid to such participating broker-dealer as a marketing fee, based on such
factors as the number of units sold by such participating broker-dealer, the
assistance of such participating broker-dealer in marketing the offering and
bona fide conference fees incurred.
In accordance with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., the total underwriting compensation,
including sales commissions, the dealer manager fee and underwriting expense
reimbursements, may not exceed 10% of gross offering proceeds, except for the
additional .5% of gross offering proceeds which we may pay in connection with
due diligence activities.
Our general partners have agreed to indemnify the participating
broker-dealers, including the Dealer Manager, against certain liabilities
arising under the Securities Act of 1933, as amended.
The broker-dealers are not obligated to obtain any subscriptions on
our behalf, and we cannot assure you that any units will be sold.
Our general partners may at their option purchase units offered hereby
at the public offering price, in which case they would expect to hold such units
as limited partners for investment and not for distribution. Units purchased by
our general partners or their affiliates shall not be entitled to vote on any
matter presented to the limited partners for a vote. We will not pay selling
commissions in connection with any units purchased by our general partners. (See
"Risk Factors.")
You should pay for your units by check payable to "Bank of America,
N.A., as Escrow Agent." Subscriptions will be effective only upon acceptance by
our general partners, and our general partners reserve the right to reject any
subscription in whole or in part. In no event may we accept a subscription
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for units until at least five business days after the date the subscriber
receives this prospectus. You will receive a confirmation of your purchase.
Except for purchases pursuant to our distribution reinvestment plan or
reinvestment plans of other public real estate programs, all accepted
subscriptions will be for whole units and for not less than 100 units ($1,000).
(See "Suitability Standards.") Except in Maine, Minnesota, Nebraska and
Washington, investors who have satisfied the minimum purchase requirement and
have purchased units in Wells programs or units or shares in other public real
estate programs may purchase less than the minimum number of units discussed
above, provided that such investors purchase a minimum of 2.5 units ($25). After
investors have satisfied the minimum purchase requirement, minimum additional
purchases must be in increments of at least 2.5 units ($25), except for
purchases made pursuant to the distribution reinvestment plan or reinvestment
plans of other public real estate programs.
We will place subscription proceeds in an interest-bearing account
with Bank of America, N.A., Atlanta, Georgia (the "Escrow Agent") until such
subscriptions aggregating at least $1,250,000 exclusive of subscriptions for
units by the general partners or their affiliates have been received and
accepted by our general partners (the "minimum offering"). Any units purchased
by the general partners or their affiliates will not be counted in calculating
the minimum offering. Subscription proceeds held in the escrow account will be
invested in obligations of, or obligations guaranteed by, the United States
government or bank money-market accounts or certificates of deposit of national
or state banks that have deposits insured by the Federal Deposit Insurance
Corporation, including certificates of deposit of any bank acting as depository
or custodian for any such funds, as directed by the general partners. During the
period in which we hold subscription proceeds in escrow, interest earned thereon
will be allocated among subscribers on the basis of the respective amounts of
their subscriptions and the number of days that such amounts were on deposit. We
will pay such interest net of escrow expenses to subscribers upon the
termination of the escrow period. Subscribers may not withdraw funds from the
escrow account.
Investors who desire to establish an IRA for purposes of investing in
units may do so by having Wells Advisors, Inc., a qualified non-bank IRA
custodian affiliated with our general partners, act as their IRA custodian. In
the event that an IRA is established having Wells Advisors, Inc. as the IRA
custodian, the authority of Wells Advisors, Inc. will be limited to holding the
units on behalf of the beneficiary of the IRA and making distributions or
reinvestments in units solely at the discretion of the beneficiary of the IRA.
Wells Advisors, Inc. will not have the authority to vote any of the units held
in an IRA except strictly in accordance with the written instructions of the
beneficiary of the IRA. (See "Management.")
If our minimum offering has not been received and accepted by
___________, 2001, the Escrow Agent will promptly so notify us and this offering
will be terminated. In such event, the Escrow Agent is obligated to use its best
efforts to obtain an executed IRS Form W-9 from each subscriber. No later than
five business days after termination of the offering, the Escrow Agent will
refund and return all monies to subscribers and any interest earned thereon
after deducting escrow expenses, except that in the case of investors who are
residents of Maine, Missouri, North Carolina, Ohio or Pennsylvania, no escrow
expenses will be deducted. In the event that a subscriber fails to remit an
executed IRS Form W-9 to the Escrow Agent prior to the date the escrow agent
returns the subscriber's funds, the Escrow Agent will be required to withhold
from such funds 31% of the earnings attributable to such subscriber in
accordance with the applicable Treasury Regulations. Units purchased by our
general partners or their affiliates will not be counted for the purpose of
achieving the minimum offering.
Initial subscribers shall be admitted to Wells Fund XIII and the
payments transferred from escrow to Wells Fund XIII within 15 days after we have
received and accepted subscriptions for at least $1,250,000, except that
subscribers residing in New York and Pennsylvania may not be admitted to Wells
Fund XIII until subscriptions have been received and accepted for at least
$2,500,000 from all sources. Accordingly, the funds representing subscriptions
for units from New York and Pennsylvania residents will not be released from the
escrow account until subscriptions for at least $2,500,000 have been
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received from all sources. Subscriptions from New York residents may not be
included in determining whether subscriptions for the minimum offering have been
obtained. In the event that other states impose different requirements than
those set forth herein, such additional requirements will be set forth in a
supplement to this prospectus.
Our offering of units will terminate upon the earlier of (1) _______,
2003, or (2) the date on which all $45,000,000 in units have been sold.
The proceeds of this offering will be received and held in trust for
the benefit of purchasers of units and will be retained in trust after closing
to be used only for the purposes set forth in the "Estimated Use of Proceeds"
section. After the close of the minimum offering, subscriptions will be accepted
or rejected within 30 days of receipt by Wells Fund XIII, and if rejected, all
funds shall be returned to subscribers within 10 business days. Investors whose
subscriptions are accepted will be deemed admitted as limited partners of Wells
Fund XIII on the day on which their subscriptions are accepted.
Our general partners may sell units to retirement plans of
broker-dealers participating in the offering, to broker-dealers in their
individual capacities, to IRAs and qualified plans of their registered
representatives or to any one of their registered representatives in their
individual capacities for 93% of the public offering price in consideration of
the services rendered by such broker-dealers and registered representatives in
the offering. The net proceeds to Wells Fund XIII from such sales will be
identical to our net proceeds from other sales of units.
In connection with sales of 25,000 or more units ($250,000) to a
"purchaser" as defined below, a participating broker-dealer may agree in his
sole discretion to reduce the amount of his selling commissions. Such reduction
will be credited to the purchaser by reducing the total purchase price payable
by such purchaser. The following table illustrates the various discount levels
available:
<TABLE>
<CAPTION>
Dollar Dealer
Volume Sales Commissions Purchase Manager Net
of Units ------------------- Price Fee Per Proceeds
Purchased Percent Per Unit Per Unit Unit Per Unit
--------- ------- -------- -------- ---- --------
<S> <C> <C> <C> <C> <C>
Under $250,000 7.0% $0.7000 $ 10.0000 $0.25 $9.05
$250,000-$999,999 5.0% $0.4895 $ 9.7895 $0.25 $9.05
$1,000,000 and Over 3.0% $0.2876 $ 9.5876 $0.25 $9.05
</TABLE>
For example, if an investor purchases 100,000 units in Wells Fund
XIII, he could pay as little as $958,760 rather than $1,000,000 for the units,
in which event the commission on the sale of such units would be $28,760
($0.2876 per unit), and, after payment of the dealer manager fee, we would
receive net proceeds of $905,000 ($9.05 per unit). The net proceeds to Wells
Fund XIII will not be affected by volume discounts.
Because all investors will be deemed to have contributed the same
amount per unit to Wells Fund XIII for purposes of tax allocations and
distributions of net cash from operations and sale proceeds, an investor
qualifying for a volume discount will receive a higher return on his investment
in Wells Fund XIII than investors who do not qualify for such discount.
Subscriptions may be combined for the purpose of determining the
volume discounts in the case of subscriptions made by any "purchaser," as that
term is defined below, provided all such units are purchased through the same
broker-dealer. The volume discount shall be prorated among the separate
subscribers considered to be a single "purchaser." Any request to combine more
than one subscription
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must be made in writing, and must set forth the basis for such request. Any such
request will be subject to verification by the general partners that all of such
subscriptions were made by a single "purchaser."
For the purposes of such volume discounts, the term "purchaser"
includes:
. an individual, his or her spouse and their children under the
age of 21 who purchase the units for his, her or their own
accounts;
. a corporation, partnership, association, joint-stock company,
trust fund or any organized group of persons, whether
incorporated or not;
. an employees' trust, pension, profit sharing or other employee
benefit plan qualified under Section 401(a) of the Internal
Revenue Code; and
. all commingled trust funds maintained by a given bank.
Notwithstanding the above, in connection with volume sales made to our
investors, our general partners may, in their sole discretion, waive the
"purchaser" requirements and aggregate subscriptions, including subscriptions to
public real estate programs previously sponsored by our general partners, as
part of a combined order for purposes of determining the number of units
purchased, provided that any aggregate group of subscriptions must be received
from the same broker-dealer, including the Dealer Manager. Any such reduction in
selling commissions will be prorated among the separate subscribers except that,
in the case of purchases through the Dealer Manager, the Dealer Manager may
allocate such reduction among separate subscribers considered to be a single
"purchaser" as it deems appropriate. An investor may reduce the amount of his
purchase price to the net amount shown in the foregoing table, if applicable. If
such investor does not reduce the purchase price, the excess amount submitted
over the discounted purchase price shall be returned to the actual separate
subscribers for units. Except as provided in this paragraph, separate
subscriptions will not be cumulated, combined or aggregated.
In addition, in order to encourage purchases in amounts of 500,000 or
more units, a potential purchaser who proposes to purchase at least 500,000
units in Wells Fund XIII may agree with the general partners and the Dealer
Manager to have the acquisition and advisory fees payable to the general
partners with respect to the sale of such units reduced to 0.5%, to have the
dealer manager fee payable to the Dealer Manager with respect to the sale of
such units reduced to 0.5%, and to have the selling commissions payable with
respect to the sale of such units reduced to 0.5%, in which event the aggregate
fees payable with respect to the sale of such units would be reduced by $1.10
per unit, and the purchaser of such units would be required to pay a total of
$8.90 per unit purchased, rather than $10.00 per unit. The net proceeds to Wells
Fund XIII would not be affected by such fee reductions. Of the $8.90 paid per
unit, it is anticipated that approximately $8.40 per unit or approximately 94.4%
will be used to acquire our properties and pay required acquisition expenses
relating to the acquisition of our properties. All such sales must be made
through registered broker-dealers.
California residents should be aware that volume discounts will not be
available in connection with the sale of units made to California residents to
the extent such discounts do not comply with the provisions of Rule 260.140.51
adopted pursuant to the California Corporate Securities Law of 1968. Pursuant to
this Rule, volume discounts can be made available to California residents only
in accordance with the following conditions:
. there can be no variance in the net proceeds to Wells Fund
XIII from the sale of the units to different purchasers of the
same offering;
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. all purchasers of the units must be informed of the
availability of quantity discounts;
. the same volume discounts must be allowed to all purchasers of
units which are part of the offering;
. the minimum amount of units as to which volume discounts are
allowed cannot be less than $10,000;
. the variance in the price of the units must result solely from
a different range of commissions, and all discounts allowed
must be based on a uniform scale of commissions; and
. no discounts are allowed to any group of purchasers.
Accordingly, volume discounts for California residents will be available in
accordance with the foregoing table of uniform discount levels based on dollar
volume of units purchased, but no discounts are allowed to any group of
purchasers, and no subscriptions may be aggregated as part of a combined order
for purposes of determining the number of units purchased.
Investors who, in connection with their purchase of units, have
engaged the services of a registered investment advisor with whom the investor
has agreed to pay a fee for investment advisory services in lieu of normal
commissions based on the volume of securities sold may agree with the
participating broker-dealer selling such units and the Dealer Manager to reduce
the amount of selling commissions payable with respect to such sale to zero. The
net proceeds to Wells Fund XIII will not be affected by eliminating the
commissions payable in connection with sales to investors purchasing through
such investment advisors. All such sales must be made through registered
broker-dealers.
Neither the Dealer Manager nor its affiliates will directly or
indirectly compensate any person engaged as an investment advisor by a potential
investor as an inducement for such investment advisor to advise favorably for
investment in Wells Fund XIII.
In addition, subscribers for units may agree with their participating
broker-dealers and the Dealer Manager 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. Investors electing the deferred commission option
will be required to pay a total of $9.40 per unit purchased upon subscription,
rather than $10.00 per unit, with respect to which $0.10 per unit will be
payable as commissions due upon subscription. For each of the six years
following the year of purchase of the units, or longer if required to satisfy
the outstanding commission obligation, $0.10 per unit will be paid by Wells Fund
XIII as deferred commissions with respect to units sold pursuant to the deferred
commission option, which amounts will be deducted from and paid out of
distributions of net cash from operations otherwise payable to investors holding
such units. The net proceeds to Wells Fund XIII will not be affected by the
election of the deferred commission option. Under this arrangement, an investor
electing the deferred commission option will pay a 1% commission upon
subscription rather than a 7% commission and, thereafter, for the next six
years, or longer if required to satisfy the outstanding commission obligation,
an amount equal to a 1% commission per year will be deducted from and paid by
Wells Fund XIII out of net cash from operations otherwise distributable to such
investor. (See "Distributions and Allocations - Distributions of Net Cash From
Operations.")
Investors who want to elect the deferred commission option must make
the election on their Subscription Agreement Signature Page, the form of which
is included as Exhibit "B" to this prospectus. Election of the deferred
commission option on the Subscription Agreement shall authorize the general
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partners to withhold cash distributions otherwise payable to such investor for
the purpose of paying commissions due under the deferred commission option. Such
cash distributions may be pledged by the Dealer Manager or the general partners
or their affiliates to secure one or more loans, the proceeds of which would be
used to satisfy sales commission obligations.
Each 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, as determined 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. In addition, investors electing 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 during the initial six years following
the year of purchase since investors owning units purchased pursuant to the
deferred commission option must own a sufficient number of units designated as
cash preferred units during the initial seven years of Wells Fund XIII to
generate enough net cash from operations to allow Wells Fund XIII to satisfy the
deferred commission obligations with respect to the total number of units
purchased. (See "Description of the Units - Election of cash preferred units or
tax preferred units.") Further, taxable participants electing the deferred
commission option will incur tax liability for partnership income allocated to
them with respect to their units even though distributions of net cash from
operations otherwise distributable to such investors will instead be paid to
third parties to satisfy the deferred commission obligations. (See "Risk Factors
- Federal Income Tax Risks.")
Supplemental Sales Material
In addition to this prospectus, we may utilize certain sales material
in connection with the offering of the units, although only when accompanied by
or preceded by the delivery of this prospectus. In certain jurisdictions, some
or all of such sales material may not be available. This material may include
information relating to this offering, the past performance of the general
partners and their affiliates, property brochures and articles and publications
concerning real estate. In addition, the sales material may contain certain
quotes from various publications without obtaining the consent of the author or
the publication for use of the quoted material in the sales material.
The offering of units is made only by means of this prospectus.
Although the information contained in such sales material will not conflict with
any of the information contained in this prospectus, such material does not
purport to be complete, and should not be considered a part of this prospectus
or the registration statement of which this prospectus is a part, or as
incorporated by reference in this prospectus or said registration statement or
as forming the basis of the offering of the units.
Legal Opinions
The legality of the units being offered hereby has been passed upon
for Wells Fund XIII by Holland & Knight LLP (Counsel). The statements under the
caption "Federal Income Tax Consequences" as they relate to federal income tax
matters have been reviewed by Counsel, and Counsel has opined as to certain
income tax matters relating to an investment in Wells Fund XIII. Counsel has
represented our general partners, as well as affiliates of our general partners,
in other matters and may continue to do so in the future. (See "Conflicts of
Interest.")
Experts
Audited Financial Statements
The balance sheet of Wells Real Estate Fund XIII, L.P., as of December
31, 1999, and the financial statements of Wells Capital, Inc. as of December 31,
1999 and 1998, and for each of the years in the two year period ended December
31, 1999, included in this prospectus and elsewhere in the
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registration statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
Unaudited Financial Statements
The unaudited balance sheet of Wells Real Estate Fund XIII, L.P., as of
November 30, 2000, and the unaudited interim financial statements of the Wells
Capital, Inc. as of November 30, 2000, and for the eleven month periods ended
November 30, 2000 and 1999, which are included in this prospectus, have not been
audited.
Additional Information
We have filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a registration statement under the Securities
Act of 1933, as amended, with respect to the units offered pursuant to this
prospectus. This prospectus does not contain all the information set forth in
the registration statement and the exhibits related thereto filed with the
Commission, reference to which is hereby made. Copies of the registration
statement and exhibits related thereto, as well as periodic reports and
information filed by Wells Fund XIII, may be obtained upon payment of the fees
prescribed by the Commission, or may be examined at the offices of the
Commission without charge, at:
. the public reference facilities in Washington, D.C. at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549;
. the Northeast Regional Office in New York at 7 World Trade
Center, Suite 1300, New York, New York 10048; and
. the Midwest Regional Office in Chicago, Illinois at 500 West
Madison Street, Suite 1400, Chicago, Illinois 66661-2511.
The Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission (the address of such site is http://www.sec.gov).
Glossary
The following are definitions of certain terms used in this prospectus
some of which are not otherwise defined in the prospectus:
"Cash preferred units" means units with respect to which the investor
holding such units has made an effective election pursuant to Section 8.16 of
the partnership agreement to have such units be treated as cash preferred units
for the applicable accounting period.
"Dealer Manager" means Wells Investment Securities, Inc.
"Excess Limited Partner Distributions" means any distributions to
limited partners over the life of their investment in Wells Fund XIII in excess
of the sum of their net capital contributions plus their Preferential Limited
Partner Return.
"IRA" means an individual retirement account established pursuant to
Section 408 or Section 408A of the Internal Revenue Code.
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"NASAA Guidelines" means the Statement of Policy Regarding Real Estate
Programs of the North American Securities Administrators Association, Inc.
adopted on October 9 and 12, 1988, effective January 1, 1989, as amended.
"Preferential Limited Partner Return" means with respect to each
limited partnership unit the sum of (1) a cumulative (noncompounded) 10% annual
return on a limited partner's 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 cumulative (noncompounded) 15% annual return on such limited partner's net
capital contribution with respect to such unit for all periods during which such
unit was treated as a tax preferred unit. Each limited partner's Preferential
Limited Partner Return shall be calculated from the date on which such limited
partner's capital contribution was made to Wells Fund XIII.
"Property Manager" means Wells Management Company, Inc.
"Tax preferred units" means units with respect to which the investor
holding such units has made an effective election pursuant to Section 8.16 of
the partnership agreement to have such units be treated as tax preferred units
for the applicable accounting period.
"UBTI" means unrelated business taxable income, as that term is
defined in Sections 511 through 514 of the Internal Revenue Code.
121
<PAGE>
<TABLE>
INDEX TO AUDITED FINANCIAL STATEMENTS
<S> <C>
Wells Capital, Inc.
Report of Independent Public Accountants...................................................... 123
Balance Sheets as of December 31, 1999 and 1998............................................... 124
Statements of Income (Loss) for the years ended December 31, 1999 and 1998.................... 125
Statements of Stockholder's Equity for the years ended December 31, 1999 and 1998............. 126
Statements of Cash Flows for the years ended December 31, 1999 and 1998....................... 127
Notes to Financial Statements................................................................. 128
Wells Real Estate Fund XIII, L.P.
Report of Independent Public Accountants...................................................... 133
Balance Sheet as of December 31, 1999......................................................... 134
Notes to Balance Sheet........................................................................ 135
INDEX TO UNAUDITED FINANCIAL STATEMENTS
AND PRIOR PERFORMANCE TABLES
Wells Capital, Inc.
Balance Sheets as of November 30, 2000 and December 31, 1999.................................. 139
Statements of Operations for the eleven months ended November 30, 2000 and 1999............... 140
Statements of Partners' Capital for the eleven months ended November 30, 2000
and the year ended December 31, 1999..................................................... 141
Statements of Cash Flows for the eleven months ended November 30, 2000 and 1999............... 142
Condensed Notes to Financial Statements....................................................... 143
Wells Real Estate Fund XIII, L.P.
Balance Sheets as of November 30, 2000 and December 31, 1999.................................. 148
Notes to Balance Sheet........................................................................ 149
Prior Performance Tables............................................................................... 152
</TABLE>
122
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Capital, Inc.:
We have audited the accompanying balance sheets of WELLS CAPITAL, INC. (a
Georgia corporation) as of December 31, 1999 and 1998 and the related statements
of income, stockholder's equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wells Capital, Inc. as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
-----------------------
Atlanta, Georgia
January 20, 2000
123
<PAGE>
WELLS CAPITAL, INC.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 147,964 $ 41,571
Due from affiliates 150,031 105,428
Other receivables and prepaid expenses 55,971 7,547
----------- ------------
Total current assets 353,966 154,546
SECURITIES AVAILABLE FOR SALE 80,464 100,000
INVESTMENT IN AFFILIATED COMPANIES 223,776 224,093
DEFERRED OFFERING COSTS 1,296,894 1,107,044
----------- ------------
Total assets $ 1,955,100 $ 1,585,683
=========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable $ 0 $ 7,514
Due to affiliates 324,664 1,060,143
----------- ------------
Total liabilities 324,664 1,067,657
----------- ------------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDER'S EQUITY:
Common stock, $1 par value; 100,000 shares authorized, 600 shares
issued and outstanding 600 600
Contributed capital 306,541 306,541
Accumulated other comprehensive income (24,636) 0
Retained earnings 1,347,931 210,885
----------- ------------
Total stockholder's equity 1,630,436 518,026
----------- ------------
Total liabilities and stockholder's equity $ 1,955,100 $ 1,585,683
=========== ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
124
<PAGE>
WELLS CAPITAL, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
REVENUES:
Acquisition and advisory fees $3,922,296 $1,682,555
Equity in (loss) income of affiliated companies (35) 5,672
Interest income 12,830 0
Investment income 5,100 0
Miscellaneous income 430 0
---------- ----------
3,940,621 1,688,227
---------- ----------
EXPENSES:
Salaries and wages 2,871,853 1,517,818
General and administrative, net of reimbursements (68,278) 56,471
---------- ----------
2,803,575 1,574,289
---------- ----------
NET INCOME $1,137,046 $ 113,938
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
125
<PAGE>
WELLS CAPITAL, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
--------------- Contributed Comprehensive Retained Stockholder's
Shares Amount Capital Income Earnings Equity
------ ------ ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 600 $600 $306,541 $ 0 $ 96,947 $ 404,088
Net income 0 0 0 0 113,938 113,938
------ ------ ----------- ------------- ---------- -------------
BALANCE, December 31, 1998 600 600 306,541 0 210,885 518,026
Changes in unrealized loss on
investment securities 0 0 0 (24,636) 0 (24,636)
Net income 0 0 0 0 1,137,046 1,137,046
------ ------ ----------- ------------- ---------- -------------
BALANCE, December 31, 1999 600 $600 $306,541 $(24,636) $1,347,931 $1,630,436
====== ====== =========== ============= ========== =============
</TABLE>
The accompanying notes are an integral part of these statements.
126
<PAGE>
WELLS CAPITAL, INC.
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 $ 1,137,046 $ 113,938
------------ -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in loss (income) of affiliated companies 35 (5,672)
Investment income reinvested (5,100) 0
Changes in assets and liabilities:
Due from affiliates (44,603) 254,595
Deferred offering costs (189,850) (778,711)
Other receivables and prepaid expenses (48,424) (7,547)
Accounts payable (7,514) (27,107)
Due to affiliates (735,479) 480,505
------------ -----------
Total adjustments (1,030,935) (83,937)
------------ -----------
Net cash provided by operating activities 106,111 30,001
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from affiliated companies 282 277
Additional investment in affiliated companies 0 (301,800)
------------ -----------
Net cash provided by (used in) investing activities 282 (301,523)
NET INCREASE (DECREASE) IN CASH 106,393 (271,522)
CASH AT BEGINNING OF YEAR 41,571 313,093
------------ -----------
CASH AT END OF YEAR $ 147,964 $ 41,571
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
127
<PAGE>
WELLS CAPITAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Capital, Inc. (the "Company") was organized on April 18, 1984 under
the Georgia Business Corporation Code. The Company is primarily in the
business of serving as a general partner in public limited partnerships. As
a general partner, the Company performs certain administrative services for
the Wells Real Estate Funds, such as accounting and other 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. The Company is a wholly owned
subsidiary of Wells Real Estate Funds, Inc., and the sole stockholder of
Wells Real Estate Funds, Inc. is Leo F. Wells, III.
The Company is a general partner in Wells Real Estate Fund I ("Fund I"),
Wells Real Estate Fund II ("Fund II"), Wells Real Estate Fund II-OW ("Fund
II-OW"), and Wells Real Estate Fund III, L.P. ("Fund III"), all of which
are Georgia public limited partnerships, and Wells Partners, L.P. ("Wells
Partners"), a Georgia limited partnership. The Company is also a limited
partner in Fund I and Fund II. The Company does not have control over the
operations of these partnerships; however, it does exercise significant
influence. Accordingly, investment in partnerships is recorded using the
equity method of accounting. Each of the partnerships, except for Wells
Partners, has been formed to acquire and operate commercial real
properties, including both properties which are to be developed or are
under development and properties which are newly constructed or have
operating histories. Wells Partners was formed during 1990 to act as a
general partner for future Wells Real Estate Funds. Wells Partners serves
as a general partner for Wells Real Estate Fund IV, L.P. ("Fund IV"), Wells
Real Estate Fund V, L.P. ("Fund V"), Wells Real Estate Fund VI, L.P. ("Fund
VI"), Wells Real Estate Fund VII, L.P. ("Fund VII"), Wells Real Estate Fund
VIII, L.P. ("Fund VIII"), Wells Real Estate Fund IX, L.P. ("Fund IX"),
Wells Real Estate Fund X, L.P. ("Fund X"), Wells Real Estate Fund XI, L.P.
("Fund XI"), and Wells Real Estate Fund XII, L.P. ("Fund XII"). Funds IV,
V, VI, VII, VIII, IX, X, XI, and XII have the same investment objectives as
Funds I, II, II-OW, and III.
In 1997, the Company purchased 100 shares of common stock of Wells Real
Estate Investment Trust, Inc. ("Wells REIT"), a Maryland corporation that
qualifies as a real estate investment trust at the proposed initial public
offering price of $10 per share. The registration statement pertaining to
the Wells REIT became effective on January 30, 1998 and will remain
effective through December 19, 2001 or until the sale of 40,000,000 shares
of common stock. Substantially all of the Wells REIT's business is
conducted through Wells Operating Partnership, L.P. (the "Operating
Partnership"), a Delaware limited partnership. In 1997, the Operating
Partnership issued 20,000 limited partnership units to the Company in
exchange for $200,000.
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
128
<PAGE>
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Income Taxes
The Company elected to be treated as an S corporation effective January 1,
1987. No provision for income taxes is recorded, as any income tax
liability is the responsibility of the stockholder.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year financial statement presentation.
2. SECURITIES AVAILABLE FOR SALE
At December 31, 1999 and 1998, the Company owned 11,803 and 10,372 shares,
respectively, of the Wells S&P REIT Index Fund (the "Mutual Fund"). The
investment objective of the Mutual Fund is to provide results that
correspond with the performance of the S&P Real Estate Investment Trust
Composite Price Index (the "Index"). The Mutual Fund attempts to duplicate
the investment results of the Index. The Index is made up of approximately
100 stocks, which constitute a representative sample of all publicly traded
real estate investment trusts. Under normal market conditions, at least 90%
of the Mutual Fund's total assets will be invested in the stocks included
in the Index, with the remaining 10% invested in money market instruments
and U.S. government securities. The proportion of the Mutual Fund's assets
invested in each stock held in the Mutual Fund's portfolio is substantially
similar to the proportion of the Index represented by the stock. The Mutual
Fund will normally be invested in all of the stock which comprise the
Index. Wells Investment Securities, Inc. serves as the investment manager
for the Mutual Fund and is owned 100% by Leo F. Wells, III. The Company's
investment in the Mutual Fund is classified as available for sale and is
reported at fair value with net unrealized gains or losses reported within
shareholder's equity. The cost of the Company's investment in the Mutual
Fund is $105,100 at December 31, 1999, which includes $5,100 in investment
income which has been reinvested in the Mutual Fund.
3. RELATED-PARTY TRANSACTIONS
The Company is entitled to share in the allocation of cash distributions
and net income (loss) from the Wells Real Estate Funds based on the
percentages outlined in the partnership agreements. The Company, as general
partner, paid all the organizational and offering expenses for Fund I, Fund
II, Fund II-OW, and Fund III and was reimbursed pursuant to the partnership
agreements, which provided that the partnerships could reimburse the
Company up to 5% of total limited partners' contributions for organization
and offering expenses. The Company also paid, or is currently paying, on
behalf of Wells Partners, the organization and offering expenses for Fund
IV, Fund V, Fund VI, Fund VII, Fund VIII, Fund IX, Fund X, Fund XI, and
Fund XII. Pursuant to the partnership agreements of Fund IV, Fund V, and
Fund XI, these partnerships can only pay up to 3% of total limited
partners' contributions for organization and offering expenses. The
remaining partnerships can reimburse the Company up to 5% of total limited
partners' contributions for organization and offering costs pursuant to the
partnership agreements. The Wells REIT can reimburse the Company up to 3%
of total shareholder contributions for organization and offering expenses.
The Mutual Fund pays to Wells Asset Management, Inc., an affiliate of the
Company, a management fee equal to 0.5% of the daily average value of net
assets. Wells Asset
129
<PAGE>
Management, Inc. uses these funds to reimburse the Company for organization
and offering expenses. During 1999 and 1998, the Company paid organization
and offering costs related to the Mutual Fund of $284,069 and $409,916,
respectively. In 1999, the Company expensed all of the incurred and
deferred organizational and offering costs of $733,245.
During the years ended December 31, 1999 and 1998, the Company paid
organization and offering costs related to Fund X of $0 and $21,423,
respectively. During 1998, the Company expensed $21,423 of organization and
offering costs related to Fund X, which exceeded the 5% reimbursement
limitation.
During the years ended December 31, 1999 and 1998, the Company paid
organization and offering costs related to Fund XI of $49,141 and $692,610,
respectively. During 1999 and 1998, the Company expensed $49,141 and
$390,651, respectively, of organization and offering costs related to Fund
XI which exceeded the 5% reimbursement limitation.
During the years ended December 31, 1999 and 1998, the Company paid
organization and offering costs related to Fund XII of $503,860 and
$109,139, respectively. As of December 31, 1999 and 1998, deferred offering
costs represented unreimbursed organization and offering costs of $331,953
and $109,139, respectively. Fund XII will reimburse the Company for
organizational and offering costs paid on its behalf as Fund XII raises
additional capital.
During the years ended December 31, 1999 and 1998, the Company paid
organization and offering costs related to Wells REIT of $3,510,322 and
$1,205,867, respectively. As of December 31, 1999 and 1998, deferred
offering costs represented unreimbursed organizational and offering costs
of $964,941 and $548,729, respectively. Wells REIT will reimburse the
Company for organizational and offering costs paid on its behalf as Wells
REIT raises additional capital.
Due from affiliates at December 31, 1999 and 1998 represents primarily
acquisition and advisory fees paid by the Company on behalf of Fund XI,
Fund XII, and Wells REIT. The remaining due from affiliates represents
operating expenses paid by the Company on behalf of other affiliates and a
receivable from the Company's sole shareholder. The following is a detail
of due from affiliates at December 31:
1999 1998
---------- ----------
Fund X $ 0 $ 2,539
Fund XI 785 89,930
Fund XII 11,982 0
Wells REIT 68,643 6,746
Shareholder 58,412 0
Other affiliates 10,209 6,213
---------- ----------
$150,031 $105,428
========== ==========
Due to affiliates includes the liability for advances from Wells Management
Company, Inc. ("Wells Management"), an affiliate of the Company. These
advances were used to fund the general operations of the Company. The
Company anticipates repaying this obligation to Wells Management during
2000.
130
<PAGE>
4. INVESTMENT IN AFFILIATED COMPANIES
The following is a rollforward of the Company's investment in affiliated
companies for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Investment in affiliated companies, beginning of year $224,093 $ 16,898
Contribution to affiliated companies 0 201,800
Equity in (loss) income of affiliated companies (35) 5,672
Distributions from affiliated companies (282) (277)
---------- ----------
Investment in affiliated companies, end of year $223,776 $ 224,093
========== ==========
</TABLE>
The Company's investment in each affiliated company at December 31, 1999
and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Fund I $ 11,027 $ 11,027
Fund II 2,439 2,721
Wells Partners 9,310 9,345
Wells REIT 201,000 201,000
---------- ----------
$223,776 $224,093
========== ==========
</TABLE>
As of December 31, 1999 and 1998, Fund I owned interests in a medical
office building, two commercial office buildings, three retail shopping
centers, and a project consisting of seven office buildings and a shopping
center.
Fund II owns all of its properties through a joint venture, which, as of
December 31, 1999 and 1998, owned interests in a retail shopping center, a
project consisting of seven office buildings and a shopping center, two
office buildings, and a parcel of land on which a restaurant and a retail
shopping center were developed.
Wells REIT owns all of its properties either directly or through three
joint ventures, which, as of December 31, 1999, included interests in nine
office buildings, one warehouse building, three warehouse and office
facilities, and one manufacturing and office facility.
5. ACQUISITION AND ADVISORY FEES
Acquisition and advisory fees of $327,887 and $3,594,409, respectively,
were earned from Fund XII and Wells REIT, respectively, during 1999.
Acquisition and advisory fees of $578,645 and $1,103,910, respectively,
were also earned from Fund XI and Wells REIT, respectively, during 1998.
Pursuant to the partnership agreements, total fees earned may not exceed 5%
of limited partners' contributions for Fund X, and 3.5% for Fund XI, Fund
XII, and Wells REIT. As of December 31, 1999, $785 of fees due from Fund
XI, $11,982 of fees due from Fund XII, and $68,643 of fees due from Wells
REIT remained uncollected and are included in due from affiliates.
131
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Company. In the normal course
of business, the Company may be subject to litigation or claims.
132
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund XIII, L.P.:
We have audited the accompanying balance sheet of Wells Real Estate Fund XIII,
L.P. (a Georgia public limited partnership) as of December 31, 1999. This
balance sheet is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Wells Real Estate Fund XIII, L.P.
as of December 31, 1999 in conformity with accounting principles generally
accepted in the United States.
/s/ Arthur Andersen LLP
-----------------------
Atlanta, Georgia
January 20, 2000
133
<PAGE>
WELLS REAL ESTATE FUND XIII, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CASH $600
====
PARTNERS' CAPITAL:
General partners $500
Limited partner 100
----
Total partners' capital $600
====
The accompanying notes are an integral part of this balance sheet.
134
<PAGE>
WELLS REAL ESTATE FUND XIII, L.P.
(A Georgia Public Limited Partnership)
NOTES TO BALANCE SHEET
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund XIII, 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 Capital, Inc.
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. Each limited partnership unit has equal voting rights,
regardless of class. The Partnership had no operations as of December 31,
1999.
The Partnership was formed to acquire and operate commercial real estate
properties, including properties which are either to be developed,
currently under development or construction, newly constructed, or have
operating histories.
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.
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.
135
<PAGE>
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;
. 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 and amortization. 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, and amortization 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
136
<PAGE>
units in amounts equal to the deductions for depreciation and amortization
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.
2. DEFERRED OFFERING COSTS
Organization and offering expenses, to the extent they exceed 3% of gross
proceeds, will be paid by Wells Capital, Inc. 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. There were no organization and
offering expenses incurred or paid as of December 31, 1999.
3. RELATED-PARTY TRANSACTIONS
The Partnership may enter 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 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.
Wells Capital, Inc. 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
a 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.
4. INCOME TAXES
The Partnership will not request a ruling from the Internal Revenue Service
to the effect that it will be treated as a partnership and not as an
association taxable as a corporation for Federal income tax purposes. The
Partnership received an opinion from legal counsel as to its tax status as
a partnership, but such an opinion is not binding upon the Internal Revenue
Service. Based on this opinion from legal counsel, the general partners
contend that the Partnership is not subject to federal or state income
taxes, and therefore, none have been provided for in the accompanying
balance sheet. The partners are required to include their respective shares
of profits and losses in their individual income tax returns.
137
<PAGE>
5. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or Wells Capital,
Inc. In the normal course of business, the Partnership or Wells Capital,
Inc. may become subject to such litigation or claims.
138
<PAGE>
PRIOR PERFORMANCE TABLES
The following Prior Performance Tables (Tables) provide information
relating to real estate investment programs sponsored by the advisor and its
affiliates (Wells Public Programs) which have investment objectives similar to
Wells Real Estate Investment Trust, Inc. (Wells REIT). (See "Investment
Objectives and Criteria.") All of the Wells Public Programs, except for the
Wells REIT, have used substantial amounts of capital, and no acquisition
indebtedness, to acquire their properties.
Prospective investors should read these Tables carefully together with the
summary information concerning the Wells Public Programs as set forth in "Prior
Performance Summary" section of this prospectus.
Investors in the Wells REIT will not own any interest in other Wells Public
Programs and should not assume that they will experience returns, if any,
comparable to those experienced by investors in the Wells Public Programs.
The advisor is responsible for the acquisition, operation, maintenance and
resale of the real estate properties. The financial results of the Wells Public
Programs thus provide an indication of the advisor's performance of its
obligations during the periods covered. However, general economic conditions
affecting the real estate industry and other factors contribute significantly to
financial results.
The following tables are included herein:
Table I - Experience in Raising and Investing Funds (As a Percentage of
Investment)
Table II - Compensation to Sponsor (in Dollars)
Table III - Annual Operating Results of Wells Public Programs
Table IV (Results of completed programs) and Table V (sales or disposals of
property) have been omitted since none of the Wells Public Programs have sold
any of their properties to date.
Additional information relating to the acquisition of properties by the
Wells Public Programs is contained in Table VI, which is included in Part II of
the registration statement which the Wells REIT has filed with the Securities
and Exchange Commission. As described above, no Wells Public Program has sold or
disposed of any property held by it. Copies of any or all information will be
provided to prospective investors at no charge upon request.
The following are definitions of certain terms used in the Tables:
"Acquisition Fees" shall mean fees and commissions paid by a Wells Public
Program in connection with its purchase or development of a property, except
development fees paid to a person not affiliated with the Wells Public Program
or with a general partner or advisor of the Wells Public Program in connection
with the actual development of a project after acquisition of the land by the
Wells Public Program.
152
<PAGE>
"Organization Expenses" shall include legal fees, accounting fees,
securities filing fees, printing and reproduction expenses and fees paid to the
sponsor in connection with the planning and formation of the Wells Public
Program.
"Underwriting Fees" shall include selling commissions and wholesaling fees
paid to broker-dealers for services provided by the broker-dealers during the
offering.
153
<PAGE>
TABLE I
(UNAUDITED)
EXPERIENCE IN RAISING AND INVESTING FUNDS
This Table provides a summary of the experience of the sponsors of Wells
Public Programs for which offerings have been completed since December 31, 1996.
Information is provided with regard to the manner in which the proceeds of the
offerings have been applied. Also set forth is information pertaining to the
timing and length of these offerings and the time period over which the proceeds
have been invested in the properties. All figures are as of December 31, 1999.
<TABLE>
<CAPTION>
Wells Real Wells Real Wells Real Wells Real Estate
Estate Fund Estate Fund Estate Fund Investment
IX, L.P. X, L.P. XI, L.P. Trust, Inc.
-------- ------- -------- -----------
<S> <C> <C> <C> <C>
Dollar Amount Raised $35,000,000/(3)/ $ 27,128,912/(4)/ $ 16,532,802/(5)/ $ 132,181,919/(6)/
=========== ============ ============ =============
Percentage Amount Raised 100.0%/(3)/ 100%/(4)/ 100%/(5)/ 100%/(6)/
Less Offering Expenses
Underwriting Fees 10.0% 10.0% 9.5% 9.5%
Organizational Expenses 5.0% 5.0% 3.0% 3.0%
Reserves/(1)/ 0.0% 0.0% 0.0% 0.0%
---- ---- ---- ----
Percent Available for Investment 85.0% 85.0% 87.5% 87.5%
Acquisition and Development Costs
Prepaid Items and Fees related to
Purchase of Property 2.0% 5.4% 0.0% 1.1%
Cash Down Payment 67.1% 60.5% 84.0% 82.0%
Acquisition Fees/(2)/ 4.0% 4.0% 3.5% 3.5%
Development and Construction Costs 11.9% 14.1% 0.0% 0.3%
Reserve for Payment of Indebtedness 0.0% 0.0% 0.0% 0.0%
---- ---- ---- ----
Total Acquisition and Development Cost 85.0% 84.0% 87.5% 86.9%
Percent Leveraged 0.0% 0.0% 0.0% 17.6%
==== ==== ==== ====
Date Offering Began 01/05/96 12/31/96 12/31/97 01/30/98
Length of Offering 12 mo. 12 mo. 12 mo. 23 mo.
Months to Invest 90% of Amount Available 21 mo.
for Investment (Measured from Beginning of 14 mo. 19 mo. 20 mo.
Offering)
Number of Investors as of 12/31/99 2,120 1,812 1,345 3,839
</TABLE>
(1) Does not include general partner contributions held as part of reserves.
(2) Includes acquisition fees, real estate commissions, general contractor fees
and/or architectural fees paid to affiliates of the general partners.
(3) Total dollar amount registered and available to be offered was $35,000,000.
Wells Real Estate Fund IX, L.P. closed its offering on December 30, 1996,
and the total dollar amount raised was $35,000,000.
(4) Total dollar amount registered and available to be offered was $35,000,000.
Wells Real Estate Fund X, L.P. closed its offering on December 30, 1997,
and the total dollar amount raised was $27,128,912.
(5) Total dollar amount registered and available to be offered was $35,000,000.
Wells Real Estate Fund XI, L.P. closed its offering on December 30, 1998,
and the total dollar amount raised was $16,532,802.
154
<PAGE>
(6) Total dollar amount registered and available to be offered was
$165,000,000. Wells Real Estate Investment Trust, Inc. closed its initial
offering on December 20, 1999, and the total dollar amount raised in its
initial offering was $132,181,919.
155
<PAGE>
TABLE II
(UNAUDITED)
COMPENSATION TO SPONSOR
The following sets forth the compensation received by Wells Capital and
its affiliates, including compensation paid out of offering proceeds and
compensation paid in connection with the ongoing operations of Wells Public
Programs having similar or identical investment objectives the offerings of
which have been completed since December 31, 1996. These partnerships have not
sold or refinanced any of their properties to date. All figures are as of
December 31, 1999.
<TABLE>
<CAPTION>
Wells Real
Wells Real Wells Real Wells Real Estate Other
Estate Fund Estate Fund Estate Fund Investment Public
IX, L.P. X, L.P. XI, L.P. Trust, Inc. Programs/(1)/
-------- ------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Date Offering Commenced 01/05/96 12/31/96 12/31/97 01/30/98 --
Dollar Amount Raised $35,000,000 $ 27,128,912 $ 16,532,802 $132,181,919 $206,241,095
to Sponsor from Proceeds of Offering:
Underwriting Fees/(2)/ $ 309,556 $ 260,748 $ 151,911 $ 1,530,882 $ 924,156
Acquisition Fees
Real Estate Commissions -- -- -- -- --
Acquisition and Advisory Fees/(3)/ $ 1,400,000 $ 1,085,157 $ 578,648 $ 4,626,367 $ 10,159,399
Dollar Amount of Cash Generated from
Operations
Before Deducting Payments to Sponsor/(4)/ $ 7,064,631 $ 4,262,319 $ 2,133,705 $ 8,002,132 $ 38,076,886
Amount Paid to Sponsor from Operations:
Property Management Fee/(1)/ $ 169,661 $ 105,410 $ 22,200 $ 129,208 $ 1,434,957
Partnership Management Fee -- -- -- -- --
Reimbursements $ 133,784 $ 105,132 $ 61,058 $ 101,605 $ 1,613,725
Leasing Commissions $ 260,082 $ 176,108 $ 33,492 $ 129,208 $ 1,580,482
General Partner Distributions -- -- -- -- --
Other -- -- -- -- --
Dollar Amount of Property Sales and
Refinancing
Payments to Sponsors:
Cash -- -- -- -- --
Notes -- -- -- -- --
Amount Paid to Sponsor from Property Sales
and Refinancing:
Real Estate Commissions -- -- -- -- --
Incentive Fees -- -- -- -- --
Other -- -- -- -- --
</TABLE>
(1) Includes compensation paid to the general partners from Wells Real
Estate Fund I, Wells Real Estate Fund II, Wells Real Estate Fund II-OW,
Wells Real Estate Fund III, L.P., Wells Real Estate Fund IV, L.P.,
Wells Real Estate Fund V, L.P., Wells Real Estate Fund VI, L.P., Wells
Real Estate Fund VII, L.P., and Wells Real Estate Fund VIII, L.P.
during the past three years. In addition to the amounts shown,
affiliates of the general partners of Wells Real Estate Fund I are
entitled to certain property management and leasing fees but have
elected to defer the payment of such fees until a later year on
properties owned by Wells Real Estate Fund I. At December 31, 1999, the
amount of such deferred fees due the general partners totaled
$2,397,266.
(2) Includes net underwriting compensation and commissions paid to Wells
Investment Securities, Inc. in connection with the offering which was
not reallowed to participating broker-dealers.
(3) Fees paid to the general partners or their affiliates for acquisition
and advisory services in connection with the review and evaluation of
potential real property acquisitions.
(4) Includes $487,134 in net cash provided by operating activities,
$6,013,970 in distributions to limited partners and $563,527 in
payments to sponsor for Wells Real Estate Fund IX, L.P.; $400,825 in
net cash provided by operating activities, $3,474,844 in distributions
to limited partners and $386,650
156
<PAGE>
in payments to sponsor for Wells Real Estate Fund X, L.P.; $(150,720)
in net cash used by operating activities, $2,167,675 in distributions
to limited partners and $116,750 in payments to sponsor for Wells Real
Estate Fund XI, L.P.; $3,732,726 in net cash provided by operating
activities, $3,909,385 in dividends and $360,021 in payments to sponsor
for Wells Real Estate Investment Trust, Inc.; and $2,167,163 in net
cash provided by operating activities, $31,280,559 in distributions to
limited partners and $4,629,164 in payments to sponsor for other public
programs.
157
<PAGE>
TABLE III
(UNAUDITED)
The following six tables set forth operating results of Wells Public
Programs the offerings of which have been completed since December 31, 1994. The
information relates only to public programs with investment objectives similar
to those of the Wells REIT. All figures are as of December 31 of the year
indicated.
158
<PAGE>
<TABLE>
<CAPTION>
TABLE III (UNAUDITED)
OPERATING RESULTS OF PRIOR PROGRAMS
WELLS REAL ESTATE FUND VII, L.P.
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Revenues/(1)/ $ 982,630 $ 846,306 $ 816,237 $ 543,291 $ 925,246
Profit on Sale of Properties -- -- -- -- --
Less: Operating Expenses/(2)/ 85,273 85,722 76,838 84,265 114,953
Depreciation and Amortization/(3)/ 1,562 6,250 6,250 6,250 6,250
------------ ------------ ----------- ---------- ------------
Net Income GAAP Basis/(4)/ $ 895,795 $ 754,334 $ 733,149 $ 452,776 $ 804,043
============ =========== =========== ========== ============
Taxable Income: Operations $ 1,255,666 $ 1,109,096 $ 1,008,368 $ 657,443 $ 812,402
============ =========== =========== ========== ============
Cash Generated (Used By):
Operations (82,763) (72,194) (43,250) 20,883 431,728
Joint Ventures $ 1,694,247 1,770,742 1,420,126 760,628 424,304
----------- ----------- ---------- ------------
$ 1,698,548 $ 1,376,876 $ 781,511 $ 856,032
Less Cash Distributions to Investors: 1,688,290
Operating Cash Flow -- 1,636,158 1,376,876 781,511 856,032
------------
Return of Capital $ 5,957 -- 2,709 10,805 22,064
Undistributed Cash Flow from Prior Year
Operations -- -- -- 9,643
----------- ----------- ---------- ------------
Cash Generated (Deficiency) after Cash
Distribution $ 62,390 -- $ (10,805) $ (31,707)
Special Items (not including sales and financing):
Source of Funds:
General Partner Contributions -- -- -- -- --
Increase in Limited Partner Contributions $ -- $ -- $ -- $ -- $ 805,212
------------ ----------- ----------- ---------- ------------
$ 5,957 $ 62,390 $ (2,709) $ (10,805) $ 773,505
Use of Funds:
Sales Commissions and Offering Expenses -- -- -- $ 244,207
Return of Original Limited Partner's Investment -- -- -- -- 100
Property Acquisitions and Deferred Project Costs 0 181,070 169,172 736,960 14,971,002
------------ ----------- ----------- ---------- ------------
Cash Generated (Deficiency) after Cash
Distributions and Special Items $ 5,957 $ (118,680) $ (171,881) $ (747,765) $(14,441,804)
============ =========== =========== ========== ============
Net Income and Distributions Data per $1,000
Invested:
Net Income on GAAP Basis:
Ordinary Income (Loss)
- Operations Class A Units 93 85 86 62 57
- Operations Class B Units (248) (224) (168) (98) (20)
Capital Gain (Loss) -- -- -- -- --
Tax and Distributions Data per $1,000 Invested:
Federal Income Tax Results:
Ordinary Income (Loss)
- Operations Class A Units 89 82 78 55 55
- Operations Class B Units (134) (111) (58) (16)
Capital Gain (Loss) -- -- -- --
Cash Distributions to Investors: 83
Source (on GAAP Basis) --
- Investment Income Class A Units -- 81 70 43 52
- Return of Capital Class A Units -- -- -- --
- Return of Capital Class B Units 83 -- -- -- --
Source (on Cash Basis) --
- Operations Class A Units 81 70 42 51
- Return of Capital Class A Units 67 -- -- 1 1
- Operations Class B Units 16 -- -- -- --
Source (on a Priority Distribution Basis)/(5)/ --
- Investment income Class A Units 65 54 29 30
- Return of Capital Class A Units 16 16 14 22
- Return of Capital Class B Units -- -- -- --
Amount (in Percentage Terms) Remaining Invested in
Program Properties at the end of the Last Year
Reported in the Table 100%
</TABLE>
159
<PAGE>
(1) Includes $403,325 in equity in earnings of joint ventures and $521,921 from
investment of reserve funds in 1995, $457,144 in equity in earnings of
joint ventures and $86,147 from investment of reserve funds in 1996,
$785,398 in equity in earnings of joint ventures and $30,839 from
investment of reserve funds in 1997, $839,037 in equity in earnings of
joint ventures and $7,269 from investment of reserve funds in 1998, and
$981,104 in equity in earnings of joint ventures and $1,526 from investment
of reserve funds in 1999. At December 31, 1999, the leasing status was 97%
including developed property in initial lease up.
(2) Includes partnership administrative expenses.
(3) Included in equity in earnings of joint ventures in gross revenues is
depreciation of $25,468 for 1994, $140,533 for 1995, $605,247 for 1996,
$877,869 for 1997, $955,245 for 1998, and $982,052 for 1999.
(4) In accordance with the partnership agreement, net income or loss,
depreciation and amortization are allocated $950,826 to Class A Limited
Partners, $(146,503) to Class B Limited Partners and $(280) to the General
Partners for 1995; $1,062,605 to Class A Limited Partners, $(609,829) to
Class B Limited Partners and $0 to the General Partners for 1996;
$1,615,965 to class A Limited Partners, $(882,816) to Class B Limited
Partners and $0 to the General Partners for 1997; $1,704,213 to Class A
Limited Partners, $(949,879) to Class B Limited Partners and $0 to the
General Partners for 1998; and $1,879,410 to Class A Limited Partners,
$(983,615) to Class B Limited Partners and $0 to the General Partners for
1999.
(5) Pursuant to the terms of the partnership agreement, an amount equal to the
cash distributions paid to Class A Limited Partners is payable as priority
distributions out of the first available net proceeds from the sale of
partnership properties to Class B Limited Partners. The amount of cash
distributions paid per unit to Class A Limited Partners is shown as a
return of capital to the extent of such priority distributions payable to
Class B Limited Partners. As of December 31, 1999, the aggregate amount of
such priority distributions payable to Class B Limited Partners totaled
$1,680,730.
160
<PAGE>
TABLE III (UNAUDITED)
OPERATING RESULTS OF PRIOR PROGRAMS
WELLS REAL ESTATE FUND VIII, L.P.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Revenues/(1)/ $ 1,360,497 $ 1,362,513 $ 1,204,018 $ 1,057,694 $ 402,428
Profit on Sale of Properties -- -- -- -- --
Less: Operating Expenses/(2)/ 87,301 87,092 95,201 114,854 122,264
Depreciation and Amortization/(3)/ 6,250 6,250 6,250 6,250 6,250
----------- ------------ ------------- ------------ ------------
Net Income GAAP Basis/(4)/ $ 1,266,946 $ 1,269,171 $ 1,102,567 $ 936,590 273,914
=========== ============ ============= ============ ============
Taxable Income: Operations $ 1,672,844 $ 1,683,192 $ 1,213,524 $ 1,001,974 404,348
=========== ============ ============= ============ ============
Cash Generated (Used By):
Operations (87,298) (63,946) 7,909 623,268 204,790
Joint Ventures 2,558,623 2,293,504 1,229,282 279,984 20,287
----------- ------------ ------------- ------------ ------------
$ 2,471,325 $ 2,229,558 $ 1,237,191 $ 903,252 $ 225,077
Less Cash Distributions to Investors:
Operating Cash Flow 2,379,215 2,218,400 1,237,191 903,252 --
Return of Capital -- -- 183,315 2,443 --
Undistributed Cash Flow from Prior Year Operations -- -- -- 225,077 --
----------- ------------ ------------- ------------ ------------
Cash Generated (Deficiency) after Cash Distributions $ 92,110 $ 11,158 $ (183,315) $ (227,520) $ 225,077
Special Items (not including sales and financing):
Source of Funds:
General Partner Contributions -- -- -- -- --
Increase in Limited Partner Contributions/(5)/ -- -- -- 1,898,147 30,144,542
----------- ------------ ------------- ------------ ------------
$ 92,110 $ 11,158 $ (183,315) $ 1,670,627 $ 30,369,619
Use of Funds:
Sales Commissions and Offering Expenses -- -- -- 464,760 4,310,028
Return of Limited Partner's Investment -- -- 8,600 -- --
Property Acquisitions and Deferred Project Costs 0 1,850,859 10,675,811 7,931,566 6,618,273
----------- ------------ ------------- ------------ ------------
Cash Generated (Deficiency) after Cash Distributions and
Special Items $ 92,110 $ (1,839,701) $ (10,867,726) $ (6,725,699) $ 19,441,318
=========== ============ ============= ============ ============
Net Income and Distributions Data per $1,000 Invested:
Net Income on GAAP Basis:
Ordinary Income (Loss)
- Operations Class A Units
- Operations Class B Units 91 91 73 46 28
Capital Gain (Loss) (247) (212) (150) (47) (3)
-- -- -- -- --
Tax and Distributions Data per $1,000 Invested:
Federal Income Tax Results:
Ordinary Income (Loss)
- Operations Class A Units 88 89 65 46 17
- Operations Class B Units 154 (131) (95) (33) (3)
Capital Gain (Loss) -- -- -- -- --
Cash Distributions to Investors:
Source (on GAAP Basis)
- Investment Income Class A Units 87 83 54 43 --
- Return of Capital Class A Units -- -- -- -- --
- Return of Capital Class B Units -- -- -- -- --
Source (on Cash Basis)
- Operations Class A Units 87 83 47 43 --
- Return of Capital Class A Units -- -- 7 0 --
- Operations Class B Units -- -- -- -- --
Source (on a Priority Distribution Basis)/(5)/
- Investment Income Class A Units 70 69 42 33 --
- Return of Capital Class A Units 17 16 12 10 --
- Return of Capital Class B Units -- -- -- -- --
Amount (in Percentage Terms) Remaining Invested in
Program Properties at the end of the Last Year Reported in
the Table 100%
</TABLE>
161
<PAGE>
(1) Includes $28,377 in equity in earnings of joint ventures and $374,051 from
investment of reserve funds in 1995, $241,819 in equity in earnings of joint
ventures and $815,875 from investment of reserve funds in 1996, $1,034,907
in equity in earnings of joint ventures and $169,111 from investment of
reserve funds in 1997, $1,346,367 in equity in earnings of joint ventures
and $16,146 from investment of reserve funds in 1998, and $1,360,494 in
equity in earnings of joint ventures and $3 from investment of reserve funds
in 1999. At December 31, 1999, the leasing status was 98% including
developed property in initial lease up.
(2) Includes partnership administrative expenses.
(3) Included in equity in earnings of joint ventures in gross revenues is
depreciation of $14,058 for 1995, $265,259 for 1996, $841,666 for 1997,
$1,157,355 for 1998, and $1,209,171 for 1999.
(4) In accordance with the partnership agreement, net income or loss,
depreciation and amortization are allocated $294,221 to Class A Limited
Partners, $(20,104) to Class B Limited Partners and $(203) to the General
Partners for 1995; $1,207,540 to Class A Limited Partners, $(270,653) to
Class B Limited Partners and $(297) to the General Partners for 1996;
$1,947,536 to Class A Limited Partners, $(844,969) to Class B Limited
Partners and $0 to the General Partners for 1997; $2,431,246 to Class A
Limited Partners, $(1,162,075) to Class B Limited Partners and $0 to the
General Partners for 1998; and $2,481,559 to Class A Limited Partners,
$(1,214,613) to Class B Limited Partners and $0 to the General Partners for
1999.
(5) Pursuant to the terms of the partnership agreement, an amount equal to the
cash distributions paid to Class A Limited Partners is payable as priority
distributions out of the first available net proceeds from the sale of
partnership properties to Class B Limited Partners. The amount of cash
distributions paid per unit to Class A Limited Partners is shown as a return
of capital to the extent of such priority distributions payable to Class B
Limited Partners. As of December 31, 1999, the aggregate amount of such
priority distributions payable to Class B Limited Partners totaled
$1,464,810.
162
<PAGE>
TABLE III (UNAUDITED)
OPERATING RESULTS OF PRIOR PROGRAMS
WELLS REAL ESTATE FUND IX, L.P.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Revenues/(1)/ $ 1,593,734 $ 1,561,456 $ 1,199,300 $ 406,891 N/A
Profit on Sale of Properties -- -- -- --
Less: Operating Expenses/(2)/ 90,903 105,251 101,284 101,885
Depreciation and Amortization/(3)/ 12,500 6,250 6,250 6,250
----------- ------------ ------------- ------------
Net Income GAAP Basis/(4)/ $ 1,490,331 $ 1,449,955 $ 1,091,766 $ 298,756
=========== ============ ============= ============
Taxable Income: Operations $ 1,924,542 $ 1,906,011 $ 1,083,824 $ 304,552
=========== ============ ============= ============
Cash Generated (Used By):
Operations $ (94,403) $ 80,147 $ 501,390 $ 151,150
Joint Ventures 2,814,870 2,125,489 527,390 --
----------- ------------ ------------- ------------
$ 2,720,467 $ 2,205,636 $ 1,028,780 $ 151,150
Less Cash Distributions to Investors:
Operating Cash Flow 2,720,467 2,188,189 1,028,780 149,425
Return of Capital 15,528 -- 41,834 --
Undistributed Cash Flow From Prior Year Operations 17,447 -- 1,725 --
----------- ------------ ------------- ------------
Cash Generated (Deficiency) after Cash Distributions $ (32,975) $ 17,447 $ (43,559) $ 1,725
Special Items (not including sales and financing):
Source of Funds:
General Partner Contributions -- -- -- --
Increase in Limited Partner Contributions -- -- -- 35,000,000
----------- ------------ ------------- ------------
$ (32,975) $ 17,447 $ (43,559) $ 35,001,725
Use of Funds:
Sales Commissions and Offering Expenses -- -- 323,039 4,900,321
Return of Original Limited Partner's Investment -- -- 100 --
Property Acquisitions and Deferred Project Costs 190,853 9,455,554 13,427,158 6,544,019
----------- ------------ ------------- ------------
Cash Generated (Deficiency) after Cash Distributions and
Special Items $ (223,828) $ (9,438,107) $ (13,793,856) $ 23,557,385
=========== ============ ============= ============
Net Income and Distributions Data per $1,000 Invested:
Net Income on GAAP Basis:
Ordinary Income (Loss)
- Operations Class A Units 89 88 53 28
- Operations Class B Units (272) (218) (77) (11)
Capital Gain (Loss) -- -- -- --
Tax and Distributions Data per $1,000 Invested:
Federal Income Tax Results:
Ordinary Income (Loss)
- Operations Class A Units 86 85 46 26
- Operations Class B Units (164) (123) (47) (48)
Capital Gain (Loss) -- -- -- --
Cash Distributions to Investors:
Source (on GAAP Basis)
- Investment Income Class A Units 88 73 36 13
- Return of Capital Class A Units 2 -- -- --
- Return of Capital Class B Units -- -- -- --
Source (on Cash Basis)
- Operations Class A Units 89 73 35 13
- Return of Capital Class A Units 1 -- 1 --
- Operations Class B Units -- -- -- --
Source (on a Priority Distribution Basis)(5)
- Investment Income Class A Units 77 61 29 10
- Return of Capital Class A Units 13 12 7 3
- Return of Capital Class B Units -- -- -- --
Amount (in Percentage Terms) Remaining Invested in Program
Properties at the end of the Last Year Reported in the Table 100%
</TABLE>
163
<PAGE>
(1) Includes $23,077 in equity in earnings of joint ventures and $383,884 from
investment of reserve funds in 1996, and $593,914 in equity in earnings of
joint ventures and $605,386 from investment of reserve funds in 1997,
$1,481,869 in equity in earnings of joint ventures and $79,587 from
investment of reserve funds in 1998, and $1,593,734 in equity in earnings
of joint ventures and $0 from investment of reserve funds in 1999. At
December 31, 1999, the leasing status was 100% including developed property
in initial lease up.
(2) Includes partnership administrative expenses.
(3) Included in equity in earnings of joint ventures in gross revenues is
depreciation of $25,286 for 1996, $469,126 for 1997, $1,143,407 for 1998,
and $1,210,939 for 1999.
(4) In accordance with the partnership agreement, net income or loss,
depreciation and amortization are allocated $330,270 to Class A Limited
Partners, $(31,220) to Class B Limited Partners and $(294) to the General
Partners for 1996; $1,564,778 to Class A Limited Partners, $(472,806) to
Class B Limited Partners and $(206) to the General Partners for 1997;
$2,597,938 to Class A Limited Partners, $(1,147,983) to Class B Limited
Partners and $0 to the General Partners for 1998; and $2,713,636 to Class A
Limited Partners, $(1,223,305) to Class B Limited Partners and $0 to the
General Partners for 1999.
(5) Pursuant to the terms of the partnership agreement, an amount equal to the
cash distributions paid to Class A Limited Partners is payable as priority
distributions out of the first available net proceeds from the sale of
partnership properties to Class B Limited Partners. The amount of cash
distributions paid per unit to Class A Limited Partners is shown as a
return of capital to the extent of such priority distributions payable to
Class B Limited Partners. As of December 31, 1999, the aggregate amount of
such priority distributions payable to Class B Limited Partners totaled
$993,010.
164
<PAGE>
<TABLE>
<CAPTION>
TABLE III (UNAUDITED)
OPERATING RESULTS OF PRIOR PROGRAMS
WELLS REAL ESTATE FUND X, L.P.
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Revenues/(1)/ $1,309,281 $ 1,204,597 $ 372,507 N/A N/A
Profit on Sale of Properties -- -- --
Less: Operating Expenses/(2)/ 98,213 99,034 88,232
Depreciation and Amortization/(3)/ 18,750 55,234 6,250
---------- ------------ -----------
Net Income GAAP Basis/(4)/ $1,192,318 $ 1,050,329 $ 278,025
========== ============ ===========
Taxable Income: Operations $1,449,771 $ 1,277,016 $ 382,543
========== ============ ===========
Cash Generated (Used By):
Operations (99,862) 300,019 200,668
Joint Ventures 2,175,915 886,846 --
---------- ------------ -----------
$2,076,053 $ 1,186,865 $ 200,668
Less Cash Distributions to Investors:
Operating Cash Flow 2,067,801 1,186,865 --
Return of Capital -- 19,510 --
Undistributed Cash Flow From Prior Year Operations -- 200,668 --
---------- ------------ -----------
Cash Generated (Deficiency) after Cash Distributions $ 8,252 $ (220,178) $ 200,668
Special Items (not including sales and financing):
Source of Funds:
General Partner Contributions -- -- --
Increase in Limited Partner Contributions -- -- 27,128,912
---------- ------------ -----------
$ 8,252 $ (220,178) $27,329,580
Use of Funds:
Sales Commissions and Offering Expenses -- 300,725 3,737,363
Return of Original Limited Partner's Investment -- -- 100
Property Acquisitions and Deferred Project Costs 0 17,613,067 5,188,485
---------- ------------ -----------
Cash Generated (Deficiency) after Cash Distributions
and Special Items $ 8,252 $(18,133,970) $18,403,632
========== ============ ===========
Net Income and Distributions Data per $1,000
Invested:
Net Income on GAAP Basis:
Ordinary Income (Loss)
- Operations Class A Units 97 85 28
- Operations Class B Units (160) (123) (9)
Capital Gain (Loss) -- -- --
Tax and Distributions Data per $1,000 Invested:
Federal Income Tax Results:
Ordinary Income (Loss)
- Operations Class A Units 92 78 35
- Operations Class B Units (100) (64) 0
Capital Gain (Loss) -- -- --
Cash Distributions to Investors:
Source (on GAAP Basis)
- Investment Income Class A Units 95 66 --
- Return of Capital Class A Units -- -- --
- Return of Capital Class B Units -- -- --
Source (on Cash Basis)
- Operations Class A Units 95 56 --
- Return of Capital Class A Units -- 10 --
- Operations Class B Units -- -- --
Source (on a Priority Distribution Basis)/(5)/
- Investment Income Class A Units 71 48 --
- Return of Capital Class A Units 24 18 --
- Return of Capital Class B Units -- -- --
Amount (in Percentage Terms) Remaining Invested in
Program Properties at the end of the Last Year 100%
Reported in the Table
</TABLE>
165
<PAGE>
(1) Includes $(10,035) in equity in earnings of joint ventures and $382,542
from investment of reserve funds in 1997, and $869,555 in equity in
earnings of joint ventures and $215,042 from investment of reserve funds in
1998, and $1,309,281 in equity in earnings of joint ventures and $0 from
investment of reserve funds in 1999. At December 31, 1999, the leasing
status was 100% including developed property in initial lease up.
(2) Includes partnership administrative expenses.
(3) Included in equity in earnings of joint ventures in gross revenues is
depreciation of $18,675 for 1997, $674,986 for 1998, and $891,911 for 1999.
(4) In accordance with the partnership agreement, net income or loss,
depreciation and amortization are allocated $302,862 to Class A Limited
Partners, $(24,675) to Class B Limited Partners and $(162) to the General
Partners for 1997; $1,779,191 to Class A Limited Partners, $(728,524) to
Class B Limited Partners and $(338) to General Partners for 1998; and
$2,084,229 to Class A Limited Partners, $(891,911) to Class B Limited
Partners and $0 to the General Partners for 1999.
(5) Pursuant to the terms of the partnership agreement, an amount equal to the
cash distributions paid to Class A Limited Partners is payable as priority
distributions out of the first available net proceeds from the sale of
partnership properties to Class B Limited Partners. The amount of cash
distributions paid per unit to Class A Limited Partners is shown as a
return of capital to the extent of such priority distributions payable to
Class B Limited Partners. As of December 31, 1999, the aggregate amount of
such priority distributions payable to Class B Limited Partners totaled
$909,527.
166
<PAGE>
<TABLE>
<CAPTION>
TABLE III (UNAUDITED)
OPERATING RESULTS OF PRIOR PROGRAMS
WELLS REAL ESTATE FUND XI, L.P.
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross Revenues/(1)/ 766,586 262,729 N/A N/A N/A
Profit on Sale of Properties -- --
Less: Operating Expenses/(2)/ 111,058 113,184
Depreciation and Amortization/(3)/ 25,000 6,250
----------- -----------
Net Income GAAP Basis/(4)/ $ 630,528 $ 143,295
=========== ===========
Taxable Income: Operations $ 704,108 $ 177,692
=========== ===========
Cash Generated (Used By):
Operations 40,906 (50,858)
Joint Ventures 705,394 102,662
----------- -----------
$ 746,300 $ 51,804
Less Cash Distributions to Investors:
Operating Cash Flow 746,300 51,804
Return of Capital 49,761 48,070
Undistributed Cash Flow From Prior Year Operations -- --
----------- -----------
Cash Generated (Deficiency) after Cash Distributions $ (49,761) $ (48,070)
Special Items (not including sales and financing):
Source of Funds:
General Partner Contributions -- --
Increase in Limited Partner Contributions -- 16,532,801
----------- -----------
$ (49,761) $16,484,731
Use of Funds:
Sales Commissions and Offering Expenses 214,609 1,779,661
Return of Original Limited Partner's Investment 100 --
Property Acquisitions and Deferred Project Costs 9,005,979 5,412,870
----------- -----------
Cash Generated (Deficiency) after Cash Distributions and
Special Items $(9,270,449) $ 9,292,200
=========== ===========
Net Income and Distributions Data per $1,000 Invested:
Net Income on GAAP Basis:
Ordinary Income (Loss)
- Operations Class A Units 77 20
- Operations Class B Units (112) (32)
Capital Gain (Loss) -- --
Tax and Distributions Data per $1,000 Invested:
Federal Income Tax Results:
Ordinary Income (Loss)
- Operations Class A Units 71 18
- Operations Class B Units (73) (17)
Capital Gain (Loss) -- --
Cash Distributions to Investors:
Source (on GAAP Basis)
- Investment Income Class A Units 60 8
- Return of Capital Class A Units -- --
- Return of Capital Class B Units -- --
Source (on Cash Basis)
- Operations Class A Units 56 4
- Return of Capital Class A Units 4 4
- Operations Class B Units -- --
Source (on a Priority Distribution Basis)/(5)/
- Investment Income Class A Units 46 6
- Return of Capital Class A Units 14 2
- Return of Capital Class B Units -- --
Amount (in Percentage Terms) Remaining Invested in
Program Properties at the end of the Last Year Reported
in the Table 100%
</TABLE>
167
<PAGE>
(1) Includes $142,163 in equity in earnings of joint ventures and $120,566 from
investment of reserve funds in 1998, and $607,579 in equity in earnings of
joint ventures and $159,007 from investment of reserve funds in 1999. At
December 31, 1999, the leasing status was 100% including developed property
in initial lease up.
(2) Includes partnership administrative expenses.
(3) Included in equity in earnings of joint ventures in gross revenues is
depreciation of $105,458 for 1998, and $353,840 for 1999.
(4) In accordance with the partnership agreement, net income or loss,
depreciation and amortization are allocated $254,862 to Class A Limited
Partners, $(111,067) to Class B Limited Partners and $(500) to General
Partners for 1998; and $1,009,368 to Class A Limited Partners, $(378,840)
to Class B Limited Partners and $0 to the General Partners for 1999.
(5) Pursuant to the terms of the partnership agreement, an amount equal to the
cash distributions paid to Class A Limited Partners is payable as priority
distributions out of the first available net proceeds from the sale of
partnership properties to Class B Limited Partners. The amount of cash
distributions paid per unit to Class A Limited Partners is shown as a
return of capital to the extent of such priority distributions payable to
Class B Limited Partners. As of December 31, 1999, the aggregate amount of
such priority distributions payable to Class B Limited Partners totaled
$213,006.
168
<PAGE>
EXHIBIT "A"
FORM OF AGREEMENT OF
LIMITED PARTNERSHIP OF
WELLS REAL ESTATE FUND XIII, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE I. FORMATION...................................................... 1
ARTICLE II. NAME.......................................................... 1
ARTICLE III. DEFINITIONS.................................................. 1
ARTICLE IV. BUSINESS...................................................... 8
Purpose................................................................... 8
Objectives................................................................ 8
ARTICLE V. NAMES AND ADDRESSES OF PARTNERS................................ 8
ARTICLE VI. TERM.......................................................... 8
ARTICLE VII. PRINCIPAL AND REGISTERED OFFICE AND REGISTERED AGENT......... 8
ARTICLE VIII. CAPITAL CONTRIBUTIONS....................................... 9
Capital Accounts.......................................................... 9
General Partners.......................................................... 9
General Partner Purchase of Units......................................... 9
Initial Limited Partner................................................... 9
Limited Partner Contributions............................................. 9
Admission of Limited Partners............................................. 10
Minimum Capitalization.................................................... 10
Escrow.................................................................... 10
Public Offering........................................................... 11
Return and Withdrawal of Capital.......................................... 11
Repurchase of Units....................................................... 11
Interest on Capital Contributions......................................... 12
Ownership by Limited Partner of Interest in Affiliates of
General Partners........................................................ 13
Deficit Capital Accounts.................................................. 13
Distribution Reinvestment Plan............................................ 13
Cash Preferred Units and Tax Preferred Units.............................. 14
ARTICLE IX. DISTRIBUTIONS................................................. 15
Net Cash From Operations.................................................. 15
Nonliquidating Net Sale Proceeds.......................................... 16
Dissolution............................................................... 17
Liquidating Distributions................................................. 17
Distribution Dates........................................................ 18
Allocation Among General Partners......................................... 18
Allocation Among Limited Partners......................................... 18
ARTICLE X. ALLOCATIONS.................................................... 18
Net Loss.................................................................. 18
Depreciation, Amortization and Cost Recovery Deductions................... 18
Net Income................................................................ 19
Gain on Sale.............................................................. 19
Qualified Income Offset................................................... 21
Allocation Among Limited Partners......................................... 21
Allocation Among General Partners......................................... 21
Item Prorations........................................................... 21
Allocations in Respect to Transferred Units............................... 22
Allocations in Respect to Repurchased Units............................... 22
Disputes.................................................................. 22
ARTICLE XI. MANAGEMENT OF THE PARTNERSHIP................................. 22
Management................................................................ 22
i
<PAGE>
Powers of the General Partners............................................ 22
Limitations on Powers of the General Partners............................. 24
Expenses of the Partnership............................................... 29
ARTICLE XII. SERVICES TO PARTNERSHIP BY GENERAL PARTNERS.................. 33
Acquisition and Advisory Services......................................... 33
Limitations on Acquisition Fees........................................... 34
Property Management Services.............................................. 34
Insurance Services Prohibited............................................. 35
Development and Construction Services Prohibited.......................... 35
Real Estate Commissions on Resale of Properties........................... 35
Rebates, Give-ups and Reciprocal Arrangements............................. 35
Other Services............................................................ 36
ARTICLE XIII. TRANSACTIONS BETWEEN GENERAL PARTNERS AND THE PARTNERSHIP... 36
Sales and Leases to the Partnership....................................... 36
Sales and Leases to the General Partners.................................. 36
Loans..................................................................... 36
Dealings with Related Programs............................................ 36
Commissions on Reinvestment or Distribution............................... 36
ARTICLE XIV. INDEPENDENT ACTIVITIES OF PARTNERS........................... 37
ARTICLE XV. BOOKS, REPORTS, FISCAL AND TAX MATTERS........................ 37
Books..................................................................... 37
Reports................................................................... 38
Acquisition Reports..................................................... 38
Annual Report........................................................... 38
Quarterly Reports....................................................... 38
Report of Fees.......................................................... 39
Tax Information......................................................... 39
ERISA Report............................................................ 39
Performance Reporting................................................... 39
Expense Reporting....................................................... 39
Other Reports........................................................... 39
Cessation of Reports.................................................... 40
Fiscal Year............................................................... 40
Tax Elections............................................................. 40
Bank Accounts............................................................. 40
Insurance................................................................. 40
Taxation as Partnership................................................... 40
Tax Matters............................................................... 40
ARTICLE XVI. RIGHTS AND LIABILITIES OF THE LIMITED PARTNERS............... 41
Powers of the Limited Partners............................................ 41
Restrictions on Power to Amend............................................ 42
Limited Liability......................................................... 42
Meetings of, or Actions by, the Limited Partners.......................... 42
ARTICLE XVII. WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS; ASSIGNABILITY
OF GENERAL PARTNERS' AND LIMITED PARTNERS' INTERESTS..................... 43
Limited Partners' Interest.............................................. 44
Restrictions on Transfers................................................. 44
Substituted Limited Partners.............................................. 45
Assignment of Limited Partnership Interest Without Substitution........... 46
Withdrawal of Limited Partner............................................. 46
ii
<PAGE>
Death, Legal Incompetency or Dissolution of Limited Partner............... 46
Elimination or Modification of Restrictions............................... 46
ARTICLE XVIII. LOANS TO PARTNERSHIP....................................... 46
Authority to Borrow....................................................... 46
Loans from Partners....................................................... 46
ARTICLE XIX. POWER OF ATTORNEY, CERTIFICATES AND OTHER DOCUMENTS.......... 47
Power of Attorney......................................................... 47
Required Signatures....................................................... 49
Additional Documents...................................................... 49
ARTICLE XX. DISSOLUTION AND TERMINATION OF THE PARTNERSHIP................ 49
Dissolution............................................................... 49
Proxy to Liquidate........................................................ 50
Limited Partners' Right to Continue the Business of the Partnership....... 51
Payment to Withdrawn or Removed General Partner........................... 51
Termination of Executory Contracts........................................ 52
ARTICLE XXI. DISTRIBUTION ON TERMINATION OF PARTNERSHIP................... 52
Liquidation Distribution.................................................. 52
Time of Liquidation....................................................... 52
Liquidation Statement..................................................... 52
No Liability for Return of Capital........................................ 52
No Right of Partition..................................................... 52
Priority; Return of Capital............................................... 52
Escheat of Distributions.................................................. 52
ARTICLE XXII. GENERAL PROVISIONS.......................................... 53
Notices................................................................... 53
Survival of Rights........................................................ 53
Amendment................................................................. 53
Headings.................................................................. 53
Agreement in Counterparts................................................. 53
Governing Law............................................................. 53
Time...................................................................... 53
Pronouns.................................................................. 53
Separability of Provisions................................................ 54
No Mandatory Arbitration of Disputes...................................... 54
iii
<PAGE>
FORM OF AGREEMENT OF
LIMITED PARTNERSHIP OF
WELLS REAL ESTATE FUND XIII, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP is made and entered into effective as
of the ____ day of ______, 2001, by and between Leo F. Wells, III, a Georgia
resident, and Wells Capital, Inc., a Georgia corporation, as the General
Partners, and Douglas P. Williams, a Georgia resident, as the Initial Limited
Partner, and those parties who from time to time become Limited Partners as
provided in this Agreement, as the Limited Partners.
WHEREAS, on September 15, 1998, a Certificate of Limited Partnership was
filed with the Secretary of State of the State of Georgia, as amended by that
certain Certificate of Amendment to the Certificate of Limited Partnership dated
October 20, 2000, pursuant to which the General Partners and the Initial Limited
Partner formed a limited partnership (the "Partnership") under the Georgia
Revised Uniform Limited Partnership Act, O.C.G.A. (S) 14-9-100, et seq. (the
"Act"); and
WHEREAS, the parties hereto desire to enter into this Agreement of Limited
Partnership.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and conditions herein contained, the parties hereto hereby agree, as follows:
ARTICLE I
FORMATION
The General Partners have executed and filed a Certificate of Limited
Partnership dated September 15, 1998, with the Secretary of State of the State
of Georgia in accordance with the provisions of Section 14-9-201 of the Act, as
amended by that certain Certificate of Amendment to the Certificate of Limited
Partnership dated October 20, 2000, pursuant to which the parties hereto have
previously formed the Partnership.
ARTICLE II
NAME
The business of the Partnership shall be conducted under the name of "Wells
Real Estate Fund XIII, L.P." or such other name as the General Partners shall
hereafter designate in their discretion from time to time.
ARTICLE III
DEFINITIONS
3.1 "Act" shall mean the provisions of the Georgia Revised Uniform
Limited Partnership Act, O.C.G.A. (S)14-9-100, et seq.
3.2 "Acquisition Expenses" shall mean expenses, including, but not
limited to, legal fees and expenses, travel and communications expenses, costs
of appraisals, nonrefundable option payments on property not acquired,
accounting fees and expenses, title insurance and miscellaneous expenses related
to selection and acquisition of properties, whether or not acquired.
<PAGE>
3.3 "Acquisition Fees" shall mean the total of all fees and commissions
paid by any party to any Person in connection with the purchase, development or
construction of property by the Partnership, including the Acquisition and
Advisory Fees payable to the General Partners or their Affiliates, real estate
brokerage commissions, investment advisory fees, finder's fees, selection fees,
Development Fees, Construction Fees, nonrecurring management fees, or any other
fees of a similar nature, however designated, but excluding any Development Fees
and Construction Fees paid to a Person not affiliated with the Sponsor in
connection with the actual development or construction of a property.
3.4 "Acquisition and Advisory Fee" shall mean the fee payable to the
General Partners or their Affiliates pursuant to Section 12.1 hereof for
performing acquisition advisory services in connection with the review and
evaluation of potential real property acquisitions for the Partnership.
3.5 "Additional Limited Partners" shall refer to all persons who are
admitted as Limited Partners pursuant to the provisions hereof.
3.6 "Affiliate" shall mean (a) any Person directly or indirectly
controlling, controlled by or under common control with a General Partner, (b)
any Person owning or controlling 10% or more of the outstanding voting
securities of a General Partner, (c) any officer, director or partner of a
General Partner, and (d) if such other Person is an officer, director or
partner, any company for which a General Partner acts in any such capacity.
3.7 "Agreement" shall mean this Agreement of Limited Partnership as
amended, modified or supplemented from time to time.
3.8 "Assignee" shall mean a Person who has acquired a Limited Partner's
beneficial interest in one or more Units and has not become a substituted
Limited Partner.
3.9 "Capital Account" shall mean the account established and maintained
for each Partner pursuant to Section 8.1 hereof.
3.10 "Capital Contribution" shall mean, in the case of the General
Partners, the aggregate amount of cash contributed by the General Partners to
the Partnership and, in the case of a Limited Partner, the gross amount of
investment in the Partnership by such Limited Partner, which shall be an amount
equal to $10.00 multiplied by the number of Units purchased by such Limited
Partner.
3.11 "Cash Flow" shall mean cash funds from operations of the Partnership,
including without limitation interest and other investment income but excluding
Capital Contributions and without deduction for depreciation or amortization,
after deducting funds used to pay or to provide for the payment of all operating
expenses of the Partnership and each Partnership Property and debt service, if
any, capital improvements and replacements.
3.12 "Cash Preferred Unit" shall mean a Unit with respect to which the
Limited Partner holding such Unit has made an effective election pursuant to
Section 8.16 hereof to be treated as a Cash Preferred Unit for the applicable
accounting period.
3.13 "Certificate" shall mean the Certificate of Limited Partnership filed
with the Secretary of State of Georgia dated September 15, 1998, as amended from
time to time.
3.14 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2
<PAGE>
3.15 "Construction Fees" shall mean any fees or other remuneration for
acting as general contractor and/or construction manager to construct, supervise
and/or coordinate improvements in connection with the actual development or
construction of a Partnership Property.
3.16 "Development Fees" shall mean any fees or other remuneration for the
packaging of a Partnership Property, including negotiating and approving plans,
assisting in obtaining zoning and necessary variances for a specific property,
and related matters.
3.17 "Dissenting Limited Partner" shall mean any Limited Partner who casts
a vote against a Roll-Up; except that, for purposes of a transaction
constituting a Roll-Up which involves an exchange or a tender offer, Dissenting
Limited Partner shall mean any person who files a dissent from the terms of the
transaction with the party responsible for tabulating the votes or tenders to be
received in connection with the transaction during the period in which the offer
is outstanding.
3.18 "Distribution Reinvestment Plan" shall mean the plan established
pursuant to Section 8.15 hereof.
3.19 "Event of Withdrawal" shall mean, as to the General Partners (a) the
dissolution, death or permanent disability of a General Partner; (b) if such
General Partner (i) makes an assignment for the benefit of the creditors; (ii)
files a voluntary petition in bankruptcy; (iii) is adjudicated a bankrupt or
insolvent; (iv) files a petition or answer speaking for himself or itself in the
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation; (v) files an answer or
other pleading admitting or failing to contest the material allegations of the
petition filed against him or it in any proceeding of this nature; (vi) seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of such General Partner of all or a substantial part of his or its
property; or (c) upon (i) the filing of a certificate of dissolution of a
General Partner or the revocation of a General Partner's charter and lapse of 90
days after notice to the General Partner of revocation without reinstatement of
its charter; (ii) 120 days after the commencement of any proceeding against a
General Partner seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or regulation,
if the proceeding has not been dismissed; or (iii) the expiration of 90 days
after the appointment without such General Partner's consent or acquiescence of
a trustee, receiver or liquidator of such General Partner or of all or any
substantial part of its properties, the appointment of which is not vacated or
stayed within 90 days after the expiration of any stay or, if within 90 days
after the expiration of any stay the appointment is not vacated. If there is at
least one remaining General Partner, an Event of Withdrawal of a General Partner
shall be effective as of the date of any such event; however, if an Event of
Withdrawal shall occur with respect to the last remaining General Partner, the
Event of Withdrawal shall not be effective until 120 days after the event giving
rise to the Event of Withdrawal has occurred.
3.20 "Expiration Date" shall mean the date on which the Offering
terminates as provided in the Prospectus.
3.21 "Front-End Fees" shall mean fees and expenses paid by any party for
any services rendered during the Partnership's organizational or acquisition
phase including Organization and Offering Expenses, Acquisition Fees (including
Acquisition and Advisory Fees), Acquisition Expenses, interest on deferred fees
and expenses, if applicable, and any other similar fees, however designated.
3.22 "Gain on Sale" shall mean the taxable income or gain for federal
income tax purposes (including gain exempt from tax) in the aggregate for each
fiscal year from the sale, exchange or other disposition of all or any portion
of a Partnership asset after netting losses from such sales, exchanges or other
dispositions against the gains from such transactions.
3
<PAGE>
3.23 "General Partners" shall refer collectively to Leo F. Wells, III and
Wells Capital, Inc., or any other Person or Persons who succeed any or all of
them in that capacity.
3.24 "Gross Revenues" shall mean all amounts actually collected as rents
or other charges for the use and occupancy of Partnership Properties, but shall
exclude interest and other investment income of the Partnership and proceeds
received by the Partnership from a sale, exchange, condemnation, eminent domain
taking, casualty or other disposition of assets of the Partnership.
3.25 "IRS" means Internal Revenue Service.
3.26 "Initial Limited Partner" shall mean Douglas P. Williams.
3.27 "Independent Expert" shall mean a Person with no material current or
prior business or personal relationship with the Sponsor who is engaged to a
substantial extent in the business of rendering opinions regarding the value of
assets of the type held by the Partnership and who is qualified to perform such
work.
3.28 "Investment in Properties" shall mean the amount of Capital
Contributions actually paid or allocated to the purchase, development,
construction or improvement of properties acquired by the Partnership (including
the purchase of properties, working capital reserves allocable thereto [except
that working capital reserves in excess of 5% shall not be included] and other
cash payments such as interest and taxes, but excluding Front-End Fees).
3.29 "Limited Partners" shall refer to the Initial Limited Partner, the
Additional Limited Partners and to all other Persons who are admitted to the
Partnership as additional or substituted Limited Partners.
3.30 "Liquidating Distributions" shall mean the net cash proceeds received
by the Partnership from (a) the sale, exchange, condemnation, eminent domain
taking, casualty or other disposition of substantially all of the assets of the
Partnership or the last remaining assets of the Partnership or (b) a liquidation
of the Partnership's assets in connection with a dissolution of the Partnership,
after (i) payment of all expenses of such sale, exchange, condemnation, eminent
domain taking, casualty or other disposition or liquidation, including real
estate commissions, if applicable, (ii) the payment of any outstanding
indebtedness and other liabilities of the Partnership, (iii) any amounts used to
restore any such assets of the Partnership, and (iv) any amounts set aside as
reserves which the General Partners in their sole discretion may deem necessary
or desirable.
3.31 "Majority Vote" shall mean the affirmative vote or written consent
of Limited Partners then owning of record more than 50% of the outstanding Units
of the Partnership, without distinction as to the class of such Units; provided,
however, that any Units owned or otherwise controlled by the General Partners or
their Affiliates may not be voted and will not be included in the total number
of outstanding Units for purposes of this definition.
3.32 "Minimum Gain" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(d).
3.33 "Minimum Offering" shall mean the receipt and acceptance by the
General Partners of subscriptions for Units aggregating at least $1,250,000 in
offering proceeds.
3.34 "Minimum Offering Expiration Date" shall mean six (6) months after
the commencement of the Offering of the Units.
4
<PAGE>
3.35 "NASAA Guidelines" shall mean the Statement of Policy Regarding Real
Estate Programs of the North American Securities Administrators Association,
Inc. adopted on October 9 and 12, 1988, effective January 1, 1989, as amended.
3.36 "Net Capital Contribution" shall mean, with respect to any Partner,
the Partner's Capital Contribution as reduced from time to time by distributions
to such Partner constituting a return of unused capital pursuant to Section 8.10
hereof or by distributions to such Partner of Nonliquidating Net Sale Proceeds
and Liquidating Distributions pursuant to Sections 9.2 and 9.4 hereof, but
excluding distributions made to Limited Partners pursuant to Section 9.2(a)
hereof, and without reduction for distributions of Net Cash From Operations made
pursuant to Section 9.1 hereof.
3.37 "Net Cash From Operations" shall mean Cash Flow, less adequate cash
reserves for other obligations of the Partnership for which there is no
provision and the Repurchase Reserve, if any.
3.38 "Net Income" or "Net Loss" shall mean the net income or loss realized
or recognized by the Partnership for a fiscal year, as determined 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.
3.39 "Nonliquidating Net Sale Proceeds" shall mean the net cash proceeds
received by the Partnership from a sale, exchange, condemnation, eminent domain
taking, casualty or other disposition of assets of the Partnership, which does
not constitute substantially all of the remaining assets of the Partnership,
after (a) payment of all expenses of such sale, exchange, condemnation, eminent
domain taking, casualty or other disposition, including real estate commissions,
if applicable, (b) the payment of any outstanding indebtedness and other
Partnership liabilities relating to such assets, (c) any amounts used to restore
any such assets of the Partnership, and (d) any amounts set aside as reserves
which the General Partners in their sole discretion may deem necessary or
desirable.
3.40 "Offering" shall mean the offering and sale of Units to the public
pursuant to the terms and conditions set forth in the Prospectus.
3.41 "Organization and Offering Expenses" shall mean those expenses
incurred in connection with organizing the Partnership, preparing the
Partnership for registration and subsequently offering and distributing the
Units to the public, including without limitation, legal and accounting fees,
sales commissions paid to broker-dealers in connection with the distribution of
the Units and all advertising expenses.
3.42 "Participating Percentage" shall mean at any given time, as to each
holder of a Unit or Units, the percentage of that Person's Unit or Units to the
total Units being measured and shall be determined by dividing the total number
of Units held by such Person by the total number of outstanding Units in the
class or classes being measured and multiplying the quotient thereof by 100.
3.43 "Partners" shall refer collectively to the General Partners and to
the Limited Partners, and reference to a "Partner" shall be to any one of the
Partners.
3.44 "Partnership" shall refer to the limited partnership created under
this Agreement.
3.45 "Partnership Property" or "Partnership Properties" shall mean any and
all land and improvements purchased or constructed by the Partnership and all
repairs, replacements or renewals thereof, together with all personal property
acquired by the Partnership which is from time to time located thereon or
specifically used in connection therewith.
5
<PAGE>
3.46 "Person" shall mean any natural person, partnership, corporation,
association, or other legal entity, including without limitation, qualified
pension and profit sharing trusts.
3.47 "Preferential Limited Partner Return" shall mean with respect to each
Limited Partner Unit the sum of (a) a cumulative (but not compounded) 10% per
annum return on a Limited Partner's Net Capital Contribution with respect to
such Unit for all periods during which such Unit was treated as a Cash Preferred
Unit, and (b) a cumulative (but not compounded) 15% per annum return on such
Limited Partner's Net Capital Contribution with respect to such Unit for all
periods during which such Unit was treated as a Tax Preferred Unit. Each Limited
Partner's Preferential Limited Partner Return shall be calculated from the date
on which such Limited Partner's initial Capital Contribution was made to the
Partnership.
3.48 "Prior Wells Public Programs" shall mean public real estate limited
partnerships or other publicly registered programs or entities previously or
currently sponsored by the General Partners or their Affiliates having
substantially identical investment objectives as the Partnership.
3.49 "Prospectus" shall mean the prospectus used by the Partnership in
connection with its offer and sale of Units pursuant to a Registration Statement
filed under the Securities Act of 1933, as amended.
3.50 "Purchase Price" shall mean the sum of the prices paid for all
properties by the Partnership (including all Acquisition Fees, liens and
mortgages on the properties, but excluding points and prepaid interest) plus all
costs of improvements, if any, reasonably and properly allocable to the
properties.
3.51 "Registration Statement" shall mean the registration statement filed
by the Partnership with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, in order to register the Units for sale to
the public.
3.52 "Repurchase Reserve" shall mean the cash reserve established under
Section 11.3(h) hereof, which may be used to repurchase Units from the Limited
Partners in accordance with Section 8.11 hereof.
3.53 "Retirement Plans" shall mean Individual Retirement Accounts
established under Section 408 or Section 408A of the Code and Keogh or corporate
pension or profit sharing plans established under Section 401(a) of the Code.
3.54 "Roll-Up" shall mean any transaction or series of transactions that
through acquisition or otherwise involves the combination, reorganization,
merger, conversion or consolidation, either directly or indirectly, of the
Partnership and either the offer, sale or issuance of securities of a Roll-Up
Entity or the acquisition of the Roll-Up Entity's securities by the Partnership;
provided, however, that such term does not include a transaction that (a)
involves securities of the Partnership that have been listed for at least 12
months on a national securities exchange or traded through the National
Association of Securities Dealers Automated Quotation National Market System; or
(b) involves the conversion to corporate, trust or association form of only the
Partnership if, as a consequence of the transaction, there will be no
significant adverse change in any of the following: (i) Limited Partners' voting
rights, (ii) the term of existence of the Partnership, (iii) compensation to the
General Partners or their Affiliates, or (iv) the Partnership's investment
objectives.
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3.55 "Roll-Up Entity" shall mean a partnership, real estate investment
trust, corporation, trust or other entity that would be created or would survive
after the successful completion of a proposed Roll-Up.
3.56 "Roll-Up Transaction Costs" shall mean the costs of printing and
mailing the proxy, prospectus, or other documents; legal fees; financial
advisory fees; investment banking fees; appraisal fees; accounting fees;
independent committee expenses; travel expenses; and all other fees relating to
the preparatory work of the transaction, but not including costs that would have
otherwise been incurred by the subject limited partnerships in the ordinary
course of business.
3.57 "Sale Date" shall mean the day on which the Partnership realizes any
gain or loss from the sale, exchange or other disposition of Partnership assets
which it is required to allocate to the Partners under Section 10.4 hereof.
3.58 "Sponsor" shall mean any individual, partnership, corporation or
other legal entity which (i) is directly or indirectly instrumental in
organizing, wholly or in part, the Partnership, (ii) will manage or participate
in the management of the Partnership, and any Affiliate of any such Person,
other than a Person whose only relationship with the Partnership is that of an
independent property manager, whose only compensation is as such, (iii) takes
the initiative, directly or indirectly, in founding or organizing the
Partnership, either alone or in conjunction with one or more other Persons, (iv)
receives a material participation in the Partnership in connection with the
founding or organizing of the business of the Partnership, in consideration of
services or property, or both services and property, (v) has a substantial
number of relationships and contacts with the Partnership, (vi) possesses
significant rights to control Partnership Properties, (vii) receives fees for
providing services to the Partnership which are paid on a basis that is not
customary in the industry, or (viii) provides goods or services to the
Partnership on a basis which was not negotiated at arm's-length with the
Partnership.
3.59 "Tax Preferred Unit" shall mean a Unit with respect to which the
Limited Partner holding such Unit has made an effective election pursuant to
Section 8.16 hereof to be treated as a Tax Preferred Unit for the applicable
accounting period.
3.60 "Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code by the United States Treasury Department.
3.61 "Unit" shall mean the limited partnership interest entitling the
holder thereof to all rights and benefits under this Agreement including, but
not limited to, an interest in the income, loss, distributions and capital of
the Partnership to be allocated to holders of Units, as set forth in Articles IX
and X hereof. Limited Partners holding Units shall have the right to elect to
have their Units treated as Cash Preferred Units or Tax Preferred Units pursuant
to the provisions of Section 8.16 hereof. All Units, whether they be treated as
Cash Preferred Units or Tax Preferred Units, shall represent a Capital
Contribution of $10.00 each (irrespective of the fact that because of discounts
in sales commissions and other fees under certain circumstances, certain Units
may be sold and issued for a gross consideration of less than $10.00 per Unit),
shall be issued as fully paid and nonassessable and shall have the same rights,
privileges and preferences except as expressly provided herein.
3.62 "Wells Capital" shall mean Wells Capital, Inc., a Georgia
corporation.
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ARTICLE IV
BUSINESS
4.1 Purpose. The principal purpose of the Partnership is to acquire,
-------
develop, construct, own, operate, improve, lease and otherwise manage for
investment purposes, either alone or in association with others, a diversified
portfolio of income-producing commercial or industrial properties as shall from
time to time be acquired by the Partnership and to engage in any or all general
business activities related to or incidental to such principal purpose.
4.2 Objectives. The business of the Partnership shall be conducted with
----------
the following objectives:
(a) To maximize Net Cash From Operations;
(b) To preserve, protect and return the Partners' investment in the
Partnership; and
(c) To realize appreciation in value of Partnership Properties.
ARTICLE V
NAMES AND ADDRESSES OF PARTNERS
The names of the General Partners are Wells Capital, Inc., a Georgia
corporation, and Leo F. Wells, III. The name of the Initial Limited Partner is
Douglas P. Williams. The business address of the General Partners and the
Initial Limited Partner is 6200 The Corners Parkway, Suite 250, Norcross,
Georgia 30092. The names and addresses of all the Additional Limited Partners
shall be set forth in the books and records of the Partnership.
ARTICLE VI
TERM
The Partnership term commenced upon the filing of the Certificate and shall
continue until December 31, 2030, unless sooner terminated as hereinafter
provided.
ARTICLE VII
PRINCIPAL AND REGISTERED OFFICE AND REGISTERED AGENT
The principal and registered office of the Partnership shall be 6200 The
Corners Parkway, Suite 250, Norcross, Georgia 30092. The General Partners may
from time to time change the principal place of business and, in such event,
shall notify the Limited Partners in writing of the change and the effective
date of such change. The registered agent for the Partnership at such address
shall be Wells Capital, Inc.
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ARTICLE VIII
CAPITAL CONTRIBUTIONS
8.1 Capital Accounts. A separate Capital Account shall be maintained for
----------------
each Partner. The Capital Accounts of the Partners shall be determined and
maintained throughout the term of the Partnership in accordance with the capital
accounting rules of Treasury Regulations Section 1.704-1(b), as it may be
amended or revised from time to time.
8.2 General Partners. The General Partners shall make Capital
-----------------
Contributions to the Partnership as follows:
Name Dollar Amount
---- -------------
Wells Capital, Inc. $400
Leo F. Wells, III 100
----
Total $500
8.3 General Partner Purchase of Units. The Capital Contributions of the
---------------------------------
General Partners, together with the Capital Contribution of the Initial Limited
Partner, shall constitute the initial capital of the Partnership and shall not
entitle the General Partners to any Units. The General Partners may, in their
discretion, make additional Capital Contributions to the capital of the
Partnership in exchange for the purchase of Units. Any General Partner who
purchases Units shall continue, in all respects, to be treated as a General
Partner but shall receive the income, losses and cash distributions with respect
to any Units purchased by such General Partner on the same basis as other
Partners may receive with respect to their Units. Units purchased by the General
Partners or their Affiliates shall not be entitled to vote on any transaction
requiring Limited Partner approval.
8.4 Initial Limited Partner. The Initial Limited Partner shall contribute
-----------------------
$100 in cash to the Partnership and agrees that his interest shall automatically
be redeemed for $100 upon the admission of any Additional Limited Partners to
the Partnership.
8.5 Limited Partner Contributions. The General Partners are authorized and
-----------------------------
directed to raise capital for the Partnership as provided in the Prospectus by
offering and selling not more than an aggregate of 4,500,000 Units as follows:
(a) Each Unit shall be issued for a purchase price of $10.00 less any
discounts authorized in the Prospectus.
(b) Except as set forth below, the minimum purchase of either class
or combination of Units shall be 100 Units (or such greater minimum number of
Units as may be required under applicable state or federal laws). Except in
certain states, subscribers who have satisfied the minimum purchase requirements
and have purchased units in Prior Wells Public Programs or units or shares of
other public real estate programs may purchase less than the minimum number of
Units described above, but in no event less than 2.5 Units. In addition, after
subscribers have satisfied the minimum purchase requirements, the minimum
additional investment in the Partnership shall not be less than 2.5 Units.
Fractional Units may be sold at the discretion of the General Partners.
Notwithstanding the foregoing, the provisions set forth above relating to the
minimum number of Units which may be purchased shall not apply to purchases of
Units pursuant to the Distribution Reinvestment Plan described in Section 8.15
hereof or a qualified Distribution Reinvestment Plan authorized by the
partnership agreement of one of
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the Prior Wells Public Programs or reinvestment plans of other public real
estate programs. The suitability standards set forth in the Prospectus will not
be decreased with respect to any investment in Units of the Partnership.
(c) The General Partners may refuse to accept subscriptions for Units
and contributions tendered therewith for any reason whatsoever. Subscriptions
shall be so accepted or rejected by the General Partners within 30 days of their
receipt. If rejected, all funds will be returned to the subscriber within ten
business days. Once accepted, such subscription amounts shall be deposited in
escrow within 48 hours or deposited to the Partnership's account, as may then be
appropriate under this Agreement.
(d) Each Unit sold to a subscriber shall be fully paid and
nonassessable.
8.6 Admission of Limited Partners. No action or consent by any Limited
-----------------------------
Partners shall be required for the admission of Additional Limited Partners to
the Partnership, provided that the Partnership may not issue more than 4,500,000
Units. Funds of subscribers for Units shall be held in the escrow account
described in Section 8.8 below. Such funds shall not be released from escrow,
and no subscribers for Units shall be admitted to the Partnership unless and
until the receipt and acceptance by the Partnership of the Minimum Offering. At
any time thereafter, the Capital Contributions of such subscribers may be
released directly to the Partnership, provided that such subscribers shall be
admitted to the Partnership within 15 days after such release. Subscriptions
from subsequent subscribers shall be accepted or rejected within 30 days of
receipt by the Partnership, and if rejected, all funds shall be returned to
subscribers within 10 business days. Subsequent subscribers shall be deemed
admitted as Limited Partners of the Partnership on the day on which the
subscriptions from such Persons are accepted by the Partnership.
No Person shall be admitted as a Limited Partner who has not executed and
delivered to the Partnership the Subscription Agreement specified in the
Prospectus, together with such other documents and instruments as the General
Partners may deem necessary or desirable to effect such admission, including,
but not limited to, the written acceptance and agreement by such Person to be
bound by the terms and conditions of this Agreement.
8.7 Minimum Capitalization. The Offering will terminate if the Partnership
----------------------
has not received and accepted subscriptions for the Minimum Offering on or
before the Minimum Offering Expiration Date.
8.8 Escrow. Until subscriptions for the Minimum Offering are received and
------
accepted by the General Partners, or until the Minimum Offering Expiration Date,
whichever first occurs, all subscription proceeds shall be held in an escrow
account separate and apart from all other funds and invested in obligations of,
or obligations guaranteed by, the United States government, or bank money-market
accounts or certificates of deposit of national or state banks that have
deposits insured by the Federal Deposit Insurance Corporation (including
certificates of deposit of any bank acting as a depository or custodian for any
such funds), which mature on or before the Minimum Offering Expiration Date,
unless such instrument cannot be readily sold or otherwise disposed of for cash
by the Minimum Offering Expiration Date without any dissipation of the
subscription proceeds invested, all in the discretion of such escrow agent or
agents appointed by the General Partners. All moneys tendered by Persons whose
subscriptions are rejected shall be returned, without interest, to such Persons
promptly after such rejection. If subscriptions for the Minimum Offering are not
received and accepted before the Minimum Offering Expiration Date, those
subscriptions and funds in escrow on such date shall be returned to the
subscribers, together with any interest earned thereon after deducting escrow
expenses (except for Maine, Minnesota, Missouri, Ohio and Pennsylvania
residents). Notwithstanding the above, subscriptions from
10
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residents of New York and Pennsylvania may not be released from escrow to the
Partnership until the receipt and acceptance by the General Partners of
subscriptions from all sources for not less than 250,000 Units.
8.9 Public Offering. Except as otherwise provided in this Agreement, the
---------------
General Partners shall have sole and complete discretion in determining the
terms and conditions of the offer and sale of Units and are hereby authorized
and directed to do all things which they deem to be necessary, convenient,
appropriate and advisable in connection therewith, including, but not limited
to, the preparation and filing of the Registration Statement with the Securities
and Exchange Commission and the securities commissioners (or similar agencies or
officers) of such jurisdictions as the General Partners shall determine, and the
execution or performance of agreements with selling agents and others concerning
the marketing of the Units, all on such basis and upon such terms as the General
Partners shall determine.
8.10 Return and Withdrawal of Capital.
--------------------------------
(a) Any proceeds of the Offering of the Units not invested or
committed to the acquisition or development of specific real properties within
the later of three years from the effective date of the Registration Statement
or one year after the termination of the Offering (except for necessary
operating expenses and any reserves under Section 11.3(h) of this Agreement)
shall be distributed pro rata to the Limited Partners as a return of capital. In
such event, the amount paid to the Limited Partners shall include Front-End Fees
but only to the extent such fees exceed the adjusted allowable Front-End Fees
based on the obligation of the General Partners pursuant to Section 12.2(b)
hereof to commit at least 84% of the remaining Capital Contributions to
Investment in Properties. For purposes of the foregoing, funds will be deemed to
have been committed and will not be distributed to the extent such funds would
be required to acquire property with respect to which contracts, agreements in
principle or letters of understanding have been executed, regardless of whether
such property is actually acquired, and to the extent such funds have been
reserved to make contingent payments in connection with the acquisition,
development or improvement of any property, whether or not any such payments are
made. No such return shall be made until this Agreement has been amended to
reflect such reduction of capital. Any distribution pursuant to this Section
8.10(a) shall be deemed to have been consented to by the Limited Partners.
(b) No Partner, including a withdrawing Partner, shall have any
right to withdraw or make a demand for withdrawal of any such Partner's Capital
Contribution (or the capital interest reflected in such Partner's Capital
Account) until the full and complete winding up and liquidation of the business
of the Partnership unless such withdrawal is provided for herein.
8.11 Repurchase of Units. After one year following the termination of the
-------------------
Offering of Units, the Partnership shall have the right, in the sole discretion
of the General Partners, to use funds held in the Repurchase Reserve to purchase
Units upon written request of a Limited Partner. The establishment of a
Repurchase Reserve is in the sole discretion of the General Partners, and if
established, the Repurchase Reserve may be terminated and/or reestablished at
any time in the sole discretion of the General Partners.
(a) In no event shall the Repurchase Reserve exceed 5% of the Cash
Flow in any given year.
(b) A Limited Partner wishing to have his Units repurchased must
mail or deliver a written request to the Partnership (executed by the trustee or
authorized agent in the case of Retirement Plans) indicating his desire to have
such Units repurchased. Such requests will be considered by the General Partners
in the order in which they are received.
11
<PAGE>
(c) In the event that 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 repurchased Units and of the effective date
of the repurchase transaction (which shall be not less than 60 nor more than 75
calendar days following the receipt of the written request by the Partnership)
and will forward to such Limited Partner the documents necessary to effect such
repurchase transaction.
(d) Fully executed documents to effect the repurchase
transaction must be returned to the Partnership at least 30 days prior to the
effective date of the repurchase transaction.
(e) The purchase price for the repurchased Units shall be
established by the Partnership no more often than on a quarterly basis.
(f) The purchase price for repurchased Units will be equal to
$8.50 per Unit until three years from the termination of the offering, and 90%
of the fair market value of the Units thereafter. The fair market value utilized
for the purpose of establishing the purchase price will be the estimated unit
value determined annually pursuant to Section 15.2(f) hereof.
(g) Only amounts then held in the Repurchase Reserve may be
used to repurchase Units.
(h) Upon receipt of the required documentation, the
Partnership will, on the effective date of the repurchase transaction,
repurchase the Units of the Limited Partner, provided that if sufficient amounts
are not then available in the Repurchase Reserve to repurchase all of such
Units, only a portion of such Units will be repurchased; and provided further,
that the Partnership may not repurchase any Units of such Limited Partner if, as
a result thereof, the Limited Partner would own less than the minimum
investment. Units repurchased by the Partnership pursuant to this Section 8.11
shall be promptly canceled.
(i) In the event that insufficient funds are available in the
Repurchase Reserve to repurchase all of such Units, the Limited Partner will be
deemed to have priority for subsequent Partnership repurchases over Limited
Partners who subsequently request repurchases.
(j) Repurchases of Units out of the Repurchase Reserve shall
be subject to the restrictions set forth in Section 17.3(g) hereof.
(k) In addition to the restrictions set forth in Section
17.3(g) hereof, (i) repurchases out of the Repurchase Reserve may not exceed in
the aggregate more than 2% of total Capital Contributions 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% of income or
net worth during the year in which such repurchase occurs); and (ii) 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.
(l) In no event shall Units owned by the General Partners or
their Affiliates be repurchased by the Partnership.
8.12 Interest on Capital Contributions. No interest shall be paid
---------------------------------
on any Capital Contributions.
12
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8.13 Ownership by Limited Partner of Interest in Affiliates of General
-----------------------------------------------------------------
Partners. No Limited Partner (other than a General Partner, in the event that he
--------
or it is also a Limited Partner) shall at any time, either directly or
indirectly, own any stock or other interest in any Affiliate of any General
Partner if such ownership, by itself or in conjunction with the stock or other
interest owned by other Limited Partners would, in the opinion of counsel for
the Partnership, jeopardize the classification of the Partnership as a
partnership for federal income tax purposes. The General Partners shall be
entitled to make such reasonable inquiry of the Limited Partners and prospective
Limited Partners as is required to establish compliance by the Limited Partners
with the provisions of this Section 8.13.
8.14 Deficit Capital Accounts. The Limited Partners shall not be required
------------------------
to reimburse the Partnership or any other Partner for deficiencies in their
Capital Accounts. In addition, except as may be required under state law, the
General Partners shall not be required to reimburse the Partnership or the
Limited Partners for deficiencies in their Capital Accounts.
8.15 Distribution Reinvestment Plan.
------------------------------
(a) A Limited Partner who acquired his Units in the Offering may
elect to participate in a program for the reinvestment of his distributions (the
"Distribution Reinvestment Plan") and have his distributions of Net Cash From
Operations reinvested in Units of the Partnership during the offering period or
in units issued by a subsequent limited partnership sponsored by the General
Partners or their Affiliates which has substantially identical investment
objectives as the Partnership. A Limited Partner who acquired his Units by
transfer from a former Limited Partner is not eligible to have his distributions
of Net Cash From Operations reinvested in Units of the Partnership, but may
participate in the Distribution Reinvestment Plan with respect to reinvestment
in units issued by a subsequent limited partnership sponsored by the General
Partners or their Affiliates which has substantially identical investment
objectives as the Partnership. Limited Partners participating in the
Distribution Reinvestment Plan may purchase fractional Units and shall not be
subject to minimum investment requirements, although the General Partners may,
at their option, impose certain minimum investment requirements or restrictions
with respect to purchases of Units pursuant to the Distribution Reinvestment
Plan. Each Limited Partner electing to have such distributions of Net Cash From
Operations reinvested will receive, with each confirmation of distributions, a
notice advising such Limited Partner that he is entitled to change his election
with respect to subsequent distributions by return of a notice to the
Partnership by a date to be specified by the General Partners.
(b) If a Limited Partner withdraws from participation in the
Distribution Reinvestment Plan, such withdrawal shall be effective only with
respect to distributions made more than 30 days following receipt by the General
Partners of written notice of such withdrawal. In the event a Limited Partner
transfers his Units, such transfer shall terminate the Limited Partner's
participation in the plan as of the first day of the quarter in which such
transfer is effective.
(c) Distributions may be reinvested in a subsequent limited
partnership only if (i) prior to the time of such reinvestment, the Limited
Partner has received the final prospectus (and any supplements thereto) offering
interests in the subsequent limited partnership and such prospectus allows
investment pursuant to a distribution reinvestment plan; (ii) a registration
statement covering the interests in the subsequent limited partnership has been
declared effective under the Securities Act of 1933; (iii) the offer or sale of
such interests is qualified for sale under the applicable state securities laws;
(iv) the participant executes the subscription agreement included with the
prospectus for the subsequent limited partnership; (v) the participant qualifies
under the applicable investor suitability standards as contained in the
prospectus for the subsequent limited partnership; and (vi) the subsequent
limited partnership has substantially identical investment objectives as the
Partnership. If (A) any of the foregoing conditions are
13
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not satisfied at the time of a distribution or (B) no interests are available to
be purchased, such distributions will be paid in cash.
(d) Each Limited Partner electing to participate in the
Distribution Reinvestment Plan hereby agrees that his investment in this
Partnership or any subsequent limited partnership sponsored by the General
Partners or their Affiliates shall be deemed to constitute his agreement to be a
limited partner of the partnership in which such investment is made and to be
bound by the terms and conditions of the agreement of limited partnership of
such partnership, and if, at any time, he fails to meet the applicable limited
partnership investor suitability standards or cannot make the other investor
representations or warranties set forth in the then current limited partnership
prospectus, partnership agreement or subscription agreement relating thereto, he
will promptly notify the General Partners in writing.
(e) The General Partners may, at their option, elect not to
provide the Distribution Reinvestment Plan or terminate any such plan at any
time without notice to the Limited Partners.
8.16 Cash Preferred Units and Tax Preferred Units. Upon
--------------------------------------------
subscription for Units, each Limited Partner shall elect to have his Units
treated either as Cash Preferred Units or Tax Preferred Units, or a combination
thereof. Notwithstanding the foregoing, each Limited Partner purchasing Units
pursuant to the deferred commission option, as defined in the Prospectus, 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 Limited Partner pursuant to the
deferred commission option. Elections to be treated as Cash Preferred Units or
Tax Preferred Units will be in effect for each fiscal year of the Partnership,
or such shorter applicable accounting period as the General Partners, in their
sole discretion, may determine and use for accounting purposes. Units with
respect to which the Limited Partner owning such Units has elected to be treated
as Cash Preferred Units with respect to an accounting period shall be referred
to as herein as "Cash Preferred Units" for such accounting period, and Units
with respect to which the Limited Partner owning such Units has elected to have
treated as Tax Preferred Units with respect to an accounting period shall be
referred to herein as "Tax Preferred Units" for such accounting period. Limited
Partners holding Cash Preferred Units and Limited Partners holding Tax Preferred
Units shall have such interests in the income, distributions, allocations and
capital of the Partnership as are described in Articles IX and X below. Except
as specifically described in Articles IX and X below, all Limited Partners shall
have the same rights under this Agreement as all other Limited Partners
regardless of whether their Units are treated as Cash Preferred Units or Tax
Preferred Units. Limited Partners shall initially elect to have their Units
treated as Cash Preferred Units or Tax Preferred Units in their Subscription
Agreement for Units. Thereafter, except as set forth below or as may be
otherwise limited or prohibited by applicable state law, Limited Partners may
change their election by mailing or delivering written notice to the Partnership
(executed by the trustee or authorized agent in the case of Retirement Plans).
Elections made in Subscription Agreements shall be effective immediately upon
acceptance. Thereafter, Limited Partners shall have the right to change their
prior election with respect to the treatment of their Units as Cash Preferred
Units or Tax Preferred Units (except where prohibited by applicable state law)
one time during each accounting period, and any such election shall be effective
commencing as of the first day of the next succeeding accounting period
following the receipt by the Partnership of written notice of such election. Any
such election to be treated as Cash Preferred Units or Tax Preferred Units shall
remain in effect until the first day of the next succeeding accounting period
following receipt by the Partnership of written notice to change such election,
and all such elections shall be binding upon the Limited Partner's successors
and assigns. Notwithstanding the foregoing, during the initial six years
following termination of the Offering, Limited Partners purchasing Units
pursuant to the deferred commission option, as defined in the Prospectus, will
be permitted to elect to have their Cash
14
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Preferred Units treated as Tax Preferred Units only to the extent that such
Limited Partners at all times maintain a sufficient number of Cash Preferred
Units during such initial six year period, in the discretion of the General
Partners, to generate enough Net Cash From Operations to allow the Partnership
to satisfy the deferred commission obligations relating to the total number of
Units purchased by such Limited Partners pursuant to the deferred commission
option. Notwithstanding anything to the contrary contained herein, Units
acquired and held by the General Partners or their Affiliates shall at all times
be treated as Cash Preferred Units, and neither the General Partners nor their
Affiliates shall have the right to make an election to have Units beneficially
owned by them treated as Tax Preferred Units.
ARTICLE IX
DISTRIBUTIONS
9.1 Net Cash From Operations. Except as otherwise provided for in a
------------------------
liquidation in Sections 9.3 and 9.4 hereof, Net Cash From Operations for each
applicable accounting period shall be distributed to the Partners as follows:
(a) First, to the Limited Partners holding Cash Preferred Units
on a per Unit basis until each of such Limited Partners has received
distributions of Net Cash From Operations with respect to such fiscal year, or
applicable portion thereof, equal to 10% per annum of his Net Capital
Contribution;
(b) Then, to the General Partners until they have received
distributions of Net Cash From Operations with respect to such fiscal year equal
to 10% of the total distributions under Section 9.1(a) above and this Section
9.1(b) with respect to such fiscal year; and
(c) Thereafter, 90% to the Limited Partners holding Cash
Preferred Units on a per Unit basis, and 10% to the General Partners.
Notwithstanding the foregoing, Limited Partners holding Cash Preferred
Units who purchased Units pursuant to the deferred commission option described
in the Prospectus shall for a period of six years following the year of purchase
(or longer if required to satisfy the commissions due with respect to such
Units) 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 said deferred commission option, which amounts shall
be used by the Partnership to pay commissions due with respect to such Units.
All such amounts withheld from Net Cash From Operations shall be deemed to have
been distributed to, and be deemed to have been received by, such Limited
Partners as Net Cash From Operations.
The General Partners shall be prohibited from making any distributions
of Net Cash From Operations out of Capital Contributions, and distributions of
Net Cash From Operations shall not reduce Partners" Net Capital Contributions.
No distributions of Net Cash From Operations will be made with respect to Tax
Preferred Units.
The General Partners shall not incur any liability as a result of their
determination to distribute Net Cash From Operations, even though such
distribution may result in the Partnership's retaining insufficient funds for
the operation of its business, provided their determination was made in good
faith and not as a result of their negligence or misconduct.
15
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9.2 Nonliquidating Net Sale Proceeds. Except as otherwise provided
--------------------------------
for in Sections 9.3 and 9.4 hereof and except for the potential reinvestment of
Nonliquidating Net Sale Proceeds as provided in Section 11.3(f) hereof,
Nonliquidating Net Sale Proceeds, after the payment of all Partnership debts and
liabilities and the establishment of any reserves which the General Partners in
their sole discretion may deem reasonably necessary or desirable, shall be
distributed to the Partners as follows:
(a) To Limited Partners holding Units which at any time have
been treated as Tax Preferred Units on a per Unit basis, such amounts as may be
necessary to give each such Limited Partner an amount of Nonliquidating Net Sale
Proceeds which, when added to distributions received or deemed received by such
Limited Partner with respect to any period during which his Units were treated
as Cash Preferred Units, would be equal on a per Unit basis to the Net Cash From
Operations allocated and distributed pursuant to Section 9.1 hereof received or
deemed received by Limited Partners holding Units which at all times have been
treated as Cash Preferred Units, assuming such Limited Partners purchased an
equivalent number of Units on the same date (it being the intent of the Partners
that the distribution preference provided by Section 9.1 hereof be only a timing
preference on distributions and that this provision have the effect of
equalizing distributions to Limited Partners on a per Unit basis so that, after
receipt of distributions under this Section 9.2(a), all Limited Partners, to the
extent possible, be in the receipt of the same aggregate amount of distributions
under this Article IX on a per Unit basis);
(b) Then, to the Limited Partners on a per Unit basis until each
Limited Partner has received or has been deemed to have received distributions
under Section 8.10 hereof, this Section 9.2(b) and Section 9.4 hereof totaling
100% of his Net Capital Contribution;
(c) 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 under Sections 9.1, 9.2(a) and this 9.2(c) equal to a cumulative
(but not compounded) 10% per annum return on his Net Capital Contribution;
(d) 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 under Sections 9.1, 9.2(a), 9.2(c) and this 9.2(d) equal to his
Preferential Limited Partner Return, as defined in Section 3.48 hereof;
(e) Then, to the General Partners until the General Partners
have received distributions totaling 100% of their Capital Contributions;
(f) Then, if and only in the event that Limited Partners have
received Excess Limited Partner Distributions, as hereinafter defined, to the
General Partners until they have received distributions of Nonliquidating Net
Sale Proceeds equal to 20% of the sum of any such Excess Limited Partner
Distributions and distributions to the General Partners pursuant to this Section
9.2(f) (the term "Excess Limited Partner Distributions" means any distributions
to Limited Partners over the life of their investment in the Partnership in
excess of the sum of their Net Capital Contributions plus their Preferential
Limited Partner Return); and
(g) Thereafter, 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 be allocated or receive distributions in excess of the NASAA
Guidelines Resale Proceeds Maximum Amount, as defined herein. It is the intent
of the foregoing proviso that the General Partners receive no more of the net
proceeds from the sale or financing of Partnership Properties than is allowed
pursuant to Article IV, Section E.2.b. of the NASAA Guidelines, and in the event
the allocations pursuant to this Article IX would otherwise result in the
General Partners receiving any such excess distributions, such excess
distributions otherwise distributable to the General Partners will instead be
reallocated in favor of and distributed to the Limited
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Partners on a per Unit basis. As used herein, the term "NASAA Guidelines Resale
Proceeds Maximum Amount" means an amount equal to 15% of aggregate
Nonliquidating Net Sale Proceeds and Liquidating Distributions remaining after
payments to all Limited Partners from such proceeds of amounts equal to 100% of
their Net Capital Contributions plus amounts equal to a 6% per annum return on
their Net Capital Contributions, calculated on a cumulative (noncompounded)
basis.
Notwithstanding the foregoing, in the event that the Partnership sells
any Partnership Property at a sale price which is less than the Purchase Price
originally paid for such Partnership Property, then prior to the distribution of
Nonliquidating Net Sale Proceeds under Section 9.2(a) above, the Limited
Partners holding Cash Preferred Units shall first receive distributions of
Nonliquidating Net Sale Proceeds in an amount equal to the excess of the
original Purchase Price of such Partnership Property sold over the sale price of
such Partnership Property, but not in excess of the amount of the special
allocations of deductions for depreciation, amortization and cost recovery with
respect to such Partnership Property previously made to the Limited Partners
holding Tax Preferred Units made pursuant to Sections 10.2(a) and 10.2(b)
hereof.
9.3 Dissolution. Upon dissolution, the Partnership shall proceed to
-----------
liquidate its assets as follows:
(a) Subject to any applicable limitations of law, upon
dissolution of the Partnership, the assets of the Partnership shall be converted
to cash. The Partnership shall be given adequate time to collect any notes
received with respect to the sale of such assets and collect any other debts
outstanding. All cash on hand, including all cash received after the happening
of an event of dissolution set forth in Section 20.1 hereof, shall be applied
and distributed as follows:
(i) All of the debts and liabilities of the Partnership,
except indebtedness to Partners, shall first be paid and satisfied or adequate
provision, including the setting up of any reserves which the General Partners
in their sole discretion deem reasonably necessary or desirable, shall be made
for the payment or satisfaction thereof;
(ii) All debts of the Partnership to Partners shall next
be paid on a pro rata basis without respect to the date on which such debts were
incurred;
(iii) Any fees due to the General Partners shall next be
paid; and
(iv) The balance of the assets of the Partnership shall be
distributed to each Partner in accordance with the positive balance in his
Capital Account as of the date of distribution, as provided in Section 9.4
below.
(b) Upon dissolution, each Limited Partner shall look solely to
the assets of the Partnership for the return of his investment, and if the
Partnership Property remaining after payment or discharge of the debts and
liabilities of the Partnership, including debts and liabilities owed to one or
more of the Partners, is insufficient to return the aggregate Capital
Contributions of each Limited Partner, such Limited Partners shall have no
recourse against the General Partners or any other Limited Partner.
9.4 Liquidating Distributions. After the payment of all Partnership
-------------------------
debts and liabilities and the establishment of any reserves which the General
Partners in their sole discretion may deem reasonably necessary or desirable,
Liquidating Distributions shall be distributed to each Partner in accordance
with the positive balance in his Capital Account as of the date of distribution
(after allocation of the Gain on Sale as provided in Section 10.4 hereof).
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9.5 Distribution Dates. Partnership distributions under this
------------------
Article IX will be made at least quarterly, but no more often than monthly, in
the discretion of the General Partners (the "Distribution Period").
9.6 Allocation Among General Partners. All amounts distributed to the
---------------------------------
General Partners under this Article IX shall be apportioned among the General
Partners in such percentages as they may from time to time agree upon among
themselves.
9.7 Allocation Among Limited Partners. All allocations and
---------------------------------
distributions made to the Limited Partners pursuant to this Article IX shall be
paid to those Persons who were Limited Partners or Assignees as of the last day
of the Distribution Period preceding the time of the distribution (the
"Allocation Date") on a pro rata basis according to the number of Units held on
the Allocation Date; provided, however, with respect to any Unit issued by the
Partnership during such Distribution Period, allocations and distributions made
with respect to such Unit for such Distribution Period shall be equal to the pro
rata share for such Unit determined in accordance with the first clause of this
Section 9.7 multiplied by a fraction, the numerator of which is the number of
days contained in the Distribution Period during which the Unit in question was
issued, and the denominator of which is the total number of days contained in
such Distribution Period.
ARTICLE X
ALLOCATIONS
10.1 Net Loss. Net Loss for each applicable accounting period shall be
--------
allocated to the Partners as follows:
(a) 99% to the Limited Partners holding Tax Preferred Units with
respect to such accounting period on a per Unit basis, and 1% to the General
Partners until the Capital Accounts of all such Partners have been reduced to
zero;
(b) Then, to any Partner having a positive balance in his
Capital Account (in proportion to the aggregate positive balances in all Capital
Accounts) in an amount not to exceed such positive balance as of the last day of
the fiscal year; and
(c) 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 the Limited Partners holding Cash Preferred
Units with respect to such accounting period on a per Unit basis, and Net Loss
of the Partnership for such accounting period shall be determined without regard
to such interest income.
10.2 Depreciation, Amortization and Cost Recovery Deductions. All
-------------------------------------------------------
deductions for depreciation, amortization and cost recovery for each applicable
accounting period shall be allocated to the Partners as follows:
(a) 99% to the Limited Partners holding Tax Preferred Units with
respect to such accounting period on a per Unit basis, and 1% to the General
Partners until the Capital Accounts of all such Partners have been reduced to
zero;
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(b) Then, to any Partner having a positive balance in his Capital
Account (in proportion to the aggregate positive balances in all Capital
Accounts) in an amount not to exceed such positive balance as of the last day of
the fiscal year; and
(c) Then, 100% to the General Partners.
This Section 10.2 notwithstanding, all Net Loss and Net Income for each
fiscal year shall be allocated to the Partners in the manner provided in
Sections 10.1 and 10.3 hereof and shall be reflected in each Partner's Capital
Account as of the last day of such fiscal year before any allocation of
depreciation, amortization or cost recovery deductions is made to the Partners
under this Section 10.2.
10.3 Net Income. Subject to the Qualified Income Offset provisions of
----------
Section 10.5 hereof, Net Income for each applicable accounting period shall be
allocated to the Partners as follows:
(a) To the General Partners and the Limited Partners holding Cash
Preferred Units with respect to such accounting period on a per Unit basis, in
the same proportion as, and to the extent that, Net Cash From Operations is
distributed or deemed distributed to them under Section 9.1 hereof with respect
to such accounting period; and
(b) Then, to the extent Net Income exceeds the actual distribution of
Net Cash From Operations with respect to such accounting period, such excess Net
Income shall be allocated 99% to the Limited Partners holding Cash Preferred
Units with respect to such accounting period on a per Unit basis, and 1% to the
General Partners.
10.4 Gain on Sale. Gain on Sale for each applicable accounting period
------------
shall be allocated to the Partners as follows:
(a) First, to the extent applicable, pursuant to the Qualified Income
Offset provisions of Section 10.5 hereof;
(b) Then, to those Partners having negative Capital Accounts, if any,
in the ratio that the negative Capital Account of each Partner having a negative
Capital Account bears to the aggregate amount of negative Capital Accounts of
all such Partners until all negative Capital Accounts have been restored to
zero;
(c) 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 specially allocated to such Limited
Partners pursuant to Section 10.2(a) hereof, with respect to the specific
Partnership Property, the sale, exchange or other disposition of which resulted
in the allocation of Gain on Sale hereunder, but not in excess of the amount of
Gain on Sale recognized by the Partnership pursuant to the sale, exchange or
other disposition of said specific Partnership Property;
(d) Then, to the Limited Partners in amounts equal to the deductions
for depreciation, amortization and cost recovery allocated to such Limited
Partners pursuant to Section 10.2(b) hereof with respect to the specific
Partnership Property, the sale, exchange or other disposition of which resulted
in the allocation of Gain on Sale hereunder;
(e) Then, to Limited Partners holding Units which at any time have
been treated as Tax Preferred Units on a per Unit basis, such amounts as may be
necessary to give each such Limited Partner, after the allocation of Gain on
Sale under this Section 10.4(e), distributions which, when added to
distributions received or deemed received by such Limited Partner with respect
to any period during
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which his Units were treated as Cash Preferred Units, would be equal on a per
Unit basis to the Net Cash From Operations allocated and distributed pursuant to
Section 9.1 hereof received or deemed received by Limited Partners holding Units
which at all times have been treated as Cash Preferred Units, assuming said
Limited Partners purchased an equivalent number of Units on the same day (it
being the intent of the Partners that the distribution preference provided in
Section 9.1 hereof be only a timing preference on distributions and that Section
9.2(a) hereof and this provision have the effect of equalizing distributions to
Limited Partners on a per Unit basis so that, after receipt of distributions
under Section 9.2(a) hereof and distributions resulting from the allocation of
Gain on Sale pursuant to this Section 10.4(e), all Limited Partners, to the
extent possible, be in receipt of the same aggregate amount of distributions
under Article IX on a per Unit basis);
(f) Then, to the Limited Partners on a per Unit basis until
each Limited Partner has been allocated an amount equal to the excess of each
Limited Partner's Net Capital Contribution over prior distributions received or
deemed received by such Limited Partner under Sections 8.10, 9.2(b) and 9.4
hereof;
(g) 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 cumulative
(but not compounded) 10% per annum return on his Net Capital Contribution over
prior distributions received or deemed received by such Limited Partner under
Sections 9.1, 9.2(a), 9.2(c), 9.2(d) and 9.4 hereof;
(h) 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, as defined in Section 3.48 hereof, over
prior distributions received or deemed received by each such Limited Partner
under Sections 9.1, 9.2(a), 9.2(c), 9.2(d) and 9.4 hereof;
(i) Then, to the General Partners, until the General Partners
have been allocated amounts equal to 100% of their Capital Contributions;
(j) Then, if and only in the event that Limited Partners have
received any Excess Limited Partner Distributions, as defined in Section 9.2(f)
hereof, to the General Partners, until the General Partners have been allocated
Gain on Sale under this Section 10.4(j) 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 Section 10.4(j); and
(k) Thereafter, 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 be allocated Gain on Sale pursuant to this Section 10.4 which
would result in the General Partners receiving distributions in excess of the
NASAA Guidelines Resale Proceeds Maximum Amount, as defined in Section 9.2(g)
hereof. It is the intent of the foregoing proviso that the General Partners
receive no more of the net proceeds from the sale or financing of Partnership
Properties than is allowed pursuant to Article IV, Section E.2.b. of the NASAA
Guidelines, and in the event the allocations pursuant to this Article X would
otherwise result in the General Partners receiving any such excess
distributions, such excess allocations of Gain on Sale otherwise allocable to
the General Partners will instead be reallocated in favor of and to the Limited
Partners on a per Unit basis.
Notwithstanding the foregoing, in the event that the Partnership sells
the last remaining Partnership Property at a sale price which is less than the
Purchase Price originally paid for such Partnership Property, then, after the
allocation of Gain on Sale derived from any such sale pursuant to Sections
10.4(a) and 10.4(b) above, and prior to the allocation of Gain on Sale pursuant
to Section 10.4(c) above, Limited Partners holding Cash Preferred Units shall
first be allocated Gain on Sale derived from
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any such sale in an amount equal to the excess of the original Purchase Price of
such Partnership Property sold over the sale price of such Partnership Property,
but not in excess of the amount of the special allocations of deductions for
depreciation, amortization and cost recovery with respect to such Partnership
Property previously made to Limited Partners holding Tax Preferred Units
pursuant to Sections 10.2(a) and 10.2(b) hereof.
10.5 Qualified Income Offset. Notwithstanding any provision to the
-----------------------
contrary contained herein, in the event that any Partner receives an adjustment,
allocation or distribution described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes a deficit 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, all in
accordance with Treasury Regulations Section 1.704-1(b)(2)(ii)(d). (It is the
intent of the Partners that the foregoing provision constitute a "Qualified
Income Offset," as defined in Treasury Regulations Section 1.704-1(b)(2)(ii)(d),
and the foregoing provision shall in all events be interpreted so as to
constitute a valid "Qualified Income Offset.")
10.6 Allocation Among Limited Partners. Except as otherwise provided
---------------------------------
in this Article X, all allocations made to the Limited Partners as a group under
this Article X shall be apportioned among the Limited Partners according to each
Limited Partner's Participating Percentage. Except as otherwise provided in this
Article X, all allocations made among Limited Partners holding Cash Preferred
Units shall be apportioned according to a percentage, the numerator of which
shall be the number of Cash Preferred Units held by each such Limited Partner,
and the denominator of which shall be the total number of Cash Preferred Units
held by all Limited Partners, and all allocations made among Limited Partners
holding Tax Preferred Units shall be apportioned among such Limited Partners
according to a percentage, the numerator of which shall be the number of Tax
Preferred Units held by each such Limited Partner, and the denominator of which
shall be the total number of Tax Preferred Units held by all Limited Partners.
If, however, Limited Partners are admitted to the Partnership pursuant to
Article VIII on different dates during any fiscal year, such allocations under
this Article X for such fiscal year (and, if necessary, subsequent years) shall
be divided among the Persons who own Units from time to time during such year in
accordance with Section 706 of the Code, using any conventions permitted by law
and selected by the General Partners, in their sole discretion. In addition, if
elections to be treated as Cash Preferred Units or Tax Preferred Units are
deemed to be effective during any fiscal year, allocations under this Article X
for such fiscal year (and, if necessary, subsequent years) shall be divided
among the Limited Partners in accordance with Section 706 of the Code, using any
conventions permitted by law and selected by the General Partners, in their sole
discretion.
10.7 Allocation Among General Partners. All allocations made under
---------------------------------
this Article X to the General Partners shall be apportioned among the General
Partners in such percentages as they may from time to time agree among
themselves.
10.8 Item Prorations. Any fiscal year of the Partnership in which the
---------------
Partnership realizes any Gain on Sale shall be divided into multiple accounting
periods, the first of which shall begin on the first day of such fiscal year and
shall end on the Sale Date, and the second of which shall begin on the day
following such Sale Date and shall end on the following Sale Date, if any, and
if no further Sale Date occurs, then on the last day of such fiscal year. Any
Net Income realized by the Partnership in any of such accounting periods shall
be allocated to the Partners in the manner provided in Section 10.3 hereof as if
such accounting period were a complete fiscal year of the Partnership. Any Net
Loss, depreciation, amortization or cost recovery deductions incurred by the
Partnership in any of such accounting periods shall be allocated to the Partners
in the manner provided in Sections 10.1 and 10.2 hereof as if such accounting
period were a complete fiscal year of the Partnership. The Net Income, Net Loss,
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depreciation, amortization and cost recovery deductions so allocated to the
Partners shall be reflected in their respective Capital Accounts before any Gain
on Sale realized by the Partnership during such accounting period is allocated
to the Partners under Section 10.4 hereof.
10.9 Allocations in Respect to Transferred Units. If any Units are
-------------------------------------------
transferred during any fiscal year, all items attributable to such Units for
such year shall be allocated between the transferor and the transferee by taking
into account their varying interests during the year in accordance with Section
706(d) of the Code, utilizing any conventions permitted by law and selected by
the General Partners, in their sole and absolute discretion. Solely for purposes
of making such allocations, the Partnership shall recognize the transfer of such
Units as of the end of the calendar quarter during which it receives written
notice of such transfer, provided that if the Partnership does not receive a
written notice stating the date such Units were transferred and such other
information as may be required by this Agreement or as the General Partners may
reasonably require within 30 days after the end of the year during which the
transfer occurs, then all such items shall be allocated to the Person who,
according to the books and records of the Partnership, on the last day of the
year during which the transfer occurs, was the owner of the Units. The General
Partners and the Partnership shall incur no liability for making allocations in
accordance with the provisions of this Section 10.9, whether or not the General
Partners or the Partnership have knowledge of any transfer of ownership of any
Units.
10.10 Allocations in Respect to Repurchased Units. If any Units are
-------------------------------------------
repurchased pursuant to Section 8.11 hereof during any fiscal year, all items
attributable to such Units for such year shall be determined by the General
Partners (a) pro rata with respect to the number of months such Units were
outstanding during such year, (b) on the basis of an interim closing of the
Partnership books, or (c) in accordance with any other method established by the
General Partners in accordance with applicable provisions of the Code and
Treasury Regulations.
10.11 Disputes. Except with respect to matters as to which the General
--------
Partners are granted discretion hereunder, the opinion of the independent public
accountants retained by the Partnership from time to time shall be final and
binding with respect to all disputes and uncertainties as to all computations
and determinations required to be made under Articles IX and X hereof (including
but not limited to any computations and determinations in connection with any
distribution or allocation pursuant to a dissolution and liquidation).
ARTICLE XI
MANAGEMENT OF THE PARTNERSHIP
11.1 Management. The General Partners shall conduct the business of
----------
the Partnership, devoting such time thereto as they, in their sole discretion,
shall determine to be necessary to manage Partnership business and affairs in an
efficient manner. Any action required to be taken by the General Partners
pursuant to this Agreement shall be duly taken only if it is approved, in
writing or otherwise, by all the General Partners, unless the General Partners
agree among themselves to a different arrangement for said approval.
11.2 Powers of the General Partners. The General Partners shall have
------------------------------
full charge of overall management, conduct and operation of the Partnership, and
shall have the authority to act on behalf of the Partnership in all matters
respecting the Partnership, its business and its property, and, without limiting
in any manner the foregoing, authority:
(a) To do on behalf of the Partnership all things which, in
their sole judgment, are necessary, proper or desirable to carry out the
Partnership's business, including, but not limited to, the
22
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right, power and authority: (i) to execute all agreements and other documents
necessary to implement the purposes of the Partnership, to take such action as
may be necessary to consummate the transactions contemplated hereby and by the
Prospectus, and to make all reasonably necessary arrangements to carry out the
Partnership's obligations in connection therewith; (ii) to employ, oversee and
dismiss from employment any and all employees, agents, independent contractors,
real estate managers, contractors, engineers, architects, developers, designers,
brokers, attorneys and accountants; (iii) to sell, exchange or grant an option
for the sale of all or substantially all (subject to the requirement to obtain a
Majority Vote of the Limited Partners pursuant to Section 16.1 hereof with
respect to a sale of all or substantially all of the real properties acquired by
the Partnership) or any portion of the real and personal property of the
Partnership, at such price or amount, for cash, securities or other property and
upon such other terms as the General Partners, in their sole discretion, deem
proper; (iv) to let or lease all or any portion of the Partnership Properties
for any purpose and without limit as to the term thereof, whether or not such
term (including renewal terms) shall extend beyond the date of the termination
of the Partnership and whether or not the portion so leased is to be occupied by
the lessee or, in turn, subleased in whole or in part to others; (v) to create,
by grant or otherwise, easements and servitudes; (vi) to borrow money and incur
indebtedness; provided, however, the Partnership shall not be permitted to incur
any indebtedness except as authorized in Section 11.3(e) hereof; (vii) to draw,
make, accept, endorse, sign and deliver any notes, drafts or other negotiable
instruments or commercial paper; (viii) to execute such agreements and
instruments as may be necessary, in their discretion, to operate, manage and
promote the Partnership assets and business; (ix) to construct, alter, improve,
repair, raze, replace or rebuild all or any portion of the Partnership
Properties; (x) to submit to arbitration any claim, liability or dispute
involving the Partnership (provided that such claims will be limited to actions
against the Partnership not involving securities claims by the Limited Partners
and provided further that no claim, liability or dispute of a Limited Partner
will be subject to mandatory arbitration); (xi) to compromise any claim or
liability due to the Partnership; (xii) to execute, acknowledge or verify and
file any notification, application, statement and other filing which the General
Partners consider either required or desirable to be filed with any state or
federal securities administrator or commission; (xiii) to make any tax elections
to be made by the Partnership; (xiv) to place record title to any of its assets
in the name of a nominee, agent or a trustee; (xv) to do any or all of the
foregoing, discretionary or otherwise, through agents selected by the General
Partners, whether compensated or uncompensated by the Partnership; (xvi) to
execute and file of record all instruments and documents which are deemed by the
General Partners to be necessary to enable the Partnership properly and legally
to do business in the State of Georgia or any other jurisdiction deemed
advisable; (xvii) to monitor the transfer of Partnership interests to determine
if such interests are being traded on "an established securities market or a
secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code, and take (and cause Affiliates to take) all steps
reasonably necessary or appropriate to prevent any such trading of interests,
including without limitation, voiding transfers if the General Partners
reasonably believe such transfers will cause the Partnership to be treated as a
"publicly traded partnership" under the Code or Treasury Regulations thereunder;
(xviii) at the appropriate time, to register the Units with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934; and (xix)
to do any or all of the foregoing for such consideration and upon such other
terms or conditions as the General Partners, in their discretion, determine to
be appropriate; provided, however, in no event shall the General Partners or
their Affiliates receive compensation from the Partnership unless specifically
authorized by Article XII hereof, by Articles IX and X hereof or by the
"Compensation of the General Partners and Affiliates" section of the Prospectus.
(b) Notwithstanding anything contained herein to the contrary,
subject to the provisions contained in Section 16.2 hereof, to amend this
Agreement without the consent or vote of any of the Limited Partners: (i) to
reflect the addition or substitution of Limited Partners or the reduction of
Capital Accounts upon the return of capital to Partners; (ii) to add to the
representations, duties or obligations of the General Partners or their
Affiliates or surrender any right or power granted herein to the General
Partners or their Affiliates for the benefit of the Limited Partners; (iii) to
cure any ambiguity, to
23
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correct or supplement any provision herein which may be inconsistent with any
other provision herein, or to add any other provision with respect to matters or
questions arising under this Agreement which will not be inconsistent with the
provisions of this Agreement; (iv) to delete or add any provision from or to
this Agreement requested to be so deleted or added by the staff of the
Securities and Exchange Commission or by the staff of any state regulatory
agency, the deletion or addition of which provision is deemed by the staff of
any such regulatory agency to be for the general benefit or protection of the
Limited Partners; and (v) to attempt to have the provisions of this Agreement
comply with federal income tax law and regulations thereunder.
(c) To possess and exercise, as may be required, all of the
rights and powers of general partners as more particularly provided by the Act,
except to the extent that any of such rights may be limited or restricted by the
express provisions of this Agreement.
(d) To execute, acknowledge and deliver any and all
instruments and take such other steps as are necessary to effectuate the
foregoing. Any such instruments may be executed on behalf of the Partnership by
either of the General Partners, except that any instrument pursuant to which the
Partnership acquires or disposes of any interest in real property shall require
the signature, personally or by attorney-in-fact, of each of the General
Partners.
11.3 Limitations on Powers of the General Partners. The General
---------------------------------------------
Partners shall observe the following policies in connection with Partnership
operations:
(a) Pending initial investment of its funds, or to provide a
source from which to meet contingencies, including, without limitation, the
working capital reserve and Repurchase Reserve, the Partnership may temporarily
invest its funds in short-term, highly liquid investments where there is
appropriate safety of principal, such as government obligations, bank or savings
and loan association certificates of deposit, short-term debt obligations and
interest-bearing accounts; provided that, following one year after the
commencement of the operations of the Partnership, no more than 45% of the value
(as defined in Section 2(a)(41) of the Investment Company Act of 1940, as
amended) of the Partnership's total assets (exclusive of government securities
and cash items) will consist of, and no more than 45% of the Partnership's net
income after taxes (for any four consecutive fiscal quarters combined) will be
derived from, securities other than (i) government securities; (ii) securities
issued by majority owned subsidiaries of the Partnership which are not
investment companies; and (iii) securities issued by companies, which are
controlled primarily by the Partnership, through which the Partnership engages
in a business other than that of investing, reinvesting, owning, holding or
trading in securities, and which are not investment companies.
(b) The Partnership shall not acquire unimproved or non-income
producing property, except in amounts and upon terms which can be financed by
the Offering proceeds or from Cash Flow and provided investment in such
properties shall not exceed 15% of net Offering proceeds available for
Investment in Properties. Properties shall not be considered non-income
producing if they are expected to produce income within two years after their
acquisition.
(c) All real property acquisitions must be supported by an
appraisal which shall be prepared by a competent, independent appraiser. The
appraisal shall be maintained in the Partnership's records for at least five
years and shall be available for inspection and duplication by any Limited
Partner. The Purchase Price paid by the Partnership for each property shall not
exceed the appraised value of such property.
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(d) The General Partners shall not have the authority to incur
indebtedness which is secured by the Partnership Properties or assets, except as
specifically authorized pursuant to Section 11.3(e) below.
(e) The General Partners shall have the authority to borrow
funds (i) for Partnership operating purposes in the event of unforeseen or
unexpected circumstances in which the Partnership's available cash resources are
deemed insufficient for the maintenance and repair of Partnership Properties or
for the protection or replacement of the Partnership's assets, and (ii) in order
to finance improvement of and improvements to Partnership Properties at such
time as the General Partners may deem such improvements to be necessary or
appropriate to protect capital previously invested in such Partnership
Properties, to protect the value of the Partnership's investment in a particular
Partnership Property, or to make a particular Partnership Property more
attractive for sale or lease; provided, however, that the aggregate amount of
Partnership borrowings shall at no time exceed 25% of the total purchase price
of Partnership Properties. The Partnership may borrow such funds from the
General Partners, their Affiliates or others, provided that if any such
borrowing is from the General Partners or their Affiliates, (i) such borrowing
may not constitute a "financing" as that term is defined under the NASAA
Guidelines (i.e., all indebtedness encumbering Partnership Properties or
incurred by the Partnership, "the principal amount of which is scheduled to be
paid over a period of not less than 48 months, and not more than 50 percent of
the principal amount of which is scheduled to be paid during the first 24
months"); (ii) interest and other financing charges or fees charged on any such
borrowing may not exceed amounts which would be charged by unrelated lending
institutions on comparable financing for the same purpose in the same locality
as the Partnership's principal place of business; and (iii) no prepayment charge
or penalty shall be required with respect to any such borrowing.
(f) The Partnership shall not reinvest Cash Flow or any
proceeds from the sale of a Partnership Property in new properties except that
if the Partnership requires funds to exercise an option to acquire property
under lease or to purchase from any co-venturer an interest in a property that
the Partnership owns jointly with such Person, the Partnership may either
distribute the net proceeds of any sale of Partnership Property to the Partners
or may reinvest such proceeds for the aforementioned purposes; provided,
however, that in any event, a portion of such proceeds sufficient to cover any
increase in Limited Partners" federal and state income taxes attributable to the
sale (assuming a 30% combined federal and state tax bracket) shall be
distributed in time to pay such increase.
(g) The General Partners shall exercise their fiduciary duty
for the safekeeping and use of all funds and assets of the Partnership, whether
or not in their immediate possession or control, and shall not employ, or permit
another to employ, such funds or assets in any manner except for the exclusive
benefit of the Partnership. In addition, the Partnership shall not permit the
Partners to contract away the fiduciary duty owed to the Partners by the General
Partners under common law.
(h) The Partnership may, in the sole discretion of the General
Partners, maintain reasonable reserves for normal repairs, replacements and
contingencies or for specified or unspecified tenant improvements or leasing
commissions relating to Partnership Properties, in such amounts as the General
Partners in their sole and absolute discretion determine from time to time to be
adequate, appropriate or advisable in connection with the operations of the
Partnership. In the event expenditures are made from any such reserves, future
operating revenues may be allocated to such reserve to the extent deemed
necessary by the General Partners for the maintenance of reasonable reserves. In
addition, one year after the termination of the Offering, the Partnership may at
the sole discretion of the General Partners maintain a Repurchase Reserve of up
to 5% of Cash Flow in any year. Such funds may be used to repurchase Units as
described in Section 8.11 hereof.
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(i) The Partnership shall not own or lease property jointly or
in partnership with unrelated entities except in general partnerships or joint
ventures which own and operate one or more particular properties, unless (i)
such unrelated entity has substantially identical investment objectives as those
of the Partnership; (ii) the management of such partnership or joint ownership
is under the control of the Partnership in that the Partnership or an Affiliate
of the Partnership possesses the power to direct or to cause the direction of
the management and policies of any such partnership or joint venture; (iii) the
Partnership, as a result of such joint ownership or partnership ownership of a
property, is not charged, directly or indirectly, more than once for the same
services; (iv) the joint ownership or partnership does not authorize or require
the Partnership to do anything as a partner or joint venturer with respect to
the property which the Partnership or the General Partners could not do directly
because of this Agreement; and (v) the General Partners and their Affiliates are
prohibited from receiving any compensation, fees or expenses which are not
permitted to be paid under this Agreement.
The Partnership may not own or lease property jointly or in a
partnership or joint venture with an Affiliate of the General Partners unless
such property is owned or leased by a joint venture or general partnership with
a publicly registered Affiliate, and unless (i) such Affiliate has substantially
identical investment objectives as those of the Partnership; (ii) the
Partnership, as a result of such joint ownership or partnership ownership of a
property, is not charged, directly or indirectly, more than once for the same
services; (iii) the compensation payable to the General Partners and their
Affiliates is substantially identical in each program; (iv) the Partnership will
have a right of first refusal to buy the property held by such joint venture in
the event that such Affiliate elects to sell its interest in the joint venture;
and (v) the investment by the Partnership and such Affiliate are on
substantially the same terms and conditions.
The ownership of the common areas located on property through
a condominium association or other similar form of real property ownership shall
not be considered a joint ownership of property for purposes of this paragraph.
(j) Investments by the Partnership in limited partnership
interests of other partnerships shall be prohibited.
(k) The completion of improvements which are to be constructed
or are under construction on Partnership Property shall be guaranteed at the
price contracted either by an adequate completion bond or by other satisfactory
assurances; provided, however, that such other satisfactory assurances shall
include at least one of the following: (i) a written personal guarantee of one
or more of the general contractor's principals accompanied by the financial
statements of such guarantor indicating a substantial net worth; (ii) a written
fixed price contract with a general contractor that has a substantial net worth;
(iii) a retention of a reasonable portion of the Purchase Price as a potential
offset to such Purchase Price in the event the seller does not perform in
accordance with the purchase and sale agreement; or (iv) a program of
disbursements control which provides for direct payments to subcontractors and
suppliers.
(l) The Partnership shall make no construction loans to
builders of Partnership Properties and shall make no periodic progress or other
advance payments to such builders unless the Partnership has first received an
architect's certification as to the percentage of the project which has been
completed and as to the dollar amount of the construction then completed.
(m) The Partnership shall not acquire property in exchange for
Units.
(n) The Partnership shall not obtain nonrecourse financing
from a Limited Partner or any party affiliated with a Limited Partner.
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(o) The Partnership shall not purchase a Partnership Property
if (i) the acquisition price of such Partnership Property is not a fixed amount
determined as of the date of acquisition; or (ii) any amount payable in
connection with such acquisition or the time for making payments thereunder is
dependent, in whole or in part, upon revenues, income or profits derived from
the Partnership Property.
(p) The Partnership shall not take back an "all-inclusive" or
"wraparound" note in connection with the sale or other disposition of a
Partnership Property.
(q) The Partnership's business purposes and objectives, as set
forth in Article IV, shall not be changed unless approved by a Majority Vote of
the Limited Partners.
(r) The Partnership shall not invest in junior trust deeds and
other similar obligations.
(s) The General Partners shall not have the authority on
behalf of the Partnership to:
(i) list, recognize or facilitate the trading of
Units (or any interest therein) on any "established securities market (or the
equivalent thereof)" within the meaning of Section 7704 of the Code, or permit
any of their Affiliates to take such actions, if as a result thereof, the
Partnership would be treated for federal income tax purposes as an association
taxable as a corporation or taxed as a "publicly traded partnership;" or
(ii) create for the Units (or any interest therein) a
"secondary market (or the equivalent thereof)" within the meaning of Section
7704 of the Code or otherwise permit, recognize or facilitate the trading of any
such Units (or any interest therein) on any such market or permit any of their
Affiliates to take such actions, if as a result thereof, the Partnership would
be treated for federal income tax purposes as an association taxable as a
corporation or taxed as a "publicly traded partnership."
(t) The funds of the Partnership shall not be commingled with
the funds of any other Person, except in the case of making capital
contributions to a joint venture or partnership permitted pursuant to the
provisions of Section 11.3(i) above.
(u) The General Partners hereby agree that they shall not
initiate a transaction wherein the Partnership is merged or consolidated with
another partnership or corporation, and the General Partners shall not be
authorized to merge or consolidate the Partnership with any other partnership or
corporation or to convert the Partnership to a real estate investment trust
unless first obtaining a Majority Vote of the Limited Partners to any such
transaction. In addition, the General Partners shall not be authorized to enter
into or effect any Roll-Up unless such Roll-Up complies with the following terms
and conditions:
(i) An appraisal of all assets of the Partnership
shall be obtained from a competent Independent Expert. If the appraisal will be
included in a prospectus used to offer the securities of a Roll-Up Entity, the
appraisal shall be filed with the Securities and Exchange Commission and the
states as an exhibit to the registration statement for the offering. The assets
of the Partnership shall be appraised on a consistent basis. The appraisal shall
be based on an evaluation of all relevant information and shall indicate the
current value of the Partnership's assets as of a date immediately prior to the
announcement of the proposed Roll-Up. The appraisal shall assume an orderly
liquidation of the Partnership's assets over a 12 month period, shall consider
other balance sheet items, and shall be net of the assumed cost of sale. The
terms of the engagement of the Independent Expert shall clearly state that the
engagement is for the benefit of the Partnership and its Limited Partners. A
summary of the
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independent appraisal, indicating all material assumptions underlying the
appraisal, shall be included in a report to the Limited Partners in connection
with the proposed Roll-Up.
(ii) In connection with the proposed Roll-Up, the
person sponsoring the Roll-Up shall provide each Limited Partner with a document
which instructs the Limited Partner on the proper procedure for voting against
or dissenting from the Roll-Up and shall offer to Dissenting Limited Partners
the choice of: (A) accepting the securities of the Roll-Up Entity offered in the
proposed Roll-Up which have substantially the same terms and conditions as the
security originally held, provided that the receipt or retention of that
security is not a step in a series of subsequent transactions that directly or
indirectly through acquisition or otherwise involves future contributions or
reorganizations involving the Roll-Up Entity; or (B) one of the following: (I)
remaining as Limited Partners in the Partnership and preserving their interests
therein on the same terms and conditions as existed previously, or (II)
receiving cash in an amount equal to the Limited Partners' pro rata share of the
appraised value of the net assets of the Partnership.
(iii) Securities of the Roll-Up Entity received in
the Roll-Up will be considered to have the same terms and conditions as the
security originally held if: (A) there is no material adverse change to
Dissenting Limited Partners' rights, including but not limited to, rights with
respect to voting, the business plan, or the investment, distribution,
management compensation and liquidation policies of the Roll-Up Entity; and (B)
the Dissenting Limited Partners receive the same preferences, privileges and
priorities as they had pursuant to the security originally held.
(iv) The Partnership may not participate in any
proposed Roll-Up in which any General Partner converts an equity interest in the
Partnership for which consideration was not paid and which was not otherwise
provided for in this Agreement and disclosed to the Limited Partners, into a
voting interest in the Roll-Up Entity, provided, however, an interest originally
obtained in order to comply with the provisions of IRS Revenue Procedure 89-12
may be converted into a voting interest in the Roll-Up Entity not to exceed a
one percent (1%) interest in the assets and income of such entity.
(v) The Partnership may not participate in any
proposed Roll-Up in which a General Partner does not utilize an independent
third party to receive and tabulate all votes and dissents, and require that the
third party make the tabulation available to the General Partners and any
Limited Partner upon request at any time during and after voting occurs.
(vi) The Partnership may not participate in any
proposed Roll-Up which would result in the Limited Partners having (A) voting
rights which do not generally follow the voting rights of the Limited Partners
pursuant to this Agreement or (B) democracy rights in the Roll-Up Entity which
are less than those provided for under Sections VII.A. and VII.B. of the NASAA
Guidelines. If the Roll-Up Entity is a corporation, the voting rights shall
correspond to the voting rights provided for in the NASAA Guidelines to the
greatest extent possible.
(vii) The Partnership may not participate in any
proposed Roll-Up which includes provisions which would otherwise materially
impede or frustrate the accumulation of shares by any purchaser of the
securities of the Roll-Up Entity (except to the minimum extent necessary to
preserve the tax status of the Roll-Up Entity). The Partnership may not
participate in any proposed Roll-Up which would limit the ability of a Limited
Partner to exercise the voting rights of his securities in the Roll-Up Entity on
the basis of the limited partnership interests or other indicia of ownership
held by that Limited Partner.
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(viii) The Partnership may not participate in any
proposed Roll-Up in which the Limited Partners' rights of access to the records
of the Roll-Up Entity will be less than those provided for under Section VII.D.
of the NASAA Guidelines.
(ix) The Partnership may not participate in any
proposed Roll-Up in which any of the costs of the transaction would be borne by
the Partnership if the proposed Roll-Up is not approved by a Majority Vote of
the Limited Partners.
(x) The Partnership may not participate in any
proposed Roll-Up in which the rights of Limited Partners are not protected as to
fees of General Partners. The rights of Limited Partners shall be presumed not
to be protected as to fees of General Partners if: (A) General Partners are not
prevented from receiving both unearned management fees discounted to a present
value, if those fees were not previously provided for in this Agreement and
disclosed to Limited Partners, and new asset-based fees; (B) property management
fees and other management fees are not appropriate, not reasonable and greater
than what would be paid to third parties for performing similar services; or (C)
changes in fees which are substantial and adverse to Limited Partners are not
approved by an independent committee according to the facts and circumstances of
each transaction. For purposes of this provision, "management fee" means a fee
paid to the General Partners, their Affiliates, or other persons for management
and administration of the limited partnership Roll-Up Entity.
(xi) The Person proposing a Roll-Up shall pay all
solicitation expenses related to the transaction, including all preparatory work
related thereto, in the event the Roll-Up is not approved. For purposes of this
provision, "solicitation expenses" include direct marketing expenses such as
telephone calls, broker-dealer fact sheets, legal and other fees related to the
solicitation, as well as direct solicitation compensation to brokers and
dealers.
(xii) The Partnership may not participate in any
proposed Roll-Up in which a broker or dealer receives compensation for
soliciting votes or tenders from Limited Partners in connection with the Roll-Up
unless that compensation: (A) is payable and equal in amount regardless of
whether the Limited Partner votes affirmatively or negatively in the proposed
Roll-Up; (B) in the aggregate, does not exceed 2% of the exchange value of the
newly created securities; and (C) is paid regardless of whether the Limited
Partners reject the proposed Roll-Up.
11.4 Expenses of the Partnership.
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(a) Subject to Sections 11.4(b) and 11.4(c) below, the
Partnership shall reimburse the General Partners for (i) all Organization and
Offering Expenses incurred by them, and (ii) the actual cost to them of goods
and materials used for or by the Partnership and obtained from entities
unaffiliated with the General Partners.
(b) Except as provided below and in Sections 11.4(a) and
11.4(c), all of the Partnership's expenses shall be billed directly to and paid
by the Partnership. The General Partners may be reimbursed for the
administrative services necessary to the prudent operation of the Partnership
provided that the reimbursement shall be at the lower of the General Partners'
actual cost or the amount the Partnership would be required to pay to
independent parties for comparable administrative services in the same
geographic location. No payment or reimbursement will be made for services for
which the General Partners are entitled to compensation by way of a separate
fee. Excluded from allowable reimbursements shall be: (i) rent or depreciation,
utilities, capital equipment, other administrative items; and (ii) salaries,
fringe benefits, travel expenses and other administrative items incurred by or
allocated to any controlling Persons of the General Partners or their
Affiliates. A controlling Person, for purposes of this Section 11.4(b), shall be
deemed to include, but not be limited to, any Person, whatever his title, who
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performs functions for the General Partners similar to those of: (A) chairman or
member of the Board of Directors; (B) executive management, including the
President, Vice President or Senior Vice President, Corporate Secretary and
Treasurer; (C) senior management, such as the Vice President of an operating
division who reports directly to executive management; or (D) those holding a 5%
or more equity interest in Wells Capital, Inc. or a Person having the power to
direct or cause the direction of the General Partners, whether through the
ownership of voting securities, by contract or otherwise. It is not intended
that every person who carries a title such as vice president, secretary or
treasurer be considered a controlling Person. The General Partners believe that
their employees and those of their Affiliates who will perform services for the
Partnership for which reimbursement is allowed pursuant to this Section 11.4(b)
have the experience and educational background, in their respective fields of
expertise, appropriate for the performance of such services.
The annual report to investors shall include a breakdown of the costs
reimbursed to the General Partners pursuant to this subsection. Within the scope
of the annual audit of the General Partners' financial statements, the
independent certified public accountant must verify the allocation of such costs
to the Partnership. The method of verification shall at a minimum provide:
(I) A review of the time records of individual
employees, the cost of whose services were reimbursed; and
(II) A review of the specific nature of the
work performed by each such employee. The methods of verification shall be in
accordance with generally accepted auditing standards and shall, accordingly,
include such tests of the accounting records and such other auditing procedures
which the General Partners' independent certified public accountant considers
appropriate under the circumstances. The additional cost of such verification
will be itemized by said accountants on a program-by-program basis and may be
reimbursed to the General Partners by the Partnership in accordance with this
subsection only to the extent that such reimbursement when added to the cost for
services rendered does not exceed the allowable rate for such services as
determined above.
(c) The General Partners or their Affiliates shall pay, at no
additional cost to the Partnership (i) overhead expenses of the General Partners
and their Affiliates; (ii) expenses and salaries related to the performance of
those services for which the General Partners and their Affiliates are entitled
to compensation by way of Acquisition and Advisory Fees, Partnership and
property management fees or real estate brokerage commissions related to the
resale of Partnership Properties (provided, however, that the foregoing shall in
no way limit the payment or reimbursement of legal, travel, employee-related
expenses and other out-of-pocket expenses which are directly related to a
particular Partnership Property and not prohibited by Section 11.4(b) above);
and (iii) all other administrative expenses which are unrelated to the business
of the Partnership. The General Partners or their Affiliates shall pay, at no
additional cost to the Partnership, Partnership Organization and Offering
Expenses (other than commissions paid to broker-dealers and other underwriting
compensation) to the extent they exceed 3% of the gross proceeds of the Offering
of Units.
(d) Subject to the provisions of paragraphs (b) and (c) of
this Section 11.4, the Partnership shall pay the following expenses of the
Partnership:
(i) Partnership Organization and Offering Expenses
(other than commissions paid to broker-dealers and other underwriting
compensation) which do not exceed 3% of the gross proceeds of the Offering of
Units;
(ii) underwriting compensation, including broker-dealer
selling commissions and the dealer manager fee, payable in an amount not to
exceed 10% of the gross proceeds of the Offering
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of Units, plus a maximum of .5% of the gross proceeds of the Offering of Units
for reimbursement of bona fide due diligence expenses to be paid out of
Organization and Offering Expenses subject to the limitation of Section
11.4(d)(i) above.
(iii) All operational expenses of the Partnership,
which may include, but are not limited to: (A) all costs of personnel employed
by the Partnership or directly involved in the business of the Partnership,
including Persons who may also be employees of the General Partners or their
Affiliates, including but not limited to, salaries and other employee-related
expenses, travel and other out-of-pocket expenses of such personnel which are
directly related to a particular Partnership Property; (B) all costs of borrowed
money, taxes and assessments on Partnership Properties and other taxes
applicable to the Partnership; (C) legal, accounting, audit, brokerage and other
fees; (D) fees and expenses paid to independent contractors, brokers and
servicers, leasing agents, consultants, on-site managers, real estate brokers,
mortgage brokers, insurance brokers and other agents; and (E) expenses in
connection with the disposition, replacement, alteration, repair, remodeling,
refurbishment, leasing and operation of Partnership Properties (including the
costs and expenses of foreclosures, legal and accounting fees, insurance
premiums, real estate brokerage and leasing commissions and maintenance
connected with such Property); and
(iv) All accounting, documentation, professional
and reporting expenses of the Partnership, which may include, but are not
limited to: (A) preparation and documentation of Partnership bookkeeping,
accounting and audits; (B) preparation and documentation of budgets, economic
surveys, Cash Flow projections and Repurchase Reserve and working capital
requirements; (C) preparation and documentation of Partnership federal and state
tax returns; (D) printing, engraving and other expenses and documents evidencing
ownership of an interest in the Partnership or in connection with the business
of the Partnership; (E) expenses of insurance as required in connection with the
business of the Partnership, including, without limitation, life and disability
insurance with respect to any individual General Partner; (F) expenses in
connection with distributions made by the Partnership to, and communications,
bookkeeping and clerical work necessary in maintaining relations with, Limited
Partners, including the costs of printing and mailing to such Persons
certificates for the Units and reports of the Partnership, and of preparing
proxy statements and soliciting proxies in connection therewith; (G) expenses in
connection with preparing and mailing reports required to be furnished to
Limited Partners for investing, tax reporting or other purposes, including
reports required to be filed with the Securities and Exchange Commission and
other federal or state regulatory agencies, or expenses associated with
furnishing reports to Limited Partners which the General Partners deem to be in
the best interests of the Partnership; (H) expenses of revising, amending,
converting, modifying or terminating the Partnership; (I) costs incurred in
connection with any litigation in which the Partnership is involved as well as
any examination, investigation or other proceedings conducted of the Partnership
by any regulatory agency, including legal and accounting fees incurred in
connection therewith; (J) costs of any computer equipment or services used for
or by the Partnership; (K) costs of any accounting, statistical or bookkeeping
equipment necessary for the maintenance of the books and records of the
Partnership; (L) costs of preparation and dissemination of information and
documentation relating to potential sale, financing or other disposition of
Partnership Properties; and (M) supervision and expenses of professionals
employed by the Partnership in connection with any of the foregoing, including
attorneys, accountants and appraisers.
11.5 Limitation on Liability of the General Partners;
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Indemnification of the General Partners.
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(a) Neither the General Partners nor any of their Affiliates
(hereinafter, an "Indemnified Party") shall be liable, responsible or
accountable in damages or otherwise to any other Partner, the Partnership, its
receiver or trustee (the Partnership, its receiver or trustee are hereinafter
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referred to as "Indemnitors") for, and the Indemnitors agree to indemnify, pay,
protect and hold harmless each Indemnified Party (on the demand of such
Indemnified Party) from and against any and all liabilities, obligations,
losses, damages, actions, judgments, suits, proceedings, reasonable costs,
reasonable expenses and disbursements (including, without limitation, all
reasonable costs and expenses of defense, appeal and settlement of any and all
suits, actions or proceedings instituted against such Indemnified Party or the
Partnership and all reasonable costs of investigation in connection therewith)
(collectively referred to as "Liabilities" for the remainder of this Section)
which may be imposed on, incurred by, or asserted against such Indemnified Party
or the Partnership in any way relating to or arising out of any action or
inaction on the part of the Partnership or on the part of such Indemnified Party
in connection with services to or on behalf of the Partnership (and with respect
to an Indemnified Party which is an Affiliate of the General Partners for an act
which the General Partners would be entitled to indemnification if such act were
performed by them) which such Indemnified Party in good faith determined was in
the best interest of the Partnership. Notwithstanding the foregoing, each
Indemnified Party shall be liable, responsible and accountable, and neither the
Partnership nor any Indemnitor shall be liable to an Indemnified Party, for any
portion of such Liabilities which resulted from such Indemnified Party's (i) own
fraud, negligence, misconduct or knowing violation of law, (ii) breach of
fiduciary duty to the Partnership or any Partner, or (iii) breach of this
Agreement, regardless of whether or not any such act was first determined by the
Indemnified Party, in good faith, to be in the best interest of the Partnership.
If any action, suit or proceeding shall be pending against the Partnership or
any Indemnified Party relating to or arising out of any such action or inaction,
such Indemnified Party shall have the right to employ, at the reasonable expense
of the Partnership (subject to the provisions of Section 11.5(b) below),
separate counsel of such Indemnified Party's choice in such action, suit or
proceeding. The satisfaction of the obligations of the Partnership under this
Section shall be from and limited to the assets of the Partnership and no
Limited Partner shall have any personal liability on account thereof.
(b) Cash advances from Partnership funds to an Indemnified
Party for legal expenses and other costs incurred as a result of any legal
action initiated against an Indemnified Party by a Limited Partner are
prohibited. Cash advances from Partnership funds to an Indemnified Party for
reasonable legal expenses and other costs incurred as a result of any legal
action or proceeding are permissible if (i) such suit, action or proceeding
relates to or arises out of any action or inaction on the part of the
Indemnified Party in the performance of its duties or provision of its services
on behalf of the Partnership; (ii) such suit, action or proceeding is initiated
by a third party who is not a Limited Partner; and (iii) the Indemnified Party
undertakes to repay any funds advanced pursuant to this Section in the cases in
which such Indemnified Party would not be entitled to indemnification under
Section 11.5(a) above. If advances are permissible under this Section, the
Indemnified Party shall have the right to bill the Partnership for, or otherwise
request the Partnership to pay, at any time and from time to time after such
Indemnified Party shall become obligated to make payment therefor, any and all
amounts for which such Indemnified Party believes in good faith that such
Indemnified Party is entitled to indemnification under Section 11.5(a) above.
The Partnership shall pay any and all such bills and honor any and all such
requests for payment within 60 days after such bill or request is received. In
the event that a final determination is made that the Partnership is not so
obligated for any amount paid by it to a particular Indemnified Party, such
Indemnified Party will refund such amount within 60 days of such final
determination, and in the event that a final determination is made that the
Partnership is so obligated for any amount not paid by the Partnership to a
particular Indemnified Party, the Partnership will pay such amount to such
Indemnified Party within 60 days of such final determination.
(c) Notwithstanding anything to the contrary contained in
Section 11.5(a) above, neither the General Partners nor any of their Affiliates
nor any Person acting as a broker-dealer with respect to the Units shall be
indemnified from any liability, loss or damage incurred by them arising due to
an alleged violation of federal or state securities laws unless (i) there has
been a successful adjudication on the merits of each count involving alleged
securities law violations as to the particular Indemnified
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Party, or (ii) such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the particular Indemnified Party, or (iii)
a court of competent jurisdiction approves a settlement of the claims against
the particular Indemnified Party and finds that indemnification of the
settlement and related costs should be made. Prior to seeking a court approval
for indemnification, the General Partners shall undertake to cause the party
seeking indemnification to apprise the court of the position of the Securities
and Exchange Commission, the California Commissioner of the Department of
Corporations, the Massachusetts Securities Division, the Missouri Securities
Division, the Nebraska Bureau of Securities, the Oklahoma Department of
Securities, the Pennsylvania Securities Commission, the Tennessee Securities
Division and the Texas State Securities Board with respect to indemnification
for securities violations.
(d) The Partnership shall not incur the cost of the portion of
any insurance which insures any party against any liability as to which such
party is prohibited from being indemnified as set forth above.
(e) For purposes of this Section 11.5, an Affiliate of the
General Partner shall be indemnified by the Partnership only in circumstances
where the Affiliate has performed an act on behalf of the Partnership or the
General Partners within the scope of the authority of the General Partners and
for which the General Partners would have been entitled to indemnification had
such act been performed by them.
ARTICLE XII
SERVICES TO PARTNERSHIP BY GENERAL PARTNERS
12.1 Acquisition and Advisory Services. The General Partners and their
---------------------------------
Affiliates shall perform acquisition and advisory services in connection with
the review and evaluation of potential real property acquisitions for the
Partnership, which services shall include, but shall not be limited to, an
analysis of: (a) the geographic market in which any such property is located,
including market demand analyses; (b) the physical condition of any existing
structures, appurtenances and service systems; (c) the availability of
contractors and engineers; (d) zoning and other governmental restrictions
applicable to the use or development of the property; and (e) income and expense
forecasts. In consideration for such services, including services rendered with
respect to properties which are considered for acquisition by the Partnership
but are not acquired, the General Partners and their Affiliates shall be paid
Acquisition and Advisory Fees in an amount of up to 3% of Capital Contributions,
provided that such amount does not exceed the limitations set forth in Section
12.2 hereof. In addition, in reimbursement for certain Acquisition Expenses
relating to property acquisitions by the Partnership, such as legal fees, travel
expenses, title insurance premium expenses and other closing costs, the General
Partners and their Affiliates shall be paid an amount of up to .5% of Capital
Contributions. Acquisition and Advisory Fees and Acquisition Expenses shall be
accrued as Units are sold by the Partnership and shall be payable upon receipt
by the Partnership of such Capital Contributions, whether such fees relate to
properties which are acquired which are income-producing properties or raw land
to be developed or to properties which are not acquired. The General Partners
shall refund to the Partnership any such fees which are received in advance of
the services to be rendered and for which services are not subsequently
rendered. In addition to such fees, the Partnership shall bear the expenses of
independent appraisers, market analysts or other such Persons not affiliated
with the General Partners who may be engaged to evaluate potential real estate
acquisitions and developments by or on behalf of the Partnership.
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12.2 Limitations on Acquisition Fees.
-------------------------------
(a) Acquisition and Advisory Fees paid in connection with the
organization of the Partnership and the purchase and development of Partnership
Properties and with respect to each particular Partnership Property shall be
paid only for services actually rendered, and in no event will the total of all
Acquisition Fees, including the Acquisition and Advisory Fees paid to the
General Partners or their Affiliates, exceed the compensation customarily
charged in arm's-length transactions by others rendering similar services as an
ongoing public activity in the same geographic location and for comparable
property. The limitation imposed hereby will be complied with at any given time
on an ongoing basis. Within 30 days after completion of the last acquisition,
the General Partners shall forward to the California Commissioner of the
Department of Corporations a schedule, verified under penalties of perjury,
reflecting:
(i) each acquisition made;
(ii) the purchase price paid;
(iii) the aggregate of all Acquisition Fees paid
on each transaction; and
(iv) a computation showing compliance with Rule
260.140.113.3 adopted pursuant to the California Corporate Securities Law of
1968.
(b) The General Partners intend to acquire Partnership
Properties on an all cash basis and shall commit a percentage of Capital
Contributions to Investment in Properties acquired by the Partnership in an
amount which is equal to at least 80% of Capital Contributions. For such
purposes, working capital reserves in an aggregate amount not in excess of 5% of
Capital Contributions shall be deemed to be committed to the purchase,
development, construction or improvement of properties acquired by the
Partnership. Anything contained in this Agreement to the contrary
notwithstanding, at a minimum the General Partners shall commit a percentage of
the Capital Contributions to Investment in Properties which is equal to at least
80% of the Capital Contributions.
12.3 Property Management Services. The General Partners shall cause
----------------------------
the Partnership to employ a property management company (which may be an
Affiliate of the General Partners) to perform professional property management
and leasing services for the Partnership. In the event the property management
company is an Affiliate of the General Partners, the compensation payable to
such Affiliate shall be equal to the lesser of (a) fees which would be charged
by Persons who are not affiliated with the General Partners rendering comparable
services in the same geographic area, or (b) 4.5% of Gross Revenues of the
properties managed. In the case of industrial and commercial properties which
are leased on a long-term (ten or more years) net lease basis, the maximum
property management fee from such leases shall be 1% of Gross Revenues, except
for a one time initial leasing fee of 3% of Gross Revenues on each lease payable
over the first five full years of the original term of the lease. Included
within such fees should be bookkeeping services and fees paid to non-related
Persons for property management services. In addition, in connection with the
initial lease-up of newly constructed properties, the Partnership may also pay a
separate competitive fee for the one time initial rent-up or leasing-up of a
newly constructed property, provided such services are not included in the
Purchase Price of the property. The Partnership may also pay to either non-
affiliated third party leasing agents or to an Affiliate of the General Partners
leasing fees currently ranging from $.50 to $1.50 per square foot for procuring
tenants and negotiating the terms of tenant leases. These leasing fees shall be
paid for only leasing services actually rendered and, if paid to a property
management company, will not exceed the fees which would customarily be charged
in arm's length transactions by others rendering similar services in the same
geographic area for similar properties. In no event may the aggregate of all
property management and
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leasing fees paid to Affiliates of the General Partners exceed 6% of gross
revenues. The foregoing limitation will include all leasing, re-leasing and
leasing related services.
12.4 Insurance Services Prohibited. Neither the General
-----------------------------
Partners nor any of their Affiliates may receive an insurance brokerage fee or
write any insurance policy covering the Partnership or any Partnership
Properties.
12.5 Development and Construction Services Prohibited. Neither the
------------------------------------------------
General Partners nor any of their Affiliates (except any Persons affiliated with
the General Partners only through their employment by the Partnership) may
receive any development or construction fees or any other fees or other
compensation from the Partnership in connection with the development or
construction of Partnership Properties, except with respect to expense
reimbursements specifically authorized under Section 11.4 hereof.
12.6 Real Estate Commissions on Resale of Properties. The General
-----------------------------------------------
Partners and their Affiliates may perform real estate brokerage services for the
Partnership in connection with the resale of property by the Partnership;
provided that the compensation therefor to the General Partners or their
Affiliates in connection with the sale of a particular property shall not exceed
the lesser of (a) 50% of the reasonable, customary and competitive real estate
brokerage commission normally and customarily paid for the sale of a comparable
property in light of the size, type and location of the property, or (b) 3% of
the gross sales price of the property; and provided, further, that payments of
said compensation shall be made only after the Partnership has distributed to
each Limited Partner or his Assignee from Nonliquidating Distributions or
Liquidating Distributions, as the case may be, an aggregate amount in cash which
is equal to 100% of his Capital Contribution (less all amounts, if any,
theretofore distributed as a return of unused capital pursuant to Section 8.10),
and has distributed to each Limited Partner or Assignee from all sources an
additional amount equal to a 6% per annum cumulative (but not compounded) return
on his Net Capital Contribution, calculated from the date of his admission into
the Partnership; and provided, further, that the General Partners and their
Affiliates may receive such real estate commission only if they provide
substantial services in connection with the sales effort. The aggregate real
estate commission paid to all parties involved in the sale of a Partnership
Property shall not exceed the lesser of: (a) the reasonable, customary and
competitive real estate brokerage commission normally and customarily paid for
the sale of a comparable property in light of the size, type and location of the
property, or (b) 6% of the gross sales price of such property.
Notwithstanding the foregoing, neither the General Partners nor any of
their Affiliates shall be granted an exclusive right to sell or exclusive
employment to sell any property on behalf of the Partnership.
12.7 Rebates, Give-ups and Reciprocal Arrangements.
---------------------------------------------
(a) No rebates or give-ups may be received by any of the
General Partners or their Affiliates nor may the General Partners or their
Affiliates participate in any reciprocal business arrangements which would
circumvent the provisions of this Agreement.
(b) None of the General Partners nor any of their Affiliates
shall, or shall knowingly permit any underwriter, dealer or salesman to,
directly or indirectly, pay or award any finder's fees, commissions or other
compensation to any Person engaged by a potential investor for investment advice
as an inducement to such advisor to recommend the purchase of interests in the
Partnership; provided, however, that this clause shall not prohibit the normal
sales commissions payable to a registered broker-dealer or other properly
licensed Person (including the General Partners and their Affiliates) for
selling Partnership Units.
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12.8 Other Services. Other than as specifically provided in this
--------------
Agreement or in the Prospectus, neither the General Partners nor their
Affiliates shall be compensated for services rendered to the Partnership. The
General Partners and their Affiliates cannot receive any fees or other
compensation from the Partnership except as specifically provided for in this
Article XII, in Articles IX, X or XI hereof or in the "Compensation of the
General Partners and Affiliates" section of the Prospectus.
ARTICLE XIII
TRANSACTIONS BETWEEN GENERAL PARTNERS AND THE PARTNERSHIP
13.1 Sales and Leases to the Partnership. The Partnership shall not
-----------------------------------
purchase or lease investment properties, other than as provided in Section
11.3(i) hereof, in which any of the General Partners or their Affiliates have an
interest or from any entity in which the General Partners or their Affiliates
have an interest. The provisions of this Section 13.1 notwithstanding, the
General Partners or their Affiliates may temporarily enter into contracts
relating to investment properties to be assigned to the Partnership prior to
closing or may purchase property in their own names and temporarily hold title
thereto for the purpose of facilitating the acquisition of such property for the
Partnership, provided that such property is purchased by the Partnership for a
price no greater than the cost of such property to the General Partners or their
Affiliates (including closing and carrying costs), that in no event shall the
Partnership purchase property from the General Partners or their Affiliates if
such entity has held title to such property for more than 12 months prior to the
commencement of the Offering, that the General Partners or their Affiliates
shall not sell property to the Partnership if the cost of the property exceeds
the funds reasonably anticipated to be available to the Partnership to purchase
such property, and that all profits and losses during the period any such
property is held by the General Partners or their Affiliates will accrue to the
Partnership and such profits shall be deemed to be included as Partnership Cash
Flow for the purpose of computing distributions of Net Cash From Operations
under Article IX hereof; and provided further, that there is no other benefit to
the General Partners or any Affiliate of the General Partners apart from
compensation otherwise permitted by this Agreement. Notwithstanding the
foregoing, the Partnership may not acquire from the General Partners or their
Affiliates any property which, on the effective date of the Prospectus, was
owned by such General Partner or Affiliate.
13.2 Sales and Leases to the General Partners. The Partnership
----------------------------------------
shall not sell or lease any Partnership Property to the General Partners or
their Affiliates.
13.3 Loans. No loans may be made by the Partnership to any of the
-----
General Partners or their Affiliates.
13.4 Dealings with Related Programs. Except as permitted by Sections
------------------------------
11.3(i) and 13.1 hereof, the Partnership shall not acquire property from or sell
property to any Person in whom any of the General Partners or any of their
Affiliates have an interest.
13.5 Commissions on Reinvestment or Distribution. The Partnership shall
-------------------------------------------
not pay, directly or indirectly, a commission or fee (except as permitted under
Article XII hereof) to a General Partner in connection with the reinvestment or
distribution of the proceeds of the sale, exchange or financing of Partnership
Properties.
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ARTICLE XIV
INDEPENDENT ACTIVITIES OF PARTNERS
Any of the Partners may engage in or possess an interest in other
business ventures of every nature and description, independently or with others,
including, but not limited to, the ownership, financing, leasing, management,
syndication, brokerage and development of real property of any kind whatsoever
(including properties which may be similar to those owned by the Partnership),
and neither the Partnership nor any of the Partners shall have any right by
virtue of this Agreement in and to such independent ventures or to the income or
profits derived therefrom, provided that the General Partners shall in no way be
relieved of their fiduciary duty owed to the Partnership. In the event that the
Partnership, the General Partners or any Affiliate or any entity formed or
managed by the General Partners or their Affiliates is in the market for similar
properties, the General Partners will review the investment portfolio of each
partnership and each such affiliated entity and will decide which entity will
acquire a particular property on the basis of such factors as, among others,
anticipated cash flow, the effect of the purchase price on diversification of
the portfolio of each such entity, the estimated income tax effects of the
purchase on each such entity, the amount of funds which each such entity has
available for investment, and the length of time funds of each such entity have
been available for investment.
ARTICLE XV
BOOKS, REPORTS, FISCAL AND TAX MATTERS
15.1 Books. The General Partners shall maintain full and complete books
-----
and records for the Partnership at its principal office, and all Limited
Partners and their designated representatives shall have the right to inspect,
examine and copy at their reasonable cost such books at reasonable times. The
books of account for financial accounting purposes shall be kept in accordance
with generally accepted accounting principles. Limited Partner suitability
records shall be maintained for at least six years. In addition, the General
Partners shall maintain an alphabetical list of the names, addresses and
business telephone numbers of the Limited Partners of the Partnership along with
the number of Units held by each of them (the "Participant List") as a part of
the books and records of the Partnership which shall be available for inspection
by any Limited Partner or his designated representative at the home office of
the Partnership upon the request of the Limited Partner. The Participant List
shall be updated at least quarterly to reflect changes in the information
contained therein. A copy of the Participant List shall be mailed to any Limited
Partner requesting the Participant List within ten (10) days of the request. The
copy of the Participant List to be mailed to a Limited Partner shall be printed
in alphabetical order, on white paper, and in readily readable type size (in no
event smaller than 10-point type). A reasonable charge for copy work may be
charged by the Partnership. The purposes for which a Limited Partner may request
a copy of the Participant List include, without limitation, matters relating to
the Limited Partners' voting rights under this Agreement and the exercise of the
Limited Partners' rights under federal proxy laws. If the General Partners of
the Partnership neglect or refuse to exhibit, produce or mail a copy of the
Participant List as requested, they shall be liable to the Limited Partner
requesting the list for the costs, including attorneys' fees, incurred by that
Limited Partner for compelling the production of the Participant List and for
actual damages suffered by the Limited Partner by reason of such refusal or
neglect. It shall be a defense that the actual purpose and reason for a request
for inspection of or a request for a copy of the Participant List is to secure
such list of Limited Partners or other information for the purpose of selling
such list or copies thereof or for the purpose of using the same for a
commercial purpose other than in the interest of the applicant as a Limited
Partner relative to the affairs of the Partnership. The General Partners may
require any Limited Partner requesting the Participant List to represent that
the list is not requested for a commercial purpose unrelated to such Limited
Partner's interest in the Partnership. The remedies provided hereunder to
Limited Partners requesting copies of the
37
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Participant List are in addition to, and shall not in any way limit, other
remedies available to Limited Partners under federal law or under the laws of
any state.
15.2 Reports. The General Partners shall prepare or cause to be
-------
prepared the following reports:
(a) Acquisition Reports. At least quarterly within 60 days
-------------------
after the end of each quarter during which the Partnership has acquired real
property, an "Acquisition Report" of any real property acquisitions within the
prior quarter shall be sent to all Limited Partners. Such report shall describe
the real properties and all improvements contemplated to be developed thereon
and include a description of the geographic locale and of the market upon which
the General Partners are relying in projecting successful development and
operation of the properties. All facts which reasonably appear to the General
Partners to influence materially the value of the property shall be disclosed,
including 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. The Acquisition Report shall also include, by way of illustration and
not of limitation, a statement of the date and amount of the appraised value, a
statement of the actual Purchase Price including terms of the purchase and an
estimate of all proposed subsequent expenditures for development or other
improvement of the property, a statement that title insurance and any required
performance bonds or other assurances in accordance with Section 11.3(k) hereof
with respect to builders have been or will be obtained on the property, a
statement of the total amount of cash expended by the Partnership to acquire
each Partnership Property, and a statement regarding the amount of proceeds of
the Offering of Units (in both dollar amount and as a percentage of the net
proceeds of the Offering of Units available for investment) which remain
unexpended or uncommitted. In addition, the Acquisition Report shall identify
any real properties, by location and a description of their general character,
which the General Partners presently intend to be acquired by or leased to the
Partnership.
(b) Annual Report. Within 120 days after the end of each
-------------
fiscal year, an annual report shall be sent to all the Limited Partners and
Assignees which shall include (i) a balance sheet as of the end of such fiscal
year, together with a profit and loss statement, a statement of cash flows and a
statement of Partners" capital for such year, which financial statements shall
be prepared in accordance with generally accepted accounting principles and
shall be accompanied by an auditor's report containing an opinion of the
independent certified public accountant for the Partnership; (ii) a Cash Flow
statement (which need not be audited); (iii) a report of the activities of the
Partnership for such year; (iv) a report on the distributions from (A) Cash Flow
during such period, (B) Cash Flow from prior periods, (C) proceeds from the
disposition of Partnership Property and investments, (D) reserves from the
proceeds of the Offering of Units, and (E) lease payments on net leases with
builders and sellers; and (v) a report setting forth the compensation paid to
the General Partners and their Affiliates during such year and a statement of
the services performed in consideration therefor. In addition, commencing eight
years after termination of the Offering, such annual report shall include a
notification to the Limited Partners of their right pursuant to Section 20.2
hereof to request that the General Partners formally proxy the Limited Partners
to determine whether the assets of the Partnership should be liquidated. Such
annual report shall also include such other information as is deemed reasonably
necessary by the General Partners to advise the Limited Partners of the affairs
of the Partnership.
(c) Quarterly Reports. If and 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 for a quarter shall be sent
to the Limited Partners within 60 days after the end of such quarter. Whether or
not such reports are required to be filed, each Limited Partner will be
furnished within 60 days after the end of each of the first three quarters of
each Partnership fiscal year an unaudited financial report for that quarter
including a profit and loss statement, a balance sheet and a cash flow
statement. Such reports shall also include such
38
<PAGE>
other information as is deemed reasonably necessary by the General Partners to
advise the Limited Partners of the affairs of the Partnership.
(d) Report of Fees. The Partnership's annual and quarterly
--------------
reports on Form 10-K and 10-Q for any period during which the General Partners
or any of their Affiliates receive fees for services from the Partnership shall
set forth (i) a statement of the services rendered, and (ii) the amount of fees
received.
(e) Tax Information. Within 75 days after the end of each
---------------
fiscal year (in the event that the fiscal year of the Partnership remains on a
calendar year basis, and within 120 days after the end of each fiscal year in
the event that the Partnership's fiscal year is changed to some annual period
other than a calendar year pursuant to Section 15.3 hereof), there shall be sent
to all the Limited Partners and Assignees all information necessary for the
preparation of each Limited Partner's federal income tax return and state income
and other tax returns in regard to jurisdictions where Partnership Properties
are located.
(f) ERISA Report. The General Partners shall furnish each
------------
Limited Partner an annual statement of estimated Unit value. Such annual
statement shall report the value of each Unit based upon the General Partners'
estimate of the amount a Unit holder would receive if Partnership Properties
were sold at their fair market values as of the close of the Partnership's
fiscal year and the proceeds therefrom (without reduction for selling expenses),
together with other funds of the Partnership, were distributed in a liquidation
of the Partnership (provided that, with respect to the first three full fiscal
years following termination of the Offering, the value of a Unit shall be deemed
to be $10.00). In connection with their annual valuations, the General Partners
shall obtain the opinion of an independent third party that their estimate of
Unit value is reasonable and was prepared in accordance with appropriate methods
for valuing real estate. The estimated Unit value shall be reported to the
Limited Partners in the next annual or quarterly report on Form 10-K or 10-Q
sent to the Limited Partners following the completion of the valuation process.
(g) Performance Reporting. The Partnership's annual and
---------------------
quarterly reports on Form 10-K and 10-Q shall set forth the year-to-date amount
of cash flow available for distribution, as such term is generally defined in
existing Guidelines for Partnership Agreement Provisions issued by the
International Association for Financial Planning, and shall contain a detailed
reconciliation of the Partnership's net income for financial reporting purposes
to the Partnership's cash flow available for distribution for the periods
covered by the report. In addition, the notes to the Partnership's financial
statements included in its annual reports on Form 10-K shall 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.
(h) Expense Reporting. The notes to the Partnership's
-----------------
financial statements included in its annual reports on Form 10-K shall contain a
category-by-category breakdown of the general and administrative expenses
incurred by the Partnership for the periods covered by the report. This
breakdown shall reflect each type of general and administrative expense incurred
by the Partnership (e.g. investor relations, independent accountants, salaries,
rent, utilities, insurance, filing fees, legal fees, etc.) and the amount
charged to the Partnership for each category of expense incurred.
(i) Other Reports. The General Partners shall cause to be
-------------
prepared and timely 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. Any
Limited Partner shall be provided with a copy of any such report upon request
without expense to him.
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<PAGE>
(j) Cessation of Reports. In the event the Securities and
--------------------
Exchange Commission promulgates rules that allow a reduction in reporting
requirements, the Partnership may cease preparing and filing certain of the
above reports if the General Partners determine such action to be in the best
interests of the Partnership; provided, however, that the Partnership will
continue to file any reports mandated under state law.
15.3 Fiscal Year. The Partnership shall adopt a fiscal year
-----------
beginning on the first day of January and ending on the last day of December of
each year; provided, however, that the General Partners in their sole discretion
may, subject to approval by the IRS, at any time without the approval of the
Limited Partners, change the Partnership's fiscal year to a period to be
determined by the General Partners.
15.4 Tax Elections.
-------------
(a) No election shall be made by the Partnership or any
Partner to be excluded from the application of the provisions of Subchapter K of
the Code or from any similar provisions of state or local income tax laws.
(b) Upon the transfer of all or part of a Partner's or
Assignee's interest in the Partnership or upon the death of an individual
Limited Partner or Assignee, or upon the distribution of any property to any
Partner or Assignee, the Partnership, at the General Partners' option and in
their sole discretion, may file an election, in accordance with applicable
Treasury Regulations, to cause the basis of Partnership Property to be adjusted
for federal income tax purposes, as provided by Sections 734, 743 and 754 of the
Code; and similar elections under provisions of state and local income tax laws
may, at the General Partners' option, also be made.
15.5 Bank Accounts. The cash funds of the Partnership shall be
-------------
deposited in commercial bank account(s) at such banks or other institutions
insured by the Federal Deposit Insurance Corporation as the General Partners
shall determine. Disbursements therefrom shall be made by the General Partners
in conformity with this Agreement. The funds of the Partnership shall not be
commingled with the funds of any other Person, except in the case of funds held
by a joint venture or partnership permitted pursuant to the provisions of
Section 11.3(i) above.
15.6 Insurance. The Partnership shall at all times maintain
---------
comprehensive insurance, including fire, liability and extended coverage
insurance in amounts determined by the General Partners to be adequate for the
protection of the Partnership. In addition, the Partnership shall carry
appropriate worker's compensation insurance and such other insurance with
respect to the real property owned by it as shall be customary for similar
property, similarly located, from time to time.
15.7 Taxation as Partnership. The General Partners, while serving
-----------------------
as such, agree to use their best efforts to cause compliance at all times with
the conditions to the continued effectiveness of any opinion of counsel obtained
by the Partnership to the effect that the Partnership will be classified as a
partnership for federal income tax purposes.
15.8 Tax Matters.
-----------
(a) The General Partners may or may not, in their sole and
absolute discretion, make any or all elections which they are entitled to make
on behalf of the Partnership and the Partners for federal, state and local tax
purposes, including, without limitation, any election, if permitted by
applicable law: (i) to extend the statute of limitations for assessment of tax
deficiencies against Partners with respect to adjustments to the Partnership's
federal, state or local tax returns; and (ii) to represent the Partnership
40
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and the Partners before taxing authorities or courts of competent jurisdiction
in tax matters affecting the Partnership and the Partners in their capacity as
Partners and to execute any agreements or other documents relating to or
settling such tax matters, including agreements or other documents that bind the
Partners with respect to such tax matters or otherwise affect the rights of the
Partnership or the Partners.
(b) Wells Capital is designated as the "Tax Matters Partner"
in accordance with Section 6231(a)(7) of the Code and, in connection therewith
and in addition to all other powers given thereunder, shall have all other
powers needed to perform fully hereunder including, without limitation, the
power to retain all attorneys and accountants of its choice and the right to
manage administrative tax proceedings conducted at the partnership level by the
IRS with respect to Partnership matters. Any Partner has the right to
participate in such administrative proceedings relating to the determination of
partnership items at the Partnership level. Expenses of such administrative
proceedings undertaken by the Tax Matters Partner will be paid for out of the
assets of the Partnership. Each Limited Partner who elects to participate in
such proceedings will be responsible for any expense incurred by such Limited
Partner in connection with such participation. Further, the cost to a Limited
Partner of any adjustment and the cost of any resulting audit or adjustment of a
Limited Partner's return will be borne solely by the affected Limited Partner.
The designation made in this Section 15.8(b) is expressly consented to by each
Partner as an express condition to becoming a Partner. The Partnership hereby
indemnifies Wells Capital from and against any damage or loss (including
attorneys" fees) arising out of or incurred in connection with any action taken
or omitted to be taken by it in carrying out its responsibilities as Tax Matters
Partner, provided such action taken or omitted to be taken does not constitute
fraud, negligence, breach of fiduciary duty or misconduct. In the event the
Partnership should become required to register with the IRS as a tax shelter,
Wells Capital shall be the "designated organizer" of the Partnership and the
"designated person" for maintaining lists of investors in the Partnership, and
shall take such actions as shall be required to register the Partnership and to
maintain lists of investors in the Partnership as may be required pursuant to
Sections 6111 and 6112 of the Code.
ARTICLE XVI
RIGHTS AND LIABILITIES OF THE LIMITED PARTNERS
16.1 Powers of the Limited Partners. The Limited Partners shall take no
------------------------------
part in the management of the business or transact any business for the
Partnership and shall have no power to sign for or bind the Partnership;
provided, however, that the Limited Partners, by a Majority Vote, without the
concurrence of the General Partners, shall have the right to:
(a) Amend this Agreement, but not as to the matters specified
in Section 11.2(b) hereof, which matters the General Partners alone may amend
without vote of the Limited Partners;
(b) Dissolve the Partnership;
(c) Remove a General Partner or any successor General Partner;
(d) Elect a new General Partner or General Partners upon the
removal of a General Partner or any successor General Partner, or upon the
occurrence of an Event of Withdrawal or death of a General Partner or any
successor General Partner;
(e) Approve or disapprove a transaction entailing the sale of
all or substantially all of the real properties acquired by the Partnership,
except in connection with the orderly liquidation and winding up of the business
of the Partnership upon its termination and dissolution; and
41
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(f) Change the business purpose or investment objectives of
the Partnership.
16.2 Restrictions on Power to Amend. Notwithstanding Section 16.1
------------------------------
hereof, this Agreement shall in no event be amended to change the limited
liability of the Limited Partners without the vote or consent of all of the
Limited Partners, nor shall this Agreement be amended to diminish the rights or
benefits to which any of the General Partners or Limited Partners are entitled
under the provisions of this Agreement, without the consent of a majority of the
Units held by the Partners who would be adversely affected thereby, and in the
case of the General Partners being singularly affected, then by a majority vote
of the General Partners.
16.3 Limited Liability. No Limited Partner shall be liable for any
-----------------
debts or obligations of the Partnership in excess of his or its Capital
Contribution.
16.4 Meetings of, or Actions by, the Limited Partners.
------------------------------------------------
(a) Meetings of the Limited Partners to vote upon any matters as
to which the Limited Partners are authorized to take action under this Agreement
may be called at any time by any of the General Partners and shall be called by
the General Partners upon the written request of Limited Partners holding 10% or
more of the outstanding Units by delivering written notice within ten days after
receipt of such written request, either in person or by certified mail, to the
Limited Partners entitled to vote at such meeting to the effect that a meeting
will be held at a reasonable time and place convenient to the Limited Partners
and which is not less than 15 days nor more than 60 days after the receipt of
such request; provided, however, that such maximum periods for the giving of
notice and the holding of meetings may be extended for an additional 60 days if
such extension is necessary to obtain qualification or clearance under any
applicable securities laws of the matters to be acted upon at such meeting or
clearance by the appropriate governing agency of the solicitation materials to
be forwarded to the Limited Partners in connection with such meeting. The
General Partners agree to use their best efforts to obtain such qualifications
and clearances. Included with the notice of a meeting shall be a detailed
statement of the action proposed, including a verbatim statement of the wording
on any resolution proposed for adoption by the Limited Partners and of any
proposed amendment to this Agreement. All expenses of the meeting and
notification shall be borne by the Partnership.
(b) A Limited Partner shall be entitled to cast one vote for
each Unit that he owns. Attendance by a Limited Partner at any meeting and
voting in person shall revoke any written proxy submitted with respect to action
proposed to be taken at such meeting. Any matter as to which the Limited
Partners are authorized to take action under this Agreement or under law may be
acted upon by the Limited Partners without a meeting and any such action shall
be as valid and effective as action taken by the Limited Partners at a meeting
assembled, if written consents to such action by the Limited Partners are signed
by the Limited Partners entitled to vote upon such action at a meeting who hold
the number of Units required to authorize such action and are delivered to a
General Partner.
(c) The General Partners shall be responsible for enacting all
needed rules of order for conducting all meetings and shall keep, or cause to be
kept, at the expense of the Partnership, an accurate record of all matters
discussed and action taken at all meetings or by written consent. The records of
all said meetings and written consents shall be maintained at the principal
place of business of the Partnership and shall be available for inspection by
any Partner at reasonable times.
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ARTICLE XVII
WITHDRAWAL OR REMOVAL OF GENERAL PARTNERS;
ASSIGNABILITY OF GENERAL PARTNERS'
AND LIMITED PARTNERS' INTERESTS
17.1 Withdrawal or Removal of General Partners; Admission of
-------------------------------------------------------
Successor or Additional General Partners.
----------------------------------------
(a) Except as provided in this Article XVII, until the
dissolution of the Partnership, neither General Partner shall take any voluntary
step to dissolve itself or to withdraw from the Partnership. In addition, Leo F.
Wells, III hereby agrees with the Partnership and its Partners 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 without first obtaining a Majority Vote of the
Limited Partners consenting to any such sale, transfer or conveyance.
(b) With the consent of all the other General Partners and a
Majority Vote of the Limited Partners after being given 90 days written notice,
any General Partner may at any time designate one or more Persons to be
additional General Partners, with such participation in such General Partner's
interest as such General Partner and such successor or additional General
Partners may agree upon, provided that the interests of the Limited Partners
shall not be affected thereby.
(c) Except in connection with the admission of an additional
General Partner pursuant to paragraph (b) of this Section 17.1, no General
Partner shall have any right to retire or withdraw voluntarily from the
Partnership, to dissolve itself or to sell, transfer or assign the General
Partner's interest without the concurrence of the Limited Partners by a Majority
Vote; provided, however, that any General Partner may, without the consent of
any other General Partner or the Limited Partners to the extent permitted by law
and consistent with Section 17.1(a) hereof (i) substitute in its stead as
General Partner any entity which has, by merger, consolidation or otherwise,
acquired substantially all of such General Partner's assets, stock or other
evidence of equity interest and continued its business, and (ii) cause to be
admitted to the Partnership an additional General Partner or Partners if it
deems such admission to be necessary or desirable to enable the General Partner
to use its best efforts to maintain its net worth at a level sufficient to
assure that the Partnership will be classified as a partnership for federal
income tax purposes; provided, however, that such additional General Partner or
Partners shall have no authority to manage or control the Partnership under this
Agreement, there is no change in the identity of the persons who have authority
to manage or control the Partnership, and the admission of such additional
General Partner or Partners does not materially adversely affect the Limited
Partners.
(d) A General Partner may be removed from the Partnership upon
the Majority Vote of the Limited Partners; provided, however, that if such
General Partner is the last remaining General Partner, such removal shall not be
effective until 90 days after the notice of removal has been sent to such
General Partner. In the event of the removal of the last remaining General
Partner, the Limited Partners may by Majority Vote elect a new General Partner
at any time prior to the effective date of the removal of said last remaining
General Partner.
(e) Any voluntary withdrawal by any General Partner from the
Partnership or any sale, transfer or assignment by such General Partner of his
interest in the Partnership shall be effective only upon the admission in
accordance with paragraph (b) of this Section 17.1 of an additional General
Partner.
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(f) A General Partner shall cease to be such upon the
occurrence of an Event of Withdrawal of such General Partner; provided, however,
the last remaining General Partner shall not cease to be a General Partner until
120 days after the occurrence of an Event of Withdrawal.
17.2 Limited Partners' Interest. Except as specifically provided in
--------------------------
this Article XVII, none of the Limited Partners shall sell, transfer, encumber
or otherwise dispose of, by operation of law or otherwise, all or any part of
his or its interest in the Partnership. No assignment shall be valid or
effective unless in compliance with the conditions contained in this Agreement,
and any unauthorized transfer or assignment shall be void ab initio.
17.3 Restrictions on Transfers.
-------------------------
(a) No Unit may be transferred, sold, assigned or exchanged if
the transfer or sale of such Unit, when added to the total of all other
transfers or sales 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 Code unless the Partnership and the transferring holder shall have received
a ruling from the IRS that the proposed sale or exchange will not cause such
termination.
(b) No transfer or assignment may be made if, as a result of
such transfer, a Limited Partner (other than one transferring all of his Units)
will own fewer than the minimum number of Units required to be purchased under
Section 8.5(b) hereof, unless such transfer is made on behalf of a Retirement
Plan, or such transfer is made by gift, inheritance, intra-family transfer,
family dissolution or to an Affiliate.
(c) No transfer or assignment of any Unit may be made if
counsel for the Partnership is of the opinion that such transfer or assignment
would be in violation of any state securities or "Blue Sky" laws (including
investment suitability standards) applicable to the Partnership.
(d) All Units originally issued pursuant to qualification
under the California Corporate Securities Law of 1968 shall be subject to, and
all documents of assignment and transfer evidencing such Units shall bear, the
following legend condition:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
(e) No transfer or assignment of any interest in the
Partnership shall be made (i) in the case of Units subject to Section 17.3(d)
hereof, unless the transferor shall have obtained, if necessary, the consent of
the California Commissioner of the Department of Corporations to such transfer,
(ii) unless the transferee shall have paid or, at the election of the General
Partners, obligated himself to pay, all reasonable expenses connected with such
transfer, substitution and admission, including, but not limited to, the cost of
preparing an appropriate amendment to this Agreement to effectuate the
transferee's admission as a substituted Limited Partner pursuant to Section 17.4
hereof, or (iii) where the assignor and Assignee agree in connection therewith
that the assignor shall exercise any residual powers remaining in him as a
Limited Partner in favor of or in the interest or at the direction of the
Assignee.
(f) With the exception of intra-family transfers or transfers
made by gift, inheritance or family dissolution, no transfer or assignment of
any interest in the Partnership shall be made unless the
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transferee has either (i) a net worth of at least $45,000 and an annual gross
income of at least $45,000 or (ii) a net worth of at least $150,000 or (iii)
satisfied any higher suitability standards that may apply in the transferee's
state of primary residence. For purposes of the foregoing standards, net worth
is computed exclusive of home, furnishings and automobiles. Each transferee will
be required to represent that he complies with the applicable standards, that he
is purchasing in a fiduciary capacity for a Person meeting such standards, or
that he is purchasing with funds directly or indirectly supplied by a donor who
meets such standards. No transfer may be made to any Person who does not make
such representation.
(g) No Limited Partner may transfer or assign any Units or beneficial
ownership interests therein (whether by sale, exchange, repurchase, redemption,
pledge, hypothecation or liquidation), and any such purported transfer shall be
void ab initio and shall not be recognized by the Partnership or be effective
for any purpose unless (i) the General Partners determine, in their sole
discretion, that the Partnership would be able to satisfy any of the secondary
market safe harbors contained in Treasury Regulations Section 1.7704-1 (or any
other applicable safe harbor from publicly traded partnership status which may
be adopted by the IRS) for the Partnership's taxable year in which such transfer
otherwise would be effective, or (ii) the Partnership has received an opinion of
counsel satisfactory to the General Partners or a favorable IRS ruling that any
such transfer will not result in the Partnership's being classified as a
publicly traded partnership for federal income tax purposes. The Limited
Partners agree to provide all information with respect to a proposed transfer
that the General Partners deem necessary or desirable in order to make such
determination, including but not limited to, information as to whether the
transfer occurred on a secondary market (or the substantial equivalent thereof).
(h) During the initial six years following the year of purchase of
their units (or longer if required to satisfy the commissions due with respect
to such Units), Limited Partners purchasing Units pursuant to the deferred
commission option, as defined in the Prospectus, will only be permitted to
transfer or assign Cash Preferred Units in the event that they retain and
maintain at all times at least such minimum number of Cash Preferred Units
during such initial six year period, in the discretion of the General Partners,
to generate sufficient Net Cash From Operations to allow the Partnership to
satisfy the deferred commission obligations relating to the total number of
Units purchased by such Limited Partners pursuant to the deferred commission
option.
(i) Any purported transfer or assignment not satisfying all of the
foregoing conditions shall be void ab initio, and no purported transfer or
assignment shall be of any effect unless all of the foregoing conditions have
been satisfied.
17.4 Substituted Limited Partners. Except as otherwise provided in this
----------------------------
Agreement, an Assignee of the whole or any portion of a Limited Partner's
interest in the Partnership shall not have the right to become a substituted
Limited Partner in place of his assignor unless (a) the assignment instrument
shall have been in form and substance satisfactory to the General Partners; (b)
the assignor and Assignee named therein shall have executed and acknowledged
such other instrument or instruments as the General Partners may deem necessary
or desirable to effectuate such admission, including but not limited to, the
Assignee's agreement in writing that he will not, directly or indirectly, create
for the Partnership, or facilitate the trading of such interest on, a secondary
market (or the substantial equivalent thereof) within the meaning of Section
7704 of the Code; and (c) the Assignee shall have accepted, adopted and approved
in writing all of the terms and provisions of this Agreement, as the same may
have been amended. Assignees of Units will be recognized by the Partnership as
substituted Limited Partners as of the commencement of the first fiscal quarter
of the Partnership following the fiscal quarter which includes the effective
date of the assignment and in which the foregoing conditions are satisfied,
notwithstanding the time consumed in preparing the documents necessary to
effectuate the substitution.
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17.5 Assignment of Limited Partnership Interest Without Substitution.
---------------------------------------------------------------
Subject to the transfer restrictions of Section 17.3, a Limited Partner shall
have the right to assign all or part of such Limited Partner's interest in Units
by a written instrument of assignment. The assigning Limited Partner shall
deliver to the General Partners a written instrument of assignment in form and
substance satisfactory to the General Partners, duly executed by the assigning
Limited Partner or his personal representative or authorized agent, including an
executed acceptance by the Assignee of all the terms and provisions of this
Agreement and the representations of the assignor and Assignee that the
assignment was made in accordance with all applicable laws and regulations
(including investment suitability requirements). Said assignment shall be
accompanied by such assurance of genuineness and effectiveness and by such
consents or authorizations of any governmental or other authorities as may be
reasonably required by the General Partners. The Partnership shall recognize any
such assignment not later than the last day of the calendar month following
receipt of notice of the assignment and all required documentation, and an
Assignee shall be entitled to receive distributions and allocations from the
Partnership attributable to the Partnership interest acquired by reason of any
such assignment from and after the first day of the fiscal quarter following the
fiscal quarter in which the assignment of such interest takes place. The
Partnership and the General Partners shall be entitled to treat the assignor of
such Partnership interest as the absolute owner thereof in all respects, and
shall incur no liability for distributions made in good faith to such assignor,
until such time as the written instrument of assignment has been received by the
Partnership and recorded on its books.
17.6 Withdrawal of Limited Partner. Except as otherwise specifically
-----------------------------
permitted by this Agreement,no Limited Partner shall be entitled to withdraw or
retire from the Partnership.
17.7 Death, Legal Incompetency or Dissolution of Limited Partner. Upon the
-----------------------------------------------------------
death, legal incompetency or dissolution of a Limited Partner, the estate,
personal representative, guardian or other successor in interest of such Limited
Partner shall have all of the rights and be liable for all the obligations of
the Limited Partner in the Partnership to the extent of such Limited Partner's
interest therein, subject to the terms and conditions of this Agreement, and,
with the prior written consent of the General Partners, which may be withheld at
their sole discretion, may be substituted for such Limited Partner.
17.8 Elimination or Modification of Restrictions. Notwithstanding any of
-------------------------------------------
of the foregoing provisions of this Article XVII, the General Partners may amend
this Agreement to eliminate or modify any restriction on substitution or
assignment at such time as the restriction is no longer necessary.
ARTICLE XVIII
LOANS TO PARTNERSHIP
18.1 Authority to Borrow. The General Partners shall cause the Partnership
-------------------
to purchase and own all Partnership Properties on an unleveraged basis, and the
Partnership shall not incur any indebtedness except for loans which are
authorized pursuant to Section 11.3(e) hereof.
18.2 Loans from Partners. If any Partner shall make any loan or loans to
-------------------
the Partnership or advance money on its behalf pursuant to Section 11.3(e)
hereof, the amount of any such loan or advance shall not be deemed to be an
additional Capital Contribution by the lending Partner or entitle such lending
Partner to an increase in his share of the distributions of the Partnership, or
subject such Partner to any greater proportion of the losses which the
Partnership may sustain. The amount of any such loan or advance shall be a debt
due from the Partnership to such lending Partner repayable upon such terms and
conditions and bearing interest at such rates as shall be mutually agreed upon
by the lending Partner and the General Partners; provided, however, that a
General Partner as a lending Partner may not receive
46
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interest and other financing charges or fees in excess of the amount which would
be charged by unrelated banks on comparable loans for the same purpose in the
same area. No prepayment charge or penalty shall be required by a General
Partner on a loan to the Partnership. Notwithstanding the foregoing, (a) no
Partner shall be under any obligation whatsoever to make any such loan or
advance to the Partnership, and (b) neither the General Partners nor any of
their Affiliates shall provide permanent financing to the Partnership.
ARTICLE XIX
POWER OF ATTORNEY, CERTIFICATES AND OTHER DOCUMENTS
19.1 Power of Attorney. Each Limited Partner, by becoming a Limited
-----------------
Partner and adopting this Agreement, constitutes and appoints the General
Partners and each of them and any successor to the General Partners as his true
and lawful attorney-in-fact, in his name, place and stead, from time to time:
(a) To execute, acknowledge, swear to, file and/or record all
agreements amending this Agreement that may be appropriate:
(i) To reflect a change of the name or the location of the
principal place of business of the Partnership;
(ii) To reflect the disposal by any Limited Partner of his
interest in the Partnership, or any Units constituting a part thereof, in any
manner permitted by this Agreement, and any return of the Capital Contribution
of a Limited Partner (or any part thereof) provided for by this Agreement;
(iii) To reflect a Person's becoming a Limited Partner of the
Partnership as permitted by this Agreement;
(iv) To reflect a change in any provision of this Agreement or
the exercise by any Person of any right or rights hereunder not requiring the
consent of said Limited Partner;
(v) To reflect the addition or substitution of Limited
Partners or the reduction of Capital Accounts upon the return of capital to
Partners;
(vi) To add to the representations, duties or obligations of
the General Partners or their Affiliates or surrender any right or power granted
to the General Partners or their Affiliates herein for the benefit of the
Limited Partners;
(vii) To cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with law or with any other provision
herein, or to make any other provision with respect to matters or questions
arising under this Agreement which will not be inconsistent with law or with the
provisions of this Agreement;
(viii) To delete, add or modify any provision to this Agreement
required to be so deleted, added or modified by the staff of the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc. or by
a State Securities Commissioner or similar such official, which addition,
deletion or modification is deemed by such Commission or official to be for the
benefit or protection of the Limited Partners;
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(ix) To make all filings as may be necessary or proper to
provide that this Agreement shall constitute, for all purposes, an agreement of
limited partnership under the laws of the State of Georgia as they may be
amended from time to time;
(x) Upon notice to all Limited Partners, to amend the
provisions of Article X of this Agreement, or any other related provision of
this Agreement (provided, however, the General Partners shall first have
received an opinion of counsel to the Partnership that such amendment will not
materially adversely diminish the interests of the Limited Partners) to ensure
that (A) the allocations and distributions contained in Article X comply with
Treasury Regulations relating to Section 704 of the Code or any other statute,
regulation or judicial interpretation relating to such allocations, or (B) the
periodic allocations set forth in Article X will be respected under Section 706
of the Code or any other statute, regulation or judicial interpretation relating
to such periodic allocations, or (C) the provisions of this Agreement will
comply with any applicable federal or state legislation enacted after the date
of this Agreement; to take such steps as the General Partners determine are
advisable or necessary in order to preserve the tax status of the Partnership as
an entity which is not taxable as a corporation for federal income tax purposes
including, without limitation, to compel a dissolution and termination of the
Partnership; to terminate the Offering of Units; to compel a dissolution and
termination of the Partnership or to restructure the Partnership's activities to
the extent the General Partners deem necessary (after consulting with counsel)
to comply with any exemption in the "plan asset" regulations adopted by the
Department of Labor in the event that either (I) the assets of the Partnership
would constitute "plan assets" for purposes of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or (II) the transactions
contemplated hereunder would constitute "prohibited transactions" under ERISA or
the Code and an exemption for such transactions is not obtainable or not sought
by the General Partners from the United States Department of Labor; provided,
the General Partners are empowered to amend such provisions only to the minimum
extent necessary (in accordance with the advice of accountants and counsel) to
comply with any applicable federal or state legislation, rules, regulations or
administrative interpretations thereof after the date of this Agreement, and
that any such amendment(s) made by the General Partners shall be deemed to be
made pursuant to the fiduciary obligations of the General Partners to the
Partnership; and
(xi) To eliminate or modify any restriction on substitution or
assignment contained in Article XVII at such time as the restriction is no
longer necessary.
(b) To execute, acknowledge, swear to, file or record such
certificates, instruments and documents as may be required by, or may be
appropriate under, the laws of any state or other jurisdiction, or as may be
appropriate for the Limited Partners to execute, acknowledge, swear to, file or
record to reflect:
(i) Any changes or amendments of this Agreement, or pertaining
to the Partnership, of any kind referred to in paragraph (a) of this Section
19.1; or
(ii) Any other changes in, or amendments of, this Agreement, but
only if and when the consent of a Majority Vote or other required percentage of
the Limited Partners has been obtained.
Each of such agreements, certificates, instruments and documents shall be
in such form as the General Partners and legal counsel for the Partnership shall
deem appropriate. Each Limited Partner hereby authorizes the General Partners to
take any further action which the General Partners shall consider necessary or
convenient in connection with any of the foregoing, hereby giving said attorney-
in-fact full power and authority to do and perform each and every act and thing
whatsoever requisite, necessary or convenient to be done in and about the
foregoing as fully as said Limited Partner might or
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could do if personally present and hereby ratifies and confirms all that said
attorney-in-fact shall lawfully do or cause to be done by virtue hereof. The
power hereby conferred shall be deemed to be a power coupled with an interest,
in recognition of the fact that each of the Partners under this Agreement will
be relying upon the power of the General Partners to act as contemplated by this
Agreement in any filing and other action by them on behalf of the Partnership,
and shall survive the bankruptcy, death, adjudication of incompetence or
insanity, or dissolution of any Person hereby giving such power and the transfer
or assignment of all or any part of the Units of such Person; provided, however,
that in the event of the transfer by a Limited Partner of all of his Units, the
foregoing power of attorney of a transferor Limited Partner shall survive such
transfer only until such time as the transferee shall have been admitted to the
Partnership as a substituted Limited Partner and all required documents and
instruments shall have been duly executed, sworn to, filed and recorded to
effect such substitution.
19.2 Required Signatures. Any writing to amend this Agreement to reflect
-------------------
the addition of a Limited Partner need be signed only by a General Partner, by
the Limited Partner who is disposing of his interest in the Partnership, if any,
and by the Person to be substituted or added as a Limited Partner. The General
Partners, or either of them, may sign for either or both of said Limited
Partners as their attorney-in-fact pursuant to paragraph (a) of Section 19.1
hereof. Any writing to amend this Agreement to reflect the removal or withdrawal
of a General Partner in the event the business of the Partnership is continued
pursuant to the terms of this Agreement need be signed only by a remaining or a
new General Partner.
19.3 Additional Documents. Each Partner, upon the request of the others,
--------------------
agrees to perform any further acts and execute and deliver any further documents
which may be reasonably necessary to carry out the provisions of this Agreement.
ARTICLE XX
DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
20.1 Dissolution. Except as otherwise provided in this Section 20.1, no
-----------
Partner shall have the right to cause dissolution of the Partnership before the
expiration of the term for which it is formed. The Partnership shall be
dissolved and terminated upon the happening of any of the following events:
(a) The expiration of the term of the Partnership as specified in
Article VI hereof;
(b) The decision by Majority Vote of the Limited Partners to
dissolve and terminate the Partnership;
(c) The entry of a decree of judicial dissolution by a court of
competent jurisdiction, provided that the foregoing shall not apply if the
Partnership files a voluntary petition seeking reorganization under the
bankruptcy laws;
(d) The retirement or withdrawal of a General Partner unless (i) the
remaining General Partner, if any, elects to continue the business of the
Partnership within 90 days from the date of such event, or (ii) if there is no
remaining General Partner, the Limited Partners, within 120 days from the date
of such event, elect by Majority Vote to continue the business of the
Partnership and elect a new General Partner pursuant to Section 20.3 below;
(e) The effective date of the removal of a General Partner unless
(i) the remaining General Partner, if any, elects to continue the business of
the Partnership within 90 days from the date of such event, or (ii) if there is
no remaining General Partner, Limited Partners, prior to the effective date of
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such removal, elect by Majority Vote to continue the business of the Partnership
and elect a new General Partner pursuant to Section 20.3 below;
(f) The effective date of an Event of Withdrawal of a General
Partner unless (i) the remaining General Partner, if any, elects to continue the
business of the Partnership within 90 days from the date of such Event of
Withdrawal, or (ii) if there is no remaining General Partner, the Limited
Partners, within 120 days from the date of such Event of Withdrawal, elect by
Majority Vote to continue the business of the Partnership and elect a new
General Partner pursuant to Section 20.3 below;
(g) The sale or other disposition of all of the interests in real
estate (including, without limitation, purchase money security interests and
interests in joint ventures or other entities owning interests in real estate)
of the Partnership; or
(h) The election by the General Partners to terminate the
Partnership, without the consent of any Limited Partner, in the event that
either (i) the Partnership's assets constitute "plan assets," as such term is
defined for purposes of ERISA, or (ii) any of the transactions contemplated by
this Agreement constitute a "prohibited transaction" under ERISA or the Code and
no exemption for such transaction is obtainable from the United States
Department of Labor or the General Partners determine in their discretion not to
seek such an exemption.
In the Event of Withdrawal of a General Partner resulting in only one
General Partner remaining, such remaining General Partner shall be obligated to
elect to continue the business of the Partnership within 90 days from the date
of such Event of Withdrawal.
The Partnership shall not be dissolved or terminated by the admission of
any new Limited Partner or by the withdrawal, expulsion, death, insolvency,
bankruptcy or disability of a Limited Partner.
20.2 Proxy to Liquidate. At any time commencing eight years after the
------------------
termination of the Offering, upon receipt by the General Partners of written
requests from Limited Partners holding 10% or more of the outstanding Units (the
"Proxy Request") directing that the General Partners formally proxy the Limited
Partners to determine whether the assets of the Partnership should be liquidated
(the "Proxy to Liquidate"), the General Partners shall send a Proxy to Liquidate
to each Limited Partner within 60 days of receipt of the Proxy Request, or as
soon as reasonably practicable thereafter following the receipt of independent
appraisals of Partnership Properties which the Partnership shall obtain as part
of this proxy process, and the filing and review of such Proxy to Liquidate by
the Securities and Exchange Commission. The General Partners shall not be
required to send Proxies to Liquidate to Limited Partners more frequently than
once during every two (2) year period. To insure that Limited Partners are
adequately informed when casting their votes, the Proxy to Liquidate furnished
to each Limited Partner shall include financial information setting forth per
Unit pro forma tax and financial projections which assume that all Partnership
Properties will be sold immediately at prices consistent with their appraised
values, or such other information as the General Partners deem appropriate and
informative, provided in all such cases that the furnishing of such information
to Limited Partners shall not contravene applicable law or applicable rules and
regulations of the Securities and Exchange Commission regarding the solicitation
of proxies. The Proxy to Liquidate shall contain a 45 day voting deadline, and
the actual voting results shall be tabulated by the Partnership's independent
accountants who will receive the votes directly from the Limited Partners. The
General Partners shall disclose the complete voting results for the Proxy to
Liquidate in the Partnership's next annual or quarterly report on Form 10-K or
10-Q sent to the Limited Partners for the period following the date on which
voting was completed. If a Majority Vote of the Limited Partners is cast in
favor of a liquidation of the Partnership, the assets of the Partnership shall
be fully liquidated within 30 months from the close of the voting deadline
applicable to the Proxy to
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Liquidate. Under no circumstances, however, shall the General Partners direct
the Partnership to make distributions "in kind" of any Partnership Properties to
the Limited Partners.
20.3 Limited Partners' Right to Continue the Business of the Partnership.
-------------------------------------------------------------------
Upon the occurrence of an event specified in paragraphs (d), (e) or (f) of
Section 20.1 above with respect to the last remaining General Partner, the
Limited Partners shall have a right prior to the effective date of the
occurrence of any such event to elect to continue the business of the
Partnership pursuant to the provisions of this Section 20.3. The effective date
of the events specified in paragraphs (d), (e) and (f) of Section 20.1 above
with respect to the last remaining General Partner shall be 120 days after the
date of any such event. In the case of the occurrence of an event specified in
paragraphs (d), (e) or (f) of Section 20.1 above, the Limited Partners may
elect, by Majority Vote within 120 days from the date of such event, to continue
the business of the Partnership and elect one or more new General Partners. The
new General Partner or General Partners so elected shall execute, deliver,
acknowledge and record an amendment to the Certificate and such other documents
and instruments as may be necessary or appropriate to effect such change.
20.4 Payment to Withdrawn or Removed General Partner. Upon the retirement,
-----------------------------------------------
removal or Event of Withdrawal of a General Partner, the Partnership shall be
required to pay such General Partner any amounts then accrued and owing to such
General Partner under this Agreement. The method of payment to any such General
Partner must be fair and must protect the solvency and liquidity of the
Partnership. In addition, the Partnership shall have the right, but not the
obligation, to terminate any such General Partner's interest in Partnership
income, losses, distributions and capital upon payment to him of an amount equal
to the value of his interest in Partnership income, losses, distributions and
capital on the date of such retirement, removal or Event of Withdrawal. Such
interest shall be computed taking into account the General Partner's economic
interest in the Partnership under Articles IX and X hereof, and shall be based
upon the market value of the assets of the Partnership determined as if such
assets were sold on the date of such retirement, removal or Event of Withdrawal.
In the event such General Partner (or his representative) and the Partnership
cannot mutually agree upon such value within 90 days following such removal or
withdrawal, such value shall be determined by arbitration before a panel of
three appraisers, one of whom shall be selected by such General Partner (or his
representative) and one by the Partnership, and the third of whom shall be
selected by the two appraisers so selected by the parties. Such arbitration
shall take place in Atlanta, Georgia and shall be in accordance with the rules
and regulations of the American Arbitration Association then in force and
effect. The expense of arbitration shall be borne equally by such General
Partner and the Partnership. Payment to such General Partner of the value of his
interest in Partnership income, losses, distributions and capital shall be made
by the delivery of a promissory note (i) if the termination was voluntary, being
unsecured, bearing no interest and having principal payable, if at all, from
distributions which the General Partner would have otherwise received under this
Agreement had the General Partner not terminated; or (ii) if the termination was
involuntary, coming due in not less than five years and bearing interest at the
rate of 9% per annum, with principal and interest payable annually in equal
installments. In addition, within 120 days after the determination of the fair
market value of the former General Partner's interest, upon the vote of a
majority of the Limited Partners, the Partnership may sell such interest to one
or more Persons who may be Affiliates of the remaining General Partner or
General Partners and admit such Person or Persons to the Partnership as
substitute General Partner or Partners; provided, however, that the purchase
price to be paid to the Partnership for the Partnership interest of the former
General Partner shall not be less than its fair market value as determined by
the appraisal described above. Such substitute General Partner or Partners may
pay said purchase price in installments in the manner set forth above. In the
event that such General Partner's interest is not terminated by the Partnership
pursuant to the provisions set forth above, such interest shall convert
automatically to a special limited partnership interest having the same interest
in the Partnership's income, losses, distributions and capital as was
attributable to such interest as a General Partner. In either event, any such
General Partner who has retired, has been removed or with
51
<PAGE>
respect to which an Event of Withdrawal has occurred shall have no further right
to participate in the management of the Partnership.
20.5 Termination of Executory Contracts. Upon the removal or occurrence of
----------------------------------
an Event of Withdrawal of a General Partner, all executory contracts between the
Partnership and such General Partner or any Affiliate thereof (unless such
Affiliate is also an Affiliate of a remaining or new General Partner or General
Partners) may be terminated and canceled by the Partnership without prior notice
or penalty. Such General Partner or any Affiliate thereof (unless such Affiliate
is also an Affiliate of a remaining or new General Partner or General Partners)
may also terminate and cancel any such executory contract effective upon 60 days
prior written notice of such termination and cancellation to the remaining or
new General Partner or General Partners, if any, or to the Partnership.
ARTICLE XXI
DISTRIBUTION ON TERMINATION OF PARTNERSHIP
21.1 Liquidation Distribution. Upon a dissolution and final termination of
------------------------
the Partnership, the General Partners (or in the event of a General Partner's
removal or termination and, if there is no remaining General Partner, any other
Person selected by the Limited Partners) shall take account of the Partnership
assets and liabilities, and the assets shall be liquidated as promptly as is
consistent with obtaining the fair market value thereof, and the proceeds
therefrom, to the extent sufficient therefor, shall be applied and distributed
in accordance with Section 9.4 hereof.
21.2 Time of Liquidation. A reasonable time shall be allowed for the
-------------------
orderly liquidation of the assets of the Partnership and the discharge of
liabilities to creditors so as to enable the General Partners to minimize the
losses upon a liquidation.
21.3 Liquidation Statement. Each of the Partners shall be furnished with a
---------------------
statement prepared or caused to be prepared by the General Partners, which shall
set forth the assets and liabilities of the Partnership as of the date of
complete liquidation. Upon compliance with the foregoing distribution plan, the
Limited Partners shall cease to be such, and the General Partners, as the sole
remaining Partners of the Partnership, shall execute, acknowledge and cause to
be filed a Certificate of Cancellation of the Partnership.
21.4 No Liability for Return of Capital. The General Partners shall not be
----------------------------------
personally liable for the return of all or any part of the Capital Contributions
of the Limited Partners. Any such return shall be made solely from Partnership
assets.
21.5 No Right of Partition. The Partners and Assignees shall have no right
---------------------
to receive Partnership Property in kind, nor shall such Partners or Assignees
have the right to partition the Partnership Property, whether or not upon the
dissolution and termination of the Partnership.
21.6 Priority; Return of Capital. Except as provided in this Agreement, no
---------------------------
Limited Partner shall have priority over any other Limited Partner either as to
the return of Capital Contributions or as to allocations of income and losses or
payments of distributions. Other than upon the dissolution and termination of
the Partnership as provided by this Agreement, there has been no time agreed
upon when the Capital Contribution of each Limited Partner is to be returned.
21.7 Escheat of Distributions. If, upon termination and dissolution of the
------------------------
Partnership, there remains outstanding on the books of the Partnership (after a
reasonable period of time determined in the sole discretion of the General
Partners) a material amount of distribution checks which have not been
52
<PAGE>
negotiated for payment by the Limited Partners, the General Partners may, if
deemed to be in the best interest of the Partnership, cause such amounts to be
redistributed pro rata to Limited Partners of record on such final distribution
date who have previously cashed all of their distribution checks; provided,
however, that neither the General Partners nor the Partnership shall be liable
for any subsequent claims for payment of such redistributed distributions. The
General Partners are not required to make such a redistribution, in which case
such amounts may eventually escheat to the appropriate state. Notwithstanding
the foregoing, the proceeds of distribution checks payable to Ohio residents
which have not been negotiated for payment within one year of the distribution
date shall be submitted to the Ohio Division of Unclaimed Funds in accordance
with the Ohio Unclaimed Funds statute, Chapter 169 of the Ohio Revised Code.
ARTICLE XXII
GENERAL PROVISIONS
22.1 Notices. Except as otherwise provided herein, any notice, payment,
-------
distribution or other communication which shall be required to be given to any
Partner in connection with the business of the Partnership shall be in writing
and any such notice shall become effective (a) upon personal delivery thereof,
including by overnight mail and courier service, or (b) four days after it shall
have been mailed by United States mail, first class with postage prepaid; in
each case, if to a Limited Partner, addressed to the last address furnished for
such purpose by the Limited Partner to whom it is authorized to be given as of
the time sent for delivery or as of the time of such mailing; and if to a
General Partner or the Partnership, at the principal office of the Partnership,
or at such other address as such General Partner may hereafter specify in a
notice duly given as provided herein.
22.2 Survival of Rights. This Agreement shall be binding upon and inure to
------------------
benefit of the Partners and their respective heirs, legatees, legal
representatives, successors and assigns.
22.3 Amendment. Except as specifically provided herein, following the
---------
admission of Additional Limited Partners to the Partnership, this Agreement may
be amended, modified and changed only after obtaining a Majority Vote of the
Limited Partners. When voting on whether to approve or reject proposed changes
to this Agreement, Limited Partners shall be permitted to vote separately on
each significant proposed change.
22.4 Headings. The captions of the articles and sections of this Agreement
--------
are for convenience only and shall not be deemed part of the text of this
Agreement.
22.5 Agreement in Counterparts. This Agreement, or any amendment hereto,
-------------------------
may be executed in counterparts each of which shall be deemed an original
Agreement, and all of which shall constitute one agreement, by each of the
Partners hereto on the dates respectively indicated in the acknowledgements of
said Partners, notwithstanding that all of the Partners are not signatories to
the original or the same counterpart, to be effective as of the day and year
first above written.
22.6 Governing Law. This Agreement shall be governed and construed
-------------
according to the laws of the State of Georgia governing partnerships; provided,
however, that causes of action for violations of federal or state securities
laws shall not be governed by this Section 22.6.
22.7 Time. Time is of the essence in this Agreement.
----
22.8 Pronouns. All pronouns and any variations thereof shall be deemed to
--------
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the Person or Persons may require.
53
<PAGE>
22.9 Separability of Provisions. Each provision of this Agreement shall be
--------------------------
considered separable and if for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation, or affect those portions, of this
Agreement which are valid.
22.10 No Mandatory Arbitration of Disputes. Except as may be permitted or
------------------------------------
required pursuant to Section 20.4 hereof, nothing in this Agreement or the
Subscription Agreement to be executed by each Limited Partner shall be deemed to
require the mandatory arbitration of disputes between a Limited Partner and the
Partnership or any Sponsor. Nothing contained in this Section 22.10 is intended
to apply to preexisting contracts between broker-dealers and Limited Partners.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement of
Limited Partnership of Wells Real Estate Fund XIII, L.P. under seal as of the
date and year first above written.
INITIAL LIMITED PARTNER:
__________________________________(SEAL)
DOUGLAS P. WILLIAMS
GENERAL PARTNERS:
WELLS CAPITAL, INC.
A Georgia Corporation
Attest:
By:_____________________________ By:_________________________________
Name:______________________ Leo F. Wells, III
Title:_____________________ President
__________________________________(SEAL)
LEO F. WELLS, III
54
<PAGE>
EXHIBIT "B"
SUBSCRIPTION AGREEMENT
To: Wells Real Estate Fund XIII, L.P.
Suite 250
6200 The Corners Parkway
Norcross, Georgia 30092
Ladies and Gentlemen:
The undersigned, by signing and delivering a copy of the attached
Subscription Agreement Signature Page, hereby tenders this subscription and
applies for the purchase of the number of units of limited partnership interest
("Units") of Wells Real Estate Fund XIII, L.P., a Georgia limited partnership
(the "Partnership"), set forth on such Subscription Agreement Signature Page.
Payment for the units is hereby made by check payable to "Bank of America,
N.A., as Escrow Agent."
Payments for Units will be held in escrow until the Partnership has
received and accepted subscriptions for 125,000 units ($1,250,000), except with
respect to residents of the States of New York and Pennsylvania, whose payments
for units will be held in escrow until the Partnership has received and accepted
subscriptions for 250,000 units ($2,500,000) from all investors.
I hereby acknowledge receipt of the Prospectus of Wells Real Estate Fund
XIII, L.P. dated ______________, 2001 (the "Prospectus"), which includes the
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") in the form attached as Exhibit A to the Prospectus.
I agree that if this subscription is accepted, it will be held, together
with the accompanying payment, on the terms described in the Prospectus and
that, if admitted to the Partnership, I shall be bound by the terms and
conditions of the Partnership Agreement, including the power of attorney granted
to the General Partners in Section 19.1 thereof. Subscriptions may be rejected
in whole or in part by the Partnership in its sole and absolute discretion.
Prospective investors are hereby advised of the following:
(a) The assignability and transferability of the Units is restricted and
will be governed by the Agreement of Limited Partnership of Wells Real Estate
Fund XIII, L.P. and all applicable laws as described in the Prospectus.
(b) Prospective investors should not invest in Units unless they have an
adequate means of providing for their current needs and personal contingencies
and have no need for liquidity in this investment.
(c) There is no public market for the Units and, accordingly, it may not
be possible to readily liquidate an investment in the Partnership.
I hereby constitute and appoint Wells Capital, Inc. and Leo F. Wells, III,
and each of them acting singly, with full power of substitution, my true and
lawful attorney-in-fact in my name, place and stead and for my use and benefit
(a) to sign, execute, deliver, certify, acknowledge, file and record a
Partnership Agreement in substantially the form attached as Exhibit A to the
Prospectus; and (b) to sign, execute, certify, acknowledge, swear to, file,
record and publish any other certificates, instruments and documents which may
be required of the Partnership under the laws of the State of Georgia or the
laws of any state or any governmental agency, or which such attorney-in-fact
deems necessary or advisable to file, record, publish, or deliver. The foregoing
grant of authority (a) is a special power of attorney coupled with an interest,
(b) is irrevocable and shall survive my death or disability, and (c) may be
exercised by such attorney-in-fact by listing my name along with the names of
all other persons for whom such attorney-in-fact is acting and executing the
Partnership Agreement and such other certificates, instruments and documents
with the single signature of a duly-authorized officer or agent of such
attorney-in-fact for all of the persons whose names are so listed.
B-1
<PAGE>
SPECIAL NOTICE FOR CALIFORNIA RESIDENTS ONLY
CONDITIONS RESTRICTING TRANSFER OF UNITS
260.14 1.11 Restrictions on Transfer.
------------------------
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 of the Rules
(the "Rules") adopted under the California Corporate Securities Law (the "Code")
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificate evidencing the security is
delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.14 1.12 of the Rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of the Rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the broker-
dealer, nor actually present in this state if the sale of such securities is not
in violation of any securities laws of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111,25112,25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled or actually present in this state;
B-2
<PAGE>
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES."
[Last amended effective January 21, 1988.]
SPECIAL NOTICE FOR MAINE, MASSACHUSETTS, MINNESOTA, MISSOURI
AND NEBRASKA RESIDENTS ONLY
In no event may a subscription for Units be accepted until at least five
business days after the date the subscriber receives the Prospectus. Residents
of the States of Maine, Massachusetts, Minnesota, Missouri and Nebraska who
first received the Prospectus only at the time of subscription may receive a
refund of the subscription amount upon request to the Partnership within five
days of the date of subscription.
B-3
<PAGE>
STANDARD REGISTRATION REQUIREMENTS
The following requirements have been established for the various forms of
registration. Accordingly, complete Subscription Agreements and such supporting
material as may be necessary must be provided.
TYPE OF OWNERSHIP AND SIGNATURE(S) REQUIRED
1. INDIVIDUAL: One signature required.
2. JOINT TENANTS WITH RIGHT OF SURVIVORSHIP: All parties must sign.
3. TENANTS IN COMMON: All parties must sign.
4. COMMUNITY PROPERTY: Only one investor signature required.
5. PENSION OR PROFIT SHARING PLANS: The trustee signs the Signature Page.
6. TRUST: The trustee signs the Signature Page. Provide the name of the trust,
the name of the trustee and the name of the beneficiary.
7. PARTNERSHIP: Identify whether the entity is a general or limited
partnership. The general partners must be identified and their signatures
obtained on the Signature Page. In the case of an investment by a general
partnership, all partners must sign (unless a "managing partner" has been
designated for the partnership, in which case he may sign on behalf of the
partnership if a certified copy of the document granting him authority to
invest on behalf of the partnership is submitted).
8. CORPORATION: The Subscription Agreement must be accompanied by (1) a
certified copy of the resolution of the Board of Directors designating the
officer(s) of the corporation authorized to sign on behalf of the
corporation and (2) a certified copy of the Board's resolution authorizing
the investment.
9. IRA AND IRA ROLLOVERS: Requires signature of authorized signer (e.g., an
officer) of the bank, trust company, or other fiduciary. The address of the
trustee must be provided in order for the trustee to receive checks and
other pertinent information regarding the investment.
10. KEOGH (HR 10): Same rules as those applicable to IRAs.
11. UNIFORM GIFT TO MINORS ACT (UGMA) or UNIFORM TRANSFERS TO MINORS ACT
(UTMA): The required signature is that of the custodian, not of the parent
(unless the parent has been designated as the custodian). Only one child is
permitted in each investment under UGMA or UTMA. In addition, designate the
state under which the gift is being made.
B-4
<PAGE>
INSTRUCTIONS TO SUBSCRIPTION AGREEMENT SIGNATURE PAGE
TO WELLS REAL ESTATE FUND XIII, L.P. SUBSCRIPTION AGREEMENT
--------------------------------------------------------------------------------
INVESTOR Please follow these instructions carefully. Failure to do
INSTRUCTIONS so may result in the rejection of your subscription. All
information on the Subscription Agreement Signature Page
should be completed as follows:
--------------------------------------------------------------------------------
1. INVESTMENT a. GENERAL: A minimum investment of $1,000 (100 Units) is
required, except for certain states which require a higher
minimum investment. A CHECK FOR THE FULL PURCHASE PRICE OF
THE UNITS SUBSCRIBED FOR SHOULD BE MADE PAYABLE TO THE
ORDER OF "BANK OF AMERICA, N.A., AS ESCROW AGENT."
Investors who have satisfied the minimum purchase
requirements in Wells Real Estate Fund I, Wells Real Estate
Fund II, Wells Real Estate Fund II-OW, Wells Real Estate
Fund III, L.P., Wells Real Estate Fund IV, L.P., Wells Real
Estate Fund V, L.P., Wells Real Estate Fund VI, L.P., Wells
Real Estate Fund VII, L.P., Wells Real Estate Fund VIII,
L.P., Wells Real Estate Fund IX, L.P., Wells Real Estate
Fund X, L.P., Wells Real Estate Fund XI, L.P., Wells Real
Estate Fund XII, L.P. or Wells Real Estate Investment
Trust, Inc. or in any other public real estate program may
invest as little as $25 (2.5 Units) except for residents of
Maine, Minnesota, Nebraska or Washington. Units may be
purchased only by persons meeting the standards set forth
under the Section of the Prospectus entitled "Investor
Suitability Standards." Please indicate the state in which
the sale was made.
b. DEFERRED COMMISSION OPTION: Please check the box if you
have agreed with your Broker-Dealer to elect the Deferred
Commission Option, as described in the Prospectus, as
supplemented to date. By electing the Deferred Commission
Option, you are required to pay only $9.40 per Unit
purchased upon subscription. For the next six years
following the year of subscription, you will have a 1%
sales commission ($.10 per Unit) per year deducted from and
paid out of net cash from operations otherwise
distributable to you. Election of the Deferred Commission
Option shall authorize the general partners to withhold
such amounts from dividends or other cash distributions
otherwise payable to you as is set forth in the "Plan of
Distribution" section of the Prospectus.
--------------------------------------------------------------------------------
2. CLASS STATUS OF Please check the appropriate box to identify the status of
UNITS units (Cash Preferred Units or Tax Preferred Units)
desired. These classes of units entitle holders to
different rights under the Partnership Agreement. For a
more complete description of the differences between the
two classes of units, see "Description of the Units" in the
Prospectus. If electing Cash Preferred Units for some units
and Tax Preferred Units for the remaining units being
purchased, please complete a separate Subscription
Agreement Signature Page for each class of Units.
--------------------------------------------------------------------------------
3. TYPE OF Please check the appropriate box to indicate the type of
OWNERSHIP entity or type of individuals subscribing.
--------------------------------------------------------------------------------
4. REGISTRATION Please enter the exact name in which the Units are to be
NAME AND held. For joint tenants with right of survivorship or
ADDRESS tenants in common, include the names of both investors. In
the case of partnerships or corporations, include the name
of an individual to whom correspondence will be addressed.
Trusts should include the name of the trustee. All
investors must complete the space provided for taxpayer
identification number or social security number. By signing
in
B-5
<PAGE>
--------------------------------------------------------------------------------
Section 6, the investor is certifying that this number is
correct. Enter the mailing address and telephone numbers of
the registered owner of this investment. In the case of a
Qualified Plan or trust, this will be the address of the
trustee. Indicate the birthdate and occupation of the
registered owner unless the registered owner is a
partnership, corporation or trust.
--------------------------------------------------------------------------------
5. INVESTOR NAME Complete this Section only if the investor's name and
AND ADDRESS address is different from the registration name and address
provided in Section 4. If the Units are registered in the
name of a trust, enter the name, address, telephone number,
social security number, birthdate and occupation of the
beneficial owner of the trust.
--------------------------------------------------------------------------------
6. SUBSCRIBER Please separately initial each representation made by the
SIGNATURES investor where indicated. Except in the case of fiduciary
accounts, the investor may not grant any person a power of
attorney to make such representations on his or her behalf.
Each investor must sign and date this Section. If title is
to be held jointly, all parties must sign. If the
registered owner is a partnership, corporation or trust, a
general partner, officer or trustee of the entity must
sign. PLEASE NOTE THAT THESE SIGNATURES DO NOT HAVE TO BE
NOTARIZED.
--------------------------------------------------------------------------------
7. ADDITIONAL Please check if you plan to make one or more additional
INVESTMENTS investments in the Partnership. All additional investments
must be in increments of at least $25 and, unless otherwise
indicated on a new Subscription Agreement Signature Page,
you will be deemed to have elected the same status of Units
(Cash Preferred Units or Tax Preferred Units) you check in
Section 2. Additional investments by residents of Maine
must be for the minimum amounts stated under "Suitability
Standards" in the Prospectus, and residents of Maine must
execute a new Subscription Agreement Signature Page to make
additional investments in the Partnership. If additional
investments in the Partnership are made, the investor
agrees to notify the General Partners and the Broker-Dealer
named on the Subscription Agreement Signature Page in
writing if at any time he fails to meet the applicable
suitability standards or he is unable to make any other
representations or warranties set forth in the Prospectus
or the Subscription Agreement. The investor acknowledges
that the Broker-Dealer named in the Subscription Agreement
Signature Page may receive a commission not to exceed 7% of
any such additional investments in the Partnership.
--------------------------------------------------------------------------------
8. DISTRIBUTIONS a. DISTRIBUTION REINVESTMENT PLAN: By electing the
distribution reinvestment plan, the investor elects to
reinvest all distributions of net cash from operations in
the Partnership and to have the option in the future to
invest net cash from operations in limited partnerships
sponsored by the General Partners or their affiliates which
have substantially identical investment objectives as the
Partnership. Unless the General Partners are otherwise
notified in writing, Units purchased pursuant to the
distribution reinvestment plan will initially be treated as
Cash Preferred Units. The investor agrees to notify the
General Partners and the Broker-Dealer named on the
Subscription Agreement Signature Page in writing if at any
time he fails to meet the applicable suitability standards
or he is unable to make any other representations and
warranties as set forth in the Prospectus or Subscription
Agreement or in the prospectus and subscription agreement
of any future limited partnerships sponsored by the General
Partners or their affiliates. The investor acknowledges
that the Broker-Dealer named in the Subscription Agreement
Signature Page may receive a commission not to exceed 7% of
any
B-6
<PAGE>
--------------------------------------------------------------------------------
reinvested distributions.
b. DISTRIBUTION ADDRESS: If cash distributions are to be
sent to an address other than that provided in Section 5
(i.e., a bank, brokerage firm or savings and loan, etc.),
please provide the name, account number and address.
--------------------------------------------------------------------------------
9. BROKER-DEALER This Section is to be completed by the Registered
Representative. Please complete all BROKER-DEALER
information contained in Section 9 including suitability
certification. SIGNATURE PAGE MUST BE SIGNED BY AN
AUTHORIZED REPRESENTATIVE.
--------------------------------------------------------------------------------
The Subscription Agreement Signature Page, which has been delivered with
this Prospectus, together with a check for the full purchase price, should be
delivered or mailed to your Broker-Dealer. Only original, completed copies of
Subscription Agreements can be accepted. Photocopied or otherwise duplicated
Subscription Agreements cannot be accepted by the Partnership.
IF YOU NEED FURTHER ASSISTANCE IN COMPLETING THIS
SUBSCRIPTION AGREEMENT SIGNATURE PAGE,
PLEASE CALL 1-800-448-1010
B-7
<PAGE>
--------------------------------------------
SEE PRECEDING PAGE Special Instructions:
FOR INSTRUCTIONS
--------------------------------------------
WELLS REAL ESTATE FUND XIII, L.P.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
<TABLE>
<S> <C>
1. ========INVESTMENT==============================================================================================================
----------------------------------------------------------------
Make Investment Check Payable to:
_____________________ _______________________ Bank of America, N.A., as Escrow Agent
# of Units Total $ Invested
---------------------------------------------------------
(# Units x $10 = $ Invested) [_] Initial Investment (Minimum $1,000)
[_] Additional Investments (Minimum $25)
Minimum purchase $1,000 or 100 Units State in which sale was made __________________
---------------------------------------------------------------- ---------------------------------------------------------
Check the following box to elect the Deferred Commission Option: [_]
(This election must be agreed to by the Broker-Dealer listed below)
2. ========CLASS STATUS OF UNITS===================================================================================================
Check appropriate box.
If electing both Cash Preferred Units and Tax Preferred Units, please complete a separate Signature page for each type of
investment.
[_] CASH PREFERRED UNITS [_] TAX PREFERRED UNITS
(Entitled to first priority on distributions on (Allocated certain tax deductions but no distributions of
cash flow from operations) cash flow from operations)
3. ========TYPE OF OWNERSHIP=======================================================================================================
[_] IRA (06) [_] Individual (01)
[_] Keogh (10) [_] Joint Tenants With Right of Survivorship(02)
[_] Qualified Pension Plan (11) [_] Community Property (03)
[_] Qualified Profit Sharing Plan (12) [_] Tenants in Common (04)
[_] Other Trust___________________________________ [_] Custodian: A Custodian for _____________________ under
For the Benefit of ___________________________ the Uniform Gift to Minors Act or the Uniform Transfers
[_] Partnership (15) to Minors Act of the State of _______________ (08)
[_] Other _________________________________________________
4. ========REGISTRATION NAME AND ADDRESS ==========================================================================================
Please print name(s) in which Units are to be registered. Include trust name if applicable.
[_] Mr [_] Mrs [_] Ms [_] MD [_] PhD [_] DDS [_] Other__________
----------------------------------------------------------------
Taxpayer Identification Number
[_][_]-[_][_][_][_][_][_][_]
----------------------------------------------------------------
Social Security Number
[_][_][_]-[_][_]-[_][_][_][_]
----------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Street Address
or P.O. Box
-------------------------------------------------------------------------------------------------------
City State Zip Code
------------------------------------- -------------------- -----------------------
------------------------------------- -------------------------------------------------
Home Business
Telephone No. ( ) Telephone No. ( )
------------------------------------- -------------------------------------------------
------------------------------------- -------------------------------------------------
Birthdate Occupation
------------------------------------- -------------------------------------------------
5. ========INVESTOR NAME AND ADDRESS===============================================================================================
(COMPLETE ONLY IF DIFFERENT FROM REGISTRATION NAME AND ADDRESS)
[_] Mr [_] Mrs [_] Ms [_] MD [_] PhD [_] DDS [_] Other__________
Name Social Security Number
----------------------------------------------------
[_][_][_]-[_][_]-[_][_][_][_]
----------------------------------------------------
-------------------------------------------------------------------------------------------------------
Street Address
or P.O. Box
-------------------------------------------------------------------------------------------------------
City State Zip Code
------------------------------------- -------------------- -----------------------
------------------------------------- -------------------------------------------------
Home Business
Telephone No. ( ) Telephone No. ( )
------------------------------------- -------------------------------------------------
------------------------------------- -------------------------------------------------
Birthdate Occupation
------------------------------------- -------------------------------------------------
====================================================================================================================================
(REVERSE SIDE MUST BE COMPLETED)
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
6. ========SUBSCRIBER SIGNATURES===================================================================================================
Please separately initial each of the representations below. Except in the case of fiduciary accounts, you may not grant any
person a power of attorney to make such representations on your behalf. In order to induce the Partnership to accept this
subscription, I hereby represent and warrant to you as follows:
(a) I have received the Prospectus. ____________ ____________
Initials Initials
(b) I accept and agree to be bound by the terms and conditions of the Partnership Agreement. ____________ ____________
Initials Initials
(c) I have (i) a net worth (exclusive of home, home furnishings and automobiles) of
$150,000 or more; or (ii) a net worth (as described above) of at least $45,000 and had
during the last tax year or estimate that I will have during the current tax year a
minimum of $45,000 annual gross income, or that I meet the higher suitability
requirements imposed by my state of primary residence as set forth in the Prospectus
under "Suitability Standards." ____________ ____________
Initials Initials
(d) If I am a California resident or if the Person to whom I subsequently propose to assign
or transfer any Units is a California resident, I may not consummate a sale or transfer
of my Units, or any interest therein, or receive any consideration therefor, without the
prior written consent of the Commissioner of the Department of Corporations of the State
of California, except as permitted in the Commissioner's Rules, and I understand that my
Units, or any document evidencing my Units, will bear a legend reflecting the substance
of the foregoing understanding. ____________ ____________
Initials Initials
(e) ARKANSAS, NEW MEXICO AND TEXAS RESIDENTS ONLY: I am purchasing the Units for my own
account and acknowledge that the investment is not liquid. ____________ ____________
Initials Initials
I declare that the information supplied above is true and correct and may be relied upon by the Partnership in connection with
my investment as a limited partner in the Partnership. Under penalties of perjury, by signing this Signature Page, I hereby
certify that (a) I have provided herein my correct Taxpayer Identification Number, and (b) I am not subject to back-up
withholding as a result of a failure to report all interest or dividends, or the Internal Revenue Service has notified me that
I am no longer subject to back-up withholding.
--------------------------------------------- ------------------------------------------------ -----------------------
--------------------------------------------- ------------------------------------------------ -----------------------
Signature of Investor or Trustee Signature of Joint Owner, if applicable Date
(MUST BE SIGNED BY TRUSTEE(S) IF IRA, KEOGH OR QUALIFIED PLAN.)
7. ========ADDITIONAL INVESTMENTS==================================================================================================
Please check if you plan to make additional investments in the Partnership: [_]
[If additional investments are made, please include social security number or other taxpayer identification number on your
check.]
[All additional investments must be made in increments of at least $25.]
8. ========DISTRIBUTIONS===========================================================================================================
8a. Check the applicable box to participate in the Distribution Reinvestment Plan: Percentage of participation: 100% [_] Other
[_] ____%
8b. Complete the following section only to direct distributions to a party other than registered owner:
------------------------------------------------------------------------------------------------
Name
------------------------------------------------------------------------------------------------
Account Number
------------------------------------------------------------------------------------------------
Street Address or P.O. Box
------------------------------------------------------------------------------------------------
City State Zip Code
-------------------------------------------- -------------- --------------------
9. ========BROKER-DEALER===========================================================================================================
(TO BE COMPLETED BY REGISTERED REPRESENTATIVE)
The Broker-Dealer or authorized representative must sign below to complete order. Broker-Dealer warrants that it is a duly
licensed Broker-Dealer and may lawfully offer Units in the state designated as the investor's address or the state in which the
sale was made, if different. The Broker-Dealer or authorized representative warrants that he has reasonable grounds to believe
this investment is suitable for the subscriber as defined in Section 3(b) of Attachment No. 1 to Dealer Agreement and that he
has informed subscriber of all aspects of liquidity and marketability of this investment as required by Section 4 of Attachment
No. 1 to Dealer Agreement.
------------------------------------------------------------ --------------------
Broker-Dealer Name Telephone No. ( )
------------------------------------------------------------------------------------------------
Broker-Dealer Street
Address or P.O. Box
------------------------------------------------------------------------------------------------
City State Zip Code
------------------------------------- --------------- --------------------
------------------------------------------------------------ --------------------
Registered
Representative Name Telephone No. ( )
------------------------------------------------------------------------------------------------
Reg. Rep. Street
Address or P.O. Box
------------------------------------------------------------------------------------------------
City State Zip Code
------------------------------------- --------------- --------------------
------------------------------------------------------------------- --------------------------------------------------
------------------------------------------------------------------- --------------------------------------------------
Broker-Dealer Signature, if required Registered Representative Signature
Please mail completed Subscription Agreement (with all signatures) and check(s) made payable to:
Bank of America, N.A., as Escrow Agent to:
Wells Investment Securities, Inc.
6200 The Corners Parkway, Suite 250
Norcross, Georgia 30092
800-448-1010 or 770-449-7800
Overnight address: Mailing address:
6200 The Corners Parkway, Suite 250 P.0. Box 926040
Norcross, Georgia 30092 Norcross, Georgia 30092-9209
FOR COMPANY USE ONLY:
----------------------------------------------------------------------------------------------------------------------------
ACCEPTANCE BY GENERAL PARTNERS Amount_____________________ Date _____________________________________________
Received and Subscription Accepted: Check No. _________________ Certificate No. __________________________________
By:_________________________________ Wells Real Estate Fund XIII, L.P.
______________________________ _______________________________________________________________ __________________________
Broker-Dealer # Registered Representative # Account#
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALPHABETICAL INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information....................................... 120
Compensation of the General Partners and Affiliates.......... 49
Conflicts of Interest........................................ 51
Description of the Units..................................... 69
Distributions and Allocations................................ 71
Estimated Use of Proceeds.................................... 47
Experts...................................................... 119
Federal Income Tax Consequences.............................. 92
Fiduciary Duty of the General Partners....................... 56
Financial Statements......................................... 122
Glossary..................................................... 120
Investment by Tax-Exempt Entities and ERISA
Considerations............................................. 87
Investment Objectives and Criteria........................... 32
Legal Opinions............................................... 119
Management................................................... 42
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 78
Plan of Distribution......................................... 114
Prior Performance Summary.................................... 58
Prior Performance Tables..................................... 152
Real Property Investments.................................... 77
Reports to Investors......................................... 112
Risk Factors................................................. 13
Suitability Standards........................................ 28
Summary of the Offering...................................... 6
Summary of Partnership Agreement............................. 78
Supplemental Sales Material.................................. 119
</TABLE>
Until __________, 2001 (90 days after the date of this prospectus), all dealers
that affect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as soliciting
dealers.
-----------------------
We have not authorized any dealer, salesperson or other individual to give any
information or to make any representations that are not contained in this
prospectus. If any such information or statements are given or made, you should
not rely upon such information or representation. This prospectus does not
constitute an offer to sell any securities other than those to which this
prospectus relates, or an offer to sell, or a solicitation of an offer to buy,
to any person in any jurisdiction where such an offer or solicitation would be
unlawful. This prospectus speaks as of the date set forth below. You should not
assume that the delivery of this prospectus or that any sale made pursuant to
this prospectus implies that the information contained in this prospectus will
remain fully accurate and correct as of any time subsequent to the date of this
prospectus.
-----------------------
WELLS REAL ESTATE FUND XIII, L.P.
Minimum Offering of $1,250,000
-----------------------
PROSPECTUS
-----------------------
WELLS INVESTMENT
SECURITIES, INC.
____________, 2001
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 31 Other Expenses of Issuance and Distribution
-------------------------------------------
Following is an itemized statement of the expenses of the
offering and distribution of the securities to be registered,
other than underwriting commissions:
Amount
------
SEC Registration Fee $ 11,880
NASD Filing Fee 5,000
Printing Expenses *
Legal Fees and Expenses *
Accounting Fees and Expenses *
Blue Sky Fees and Expenses *
Miscellaneous *
-------
Total $ *
=======
* To be filed by Amendment.
Item 32 Sales to Special Parties
------------------------
Not Applicable
Item 33 Recent Sales of Unregistered Securities
---------------------------------------
Not Applicable
Item 34 Indemnification of the General Partners
---------------------------------------
Wells Real Estate Fund XIII, L.P. (Wells Fund XIII) shall
indemnify and hold harmless each general partner from any
loss, liability or damage incurred or suffered by any such
general partner by reason of any act performed or omitted to
be performed by such general partner in connection with the
business of Wells Fund XIII, including attorneys' fees
incurred by such general partner in connection with the
defense of any claim or action based on any such act or
omission, which attorneys' fees may be paid as incurred,
except to the extent indemnification is prohibited by law;
provided however, that any such indemnification shall only be
from the assets of Wells Fund XIII and not from the limited
partners. Any indemnification required herein to be made by
Wells Fund XIII shall be made promptly following the fixing of
the loss, liability or damage incurred or suffered by a final
judgment of any court, settlement, contract or otherwise. A
general partner (a) shall be entitled to the foregoing
indemnification, and (b) shall not be liable to Wells Fund
XIII for any loss, liability or damage suffered or incurred by
Wells Fund XIII, directly or indirectly, in connection with
the activities of such general partner; provided that no
general partner whose action or omission to act caused the
loss, liability or damage incurred or suffered may receive
indemnification or avoid liability unless such general partner
determined in good faith that such course of conduct was in
the best interest of Wells Fund XIII, and such course of
conduct did not constitute (i) fraud, negligence, misconduct
or knowing violation of law, (ii) a breach of fiduciary duty
to Wells Fund XIII or any partner, or (iii) a breach of the
partnership agreement. Wells
II-1
<PAGE>
Fund XIII shall not pay for any insurance covering liability
of a general partner for actions or omissions for which
indemnification is not permitted under the partnership
agreement. Nothing contained in the partnership agreement
shall constitute a waiver by any limited partner of any right
which he may have against any party under federal or state
securities laws.
Indemnification of the general partners will not be allowed
for any liability, loss or damage incurred by them arising
under federal and state securities laws unless (i) there has
been a successful adjudication of the merits of each count
involving alleged securities law violations as to the general
partner seeking indemnification, or (ii) such claims have been
dismissed with prejudice on the merits by a court of competent
jurisdiction as to the general partner seeking
indemnification, or (iii) a court of competent jurisdiction
approves a settlement of the claims against a general partner
seeking indemnification and finds that indemnification of the
settlement and related costs should be made. Prior to seeking
a court approval for indemnification, the general partner
shall apprise the court of the position of the Securities and
Exchange Commission, the California Commissioner of the
Development of Corporations, the Massachusetts Securities
Division, the Missouri Securities Division, the Nebraska
Bureau of Securities, the Oklahoma Department of Securities,
the Pennsylvania Securities Commission, the Tennessee
Securities Division and the Texas State Securities Board
regarding indemnification for violations of securities laws.
Item 35 Treatment of Proceeds from Stock Being Registered
-------------------------------------------------
Not Applicable
Item 36 Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements:
--------------------
The following financial statements of Wells Real Estate
Fund XIII, L.P. are included in the Prospectus:
Audited Balance Sheet
(1) Report of Independent Public Accountants,
(2) Balance Sheet as of December 31, 1999, and
(3) Notes to Balance Sheet.
*Unaudited Balance Sheet
(1) Balance Sheets as of November 30, 2000 and
December 31, 1999, and
(2) Notes to Balance Sheet
The following financial statements of Wells Capital,
Inc. and Subsidiaries are included in the Prospectus:
Audited Financial Statements
(1) Report of Independent Public Accountants,
(2) Consolidated Balance Sheets as of December
31, 1999 and 1998,
(3) Consolidated Statements of (Loss) Income for
the years ended December 31, 1999 and 1998,
II-2
<PAGE>
(4) Consolidated Statements of Stockholder's
Equity for the years ended December 31, 1999
and 1998,
(5) Consolidated Statements of Cash Flows for the
years ended December 31, 1999 and 1998, and
(6) Notes to Consolidated Financial Statements.
*Unaudited Financial Statements
(1) Balance Sheets as of November 30, 2000 and
December 31, 1999,
(2) Statements of Operations for the eleven
months ended November 30, 2000 and 1999,
(3) Statement of Stockholder's Equity for the
eleven months ended November 30, 2000 and the
year ended December 31, 1999,
(4) Statements of Cash Flow for the eleven months
ended November 30, 2000 and 1999, and
(5) Condensed Notes to Financial Statements.
*To be filed by Amendment
(b) Exhibits (See Exhibit Index):
----------------------------
Exhibit No. Description
----------- -----------
1 Form of Dealer Manager Distribution Agreement between Wells
Real Estate Fund XIII, L.P. and Wells Investment Securities,
Inc.
3.1 Form of Agreement of Limited Partnership of Wells Real Estate
Fund XIII, L.P. (included as Exhibit A to Prospectus)
3.2 Certificate of Limited Partnership of Wells Real Estate Fund
XIII, L.P. dated September 15, 1998
3.2(a) Certificate of Amendment to the Certificate of Limited
Partnership of Wells Real Estate Fund XIII, L.P. dated October
20, 2000
4 Form of Subscription Agreement and Subscription Agreement
Signature Page (included as Exhibit B to Prospectus)
5.1 Opinion of Holland & Knight LLP regarding the legality of the
securities of Wells Real Estate Fund XIII, L.P. to be offered
(to be filed by amendment)
8 Opinion of Holland & Knight LLP regarding tax matters (to be
filed by amendment)
10.1 Form of Escrow Agreement between Wells Real Estate Fund XIII,
L.P. and Bank of America, N.A.
10.2 Form of Leasing and Tenant Coordinating Agreement between
Wells Real Estate Fund XIII, L.P. and Wells Management
Company, Inc.
10.3 Form of Management Agreement between Wells Real Estate Fund
XIII, L.P. and Wells Management Company, Inc.
23.1 Consent of Holland & Knight LLP (included in Exhibits 5.1 and
8)
23.2 Consent of Arthur Andersen LLP
II-3
<PAGE>
Item 37 Undertakings
------------
(a) Wells Fund XIII undertakes to file, during any
period in which offers or sales are being made, a post-
effective amendment to this Registration Statement (i) to
include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Act"); (ii) to reflect in the
prospectus any facts or events arising after the effective
date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information
set forth in the Registration Statement; and (iii) to include
any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement, including (but not limited to) any
addition or deletion of a managing underwriter.
(b) Wells Fund XIII undertakes (i) that, for the
purpose of determining any liability under the Act, each such
post-effective amendment may be deemed to be a new
Registration Statement relating to the securities offered
therein and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof, (ii)
that all post-effective amendments will comply with the
applicable forms, rules and regulations of the Commission in
effect at the time such post-effective amendments are filed,
and (iii) to remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(c) Wells Fund XIII undertakes to send to each limited
partner, at least on an annual basis, a detailed statement of
any transactions with the general partners or their
affiliates, and of fees, commissions, compensation and other
benefits paid, or accrued to the general partners or their
affiliates, for the fiscal year completed, showing the amount
paid or accrued to each recipient and the services performed.
(d) To file a sticker supplement pursuant to Rule
424(c) under the Act during the distribution period describing
each property not identified in the prospectus at such time as
there arises a reasonable probability that such property will
be acquired and to consolidate all such stickers into a post-
effective amendment filed at least once every three months
with the information contained in such amendment provided
simultaneously to the existing limited partners; each sticker
supplement should disclose all compensation and fees received
by the general partners and their affiliates in connection
with any such acquisition; the post-effective amendment shall
include audited financial statements meeting the requirements
of Rule 3-14 of Regulation S-X only for properties acquired
during the distribution period.
(e) To file, after the end of the distribution period,
a current report on Form 8-K containing the financial
statements and any additional information required by Rule 3-
14 of Regulation S-X, to reflect each commitment (i.e., the
signing of a binding purchase agreement) made after the end of
the distribution period involving the use of 10% or more (on a
cumulative basis) of the net proceeds of the offering and to
provide the information contained in such report to the
limited partners at least once each quarter after the
distribution period of the offering has ended.
(f) Wells Fund XIII undertakes to file the financial
statements as required by Form 10-K for the first full fiscal
year of operations and to provide each limited partner the
financial statements required by Form 10-K for such year.
II-4
<PAGE>
(g) Wells Fund XIII undertakes to distribute to each
limited partner, within sixty (60) days after the close of
each quarterly period, a copy of each report on Form 10-Q
which is required to be filed with the Commission or a
quarterly report containing at least as much information as
the report on Form 10-Q.
(h) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of Wells Fund XIII
pursuant to the foregoing provisions, or otherwise, Wells Fund
XIII has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Wells Fund
XIII of expenses incurred or paid by a director, officer or
controlling person of Wells Fund XIII in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, Wells Fund XIII will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(i) Wells Fund XIII undertakes that if at the
commencement of the offering of the units of Wells Fund XIII
(which will not take place until the completion of the
offering of Wells Fund XII and the filing of the supplement
contemplated by the preceding undertaking), Wells Fund XIII
will not commence until after a post-effective amendment to
the Registration Statement has been filed and declared
effective. Any such post-effective amendment shall contain
such information as would be required in an original
registration statement with respect to the property being
acquired (including audited financial statements of the
property to be acquired meeting the requirements of Rule 3-14
of Regulation S-X).
II-5
<PAGE>
TABLE VI
ACQUISITIONS OF PROPERTIES BY PROGRAMS
The information contained on the following pages relates to acquisitions of
properties within the past three (3) years by prior programs with which the
general partners and their affiliates have been affiliated and which have
substantially similar investment objectives to Wells Fund XIII. This table
provides the potential investor with information regarding the general nature
and location of the properties and the manner in which the properties were
acquired. None of the information in Table VI has been audited.
II-6
<PAGE>
TABLE VI
--------
Wells Funds IX, X, XI and REIT
------------------------------
Name of property Ohmeda Building
Location of property Centennial Parkway, Louisville, Boulder County,
Colorado
Type of property Two-story office building
Size of parcel 15 acres
Gross leasable space 106,750 sq. feet
Date of commencement of Fund IX - February 12, 1996
operations/1/ Fund X - February 4, 1997
Fund XI - March 3, 1998
REIT - June 5, 1998
Date of purchase/2/ February 13, 1998
Mortgage financing at
date of purchase N/A
Cash down payment $100,000
Contract purchase price
plus acquisition fee $10,331,644
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/3/ $572,851
Total Acquisition Cost $10,904,495
____________
/1/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/2/ The Fund IX-X Joint Venture acquired the Ohmeda Building on February
13, 1998, and on June 11, 1998, Wells Fund XI and Wells OP (the operating
partnership of the Wells REIT) were admitted to the Fund IX-X Joint Venture as
joint venture partners.
/3/ Includes improvements made after acquisitions through September 30,
2000.
II-7
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds IX, X, XI and REIT
------------------------------
Name of property Interlocken Building
Location of property Highway 36, Broomfield, Boulder County, Colorado
Type of property Three-story multi-tenant office building
Size of parcel 5.1 acres
Gross leasable space 51,974 sq. feet
Date of commencement of Fund IX - February 12, 1996
operations/4/ Fund X - February 4, 1997
Fund XI - March 3, 1998
REIT - June 5, 1998
Date of purchase/5/ March 20, 1998
Mortgage financing at
date of purchase N/A
Cash down payment $50,000
Contract purchase price
plus acquisition fee $8,293,000
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/6/ $447,766
Total Acquisition Cost $8,740,766
____________
/4/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/5/ The Fund IX-X Joint Venture acquired the Interlocken Building on March
20, 1998, and on June 11, 1998, Wells Fund XI and Wells OP (the operating
partnership of the Wells REIT) were admitted to the Fund IX-X Joint Venture as
joint venture partners.
/6/ Includes improvements made after acquisitions through September 30,
2000.
II-8
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds IX, X, XI and REIT
------------------------------
Name of property Iomega Building
Location of property 2976 South Commerce Way, Ogden, Weber County, Utah
Type of property One-story warehouse and office building
Size of parcel 8.03 acres
Gross leasable space 100,000 sq. feet
Date of commencement of Fund IX - February 12, 1996
operations/7/ Fund X - February 4, 1997
Fund XI - March 3, 1998
REIT - June 5, 1998
Date of purchase/8/ April 1, 1998
Mortgage financing at
date of purchase N/A
Cash down payment $50,000
Contract purchase price
plus acquisition fee $5,050,425
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/9/ $1,097,658
Total Acquisition Cost $6,148,083
____________
/7/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/8/ Wells Fund X acquired the Iomega Building on April 1, 1998, and on
June 24, 1998, Wells Fund X contributed the Iomega Building to the Fund IX-X-XI-
REIT Joint Venture.
/9/ Includes improvements made after acquisitions through September 30,
2000.
II-9
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds IX, X, XI and REIT
------------------------------
Name of property Lucent Building
Location of property 14400 Hertz Quail Springs Parkway, Oklahoma City,
Oklahoma
Type of property One-story office building
Size of parcel 5.3 acres
Gross leasable space 57,186 sq. feet
Date of commencement of Fund IX - February 12, 1996
operations/10/ Fund X - February 4, 1997
Fund XI - March 3, 1998
REIT - June 5, 1998
Date of purchase June 24, 1998
Mortgage financing at
date of purchase N/A
Cash down payment $1,600,000
Contract purchase price
plus acquisition fee $5,504,276
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/11/ $127,062
Total Acquisition Cost $5,631,338
___________
/10/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/11/ Includes improvements made after acquisitions through September 30,
2000.
II-10
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds X, XI and REIT
--------------------------
Name of property Cort Furniture Building
Location of property 10700 Spencer Avenue, Fountain Valley, Orange
County, California
Type of property One-story office and warehouse building
Size of parcel 3.65 acres
Gross leasable space 52,000 sq. feet
Date of commencement of Fund X - February 4, 1997
operations/12/ Fund XI - March 3, 1998
REIT - June 5, 1998
Date of purchase July 31, 1998
Mortgage financing at
date of purchase N/A
Cash down payment $100,000
Contract purchase price
plus acquisition fee $6,548,000
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/13/ $303,616
Total Acquisition Cost $6,851,616
_______________
/12/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/13/ Includes improvements made after acquisitions through September 30,
2000.
II-11
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds X, XI and REIT
--------------------------
Name of property Fairchild Building
Location of property 47320 Kato Road, Fremont, Alameda County,
California
Type of property Two-story office and manufacturing building
Size of parcel 3.05 acres
Gross leasable space 58,424 sq. feet
Date of commencement of Fund X - February 4, 1997
operations/14/ Fund XI - March 3, 1998
REIT - June 5, 1998
Date of purchase July 21, 1998
Mortgage financing at
date of purchase N/A
Cash down payment $100,000
Contract purchase price
plus acquisition fee $8,960,000
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/15/ $397,409
Total Acquisition Cost $9,357,409
______________
/14/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/15/ Includes improvements made after acquisitions through September 30,
2000.
II-12
<PAGE>
TABLE VI (continued)
-------------------
Wells REIT
----------
Name of property PricewaterhouseCoopers Building
Location of property George Road, Tampa, Hillsborough County, Florida
Type of property Four-story office building
Size of parcel 9 acres
Gross leasable space 130,091 sq. feet
Date of commencement of June 5, 1998
operations/16/
Date of purchase December 31, 1998
Mortgage financing at
date of purchase $14,132,538
Cash down payment $420,000
Contract purchase price
plus acquisition fee $21,226,463
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $898,168
Total Acquisition Cost $22,124,631
____________
/16/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-13
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property AT&T Building
Location of property Progress Avenue and Interstate Drive, Harrisburg,
Dauphin County, Pennsylvania
Type of property Four-story office building
Size of parcel 10.5 acres
Gross leasable space 81,859 sq. feet
Date of commencement of June 5, 1998
operations/17/
Date of purchase February 4, 1999
Mortgage financing at
date of purchase $6,425,000
Cash down payment $250,000
Contract purchase price
plus acquisition fee $12,531,900
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $232,209
Total Acquisition Cost $12,764,109
_____________
/17/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-14
<PAGE>
TABLE VI (continued)
-------------------
Wells REIT
----------
Name of property Matsushita Building
Location of property Pacific Commercentre, Lake Forest, Orange County,
California
Type of property Construction of a two-story office building
Size of parcel 8.8 acres
Gross leasable space 150,000 sq. feet
Date of commencement of June 5, 1998
operations/18/
Date of purchase March 15, 1999
Mortgage financing at
date of purchase N/A
Cash down payment N/A
Contract purchase price
plus acquisition fee $4,577,485
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/19/ $13,822,515
Total Acquisition Cost $18,400,000
_______________
/18/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/19/ Includes improvements made after acquisitions through September 30,
2000.
II-15
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds XI, XII and REIT
----------------------------
Name of property EYBL CarTex Building
Location of property 111 SouthChase Boulevard in SouthChase Industrial
Park, Fountain Inn, Greenville County, South
Carolina
Type of property Two-story manufacturing and office building
Size of parcel 11.94 acres
Gross leasable space 169,510 sq. feet
Date of commencement of Fund XI - March 3, 1998
operations/20/ Fund XII - June 1, 1999
REIT - June 5, 1998
Date of purchase May 18, 1999
Mortgage financing at
date of purchase N/A
Cash down payment $50,000
Contract purchase price
plus acquisition fee $5,122,000
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $225,540
Total Acquisition Cost $5,347,540
_____________
/20/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-16
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds XI, XII and REIT
----------------------------
Name of property Sprint Building
Location of property Leawood, Kansas
Type of property Three-story office building
Size of parcel 7.12 acres
Gross leasable space 68,900 sq. feet
Date of commencement of Fund XI - March 3, 1998
operations/21/ Fund XII - June 1, 1999
REIT - June 5, 1998
Date of purchase July 2, 1999
Mortgage financing at
date of purchase N/A
Cash down payment $1,000,000
Contract purchase price
plus acquisition fee $9,546,210
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $398,299
Total Acquisition Cost $9,944,509
____________
/21/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-17
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property ABB Richmond Building
Location of property Midlothian, Chesterfield County, Virginia
Type of property Four story office building
Size of parcel 7.49 acres
Gross leasable space 99,057 sq. feet
Date of commencement of June 5, 1998
operations/22/
Date of purchase July 22, 1999
Mortgage financing at
date of purchase N/A
Cash down payment $948,400
Contract purchase price
plus acquisition fee $948,400
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/23/ $9,969,515
Total Acquisition Cost $10,917,915
______________
/22/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/23/ Includes the improvements made after acquisition through September 30,
2000.
II-18
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds XI, XII and REIT
----------------------------
Name of property Johnson Matthey Building
Location of property 434-436 Devon Park Drive, Tredyffrin, Chester
County, Pennsylvania
Type of property Research and development, office and warehouse
building
Size of parcel 10.0 acres
Gross leasable space 130,000 sq. feet
Date of commencement of Fund XI - March 3, 1998
operations/24/ Fund XII - June 1, 1999
REIT - June 5, 1998
Date of purchase August 17, 1999
Mortgage financing at
date of purchase N/A
Cash down payment $200,000
Contract purchase price
plus acquisition fee $8,050,000
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $342,077
Total Acquisition Cost $8,392,077
__________
/24/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-19
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Marconi Building
Location of property Chancellory Business Park, Wood Dale, Illinois
Type of property Two story office, assembly and manufacturing
building
Size of parcel 15.3 acres
Gross leasable space 250,354 sq. feet
Date of commencement of REIT - June 5, 1998
operations/25/
Date of purchase September 10, 1999
Mortgage financing at
date of purchase N/A
Cash down payment $500,000
Contract purchase price
plus acquisition fee $32,630,940
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $1,912,472
Total Acquisition Cost $34,543,412
____________
/25/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-20
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds XI, XII and REIT
----------------------------
Name of property Gartner Building
Location of property Fort Myers, Florida
Type of property Two story office building
Size of parcel 4.9 acres
Gross leasable space 62,400 sq. feet
Date of commencement of Fund XI - March 3, 1998
operations/26/ Fund XII - June 1, 1999
REIT - June 5, 1998
Date of purchase September 20, 1999
Mortgage financing at
date of purchase N/A
Cash down payment $500,000
Contract purchase price
plus acquisition fee $8,347,600
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $347,824
Total Acquisition Cost $8,695,424
______________
/26/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-21
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Cinemark Building
Location of property Plano, Collin County, Texas
Type of property Five story office building
Size of parcel 3.52 acres
Gross leasable space 118,108 sq. feet
Date of commencement of June 5, 1998
operations/27/
Date of purchase December 21, 1999
Mortgage financing at
date of purchase N/A
Cash down payment N/A
Contract purchase price
plus acquisition fee $21,826,900
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $920,379
Total Acquisition Cost $22,747,279
____________
/27/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-22
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Metris Building
Location of property Tulsa, Tulsa County, Oklahoma
Type of property Three story office building
Size of parcel 14.6 acres
Gross leasable space 101,100 sq. feet
Date of commencement of June 5, 1998
operations/28/
Date of purchase February 11, 2000
Mortgage financing at
date of purchase 8,000,000
Cash down payment $4,740,000
Contract purchase price
plus acquisition fee $12,740,000
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $521,072
Total Acquisition Cost $13,261,072
______________
/28/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-23
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Dial Building
Location of property 15501 N. Dial Boulevard, Scottsdale, Maricopa
County, Arizona
Type of property Two story office building
Size of parcel 8.8 acres (approximately)
Gross leasable space 129,689 sq. feet
Date of commencement of June 5, 1998
operations/29/
Date of purchase March 29, 2000
Mortgage financing at
date of purchase $14,289,309
Cash down payment $100,000
Contract purchase price
plus acquisition fee $14,289,309
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $597,264
Total Acquisition Cost $14,886,573
______________
/29/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-24
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property ASML Building
Location of property 8555 South River Parkway, Tempe, Maricopa County,
Arizona
Type of property Two story office and warehouse building
Size of parcel 9.51 acres
Gross leasable space 95,133 sq. feet
Date of commencement of June 5, 1998
operations/30/
Date of purchase March 29, 2000
Mortgage financing at
date of purchase $17,397,133
Cash down payment $100,000
Contract purchase price
plus acquisition fee $17,397,133
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $727,185
Total Acquisition Cost $18,124,318
____________
/30/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-25
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Motorola Building
Location of property 8075 South River Parkway, Tempe, Maricopa County,
Arizona
Type of property Two story office building
Size of parcel 12.44 acres
Gross leasable space 133,225 sq. feet
Date of commencement of June 5, 1998
operations/31/
Date of purchase March 29, 2000
Mortgage financing at
date of purchase $8,813,558
Cash down payment $100,000
Contract purchase price
plus acquisition fee $16,036,219
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $669,639
Total Acquisition Cost $16,705,858
_______________
/31/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-26
<PAGE>
TABLE VI (continued)
--------------------
Wells Fund XII and REIT
-----------------------
Name of property Siemens Building
Location of property 4685 Investment Drive, Troy, Oakland County,
Michigan
Type of property Three story office building
Size of parcel 5.3 acres
Gross leasable space 71,054 sq. feet
Date of commencement of Fund XII - June 1, 1999
operations/32/ REIT - June 5, 1998
Date of purchase May 10, 2000
Mortgage financing at
date of purchase N/A
Cash down payment $400,000
Contract purchase price
plus acquisition fee $14,292,489
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/33/ $1,440,430
Total Acquisition Cost $12,852,059
______________
/32/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/33/ Includes improvements made after acquisitions through September 30,
2000.
II-27
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Avnet Building
Location of property 8700 South Price Road, Tempe, Maricopa County,
Arizona
Type of property Two story office building
Size of parcel 9.63 acres
Gross leasable space 132,070 sq. feet
Date of commencement of June 5, 1998
operations/34/
Date of purchase June 12, 2000
Mortgage financing at
date of purchase N/A
Cash down payment $100,000
Contract purchase price
plus acquisition fee $13,269,502
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized N/A
Total Acquisition Cost $13,269,502
______________
/34/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-28
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Delphi Building
Location of property 1441 West Long Lake Road, Troy, Oakland County,
Michigan
Type of property Three story office building
Size of parcel 5.52 acres
Gross leasable space 107,152 sq. feet
Date of commencement of June 5, 1998
operations/35/
Date of purchase June 29, 2000
Mortgage financing at
date of purchase $8,000,000
Cash down payment N/A
Contract purchase price
plus acquisition fee $19,921,332
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized N/A
Total Acquisition Cost $19,921,332
____________
/35/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-11 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Norcross, and State of Georgia, on the 30th day of
October, 2000.
WELLS REAL ESTATE FUND XIII, L.P.
(Registrant)
By: Wells Capital, Inc.
General Partner
By: /s/ Leo F. Wells, III
---------------------------
Leo F. Wells, III
President
By: /s/ Leo F. Wells, III
---------------------------
Leo F. Wells, III
General Partner
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following person in the capacity
and on the date indicated.
Signatures Title Date
---------- ----- ----
/s/ Leo F. Wells, III President (Chief Executive Officer), October 30, 2000
--------------------- Treasurer and Sole Director of Wells
Leo F. Wells, III Capital, Inc.
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No.
-----------
1 Form of Dealer Manager Distribution Agreement between Wells Real
Estate Fund XIII, L.P. and Wells Investment Securities, Inc., filed
herewith
3.1 Form of Agreement of Limited Partnership of Wells Real Estate Fund
XIII, L.P. (included as Exhibit A to Prospectus)
3.2 Certificate of Limited Partnership of Wells Real Estate Fund XIII,
L.P. dated September 15, 1998, filed herewith
3.2(a) Certificate of Amendment to the Certificate of Limited Partnership
of Wells Real Estate Fund XIII, L.P. dated October 20, 2000, filed
herewith
4 Form of Subscription Agreement and Subscription Agreement Signature
Page (included as Exhibit B to Prospectus)
5.1 Opinion of Holland & Knight LLP regarding the legality of
securities of Wells Real Estate Fund XIII, L.P. to be offered (to
be filed by amendment)
8 Opinion of Holland & Knight LLP regarding tax matters (to be filed
by amendment)
10.1 Form of Escrow Agreement between Wells Real Estate Fund XIII, L.P.
and Bank of America, N.A., filed herewith
10.2 Form of Leasing and Tenant Coordinating Agreement between Wells
Real Estate Fund XIII, L.P. and Wells Management Company, Inc.,
filed herewith
10.3 Form of Management Agreement between Wells Real Estate Fund XIII,
L.P. and Wells Management Company, Inc., filed herewith
23.1 Consent of Holland & Knight LLP (included in Exhibits 5.1 and 8)
23.2 Consent of Arthur Andersen LLP, filed herewith
