<PAGE>
As filed with the Securities and Exchange Commission on January 16, 2001
Registration No. 333-48984
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
AMENDMENT NO. 1 TO
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
-----------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Amount Being Offering Price Aggregate Amount of
Securities Being Registered/(1)/ Registered Per Unit Offering Price Registration Fee(2)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Preferred Units
Tax Preferred Units 4,500,000 $10.00 $45,000,000 $11,880
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(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.
(2) The Registrant previously paid a registration fee of $11,880 upon its
initial filing of the Registration Statement, so no amounts are being
remitted with this filing.
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
<TABLE>
<S> <C>
Wells Real Estate Fund XIII, L.P. (Wells The most significant risks relating to an
Fund XIII) is a limited partnership that will invest investment in Wells Fund XIII include the
in commercial real estate properties primarily following:
consisting of Class A office buildings leased to
tenants having a net worth at the time of lease . inability to resell or dispose of the
execution of over $100,000,000. We are offering units, except at a substantial
and selling to the public 4,500,000 units of limited discount from the per unit price,
partnership interest for $10 per unit, the proceeds . total reliance on the general
of which will be invested in such real estate partners to select properties and
properties. Upon your purchase of units, you will conduct our operations,
elect to have your units treated as either cash . authorization of substantial fees to
preferred units or tax preferred units. the general partners and their
affiliates,
. Cash preferred units entitle you to . limited voting rights of investors
distributions of cash flow from . if we only sell 125,000 units, we
operations. may buy only one property,
. Tax preferred units entitle you to a higher . liquidation of the partnership may
percentage of net sale proceeds upon the not occur for over 12 years,
sale of our properties and allocations of . conflicts of interest facing the
certain tax deductions. general partners, and
. dependence on our tenants for
You must purchase at least 100 units for revenue.
$1,000 except in certain states as described on
page __ of this prospectus. Your money will be You should see the complete discussion of
placed in an interest-bearing escrow account with the risk factors beginning on page 11.
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.
</TABLE>
The Offering:
<TABLE>
<S> <C>
. We will invest approximately 84% of the . Our units will be offered to the
offering proceeds raised in real estate public at $10 per unit for a total
properties, and the balance will be used offering of $45,000,000.
to pay fees and expenses. . We will offer units in Wells Fund
. We will pay selling commissions to XIII until the earlier of ________,
broker-dealers of 7% and a dealer 2003, or, the date we sell all
manager fee for reimbursement of $45,000,000 worth of units.
marketing expenses of 2.5% out of
offering proceeds raised.
</TABLE>
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................................................................ 4
Risk Factors........................................................................... 11
Investment Risks...................................................................... 11
Special Risks Regarding Status of Units............................................... 17
Real Estate Risks..................................................................... 19
Federal Income Tax Risks.............................................................. 22
Retirement Plan and Qualified Plan Risks.............................................. 24
Suitability Standards.................................................................. 27
Investment Objectives and Criteria..................................................... 31
General............................................................................... 31
Acquisition and Investment Policies................................................... 31
Development and Construction of Properties............................................ 34
Acquisition of Properties from Wells Development Corporation.......................... 34
Terms of Leases and Tenant Creditworthiness........................................... 36
Borrowing Policies.................................................................... 37
Joint Venture Investments............................................................. 38
Disposition Policies.................................................................. 39
Other Policies........................................................................ 40
Management............................................................................. 41
The General Partners.................................................................. 41
Affiliated Companies.................................................................. 44
Estimated Use of Proceeds.............................................................. 47
Compensation of the General Partners and Affiliates.................................... 48
Conflicts of Interest.................................................................. 51
Fiduciary Duty of the General Partners................................................. 55
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............................................................... 73
Monthly Distributions................................................................. 76
Real Property Investments.............................................................. 76
Management's Discussion and Analysis of Financial Condition and Results of Operations.. 77
Summary of Partnership Agreement....................................................... 78
Powers of the General Partners........................................................ 78
Liabilities of the Limited Partners; Nonassessability of Units........................ 78
Other Activities of the General Partners.............................................. 78
Rights of Limited Partners to Participate in Management............................... 78
Voting Rights of the Limited Partners................................................. 78
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Mergers and Consolidations............................................................ 79
Special Partnership Provisions........................................................ 80
Removal of General Partners........................................................... 80
Assignability of General Partners' Interests.......................................... 80
Books and Records; Rights to Information; Annual Audits............................... 80
Meetings of Limited Partners.......................................................... 81
Transferability of Units.............................................................. 81
Repurchase of Units................................................................... 82
Distribution Reinvestment Plan........................................................ 83
Proxy to Liquidate.................................................................... 85
Dissolution and Termination........................................................... 85
Investment By Tax-Exempt Entities and ERISA Considerations............................. 86
General............................................................................... 86
Minimum Distribution Requirements - Plan Liquidity.................................... 87
Annual Valuation Requirement.......................................................... 87
Fiduciary Obligations - Prohibited Transactions....................................... 88
Plan Assets - Definition.............................................................. 88
Plan Asset Regulations - Available Exemptions......................................... 89
Plan Asset Consequences - Prohibited Transaction Excise Tax........................... 90
Federal Income Tax Consequences........................................................ 91
Tax Opinion........................................................................... 92
Partnership Status Generally.......................................................... 94
Publicly Traded Partnership Status.................................................... 95
General Principles of Partnership Taxation............................................ 96
Anti-Abuse Rules...................................................................... 97
Deductibility of Losses - Limitations................................................. 97
Allocations of Profit and Loss........................................................ 98
Taxable Income Without Cash Distributions............................................. 101
Investment by Qualified Plans and Other Tax-Exempt Entities........................... 102
Investment by Charitable Remainder Trusts............................................. 103
Taxation of Real Estate Operations.................................................... 104
Syndication and Organizational Expenses............................................... 105
Activities Not Engaged in For Profit.................................................. 105
Sales of Limited Partnership Units.................................................... 106
Dissolution and Liquidation of Wells Fund XIII........................................ 106
Capital Gains and Losses.............................................................. 107
Election for Basis Adjustments........................................................ 107
Alternative Minimum Tax............................................................... 107
Penalties............................................................................. 107
Tax Shelter Registration.............................................................. 108
Partnership Tax Information; Partner Tax Returns...................................... 109
Audits................................................................................ 109
Foreign Investors as Limited Partners................................................. 109
Tax Legislation and Regulatory Proposals.............................................. 110
State and Local Taxes................................................................. 110
Reports to Investors................................................................... 111
Plan of Distribution................................................................... 112
Supplemental Sales Material............................................................ 118
Legal Opinions......................................................................... 118
Experts................................................................................ 118
Audited Financial Statements.......................................................... 118
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Unaudited Financial Statements................................................. 119
Additional Information.......................................................... 119
Glossary........................................................................ 119
Financial Statements............................................................ 121
Prior Performance Tables........................................................ 146
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>
iii
<PAGE>
Questions and Answers About This Offering
________________________________________________________________________________
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
Class A office buildings.
________________________________________________________________________________
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 $624,986,638 from approximately 34,100 investors and
which own and operate a total of 59 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 Class A office
buildings located in densely populated suburban markets leased to corporate
tenants that have a net worth in excess of $100,000,000 at the time of
leasing.
________________________________________________________________________________
Q: What are the terms of your leases?
A: We anticipate entering into "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 generally 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.
________________________________________________________________________________
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 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.
1
<PAGE>
________________________________________________________________________________
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, Nebraska 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 description of the minimum investment
requirements appearing later in the "Suitability Standards" section of this
prospectus.
________________________________________________________________________________
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.
2
<PAGE>
________________________________________________________________________________
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.
________________________________________________________________________________
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
________________________________________________________________________________
3
<PAGE>
Summary of the Offering
This summary highlights selected information contained elsewhere in this
prospectus. 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:
. This is a "blind pool" offering in that we do not own any real property
and we have not identified any properties in which we will invest.
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.
. 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.
. 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.
. 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.
. 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
4
<PAGE>
result, we anticipate you will be allocated taxable income in excess of any
cash distributions you may receive 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.
. You will have limited voting rights and, therefore, will have little or no
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.
. 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.
. 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.
Before you invest in Wells Fund XIII, you should see the complete
discussion of the "Risk Factors" beginning on page 11 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 Class A 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 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.
5
<PAGE>
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.
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 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.
--------------------------------------------------------------------------------
Cash Tax
Description Preferred Preferred
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
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
6
<PAGE>
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 a conflict in
allocating their time between Wells Fund XIII and the other 14 Wells
programs and activities in which they are involved, and our
partnership agreement does not specify any minimum amount of time or
level of attention that our general partners must devote to Wells Fund
XIII;
. our general partners must determine whether Wells Fund XIII, Wells
Fund XII, the Wells REIT or some future Wells program should acquire
and own any specific property;
. our general partners must determine which of the Wells programs should
enter into a joint venture for the acquisition and operation of
specific properties;
. 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
. 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.
7
<PAGE>
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, 2000,
our general partners have raised approximately $624,986,638 from approximately
34,100 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.
8
<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 Maximum
Offering Offering
Type of Compensation Form of Compensation (125,000 units) (4,500,000 units)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Organizational and Offering Stage
-------------------------------------------------------------------------------------------------
Sales Commission 7.0% of gross offering $87,500 $3,150,000
proceeds
-------------------------------------------------------------------------------------------------
Dealer Manager 2.5% of gross offering $31,250 $1,125,000
Fee proceeds
-------------------------------------------------------------------------------------------------
Organization and 3.0% of gross offering $37,500 $1,350,000
Offering Expenses proceeds
-------------------------------------------------------------------------------------------------
Acquisition and Development Stage
------------------------------------------------------------------------------------------------
Acquisition and 3.0% of gross offering $37,500 $1,350,000
Advisory Fees proceeds
------------------------------------------------------------------------------------------------
Acquisition 0.5% 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 Competitive fee for N/A N/A
Fee geographic location of
for Newly property based on a
Constructed survey of brokers and
Property agents (customarily equal
to the first month's rent)
------------------------------------------------------------------------------------------------
Cash Distributions 10.0% of current cash N/A N/A
flow after cash preferred
priority return to limited
partners
------------------------------------------------------------------------------------------------
Liquidation Stage
------------------------------------------------------------------------------------------------
Real Estate 3.0% of sale price after N/A N/A
Commission limited partners receive
repayment of capital plus
6.0% return on capital
------------------------------------------------------------------------------------------------
Liquidating 20.0% of net sale N/A N/A
Distribution proceeds after cash
preferred and tax
preferred priority returns
to limited partners
------------------------------------------------------------------------------------------------
</TABLE>
9
<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 the limited rights of our
general partners to amend our partnership agreement without the
approval of the limited partners as described in Section 11.2(b) of
our partnership agreement;
(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.
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Risk Factors
Your purchase of units involves a number of risks. You should specifically
consider the following risks before purchasing units:
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. Accordingly, you may find it difficult to sell your units
for cash or you may have to sell your units at a substantial discount. In
addition, 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
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are merely estimates of value and should not be relied upon as accurate measures
of true worth or 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 as
agreed upon by our general partners and Wells Fund XIII or by arbitration if
they are unable to agree. (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 the President and sole director of Wells Capital, 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, Douglas P.
Williams, M. Scott Meadows, Michael C. Berndt and Allen G. Delenick, each of
whom would be difficult to replace. None of these individuals are currently
bound by any employment agreement. If any of our key personnel were to cease
employment with us, our operating results could suffer.
We may not be successful in attracting and retaining skilled personnel.
We 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 may not be
successful in attracting and retaining such skilled personnel.
Our general partners have a limited net worth consisting of assets that are
not liquid.
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. This
illiquidity 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
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gross offering proceeds for maintenance and repairs of our properties to the
extent that we have insufficient funds for such purposes. (See "Management.")
Conflicts of Interest Risks
Our general partners will face conflicts of interest relating to time
management.
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 since 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. You should note that our partnership agreement does not
specify any minimum amount of time or level of attention that our general
partners are required to devote to Wells Fund XIII. (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 Wells Fund XII, the Wells
REIT or other future 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, a real estate program which is structured
as a real estate investment trust. (See "Prior
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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 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.
Since our general partners and their affiliates control both Wells Fund
XIII and Wells Fund XII and, to a certain degree, the Wells REIT, agreements and
transactions between the parties with respect to any joint venture between such
parties will not have the benefit of arm's length negotiation of the type
normally conducted between unrelated co-venturers. Under these 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.")
Our general partners may have an incentive to purchase properties that
provide higher cash flow from operations 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 have an incentive to value the units lower 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.")
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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;
. 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.
We may have substantial limitations on our ability to achieve a 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. 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.
Additionally, we are not limited in the number or size of properties we acquire
or the percentage of net proceeds we may invest in a single property. 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
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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 Valuation
Requirement.") 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.")
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. In
addition to selling commissions of up to 7.0% of gross offering proceeds paid to
participating broker-dealers, our affiliates may receive fees of up to 2.5% of
gross offering proceeds as a dealer manager fee, 3.0% of gross offering proceeds
as reimbursement for organizational and offering expenses, 3.0% of gross
offering proceeds for acquisition and advisory fees, and 0.5% of gross offering
proceeds as reimbursement for acquisition expenses. In addition, our affiliates
may receive property management and leasing fees of 4.5% of gross revenues for
supervising the management and leasing of our properties. These fees 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 any 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:
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. 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 to our existing properties.
The reinvestment of proceeds from the sale of properties will not occur,
however, unless sufficient cash will be distributed to you 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 - Taxation of Real Estate Operations.")
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, 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.
If we enter into a contract, 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
anticipate that we will be obligated to pay a substantial earnest money deposit
anticipated to be between 20% and 30% of the purchase price at the time of
contracting to acquire properties. 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), our Property Manager, 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.")
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
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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.
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.
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-----------------------------------------------------------------------
Allocations 90% CPU/10% TPU 75% CPU/25% TPU 50% CPU/50% TPU
-----------------------------------------------------------------------
Cash Flow per CPU $0.55 $0.67 $1.00
-----------------------------------------------------------------------
Tax Losses per TPU $4.00 $1.60 $0.80
-----------------------------------------------------------------------
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. It is anticipated that
most of our properties will be leased to a single tenant and, accordingly, may
be specifically suited to the particular needs of the tenant based on the type
of business the tenant operates. For example, many technology based companies
desire space with an open floor plan. We may have difficulty obtaining a new
tenant for any vacant space in our properties, particularly if the floor plan
limits the types of businesses that can use the space without major renovation.
If a 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
that we will be able to lease the property for the rent previously received or
sell the property without incurring a loss.
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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 may
not be able to find suitable tenants to lease our 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,
pension plans and other entities engaged in real estate investment activities.
We compete against other potential purchasers of properties in the commercial
office building sector of the real property investment market. Since Wells Fund
XIII does not borrow money to acquire properties, our source of funding for
acquisitions is limited to the amount of money actually raised from our limited
partners and available for investment in properties, and our ability to form
joint ventures with affiliated entities. The commercial office sector has
numerous competitors who operate on a local, regional and national basis,
including large pension funds, real estate investment trusts and other real
estate companies and investors in commercial real estate. Competition for
investments may have the effect of increasing costs and reducing your returns.
20
<PAGE>
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 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 upon the
termination of Wells Fund XIII on December 31, 2030, or earlier if 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.
21
<PAGE>
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 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.
If the IRS were to classify Wells Fund XIII 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.
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
22
<PAGE>
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.
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
23
<PAGE>
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 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 reside 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;
24
<PAGE>
. 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;
. 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, our general partners would be considered to
be plan fiduciaries and certain contemplated transactions between our general
partners or their affiliates and Wells Fund XIII 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 will 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:
25
<PAGE>
. 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 U.S. Department of Labor Regulations or any
prohibited transaction exemption granted by the Department of Labor or
any condition which the Department of Labor might 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
26
<PAGE>
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 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 - 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
27
<PAGE>
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.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Income/Net Worth Minimum
State Requirements Purchase Other Limitations
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona (1) Current annual gross 100 units ($1,000) N/A
income of $60,000 and net
worth of $60,000, or (2) net
worth of $225,000
---------------------------------------------------------------------------------------------------------------------
California (1) Current annual gross 100 units ($1,000) The following legend must be placed
income of $60,000 and net on each certificate: "It is unlawful to
worth of $60,000, or (2) net consummate a sale or transfer of this
worth of $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 100 units ($1,000) Units of subsequent partnership
income of $45,000 and net reinvestment plan must be registered
worth of $45,000, or (2) net or exempt from registration in Florida,
worth of $150,000 and such units must be purchased from
a Florida broker.
---------------------------------------------------------------------------------------------------------------------
Iowa (1) Current annual gross 200 units ($2,000) Husband and wife may not jointly
income of $45,000 and net contribute from separate IRAs to
worth of $45,000, or (2) net satisfy minimum purchase.
worth of $150,000
---------------------------------------------------------------------------------------------------------------------
Maine (1) Current annual gross 250 units ($2,500); Husband and wife may not jointly
income of $50,000 and net 200 units ($2,000) contribute from separate IRAs to
worth of $50,000, or (2) net for IRAs satisfy minimum purchase.
worth of $200,000
---------------------------------------------------------------------------------------------------------------------
Massachusetts (1) Current annual gross 100 units ($1,000) N/A
income of $60,000 and net
worth of $60,000, or (2) net
worth of $225,000
---------------------------------------------------------------------------------------------------------------------
Michigan (1) Current annual gross 100 units ($1,000) Investor may not invest more than
income of $45,000 and net 10% of net worth.
worth of $45,000, or (2) net
worth of $150,000
---------------------------------------------------------------------------------------------------------------------
Minnesota (1) Current annual gross 250 units ($2,500); N/A
income of $45,000 and net 200 units ($2,000)
worth of $45,000, or (2) net for IRAs and
worth of $150,000 qualified retirement
plans
---------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Income/Net Worth Minimum
State Requirements Purchase Other Limitations
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mississippi (1) Current annual gross 100 units ($1,000) N/A
income of $60,000 and net
worth of $60,000, or (2) net
worth of $225,000
---------------------------------------------------------------------------------------------------------------------
Missouri (1) Current annual gross 100 units ($1,000) Husband and wife may not jointly
income of $60,000 and net contribute from separate IRAs to
worth of $60,000, or (2) net satisfy minimum purchase.
worth of $225,000
---------------------------------------------------------------------------------------------------------------------
Nebraska (1) Current annual gross 500 units ($5,000) Investments in additional units
income of $45,000 and net except for IRAs and pursuant to reinvestment plan must be
worth of $45,000, or (2) net qualified retirement at least $50 per year and made through
worth of $150,000 plans a Nebraska broker.
---------------------------------------------------------------------------------------------------------------------
New (1) Current annual gross 100 units ($1,000) N/A
Hampshire income of $50,000 and net
worth of $125,000, or (2)
net worth of $250,000
---------------------------------------------------------------------------------------------------------------------
New York (1) Current annual gross 250 units ($2,500) No proceeds from New York investors
income of $50,000 and net except for IRAs released from escrow until $2,500,000
worth of $50,000, or (2) net raised in offering.
worth of $150,000
---------------------------------------------------------------------------------------------------------------------
North (1) Current annual gross 250 units ($2,500) N/A
Carolina income of $45,000 and net except for IRAs and
worth of $45,000, or (2) net qualified retirement
worth of $150,000 plans
---------------------------------------------------------------------------------------------------------------------
Ohio (1) Current annual gross 250 units ($2,500) Investor may not invest more than
income of $45,000 and net except for IRAs 10% of net worth.
worth of $45,000, or (2) net
worth of $150,000
---------------------------------------------------------------------------------------------------------------------
Oklahoma (1) Current annual gross 100 units ($1,000) Husband and wife may not jointly
income of $45,000 and net contribute from separate IRAs to
worth of $45,000, or (2) net satisfy minimum purchase.
worth of $150,000
---------------------------------------------------------------------------------------------------------------------
Oregon (1) Current annual gross 100 units ($1,000) N/A
income of $60,000 and net
worth of $60,000, or (2) net
worth of $225,000
---------------------------------------------------------------------------------------------------------------------
Pennsylvania (1) Current annual gross 100 units ($1,000) Investor must have a net worth of at
income of $45,000 and net least ten times amount of investment
worth of $45,000, or (2) net in the partnership. Subscription
worth of $150,000 proceeds from Pennsylvania 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.
---------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Income/Net Worth Minimum
State Requirements Purchase Other Limitations
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
South (1) Net worth of $150,000, 250 units ($2,500) N/A
Carolina or (2) State and federal except IRAs and
income subject to maximum qualified retirement
rate of income tax plans
---------------------------------------------------------------------------------------------------------------------
South Dakota (1) Current annual gross 100 units ($1,000) N/A
income of $60,000 and net
worth of $60,000, or (2) net
worth of $225,000
---------------------------------------------------------------------------------------------------------------------
Tennessee (1) Current annual gross 100 units ($1,000) N/A
income of $60,000 and net
worth of $60,000, or (2) net
worth of $225,000
---------------------------------------------------------------------------------------------------------------------
Texas (1) Current annual gross 100 units ($1,000) Investments through reinvestment plan
income of $45,000 and net must be made through Texas registered
worth of $45,000, or (2) net broker.
worth of $150,000
---------------------------------------------------------------------------------------------------------------------
Wisconsin (1) Current annual gross 100 units ($1,000) Husband and wife may not jointly
income of $45,000 and net contribute from separate IRAs to
worth of $45,000, or (2) net satisfy minimum purchase.
worth of $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 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.
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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 be distributed to you;
. to preserve, protect and return capital contributions; and
. to realize capital appreciation upon the ultimate sale of properties.
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 Class A 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 tenants who have a net worth in excess of $100,000,000
at the time of lease execution. (See "Terms of Leases and Tenant
Creditworthiness.") We may 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, however, 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 Class A 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
in terms of geography, type of property and industry of our tenants 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 will not acquire a property in
exchange for units.
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.")
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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. In addition, 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
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.")
While we are not limited as to the geographic area where we may conduct our
operations, we intend to invest only in properties located in the United States.
We do not anticipate focusing our investments in any particular geographic
region within 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. Our general partners 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;
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. 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
what is generally referred to as a Phase I environmental site assessment and are
generally satisfied with the environmental status of the property. A Phase I
environmental site assessment basically consists of a visual survey of the
building and the property in an attempt to identify areas of potential
environmental concerns, visually observing neighboring properties to assess
surface conditions or activities which may have an adverse environmental impact
on the property, and contacting local governmental agency personnel and
performing a regulatory agency file search in an attempt to determine any known
environmental concerns in the immediate vicinity to property. A Phase I
environmental site assessment does not generally include any sampling or testing
of soil, groundwater or building materials from 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 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.
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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.
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 indirectly 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 thereon; development of
a commercial building thereon;
. enter into an agreement with one or more tenants to property upon its
completion; and lease all or a majority of the property upon its
completion; and
. secure a financing commitment from a commercial to finance the
acquisition and development of bank or other institutional lender 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.
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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 20% to
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
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 indirectly 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:
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. 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 Wells Fund XIII 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 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, we anticipate
entering into leases that are generally referred to as "triple net" leases. A
"triple net" lease provides that in addition to making its lease payments, the
tenant will be required to pay or to reimburse Wells Fund XIII for all real
estate taxes, sales and use taxes, special assessments, utilities, insurance and
building repairs. We are not limited to entering into only "triple-net" leases,
however, particularly if we acquire properties other than office buildings.
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 which, at the time of lease execution, have 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 75% of the aggregate gross rental income of the
public real estate programs sponsored by the general partners and their
affiliates was derived from corporate tenants, which at the time of lease
execution had a net worth of at least $100,000,000 or whose lease obligations
were guaranteed by another entity 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
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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.
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.)
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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.
(See "Risk Factors - Investment Risks.")
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 - Investment 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 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.
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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.
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.")
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 upon the termination of Wells Fund XIII on December 31, 2030, or
earlier if 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:
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. 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
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
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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., our Property Manager (Wells Management), and Wells Investment
Securities, Inc., our Dealer Manager (Wells Investment Securities). (See
"Conflicts of Interest.")
As of December 31, 2000, the net worth of Wells Capital was approximately
$__________ on a generally accepted accounting principles basis; however, the
net worth of Wells Capital consists almost entirely of ________________________
and, therefore, does not represent liquid assets.
The directors and executive officers of Wells Capital are as follows:
Name Age Position
---- --- --------
Leo F. Wells, III 57 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
Allen G. Delenick 45 Vice President
Leo F. Wells, III is the President, Treasurer and sole director of Wells
Capital. He is also the President, sole director and sole shareholder 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; a company he
organized in 1983 to manage and lease real estate properties;
. Wells Investment Securities, Inc., our Dealer Manager, a company he
organized in 1984 to serve as managing broker-dealer for the Wells
programs;
. 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, a real estate
investment trust formed in 1998 to own, operate and lease real estate
properties.
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
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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 27 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 December 31, 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
businesses and, therefore, does not represent liquid assets or assets which are
readily marketable. (See "Risk Factors.")
As of December 31, 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 liquid and not readily marketable. (See "Risk
Factors.")
Douglas P. Williams is the Senior Vice President of Wells Capital. In
1999, Mr. Williams became 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 in 1999, Mr. Franklin served as President of
Global Access Learning, an international executive education and management
development firm. From
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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 and
Director of Customer Care 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 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.
Allen G. Delenick is a Vice President of Wells Capital. He is primarily
responsible for identifying and analyzing properties for acquisition by
conducting due diligence and preparing discounted cash flow analyses on
potential acquisitions. Prior to joining Wells Capital in 1998, Mr. Delenick
worked for Carter & Associates in Atlanta. In this capacity, he was responsible
for project financings, development analysis, acquisitions and dispositions
analysis, and occupancy cost analysis. Mr. Delenick previously worked for
Portman Properties in Atlanta and Rosewood Properties in Dallas. His primary
responsibilities included real estate financial analysis and acquisitions and
development due diligence. He graduated from Lehigh University with a B.S. in
business and economics. Mr. Delenick also received an M.B.A. in finance and an
M.S. in real estate from Southern Methodist University.
Wells Capital employs personnel, in addition to the directors and executive
officers listed above, who have extensive experience in selecting and managing
commercial properties similar to the properties sought to be acquired by Wells
Fund XIII.
Our general partners, Mr. Wells and Wells Capital, will be responsible for
the direction and management of the partnership, including acquisition,
construction and property management. Any
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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:
Name Age Positions
---- --- ---------
M. Scott Meadows 37 Senior Vice President and Secretary
Michael C. Berndt 54 Vice President and Chief Investment Officer
Michael L. Watson 55 Vice President
The background of Mr. Wells is described in the "Management - The General
Partners" section of this prospectus. Below is a brief description of the other
executive officers of Wells Management.
M. Scott Meadows is a Senior Vice President and Secretary of Wells
Management. He is primarily responsible for the acquisition, operation,
management and disposition of real estate investments. Prior to joining Wells
Management in 1996, Mr. Meadows served as Senior Property Manager for The
Griffin Company, a full-service commercial real estate firm in Atlanta, where he
was responsible for managing a 500,000 square foot office and retail portfolio.
Mr. Meadows previously managed real estate as a Property Manager for Sea Pines
Plantation Company. He graduated from University of Georgia with a B.B.A. in
management. Mr. Meadows is a Georgia real estate broker and holds the Real
Property Administrator (RPA) designation of the Building Owners and Managers
Institute International. He is currently completing the final phase to receive
the Certified Property Manager (CPM) designation from the Institute of Real
Estate Management.
Michael C. Berndt is a Vice President and Chief Investment Officer of Wells
Management. He is primarily responsible for performing due diligence on
properties for acquisition, reviewing all major leasing activities and
development and being the primary contact for Wells Management's banks,
attorneys, and outside accountants. Prior to joining Wells Management in 1996,
Mr. Berndt held several
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<PAGE>
positions with financial, investment and real estate organizations, including
Ernst & Young (formerly Ernst & Ernst) and Roe, Martin & Neiman, Inc., a
registered investment advisory firm. He also primarily served as in-house
counsel and Senior Vice President of Acquisitions for Combined Equities, Inc.
and President of Phoenix Financial Corporation, an NASD broker-dealer. He
graduated from Samford University with a B.S. in Accounting. Mr. Berndt also
received a J.D. from Cumberland Law School and an LL.M. in Taxation from New
York University School of Law. Mr. Berndt is a licensed attorney in the State of
Alabama and a Certified Public Accountant.
Michael L. Watson is a Vice President of Wells Management. He is primarily
responsible for overseeing construction and tenant improvement projects
including design, engineering, and progress-monitoring functions. Prior to
joining Wells Management in 1995, Mr. Watson was Senior Project Manager with
Abrams Construction in Atlanta from 1982 to 1995. His primary responsibilities
included supervising a variety of projects consisting of high-rise office
buildings, military bases, state projects, and neighborhood shopping centers.
He graduated from University of Miami with a B.S. in Civil Engineering.
Our properties will be managed and leased initially by 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 general partners or their affiliates own an
interest. As of December 31, 2000, Wells Management was managing in excess of
5,270,000 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 approximately $________ in gross operating revenues and
approximately $__________ 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:
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. 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.
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 (Wells Investment
Securities), 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.
Wells Investment Securities 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" and "Compensation of General Partners and Affiliates.")
Wells Real Estate Funds, Inc. is the sole shareholder of Wells Investment
Securities, and Mr. Wells is the President and sole director of Wells Investment
Securities. (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
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 $85,843,000 in Wells
program investments.
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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 84.0% $37,800,000 84.0%
========== ==== =========== ====
</TABLE>
_________________________
(Footnotes to "Estimated Use of Proceeds")
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 Wells Investment Securities, an affiliate of the
general partners. Wells Investment Securities, 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. (See "Plan
of Distribution.")
3. Organization and offering expenses consist of 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 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.
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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. Acquisition and advisory fees are defined generally as fees and commissions
paid by any party to any person in connection with the purchase,
development or construction of properties. We will pay our general
partners or their affiliates acquisition and advisory fees up to a maximum
amount of 3.0% of gross offering proceeds in connection with our
acquisition of our properties. 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 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 Determination Estimated Maximum
and Entity Receiving of Amount Dollar Amount (1)
-------------------- --------- -----------------
Organizational and Offering Stage
<S> <C> <C>
Selling Commissions- Up to 7.0% of gross offering proceeds before reallowance of $3,150,000 ($87,500 in the
Wells Investment commissions earned by participating broker-dealers. Wells event Wells Fund XIII sells
Securities Investment Securities intends to reallow 100% of commissions only the minimum of
earned to participating broker-dealers. 125,000 units)
</TABLE>
48
<PAGE>
<TABLE>
<S> <C> <C>
Dealer Manager Fee - Up to 2.5% of gross offering proceeds before reallowance to $1,125,000 ($31,250 in the
Wells Investment participating broker-dealers. Wells Investment Securities, in its event Wells Fund XIII sells
Securities sole discretion, may reallow a portion of its dealer manager fee only the minimum of
of up to 1.5% of the gross offering proceeds to be paid to such 125,000 units)
participating broker-dealers as a marketing fee and due
diligence expense reimbursement, 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 for reimbursement of $1,350,000 ($37,500 in the
Organization and organization and offering expenses (excluding selling event Wells Fund XIII sells
Offering Expenses - commissions and the dealer manager fee) which will be only the minimum of
The General Partners advanced by our general partners. 125,000 units)
or Their Affiliates
Acquisition and Development Stage
Acquisition and Up to 3.0% of gross offering proceeds for the review and $1,350,000 ($37,500 in
Advisory evaluation of potential real property acquisitions. 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 fees, event the partnership sells
The General Partners travel expenses, property appraisals, title insurance premium only the minimum of
or Their Affiliates expenses and other closing costs. 125,000 units)
Operational Stage
Property Management For supervising the management and leasing of the partnership Actual amounts are
and Leasing Fees - properties, a fee equal to the lesser of: (A)(1) for commercial dependent upon results
Wells Management properties which are not leased on a long-term net lease basis, of operations and
4.5% of gross revenues, and (2) in the case of commercial therefore cannot be
properties which are leased on a long-term (10 or more years) determined at the
net lease basis, 1.0% of gross revenues plus, in the case of present time.
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.
</TABLE>
49
<PAGE>
<TABLE>
<S> <C> <C>
Share of Net Cash A noncumulative amount equal to one-tenth of net cash from Actual amounts are
From 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, then dependent upon results
Nonliquidating Net our general partners are entitled to receive the following of operations and
Sale Proceeds and amounts: therefore cannot be
Liquidating determined at the
Distributions - The (a) an amount equal to their capital contributions, present time.
General Partners
(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.)
Real Estate In connection with the sale of our properties, an amount not Actual amounts are
Commissions - exceeding the lesser of: (A) 50% of the reasonable, customary dependent upon results
The General Partners and competitive real estate brokerage commissions customarily of operations and
or Their Affiliates paid for the sale of a comparable property in light of the size, therefore cannot be
type and location of the property, or (B) 3.0% of the gross sales determined at the
price of each property, subordinated to distributions to investors present time.
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,
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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, our Property Manager, and Wells Investment
Securities, 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.
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 December 20, 2000 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.
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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;
. 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
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partnerships and activities in which they are involved. In addition, our
partnership agreement does not specify any minimum amount of time or level of
attention that our general partners must devote to Wells Fund XIII. (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.
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, 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
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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 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 the 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.")
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Tax Audit Proceeding
In the event of an audit of our 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 The Partnership." 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
. 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.
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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.
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
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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;
. 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.
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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 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), and
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 common stock of the Wells REIT on December 20,
1999, which was terminated on December 19, 2000. The Wells REIT received gross
proceeds of approximately $175,229,193 from the sale of approximately 17,522,919
shares from the second public offering. The Wells REIT commenced its third
public offering of the shares of common stock on December 20, 2000. As of
December 31, 2000, the Wells REIT had received gross proceeds of approximately
$7,686,957 from the sale of approximately 768,696 shares from its third public
offering. Accordingly, as of December 31, 2000, the Wells REIT had received
gross offering proceeds of approximately $315,098,069 from the sale of
31,509,807 shares of its common stock to 7,422 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 $62,219,692 from 2,513 investors.
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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 cash preferred units of Wells Fund XIII, and Class B Units, which were
essentially equivalent to the tax preferred units of Wells Fund XIII. As of
December 31, 2000, the total amount of funds raised from investors in the
offerings of these 13 publicly offered limited partnerships and the Wells REIT
was approximately $624,986,638, and the total number of investors in such
programs was approximately 34,100.
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
December 31, 2000, substantially all 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 75% of
the aggregate gross rental income of these 14 publicly offered programs was
derived from corporate tenants, which at the time of lease execution had a net
worth of at least $100,000,000 or whose lease obligations were guaranteed by
another entity 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 two 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
59 properties purchased by the previously sponsored Wells programs, as of
December 31, 2000, was $645,383,655 of which $4,130,806 (or approximately 0.6%)
had not yet been expended on the development of certain of the projects which
are still under construction. Of the aggregate amount, approximately 89% was or
will be spent on acquiring or developing office buildings, and approximately 11%
was or will be spent on acquiring or developing shopping centers. Of the
aggregate amount, approximately 22.4% was or will be spent on new properties,
55.7% on existing or used properties and 21.9% 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:
Type of Property New Used Construction
---------------- --- ---- ------------
Office Buildings 22.4% 52.2% 14.8%
Shopping Centers 0% 3.5% 7.1%
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:
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. a three-story medical office building in Atlanta, Georgia;
. a commercial office building in Atlanta, Georgia;
. 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 major tenant in the three-story medical office building in Atlanta,
Georgia described above vacated the building at the expiration of its 10-year
lease on December 31, 1996. Since that time, this building has remained less
than 50% occupied due, at least in part, to substantial uncertainty which
existed in the immediate vicinity of this property concerning whether a nearby
hospital would close or remain open. While this hospital did, in fact, finally
close in 2000, subsequent to this closing and the removal of this uncertainty,
potential tenants have shown renewed interest in the leasing of this property,
and the general partners are optimistic that they will be able to substantially
increase occupancy in this building in the reasonably near future.
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. The
properties owned by Wells Fund I have been held longer than 12 years due
primarily to a decline in the market values of these properties occurring during
the general downturn in the real estate industry in the late 1980's and early
1990's caused by, among other things, tax law changes, the savings and loan
crisis and general over-building and excess supply in many markets. The general
partners monitored the economic expansion occurring during the 1990's and, after
approximately ten years of ownership, decided that Wells Fund I should not yet
sell its properties based upon a determination that further appreciation in
these properties would be available for investors. In late 1999, the general
partners of Wells Fund I reached the conclusion that the value of the properties
held by Wells Fund I was reaching its maximum and began the process of selling
and positioning for sale the properties owned by Wells Fund I.
Wells Fund I recently sold one of two commercial office buildings known as
Peachtree Place located in Atlanta, Georgia and a shopping center known as
Crowe's Crossing located in DeKalb County, Georgia. Wells Fund I is in the
process of marketing the remainder of its properties for sale pending the
outcome of a proxy solicitation recommending that the Class A Limited Partners
vote in favor of an amendment to the partnership agreement to change the method
of distribution of net sale proceeds. The general partners currently anticipate
that the liquidation of the properties owned by Wells Fund I will be completed
by the end of 2002. The exact timing of the disposition of the properties of
Wells Fund I will depend upon the market conditions in particular markets where
properties are located, the occupancy status of particular properties, current
and anticipated lease terms, and the ability to obtain a fair and reasonable
price for the properties.
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:
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. 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;
. 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 have not
yet sold any of their properties. The general partners are currently in the
process of marketing and positioning their properties for sale and currently
anticipate that a liquidation of the properties owned by Wells Fund II and Wells
Fund II-OW will be completed by the end of 2002. The exact timing of the
disposition of the properties of Wells Fund II and Wells Fund II-OW will depend
upon the market conditions in particular markets where properties are located,
the occupancy status of particular properties, current and anticipated lease
terms, and the ability to obtain a fair and reasonable price for the 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.
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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. 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.
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, as of December 31, 1999,
$15,664,160 of units of Wells Fund V were treated as Class A Units, and
$1,341,860 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 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, as of December 31, 1999, $21,959,690 of units of Wells Fund VI were
treated as Class A Units, and $3,040,310 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;
. a shopping center in Cherokee County, Georgia having Kroger as the
anchor tenant;
. a combined retail and office development in Roswell, Georgia;
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. 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, as of December 31, 1999, $20,362,672 of units in Wells
Fund VII were treated as Class A Units, and $3,817,502 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:
----------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------------------------------
Gross Revenues $962,630 $846,306 $816,237 $543,291 $925,246
----------------------------------------------------------------------
Net Income $895,795 $754,334 $733,149 $452,776 $804,043
----------------------------------------------------------------------
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 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, as of December 31, 1999,
$4,748,439 of units in Wells Fund VIII were treated as Class A Units, and
$27,284,250 of units were treated as Class B Units. Wells Fund VIII owns
interests in the following properties:
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. 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:
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------
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
--------------------------------------------------------------------------
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. After
taking into effect conversion elections made by limited partners subsequent to
their subscriptions for units, as of December 31, 1999, $30,723,220 of units in
Wells Fund IX were treated as Class A Units, and $4,276,780 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.;
. a two-story office building in Boulder County, Colorado leased to
Ohmeda, Inc.;
. a three-story office building in Knox County, Tennessee leased to
Alstom Power, Inc.;
. a one-story office and warehouse building in Weber County, Utah leased
to Iomega Corporation;
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. a three-story office building in Boulder County, Colorado; and
. a one-story office building in Oklahoma City, Oklahoma leased to
Avaya, Inc.
Certain financial information for Wells Fund IX is summarized below:
------------------------------------------------------------------
1999 1998 1997 1996
------------------------------------------------------------------
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
------------------------------------------------------------------
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. After
taking into effect conversion elections made by limited partners subsequent to
their subscriptions for units, as of December 31, 1999, $21,669,662 of units in
Wells Fund X were treated as Class A Units and $5,454,250 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
Alstom Power, Inc.;
. 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;
. a one-story office building in Oklahoma City, Oklahoma leased to
Avaya, 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.
Certain financial information for Wells Fund X is summarized below:
------------------------------------------------------
1999 1998 1997
------------------------------------------------------
Gross Revenues $1,309,281 $1,204,597 $372,507
------------------------------------------------------
Net Income $1,192,318 $1,050,329 $278,025
------------------------------------------------------
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. After taking
into effect conversion elections made by limited partners subsequent to their
subscriptions for units, as of December 31, 1999, $13,369,062 of units in Wells
Fund XI were treated as Class A Units and $3,163,740 of units were treated as
Class B Units. Wells Fund XI owns interests in the following properties:
. a three-story office building in Knox County, Tennessee leased to
Alstom Power, Inc.;
. a one-story office building in Oklahoma City, Oklahoma leased to
Avaya, Inc.;
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. a two-story office building in Boulder County, Colorado leased to
Ohmeda, Inc.;
. a three-story office building in Boulder County, Colorado;
. 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:
---------------------------------------
1999 1998
---------------------------------------
Gross Revenues $766,586 $262,729
---------------------------------------
Net Income $630,528 $143,295
---------------------------------------
Wells Fund XII terminated its offering on March __, 2001. As of March __,
2001, Wells Fund XII had 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.;
. a three-story office building in Troy, Michigan leased to Siemens
Automotive Corporation; and
. a one-story office building and a two-story office building in
Oklahoma City, Oklahoma, primarily leased to AT&T Corp.
Wells Fund XII recognized net income of $856,227 in 2000.
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The Wells REIT terminated its first offering on December 19, 1999, and
received gross proceeds of $132,181,919. The Wells REIT terminated its second
offering on December 19, 2000, and received gross proceeds of $175,229,193. The
Wells REIT began a third offering on December 20, 2000, and as of December 31,
2000, had received, gross proceeds of $7,686,957. As of December 31, 2000, the
Wells REIT had received, in the aggregate, gross proceeds of approximately
$315,098,069 from the sale of approximately 31,509,807 shares of its common
stock to 7,422 investors. The Wells REIT owns interests in the following
properties:
. a one-story office building in Oklahoma City, Oklahoma leased to
Avaya, Inc.;
. a three-story office building in Knox County, Tennessee and a four-
story office building in Chesterfield County, Virginia leased to
Alstom Power, 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 two-story office and manufacturing building in Alameda County,
California leased to Cort Furniture Rental Corporation;
. a one-story office and warehouse building in Orange County, California
leased to Fairfield Technologies U.S.A., Inc.;
. a four-story office building in Hillsborough County, Florida leased to
PricewaterhouseCoopers, LLP;
. a four-story office building in Dauphin County, Pennsylvania leased to
Pennsylvania 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 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
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The Coca Cola Company;
. a three-story office building in Tulsa County, Oklahoma and a nine-
story office building in Minnetonka, Minnesota 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.;
. a two-story office building in Orange County, California leased to
Quest Software, Inc.;
. two three-story office buildings in Oakland County, Michigan leased to
Siemens Automotive Corporation and Delphi Automotive Systems, LLC;
. a three-story office building in Middlesex County, New Jersey leased
to Motorola, Inc.; and
. a one-story office building and a two-story office building in
Oklahoma City, Oklahoma, primarily leased to AT&T Corp.
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 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.
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<PAGE>
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
Wells Investment Securities to have sales commissions due with respect to the
purchase of their units paid over a seven-year period pursuant to a "deferred
commission option" rather than payment in full at the time of sale. Any investor
purchasing units pursuant to the deferred commission option must elect upon
subscription to have a sufficient number of units treated as cash preferred
units, in the discretion of the general partners, to generate at least the
amount of net cash from operations distributable with respect to such units
needed to satisfy the deferred commission 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 at least 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.")
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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
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 -
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<PAGE>
Deductibility of Losses - 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.
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
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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
. 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
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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.
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.")
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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% to limited partners electing tax preferred units and 1% 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:
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;
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. then, to limited partners on a per unit basis in amounts equal to the
excess of each limited partner's net capital contribution over all
prior distributions to such limited partner of net proceeds from the
sale of partnership properties;
. then, to the limited partners on a per unit basis until each limited
partner has been allocated an amount equal to the excess of a 10%
cumulative, noncompounded return on his net capital contribution over
prior distributions to such limited partner of net cash from
operations;
. then, to the limited partners on a per unit basis until each limited
partner has been allocated an aggregate amount equal to the excess of
his Preferential Limited Partner Return over prior distributions to
such limited partner of net cash from operations;
. then, to 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% of the sum of any such Excess Limited Partner Distributions plus
any gain on sale allocated to the general partners pursuant to this
provision; and
. then, 80% to the limited partners and 20% to our general partners;
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.
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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.
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 December 31 of each year. 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
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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 five to seven 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.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
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.
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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 our partnership agreement is included 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 to purchase our units.
The following statements are intended to summarize many of the material
provisions of our partnership agreement, with the exception of certain
information which is summarized under separate sections of this prospectus.
(See "Description of the Units" and "Distributions and Allocations.")
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.)
Liabilities of our Limited Partners; Nonassessability of Units
We are 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).) Limited partners will not have a right to withdraw any of their
capital contributions until a complete winding up of the partnership and
liquidation of our business. (Section 8.10(b).)
Other Activities of the General Partners
Our general partners may participate in various other business ventures,
some of which may be competitive with Wells Fund XIII, including the
syndication, ownership or management of other real estate. The general partners
shall not be liable to Wells Fund XIII or to the limited partners as a result of
engaging in other business ventures.
Rights of Limited Partners to Participate in Management
Our limited partners are not permitted to participate in the management or
control of our business.
Voting Rights of the Limited Partners
Our limited partners may, with the affirmative vote of limited partners
holding more than 50% of the units, take action on the following matters:
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. the approval or disapproval of any sale, exchange or pledge of all or
substantially all of our real properties;
. the dissolution of Wells Fund XIII;
. the removal of a general partner or any successor general partner;
. the 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;
. any change in the business purpose or investment objectives of Wells
Fund XIII; and
. any amendment to our partnership agreement, except as to certain
matters specified in Section 11.2(b) of our partnership agreement,
which the general partners alone may amend without a vote of the
limited partners. (Section 16.1(a).)
In addition, limited partners holding more than 50% 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 for certain transactions described in
"Mergers and Consolidations" below, limited partners not voting with the
majority will 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.")
Our partnership agreement may not be amended to change the limited
liability of the limited partners without the consent of all limited partners.
In addition, limited partners holding a majority of any class of units which
would be adversely affected by a proposed amendment to the partnership agreement
must consent to any such amendment. (Section 16.2.)
Amendments to our partnership agreement receiving the requisite vote will
be executed by our general partners 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 contains a provision prohibiting our general
partners from initiating a transaction in which Wells Fund XIII is merged or
consolidated with another 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)
limited partners owning more than 50% of the units consent to such transaction
in writing. (Section 11.3(u).)
Limited partners who vote against or dissent from any such proposal will
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 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).)
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Special Partnership Provisions
Leo F. Wells, III owns all of the issued and outstanding stock of Wells
Real Estate Funds, Inc. which, in turn, owns all of the issued and outstanding
stock of Wells Capital. (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 are prohibited from receiving any
rebates or give-ups or participating 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 more
than 50% of the units. (Section 17.1(d).) If a general partner is removed, the
fair market value of the general partner's interest 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 by issuing a promissory note to
the removed general partner providing for annual installments over a period of
five years or more and providing for interest at the rate of 9% per annum.
We may, with the consent of limited partners holding more than 50% of the
units, sell the former general partner's interest to an affiliate of the
remaining general partners and admit such person to Wells Fund XIII as a
substitute general partner. The purchase price to be paid to Wells Fund XIII for
the partnership interest of the former general partner must be at least equal to
the fair market value determined by the appraisal described above and may be
paid in installments in the manner described above.
Assignability of General Partners' Interests
A general partner may designate a successor or additional general partner
with the consent of the remaining general partners and limited partners holding
more than 50% of the units, provided that the interests of limited partners are
not adversely affected. Except in connection with such a designation, our
general partners do not have a right to retire or withdraw voluntarily from
Wells Fund XIII or to sell, transfer or assign these interests without the
consent of the limited partners holding more than 50% of the units. (Section
17.1.)
Books and Records; Rights to Information; Annual Audits
Our general partners are required to maintain full and accurate books and
records at our principal office. Limited partners have the right to inspect,
examine and obtain copies of our 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 our independent certified public accountants.
(Section 15.2(b).)
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Meetings of Limited Partners
There will not be any regularly scheduled annual or periodic meetings of
our limited partners. Our general partners are, however, required to call a
meeting of the limited partners upon the written request of limited partners
holding at least 10% of the units. In such event, a detailed statement of any
action proposed and the wording of any resolution proposed for adoption or any
proposed amendment to our partnership agreement is required to 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 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 or assigned if the sale of such unit, when added
to the total of all other sales of units within the period of 12
consecutive months prior to the proposed date of sale, would, in the
opinion of our counsel, result in the termination of Wells Fund XIII
as a partnership under Section 708 of the Internal Revenue Code,
unless we receive a ruling from the IRS that the proposed sale would
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 outstanding deferred commission obligations. (Section
17.3(h).) (See "Plan of Distribution.")
Additional restrictions on transfers of units are imposed on the residents
of various states under the securities laws of such states. In addition, our
partnership agreement contains 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 and will not be
recognized. (See "Federal Income Tax Consequences - Publicly Traded Partnership
Status" and Section 17.3(g) of our partnership agreement.)
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Transferees of units are not eligible to participate in our distribution
reinvestment plan with respect to investments in units of Wells Fund XIII.
Transferees are not disqualified, however, from participation in our
distribution reinvestment plan with respect to an investment of their
distributions in units issued by subsequent Wells programs, if the transferee
meets the plan's requirements for participation. (See "Distribution
Reinvestment Plan" below.)
An assignee of units will not become a substituted limited partner unless
the assignee expressly agrees to adopt and become a party to our partnership
agreement. (Section 17.4.) An assignee of units who does not become a
substituted limited partner will be entitled to receive distributions
attributable to the units properly transferred to him, effective no later than
the last day of the calendar month following receipt of notice of the assignment
and all required documentation. (Section 17.5.) Any such assignee will not
have any of the other rights of a limited partner, such as the right to vote as
a limited partner or 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 our
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 to
establish or terminate a repurchase reserve at any time.
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. No such repurchase may be made, however, if
either (1) such repurchase would impair our capital or operations, or (2)
following the repurchase, such limited partner would hold less than the minimum
investment in the offering (100 units). In no event will a limited partner be
permitted to have his units repurchased prior to termination of this 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 send to us an
appropriately executed written request indicating his or its desire to have such
units repurchased. Such requests will be considered by our general partners in
the order they are received.
If our general partners decide to honor a request, they will notify the
requesting limited partner in writing of the purchase price for the units to be
repurchased and the effective date of the repurchase transaction. Such notice
will be not less than 60 nor more than 75 calendar days following our receipt of
the written request.
If we do establish a repurchase reserve, 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 determined annually for
ERISA purposes. 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. (See "Investment by Tax-Exempt
Entities and ERISA Considerations - Annual Valuation Requirement.")
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If we establish a repurchase reserve and insufficient amounts are available
in our reserve to repurchase all of a limited partner's 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, the limited partner would own less
than the minimum investment in the offering (100 units). In the event that
there are insufficient funds available in any repurchase reserve to repurchase
all of a limited partner's units, the limited partner requesting repurchase of
his units will be deemed to have priority for subsequent partnership repurchases
over other limited partners who may request repurchases in the future. Units we
repurchase will be canceled.
In addition to the other restrictions described above, 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); and
. not more than 2% of the outstanding units may be purchased in any
year. (Section 8.11(k).)
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 to them.
(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 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 Funds IV, V, VI, VII, VIII, IX, X and XI, investors
holding cash preferred units in Wells Fund XII, and stockholders of the Wells
REIT will have the opportunity to have their distributions of net cash from
operations or dividends invested in units of Wells Fund XIII during the offering
period.
Units of Wells Fund XIII issued pursuant to our 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 at any time.
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, subject to certain minimum investment requirements and other
restrictions which may be imposed by our general partners. If sufficient units
are not available for issuance under the distribution reinvestment plan, we will
remit excess distributions of net cash from operations to the participants.
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Net cash from operations from Wells Fund XIII may be reinvested in units
issued by a subsequent Wells program only if all of the following conditions are
satisfied:
. prior to the time of such reinvestment, the limited partner has
received the final prospectus and any supplements thereto offering
interests in the subsequent Wells program and such prospectus allows
investment pursuant to a distribution reinvestment plan;
. a registration statement covering the interests in the subsequent
Wells program has been declared effective under the Securities Act of
1933;
. the offer and sale of such interests is qualified for sale under the
applicable state securities laws;
. the participant executes the subscription agreement included with the
prospectus for the subsequent Wells program;
. the participant qualifies under applicable investor suitability
standards as contained in the prospectus for the subsequent Wells
program; and
. the subsequent Wells program has substantially identical investment
objectives as Wells Fund XIII.
Investors who invest in subsequent Wells programs pursuant to a distribution
reinvestment plan will become limited partners in such subsequent Wells program
and, as such, will receive the same 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
investor suitability standards or cannot make the other investor representations
or warranties set forth in the then current prospectus, the subscription
agreement or partnership agreement relating to such investment, 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 will be effective only with
respect to distributions made more than 30 days after receipt of written notice
by our general partners. In addition, a transfer of units will 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 7.0% and dealer management fees not to
exceed 2.5% may be paid 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. Amounts which would otherwise have been paid as
selling commissions will be retained and used for additional investment in real
estate. Accordingly, the economic benefits resulting from the failure of an
investor to identify an account executive will be shared with all investors.
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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 as limited partners and will 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 written
confirmation showing the amount of the distribution, the number and price of the
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
reinvested 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 with 10 days notice to participants. We also 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 this offering,
limited partners holding at least 10% of the 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 each limited partner to determine whether we should sell all our
assets. If limited partners owning more than 50% of the units (without regard
to units owned or controlled by our general partners) vote in favor of a
liquidation of Wells Fund XIII, we will be required to fully liquidate our
assets within 30 months. (Section 20.2.)
Dissolution and Termination
Wells Fund XIII will be dissolved upon the earlier of December 31, 2030, or
the first to occur of the following:
. 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 effective date of the occurrence of an event of withdrawal of the
last remaining general partner unless, within 120 days from such
event, limited partners owning more than 50% of the units 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; or
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. 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 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 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).) (See "Investment by Tax-Exempt Entities and ERISA
Considerations.")
In the event Wells Fund XIII is dissolved, our assets will be liquidated
and converted to cash. Our general partners will have 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 will be distributed
first to 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 or their affiliates. The balance will then be distributed to 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 will 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, however, the plan's fiduciary
should consider applicable provisions of the Internal Revenue Code and ERISA.
Even though certain tax-exempt entities, such as most IRAs and many Keogh Plans,
are not subject to the provisions of ERISA, fiduciaries of such accounts should
also carefully review the rules and exceptions described 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 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,
considering the minimum distribution requirements under the Internal
Revenue Code, after taking this investment into account;
. the need to value the assets of the qualified plan annually; and
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. whether the investment would constitute or give rise to a prohibited
transaction under ERISA or the Internal Revenue Code.
Minimum Distribution Requirements - Plan Liquidity
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. If the units are held in an IRA
or retirement plan and, before we sell our properties, mandatory distributions
are required to be made to the IRA beneficiary or qualified plan participant,
Section 401(a)(9) of the Internal Revenue Code will likely require that a
distribution of the units be made in kind to the IRA beneficiary or qualified
plan participant. A distribution of units in kind must be included in the
taxable income of the recipient for the year in which the units are received at
the then current fair market value of the units, even though there would be no
corresponding cash distribution with which to pay the income tax liability
arising because of the distribution of units. (See "Risk Factors - Federal
Income Tax Risks.") The fair market value of any such distribution-in-kind can
be only an estimated value per unit because no public market for units exists or
is likely to develop. (See "Annual Valuation Requirement" below). Further,
there can be no assurance that such estimated value could actually be realized
by a limited partner because estimates do not necessarily indicate the price at
which units could be sold.
Annual Valuation Requirement
Fiduciaries of retirement plans are required to determine the fair market
value of the assets of such retirement plans on an annual basis. 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 under the partnership agreement to prepare annual
statements of estimated unit values for our investors.
For the first three full fiscal years following the termination of the
offering, the value of our units will be deemed to be $10.00, and no valuation
or appraisal work will be undertaken. Thereafter, we will prepare annual
valuations of our units based upon the estimated amount a unit holder would
receive if all partnership assets were sold for their estimated values as of the
close of our fiscal year and all proceeds from such sales, without reduction for
selling expenses, together with any funds held by us, were distributed to the
limited partners in liquidation of Wells Fund XIII. Such estimated property
values will be based upon annual valuations performed by the general partners,
and no independent property 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 unit valuations provided by the general partners may not satisfy the
technical requirements imposed on plan fiduciaries under ERISA.
The estimated value per unit will be reported annually in the 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, however, that:
. the estimated value per unit will actually be realized by the limited
partners upon liquidation (because estimates do not necessarily
indicate the price at which properties can be sold); or
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. limited partners would be able to realize estimated net asset values
if they were to attempt to sell their units, because no public market
for units exists or is likely to develop.
Fiduciary Obligations - Prohibited Transactions
Any person identified as a "fiduciary" with respect to a retirement plan
incurs duties and obligations under ERISA and the Internal Revenue Code as
discussed herein. 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. Transactions between an employee benefit plan and the
parties in interest with respect to such plan, including fiduciaries, are
prohibited. In addition, IRAs and Keogh Plans covering only self-employed
individuals which are not subject to ERISA are, nevertheless, still subject to
the "prohibited transaction" rules under 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, have exclusive
authority and discretion to manage and control the assets of the plan.
In the event that our properties and other assets of Wells Fund XIII were
deemed to be assets of a retirement plan (Plan Assets), the general partners
then would be deemed fiduciaries of the retirement plans investing as limited
partners. If this were to occur, certain contemplated transactions between Wells
Fund XIII and the general partners could be deemed to be "prohibited
transactions." Additionally, the standards of prudence and other provisions of
ERISA applicable to investments by retirement plans would extend to the general
partners as plan fiduciaries with respect to investments made by Wells Fund
XIII, and the requirement that Plan Assets be held in trust could be deemed to
be violated. To avoid these results, 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 - Definition
A 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.
In 1986, the Department of Labor issued regulations (Plan Asset
Regulations), relating to the definition of Plan Assets, which adopted the
general statement set forth in the Interpretive Bulletin; however, the
applicability of such statement was limited in that the regulations also
provided 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.
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Since 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 only 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, and Wells programs
have historically not qualified for this exception in that they have had equity
participation by "benefit plan investors" in excess of 25%, which would be
deemed to be significant, as defined above. Therefore, the general partners do
not anticipate that we 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 will not be deemed to be
Plan Assets under the Plan Asset Regulations. The definition of publicly
offered securities requires that such securities be "widely-held," "freely
transferable" and satisfy certain registration requirements under federal
securities laws. Although we would clearly seem to 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 easily met; however, even if the units are deemed
to be widely-held, the "freely transferable" requirement must also be satisfied
in order for us to qualify for this exemption. The Plan Asset Regulations
provide several examples of restrictions on transferability which, absent
unusual circumstances, will not cause the rights of ownership in question to be
considered not "freely transferable." One such example provided in the Plan
Asset Regulations involves an offering, such as this offering of units of Wells
Fund XIII, having a minimum investment of $10,000 or less. The allowed
restrictions in this example are illustrative of 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 has been
structured with the intent to satisfy the freely transferable requirement set
forth in the Plan Asset Regulations with respect to the units.
It should be noted, however, that because certain adverse tax consequences
can result if we are characterized as a "publicly traded partnership" under
Section 7704 of the Internal Revenue Code (see "Federal Income Tax Consequences
- Publicly Traded Partnership Status"), certain additional restrictions on the
transferability of units have been incorporated into the partnership agreement
which are intended to prevent classification as a publicly traded partnership
(Section 7704 Restrictions). The Plan Asset Regulations provide specifically,
in this regard, 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 affect a
finding that the securities are "freely
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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 us.
On the other hand, because the Section 7704 Restrictions are intended only
to prohibit transfers which would result in a reclassification of Wells Fund
XIII for federal tax purposes, if the Department of Labor interprets the Section
7704 Restrictions consistently with the specific exemption language in the Plan
Asset Regulations set forth above, we should qualify for the freely transferable
requirement and, thus, the publicly offered securities exemption. Because of
the factual nature of such a determination 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 we will, in fact,
qualify for this exemption.
Real Estate Operating Company Exemption
Even if we were deemed 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." We will be a real
estate operating company if, during the relevant valuation periods defined in
the Plan Asset Regulations, at least 50% of our 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 we have the right to participate substantially in the management or
development activities. We intend to devote more than 50% of our 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. Based on this example, and due to the
uncertainty of the application of the standards set forth in the Plan Asset
Regulations and the lack of further guidance as to the meaning of the term "real
estate operating company," there can be no assurance as to our ability to
structure our operations to qualify for the real estate operating company
exemption.
Plan Asset Consequences - Prohibited Transaction Excise Tax
Potential Classification of General Partners as "Parties in Interest"
If we were deemed to be holding 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 between the
general partners or Wells Fund XIII and any retirement plan which purchases our
units.
Both ERISA and 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" under ERISA and
as "disqualified persons" under the Internal Revenue Code. These definitions
include both parties owning threshold percentage interests in an investment
entity and "persons providing services to the plan," and certain of their
affiliates. Thus, if we are deemed to hold Plan Assets, each of our general
partners could be characterized as a "fiduciary" with respect to such assets,
and each would be deemed to be a "party in interest" under ERISA and a
"disqualified person" under the Internal Revenue Code with respect to investing
retirement plans.
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Further, if the general partners' interest in Wells Fund XIII were deemed
to exceed the threshold levels set forth in the Internal Revenue Code and ERISA,
Wells Fund XIII, itself, could also be deemed to be a disqualified person, and
an investment in units by a retirement plan could, itself, be a prohibited
transaction. Our general partners do not believe such thresholds have or will
be exceeded with respect to their interests in Wells Fund XIII or that Wells
Fund XIII should be treated as a party in interest or a disqualified person.
Potential Prohibited Transactions
If a general partner were to be characterized as a fiduciary with respect
to investing retirement plans, transactions between the general partners or
their affiliates and Wells Fund XIII, such as the payment of fees for services,
could constitute prohibited transactions because a fiduciary may not (1) deal
with Plan Assets in its own interest or (2) represent a person whose interests
are adverse to those of the plan in a transaction involving Plan Assets. It
could also 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 partnership assets, in
exchange for the provision of services, i.e., the establishment of Wells Fund
XIII and making it available as an investment to retirement plans. Absent a
specific exemption, any such transaction could be deemed to be a prohibited
transaction between investing retirement plans and the general partners.
Prohibited Transactions - Consequences
If it is determined by the Department of Labor or the IRS that a prohibited
transaction has occurred, any party in interest that has engaged in any such
transaction would be required to reverse or unwind the transaction and make good
to the retirement plan any loss resulting therefrom. 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. 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 IRAs. If Wells Fund XIII were deemed to be a party
in interest or a disqualified person with respect to an IRA, such that a
transaction between Wells Fund XIII and the account would be deemed under the
Internal Revenue Code to constitute a prohibited transaction, the tax-exempt
status of the IRA could be disallowed by reason of its investment in units. As
set forth above, the general partners do not believe that the investment
thresholds described above have or will be exceeded with respect to their
interests in Wells Fund XIII or that Wells Fund XIII should be treated as a
party in interest or a disqualified person.
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 (Regulations),
current positions of the Internal Revenue Service (IRS) contained in Revenue
Rulings, Revenue Procedures and other administrative actions and existing
judicial decisions in effect as of the date of this prospectus.
Investors should realize 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
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discussed below are necessarily general in nature, and their application may
vary depending upon a limited partner's particular circumstances. Further, no
representations are made in this prospectus as to state and local tax
consequences. 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.
Investors should note that we do 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. There can be
no assurance that the present federal income tax laws applicable to limited
partners and our operations will not be 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 personal 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 other communication from the general partners, their
affiliates, employees or any professional associated with this offering should
be construed as legal or tax advice to a potential investor. Investors should
be aware that the IRS may not agree with all tax positions taken by us and that
legislative, administrative or judicial decisions may reduce or eliminate
anticipated tax benefits.
Since investors electing cash preferred units are not anticipated to be
allocated much, if any, of the tax benefits associated with an investment in
Wells Fund XIII, discussions 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.
We will furnish to each partner and any assignee of units on an annual
basis the information necessary for the preparation and timely filing of a
federal income tax return. Investors should note that information returns filed
by us 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
General
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.
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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.
Investors should note that any statement herein or in the Tax Opinion 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.
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 we take with respect to any income tax issue.
Specific Opinions
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 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
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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 our first five calendar
years.
No Opinion on Some Issues
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 we will be considered to hold any or all of our
properties primarily for sale to customers in the ordinary course of
business; and
. the issue of whether we will be classified as a "tax shelter" under
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.")
Potential investors should note also that the IRS may 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 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, (1) the potential imposition of
the alternative minimum tax, (2) investment interest deductibility limitations
and (3) the potential limitation on deductions attributable to activities not
entered into for profit at the partner level. 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 us
nor have we 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 us.
Partnership Status Generally
The income tax results anticipated from an investment in units will depend
upon the classification of Wells Fund XIII as a partnership for federal income
tax purposes rather than an association taxable as a corporation. In the event
that, for any reason, Wells Fund XIII is treated for federal income tax purposes
as an association taxable as a corporation, the partners of Wells Fund XIII
would be treated as stockholders of a corporation 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.
Regulations regarding entity classification have been issued under 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 the
Regulations, an "eligible entity" that has at least two members will be treated
as a partnership in the
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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 we are deemed to be taxable as a corporation
pursuant to the application of the publicly traded partnership rules discussed
below, we will qualify as an "eligible entity" and need not make any election to
be treated as a partnership for federal income tax purposes.
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 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 Partnership Status
If we were to be classified as a "publicly traded partnership," then (1) we
would be taxable as a corporation (see "Partnership Status Generally" above),
and (2) our net income would be treated as portfolio income rather than passive
income (see "Passive Loss Limitation" below).
A publicly traded partnership is generally defined under 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 (Section 7704
Regulations) which provide guidance with respect to such classification
standards, however, and they include certain safe harbor standards which, if
satisfied, would preclude our being classified 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 the capital
or profits of Wells Fund XIII. 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
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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.
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 we 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 us 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 we
will be operated strictly in accordance with the terms of the partnership
agreement, Counsel has concluded that it is more likely than not we will not be
classified as a publicly traded partnership under 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
we will not, at some time in the future, be deemed to be a publicly traded
partnership.
Qualifying Income Exemption
Even if we were deemed to be a publicly traded partnership, however, there
is an exception under the Internal Revenue Code which provides that if 90% or
more of the gross income of such the partnership for each taxable year consists
of "qualifying income," then the partnership will not be taxed as a corporation.
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 a manner which
should generate income which will satisfy the 90% qualifying income exception.
(See "Investment Objectives and Criteria.") Investors should note, however,
that even if we satisfy 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 our net income as
portfolio income rather than passive income. (See "Passive Loss Limitation"
below.)
General Principles of Partnership Taxation
Under the Internal Revenue Code, no federal income tax is paid by a
partnership. Accordingly, if, as anticipated, we are treated as a partnership
for federal income tax purposes, we 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 our 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 the amount of taxable income allocated to a partner,
and the income tax liability resulting from such allocation of taxable income,
may exceed the amount of any cash distributed to such partner.
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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 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 us were to be recharacterized under these
rules, or if we 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 ability of a limited partner to deduct his distributive share of our
losses is subject to a number 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 are not
allowed 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 our taxable income and decreased, but not below zero by his distributive
share of our losses. Cash distributions which are made to a limited partner, if
any, will also decrease the basis in his units, and in the event a limited
partner has no remaining basis in his units, 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
The Internal Revenue Code substantially restricts the ability of many
taxpayers 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, our
income and loss, other than interest income which will constitute portfolio
income, will generally 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.
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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;
. 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 the last of our properties.
The Internal Revenue Code also provides that the passive activity loss
rules will be applied separately with respect to items attributable to a
publicly traded partnership. Accordingly, if we were deemed to be a publicly
traded partnership, partnership losses would be available only to offset future
non-portfolio income of Wells Fund XIII. In addition, if we 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 Partnership
Status" above.)
At Risk Limitation
The deductibility of partnership losses is limited further by the "at risk"
limitations set forth in 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 our fiscal 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 our losses and by
distributions made by us and increased by his allocable share of our 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 our 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 us 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 our allocations of profits and losses, 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.
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General Rules
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 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
(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 - General Allocations
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 our
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.
Economic Effect - Special Allocations
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.
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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
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 of partnership allocations 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
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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.
Partners' Interest in Wells Fund XIII
If the allocations of profits and losses set forth in our partnership
agreement are deemed not to have substantial economic effect, the allocations
will then be made in accordance with the partners' interests in Wells Fund XIII.
The Section 704(b) Regulations provide in this regard that a partner's interest
in Wells Fund XIII will be determined by taking into account all facts and
circumstances relating to the economic arrangement of our 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 our 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 limited partners will be matched by corresponding
reductions in the fair market value of our property; and
. the accuracy of the representations of the general partners, including
that we will be operated strictly in accordance with the terms of our
partnership agreement.
Taxable Income Without Cash Distributions
A partner is required to report his allocable share of our taxable income
on his personal income tax return regardless of whether or not he has received
any cash distributions from us. For example, a limited partner electing cash
preferred units 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 partner would receive no
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cash distributions from us. In addition, a limited partner 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 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 us. 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 an income tax liability in
excess of cash, if any, received from us 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 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 our 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 our
activities to avoid having any of our income characterized as UBTI, and the
types of partnership income and gain allocable to investing Exempt Organizations
should not generally constitute UBTI. If, however, we were either to be deemed
to hold partnership properties primarily for sale to customers in the ordinary
course of business (see "Taxation of Real Estate Operations" below), or we were
deemed 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.
"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.
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We will under no circumstances incur indebtedness to acquire partnership
properties. Thereafter, our 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 only in the event
that they deem such borrowing necessary to finance improvements of our
properties, to protect the capital previously invested in a property, to protect
the value of our 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 us
to incur indebtedness unless we first receive an opinion of counsel or an
opinion from our tax accountants that the proposed indebtedness more likely than
not will not cause our income 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 us 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, before we sell our properties,
mandatory distributions are required to be made to an IRA beneficiary or a
qualified plan participant, it is likely that a distribution of the units in
kind 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 from us 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 our
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 - Retirement Plan and Qualified Plan Risks.")
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
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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 our activities to avoid
having any of our income characterized as UBTI. Accordingly, unless we either
(1) incur indebtedness for the purpose of acquiring or improving real
properties, and are deemed to be holding property subject to "acquisition
indebtedness," or (2) we are deemed to hold our properties primarily for sale to
customers in the ordinary course of business, then under current law our income
should not be deemed to constitute UBTI to tax-exempt investors. (See
"Investment by Qualified Plans and Other Tax-Exempt Entities" above.)
Taxation of Real Estate Operations
Depreciation and Cost Recovery; Other Expenses
It is currently anticipated that the real property improvements acquired or
constructed by Wells Fund XIII and any personal property acquired by us will be
depreciated for tax purposes using the Alternative Depreciation System set forth
in Section 168 of the Internal Revenue Code for partnerships like us which have
both taxable and tax-exempt partners. This system provides that real property
improvements will be depreciated on a straight-line basis over a recovery period
of 40 years and that personal property will be depreciated over a recovery
period of 12 years on a straight-line basis.
Ordinary and necessary expenses incurred in connection with our operations
will be deductible to the extent they are deemed to be reasonable in amount,
with the exception of syndication and organizational expenses which are not
currently deductible by us. (See "Syndication and Organizational Expenses"
below.)
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 we are 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, who would, in such
cases, be treated as the owner of the property.
The 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 that we will be treated as the owner of the property in
question for federal income tax purposes. We will not seek an advance ruling
from the IRS or obtain an opinion of counsel that we will be treated as the
owner of any leased properties for federal income tax purposes, however, and a
determination by the IRS that we are 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 us or from investments in other passive
activities. (See "Passive Loss Limitation" above.)
Sales of Partnership Properties
Upon the sale of a property, we will recognize gain or loss to the extent
that the amount realized by us is more or less than the adjusted basis of the
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
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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 with respect to such property.
Assuming that we are not deemed to be a dealer with respect to our
properties (see "Property Held Primarily for Sale" below), gain or loss realized
on a sale of our properties 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 will generally be 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 - Federal Income Tax Risks.")
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 we 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. We intend 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. We will sell such property only as, in the opinion
of the general partners, is consistent with our investment objectives. The
general partners do not anticipate that we will be treated as a dealer with
respect to our properties. However, there is no assurance 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 we will be considered to hold any or all of
our properties primarily for sale to customers in the ordinary course of
business.
Syndication and Organizational Expenses
A current deduction is not allowed for expenses incurred in connection with
either (1) organizing Wells Fund XIII or (2) syndicating interests in Wells Fund
XIII. Amounts which qualify as organizational expenses, as well as other start-
up expenditures, may be amortized ratably over 60 months. Syndication expenses
are neither deductible nor amortizable and include costs and expenses incurred
in connection with promoting and marketing the units such as sales commissions,
professional fees and printing costs. The IRS may attempt to recharacterize
certain costs and expenses which the general partners intend to amortize over 60
months as nondeductible syndication expenses.
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
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that constitutes a trade or business or an activity that is engaged in for the
production 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, and
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:
. our investment objectives;
. the representations of the general partners that we will be operated
in a business-like manner in all material respects and strictly in
accordance with our partnership agreement and this prospectus; and
. the assumption that the determination as to whether the activities of
Wells Fund XIII are activities entered into for profit under Section
183 will be 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. 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 our 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 personal tax advisors regarding the impact of Section 183 on
their individual situations.
Sales of Limited Partnership Units
An investor may be unable to sell any of his units by reason of the
nonexistence of any active trading market for the units. 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 our "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 us 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 the Internal Revenue Code requires us 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 our "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 our assets,
if any, after payment of all of our 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, including but not limited to, (1) the effect
of a special basis election under Section 732(d) of the Internal Revenue Code
for
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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% for individuals, i.e., for gains realized with respect to capital
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assets held for more than 12 months, or may be taxed at a maximum marginal rate
of 18% if the capital asset disposed of is acquired after December 31, 2000, and
is held for a period of at least five years prior to its disposition. 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% or 18%. 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, we may elect to adjust the
basis of our 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 our 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 us to make any such election. As a consequence,
depreciation available to a transferee of units will be limited to the
transferor's share of the remaining depreciable basis of our 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 our 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 "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 liability or $5,000. The amount of an
understatement may be
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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 this purpose 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 we may be
considered a tax shelter and that certain partnership tax items could be
considered tax shelter items within the meaning of Section 6662 of the Internal
Revenue Code. Because the issue is dependent upon facts relating to our future
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, 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 our 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
We will furnish to the limited partners sufficient information from our
annual tax returns to enable the limited partners to prepare their own federal,
state and local tax returns. Limited partners either must report partnership
items on their returns consistently with the treatment on our information return
or must file Form 8082 with their returns identifying and explaining any
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 audits partnership 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 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 could also result in the payment by us of
substantial legal and accounting fees in our attempts 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 our tax returns 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. In addition, any audit of a limited
partner's return could result in adjustments of other items of income and
deductions not related to the operations of Wells Fund XIII.
In the event of an audit of our tax return, the general partners will take
primary responsibility for contesting federal income tax adjustments proposed by
the IRS. The general partners may also 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.
It should also be noted that in the event the general partners cause us to
elect to be treated as an "Electing Large Partnership" under the Internal
Revenue Code, thereby enabling us to take advantage of simplified flow-through
reporting of partnership items, any adjustments to our tax returns 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.
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 will generally be
required to file a United States tax return on which
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he must report his distributive share our 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
income or capital gains. A foreign investor may also be subject to tax on his
distributive share of our 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
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 personal 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 we 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
personal 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 we 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 our taxable income;
. whether an income tax or other return must also be filed in those
states where we will own properties; and
. whether he will be subject to state income tax withholding in states
where we 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 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.
Further, 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
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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 we 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 we are 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 be reduced. In addition, such
collection and filing requirements at the state level may result in increases in
our 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
personal 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 our 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 our 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 our 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 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:
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. 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
Requirement.")
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.
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, our 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.
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Except as provided below, the Dealer Manager will receive selling
commissions of 7.0% 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 0.5% 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 7.0% 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 NASD, the total
underwriting compensation, including sales commissions, the dealer manager fee
and underwriting expense reimbursements, may not exceed 10.0% of gross offering
proceeds, except for the additional 0.5% of gross offering proceeds which may be
paid 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 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
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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 (Escrow Agent) until such subscriptions
aggregating at least $1,250,000 (Minimum Offering) exclusive of subscriptions
for units by the general partners or their affiliates have been received and
accepted by our general partners. 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, 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 as the IRA custodian, the
authority of Wells Advisors 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 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 the 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 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.
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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:
Dollar Sales Commissions Dealer
Volume ----------------- Purchase Manager Net
of Units Price Fee Per Proceeds
Purchased Percent Per Unit Per Unit Unit Per Unit
--------- ------- -------- -------- ------- --------
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
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 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."
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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;
. all purchasers of the units must be informed of the availability of
quantity discounts;
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. 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 1.0% commission upon
subscription rather than a 7.0% commission and, thereafter, for the next six
years, or longer if required to satisfy the outstanding commission obligation,
an amount equal to a 1.0% commission per year will be deducted from and paid by
Wells Fund XIII out of net cash from operations otherwise distributable to such
investor and used by Wells Fund XIII to satisfy commission obligations. (See
"Distributions and Allocations - Distributions of Net Cash From Operations.")
The foregoing commission amounts may be adjusted with the approval of the Dealer
Manager by application of the volume discount provisions described previously.
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 Wells
Capital, Inc. as of November 30, 2000, and for the 11 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 (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.
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INDEX TO AUDITED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Wells Capital, Inc.
Report of Independent Public Accountants........................................... 122
Balance Sheets as of December 31, 1999 and 1998.................................... 123
Statements of Income for the years ended December 31, 1999 and 1998................ 124
Statements of Stockholder's Equity for the years ended December 31, 1999 and 1998.. 125
Statements of Cash Flows for the years ended December 31, 1999 and 1998............ 126
Notes to Financial Statements...................................................... 127
Wells Real Estate Fund XIII, L.P.
Report of Independent Public Accountants........................................... 132
Balance Sheet as of December 31, 1999.............................................. 133
Notes to Balance Sheet............................................................. 134
INDEX TO UNAUDITED FINANCIAL STATEMENTS
AND PRIOR PERFORMANCE TABLES
Wells Capital, Inc.
Balance Sheets as of November 30, 2000 and December 31, 1999....................... 137
Statements of Income for the 11 months ended November 30, 2000 and 1999............ 138
Statements of Stockholder's Equity for the 11 months ended November 30, 2000
and the year ended December 31, 1999.......................................... 139
Statements of Cash Flows for the 11 months ended November 30, 2000 and 1999........ 140
Condensed Notes to Financial Statements............................................ 141
Wells Real Estate Fund XIII, L.P.
Balance Sheet as of November 30, 2000.............................................. 142
Notes to Balance Sheet............................................................. 143
Prior Performance Tables................................................................ 146
</TABLE>
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[LOGO OF ARTHUR ANDERSEN]
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.
/s/ Arthur Andersen LLP
Atlanta, Georgia
January 20, 2000
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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.
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WELLS CAPITAL, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------- ----------
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
========== ==========
The accompanying notes are an integral part of these statements.
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WELLS CAPITAL, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Stock 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.
125
<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.
126
<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
127
<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
128
<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.
129
<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.
130
<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.
131
<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
132
<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.
133
<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.
134
<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 units in amounts equal to the deductions for depreciation and
amortization previously allocated to them
135
<PAGE>
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.
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.
136
<PAGE>
WELLS CAPITAL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(Unaudited) (Audited)
November 30, 2000 December 31, 1999
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 150,611 $ 147,964
Due from affiliates 326,923 150,031
Other receivables and prepaid expenses 143,983 55,971
---------- ----------
Total current assets 621,517 353,966
SECURITIES AVAILABLE FOR SALE 84,454 80,464
INVESTMENT IN AFFILIATED COMPANIES 222,898 223,776
DEFERRED OFFERING COSTS 1,824,582 1,296,894
---------- ----------
Total assets $2,753,451 $1,955,100
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Accounts payable $ 13,498 $ 0
Due to affiliates 0 324,664
---------- ----------
Total liabilities 13,498 324,664
---------- ----------
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) (24,636)
Retained earnings 2,457,448 1,347,931
---------- ----------
Total stockholder's equity 2,739,953 1,630,436
---------- ----------
Total liabilities and stockholder's equity $2,753,451 $1,955,100
========== ==========
</TABLE>
The accompanying condensed notes are an integral part of this balance sheet.
137
<PAGE>
WELLS CAPITAL, INC.
STATEMENTS OF INCOME
(Unaudited)
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
REVENUES:
Acquisition and advisory fees $6,106,473 $3,679,744
Equity in loss of affiliated companies 0 (35)
Interest income 36,216 10,980
Investment income 3,990 326
---------- ----------
6,146,679 3,691,015
---------- ----------
EXPENSES:
Salaries and wages 4,858,054 2,360,281
General and administrative, net of reimbursements 179,108 67,248
---------- ----------
5,037,162 2,427,529
---------- ----------
NET INCOME $1,109,517 $1,263,486
========== ==========
</TABLE>
The accompanying condensed notes are an integral part of these statements.
138
<PAGE>
WELLS CAPITAL, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
THE ELEVEN MONTHS ENDED NOVEMBER 30, 2000
(unaudited)
<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, 1998 600 $600 $306,541 $ 0 $ 210,885 $ 518,026
Changes in unrealized loss on 0 0 0 (24,636) 0 (24,636)
Investment securities
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
==== ==== ======== ======== ========== ==========
Net Income (unaudited) 0 0 0 0 1,109,517 1,109,517
---- ---- -------- -------- ---------- ----------
BALANCE, NOVEMBER 30, 2000 $600 $600 $306,541 $(24,636) $2,457,448 $2,739,953
==== ==== ======== ======== ========== ==========
(unaudited)
</TABLE>
The accompanying condensed notes are an integral part of these statements.
139
<PAGE>
WELLS CAPITAL, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,109,517 $1,263,486
----------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in loss (income) of affiliated companies 617 0
Investment income reinvested (3,990) (10,000)
Changes in assets and liabilities:
Due from affiliates (176,892) 105,428
Deferred offering costs (527,688) (117,947)
Other receivables and prepaid expenses (88,012) (17,390)
Accounts payable 13,498 (373)
Due to affiliates (324,664) (713,554)
----------- ----------
Total adjustments (1,107,131) (753,836)
----------- ----------
Net cash provided by operating activities 2,386 509,650
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from affiliated companies 261 0
----------- ----------
Net cash provided by (used in)
investing activities 261 0
----------- ----------
NET INCREASE (DECREASE) IN CASH 2,647 509,650
CASH AT BEGINNING OF YEAR 147,964 41,571
----------- ----------
CASH AT END OF THE PERIOD $ 150,611 $ 551,221
=========== ==========
</TABLE>
The accompanying condensed notes are an integral part of these statements
140
<PAGE>
WELLS CAPITAL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The financial statements of Wells Capital, Inc. (the Company) do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These interim
statements have not been examined by independent accountants, but in the
opinion of the management, the statements for the unaudited interim periods
presented include only adjustments, which are of normal and recurring
nature, necessary to present a fair presentation of the results for such
periods. For further information, refer to the financial statements and
footnotes included in the audited report of the Company for the year ended
December 31, 1999.
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"), Wells Real Estate Fund III, L.P. ("Fund III"), and Wells Real
Estate Fund XIII, L.P. ("Fund XIII"), 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 substantially the same investment objectives as Funds I,
II, II-OW, III, and XIII.
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. Substantially all of the Wells REIT's
business is conducted through Wells Operating Partnership, L.P. (the
"Operating Partnership"), a Delaware limited partnership. The Operating
Partnership issued 20,000 limited partnership units to the Company in
exchange for $200,000.
141
<PAGE>
WELLS REAL ESTATE FUND XIII, L.P.
(a Georgia Public Limited Partnership)
Balance Sheet
(Unaudited)
November 30, 2000
ASSETS
Cash $ 600
Deferred offering costs (note 2) 127,506
--------
Total Assets 128,106
========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities, due to Affiliate (note 2) $127,506
Partners' Capital:
General Partner 500
Limited Partner 100
--------
Total Partners' Capital 600
--------
Total Liabilities and Partners' Capital $128,106
========
The accompanying notes are an integral part of this balance sheet.
142
<PAGE>
WELLS REAL ESTATE FUND XIII, L.P.
(a Georgia Public Limited Partnership)
Notes to Balance Sheet
(Unaudited)
November 30, 2000
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 substantially all the assets,
subject to certain limitations. The majority vote on any of the described
matters will bind the Partnership, without the concurrence of the general
partners. Each limited partnership unit has equal voting rights, regardless
of which class of unit is selected. The Partnership had no operations as of
November 30, 2000.
The Partnership intends to acquire on an all cash basis 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 in the
partnership agreement. 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.
143
<PAGE>
Allocation of Net Income, Net Loss, and Gain on Sale
Net income of the Partnership (defined in the partnership agreement to
exclude deductions for depreciation, amortization, and cost recovery) will
be allocated each year in the same proportions that net cash from
operations is distributed to the partners. To the extent the Partnership's
net income in any year exceeds net cash from operations, it will be
allocated 99% to the limited partners holding cash preferred units and 1%
to the general partners.
Net loss, depreciation, amortization, and cost recovery deductions for each
fiscal year will be allocated as follows: (a) 99% to the limited partners
holding tax preferred units and 1% to the general partners until their
capital accounts are reduced to zero; (b) then to any partner having a
positive balance in his capital account in an amount not to exceed such
positive balance; and (c) thereafter 100% 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 have been restored to zero; and (c) allocations
to limited partners holding tax preferred units in amounts equal to the
deductions for depreciation, amortization, and cost recovery previously
allocated to them with respect to the specific partnership property sold,
but not in excess of the amount of gain on sale recognized by the
Partnership with respect to the sale of such property.
Distribution of Net Sales Proceeds
Upon sales of properties, the net sales 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 on
a per unit basis;
. To limited partners on a per unit basis until each limited
partner has received 100% of his net capital contribution, as
defined in the partnership agreement;
. To all limited partners on a per unit basis until they receive a
cumulative 10% per annum return on their net capital
contribution, 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;
. Then, if and only in the event that 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; and
. Thereafter 80% to the limited partners on a per unit basis and
20% to the general partners.
144
<PAGE>
2. DEFERRED OFFERING COSTS
Organization and offering expenses, to the extent they exceed 3% of gross
offering proceeds, will be paid by Wells Capital, Inc. (the "Company") and
not by the Partnership. Organization and offering expenses do not include
sales or underwriting commissions but do include such costs as legal and
accounting fees, printing costs, and other offering expenses.
As of November 30, 2000, the Company has paid organization and offering
expenses related to the Partnership of $127,506. A registration statement
covering the Partnership was filed with the Securities and Exchange
Commission ("SEC") on October 31, 2000. The registration statement of the
Partnership has to be declared effective by the SEC, and the Partnership
needs to receive approximately $4,250,200 in limited partners' capital
contributions before this $127,506 will be paid to the Company. At this
time, the general partners believe that the registration statement for the
Partnership will be declared effective and that all of the foregoing
organization and offering expenses will be reimbursed by the Partnership.
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.
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 while serving in the capacity as general partners for other Wells
Real Estate Funds may be in competition with the Partnership for properties
or tenants in similar geographic markets.
4. INCOME TAXES
The Partnership is not subject to federal or state income taxes, and
therefore, none have been provided for in the accompanying financial
statements. The partners of the Partnership are required to include their
respective shares of profits and losses in their individual income tax
returns.
5. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership. In the normal
course of business, the Partnership may become subject to such litigation
or claims.
145
<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.
"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.
146
<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 for
Investment (Measured from Beginning of Offering) 14 mo. 19 mo. 20 mo. 21 mo.
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.
147
<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.
148
<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
to Sponsor from Proceeds of Offering: $ 35,000,000 $ 27,128,912 $ 16,532,802 $132,181,919 $206,241,095
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
149
<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.
150
<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.
151
<PAGE>
TABLE III (UNAUDITED)
OPERATING RESULTS OF PRIOR PROGRAMS
WELLS REAL ESTATE FUND VII, L.P.
<TABLE>
<CAPTION>
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 Distributions $ 62,390 $ (2,709) $ (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>
152
<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.
153
<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 91 91 73 46 28
- Operations Class B Units (247) (212) (150) (47) (3)
Capital Gain (Loss) -- -- -- -- --
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>
154
<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.
155
<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 Expense/(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>
156
<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.
157
<PAGE>
TABLE III (UNAUDITED)
OPERATING RESULTS OF PRIOR PROGRAMS
WELLS REAL ESTATE FUND X, L.P.
<TABLE>
<CAPTION>
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 Reported in the Table 100%
</TABLE>
158
<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.
159
<PAGE>
TABLE III (UNAUDITED)
OPERATING RESULTS OF PRIOR PROGRAMS
WELLS REAL ESTATE FUND XI, L.P.
<TABLE>
<CAPTION>
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>
160
<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.
161
<PAGE>
EXHIBIT A
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.
A-1
<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.
A-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.
A-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.
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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.
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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, real estate investment trusts 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. 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.
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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 $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
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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.
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(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.
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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 or in shares issued by a
real estate investment trust 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 or in shares issued by a real estate investment
trust 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 or in a real estate investment trust 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 or real estate investment trust and such prospectus allows
investment pursuant to a distribution reinvestment plan; (ii) a registration
statement covering the interests in the subsequent limited partnership or real
estate investment trust 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 or
real estate investment trust; (v) the participant qualifies under the applicable
investor suitability standards as contained in the prospectus for the subsequent
limited partnership or real estate investment
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trust; and (vi) the subsequent limited partnership or real estate investment
trust has substantially identical investment objectives as the Partnership. If
(A) any of the foregoing conditions are 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 or real estate investment trust sponsored by the
General Partners or their Affiliates shall be deemed to constitute his agreement
to be a limited partner of the partnership or a shareholder of the real estate
investment trust in which such investment is made and to be bound by the terms
and conditions of the agreement of limited partnership of such partnership or
the articles of incorporation of such real estate investment trust, and if, at
any time, he fails to meet the applicable investor suitability standards or
cannot make the other investor representations or warranties set forth in the
then current 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 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
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initial six years following termination of the Offering (or longer if required
to satisfy the outstanding commission obligation), Limited Partners purchasing
Units pursuant to the deferred commission option, as defined in the Prospectus,
will be permitted to elect to have their Cash 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.
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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 3.47 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 3.47 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
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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
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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.
---------------------------
(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 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; Indemnification of
-------------------------------------------------------------------
the General Partners.
--------------------
(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
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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
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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
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<PAGE>
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
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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
-------------------------------------------
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
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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
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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
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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.
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<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
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<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 Wells Real Estate Fund XIII, L.P. (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
260.141.11 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 260.141.12 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.
INSTRUCTIONS Failure to do 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 "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 $9.40 per Unit purchased upon
subscription. For the next six years following the
year of subscription, or longer if required to
satisfy outstanding deferred commission
obligations, you will have a 1% sales commission
($.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 UNITS Please check the appropriate box to identify the
status of 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 OWNERSHIP Please check the appropriate box to indicate the
type of entity or type of individuals subscribing.
--------------------------------------------------------------------------------
4. REGISTRATION NAME AND Please enter the exact name in which the Units
are to be held. For joint tenants with right of
survivorship or tenants in common, include the
names of both investors. In the case of
partnerships or corporations, include the name of
an
B-5
<PAGE>
--------------------------------------------------------------------------------
ADDRESS 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 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 AND ADDRESS Complete this Section only if the investor's name
and 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 SIGNATURES Please separately initial each representation
made by the 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 INVESTMENTS Please check if you plan to make one or more
additional investments, including any systematic
monthly or other regular 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 or real estate
investment trusts 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 or real estate
investment trusts sponsored by the
B-6
<PAGE>
--------------------------------------------------------------------------------
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 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 cash flow from operations) (Allocated certain tax deductions but no
distributions of 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
[_] Partnership (15) Transfers 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>
<PAGE>
<TABLE>
<S> <C> <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 in the Company. 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 Dividend Reinvestment Plan: Percentage of participation: 100% [_]
Other [_] ___%
8b. Complete the following section only to direct dividends 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.O. 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.................................................... 119
Compensation of the General Partners and Affiliates....................... 48
Conflicts of Interest..................................................... 51
Description of the Units.................................................. 69
Distributions and Allocations............................................. 71
Estimated Use of Proceeds................................................. 47
Experts................................................................... 118
Federal Income Tax Consequences........................................... 93
Fiduciary Duty of the General Partners.................................... 55
Financial Statements...................................................... 121
Glossary.................................................................. 119
Investment by Tax-Exempt Entities and ERISA
Considerations...................................................... 87
Investment Objectives and Criteria........................................ 31
Legal Opinions............................................................ 118
Management................................................................ 41
Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 77
Plan of Distribution...................................................... 114
Prior Performance Summary................................................. 58
Prior Performance Tables.................................................. 146
Real Property Investments................................................. 76
Reports to Investors...................................................... 112
Risk Factors.............................................................. 11
Suitability Standards..................................................... 27
Summary of the Offering................................................... 4
Summary of Partnership Agreement.......................................... 78
Supplemental Sales Material............................................... 118
</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:
<TABLE>
<CAPTION>
Amount
----------
<S> <C>
SEC Registration Fee $ 11,880
NASD Filing Fee 5,000
Printing Expenses 200,000
Legal Fees and Expenses 200,000
Accounting Fees and Expenses 75,000
Blue Sky Fees and Expenses 110,000
Miscellaneous 748,120
----------
Total* $1,350,000
==========
*Estimated.
</TABLE>
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 Sheet as of November 30, 2000, and
(2) Notes to Balance Sheet.
The following financial statements of Wells Capital, Inc. are
included in the Prospectus:
Audited Financial Statements
(1) Report of Independent Public Accountants,
(2) Balance Sheets as of December 31, 1999 and 1998,
(3) Statements of Income for the years ended December 31,
1999 and 1998,
(4) Statements of Stockholder's Equity for the years ended
December 31, 1999 and 1998,
II-2
<PAGE>
(5) Statements of Cash Flows for the years ended December
31, 1999 and 1998, and
(6) Notes to Financial Statements.
Unaudited Financial Statements
(1) Balance Sheets as of November 30, 2000 and December 31,
1999,
(2) Statements of Income for the eleven months ended
November 30, 2000 and 1999,
(3) Statements 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.
(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.
(previously filed in and incorporated by reference Registrant's
Registration Statement on Form S-11, Commission File No. 333-48984,
filed on October 31, 2000)
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 (previously filed in and incorporated
by reference Registrant's Registration Statement on Form S-11,
Commission File No. 333-48984, filed on October 31, 2000)
3.2(a) Certificate of Amendment to the Certificate of Limited Partnership
of Wells Real Estate Fund XIII, L.P. dated October 20, 2000
(previously filed in and incorporated by reference Registrant's
Registration Statement on Form S-11, Commission File No. 333-48984,
filed on October 31, 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
8 Opinion of Holland & Knight LLP regarding tax matters
10.1 Form of Escrow Agreement between Wells Real Estate Fund XIII, L.P.
and Bank of America, N.A. (previously filed in and incorporated by
reference Registrant's Registration Statement on Form S-11,
Commission File No. 333-48984, filed on October 31, 2000)
10.2 Form of Leasing and Tenant Coordinating Agreement between Wells
Real Estate Fund XIII, L.P. and Wells Management Company, Inc.
(previously filed in and incorporated by reference Registrant's
Registration Statement on Form S-11, Commission File No. 333-48984,
filed on October 31, 2000)
10.3 Form of Management Agreement between Wells Real Estate Fund XIII,
L.P. and Wells Management Company, Inc. (previously filed in and
incorporated by reference
II-3
<PAGE>
Registrant's Registration Statement on Form S-11, Commission File No.
333-48984, filed on October 31, 2000)
23.1 Consent of Holland & Knight LLP (included in Exhibits 5.1 and 8)
23.2 Consent of Arthur Andersen LLP
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
II-4
<PAGE>
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.
(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
--------------------------------
<TABLE>
<S> <C>
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
</TABLE>
___________________
/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 November 30, 2000.
II-7
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds IX, X, XI and REIT
------------------------------
<TABLE>
<S> <C>
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
</TABLE>
__________________
/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 November 30, 2000.
II-8
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds IX, X, XI and REIT
------------------------------
<TABLE>
<S> <C>
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
</TABLE>
_________________________
/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 November 30, 2000.
II-9
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds IX, X, XI and REIT
------------------------------
<TABLE>
<S> <C>
Name of property Avaya 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
</TABLE>
___________________
/10/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/11/ Includes improvements made after acquisitions through November 30,
2000.
II-10
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds X, XI and REIT
--------------------------
<TABLE>
<S> <C>
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
</TABLE>
_____________________
/12/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/13/ Includes improvements made after acquisitions through November 30, 2000.
II-11
<PAGE>
TABLE VI (continued)
--------------------
Wells Funds X, XI and REIT
--------------------------
<TABLE>
<S> <C>
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
</TABLE>
____________________
/14/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/15/ Includes improvements made after acquisitions through November 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/17/ $898,168
Total Acquisition Cost $22,124,631
______________________
/16/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/17/ Includes improvements made after acquisitions through November 30, 2000.
II-13
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property AT&T Harrisburg 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/18/
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/19/ $232,209
Total Acquisition Cost $12,764,109
__________________
/18/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/19/ Includes improvements made after acquisitions through November 30, 2000.
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/20/
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/21/ $13,860,142
Total Acquisition Cost $18,437,627
________________
/20/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/21/ Includes improvements made after acquisitions through November 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/22/ 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/23/ $225,540
Total Acquisition Cost $5,347,540
______________________
/22/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/23/ Includes improvements made after acquisitions through November 30, 2000.
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/24/ 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/25/ $398,299
Total Acquisition Cost $9,944,509
_____________________
/24/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/25/ Includes improvements made after acquisitions through November 30, 2000.
II-17
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Alstom Power 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 102,000 sq. feet
Date of commencement of June 5, 1998
operations/26/
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/27/ $11,193,462
Total Acquisition Cost $12,141,862
__________________
/26/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/27/ Includes the improvements made after acquisition through November 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/28/ 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/29/ $342,077
Total Acquisition Cost $8,392,077
_________________________
/28/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/29/ Includes improvements made after acquisitions through November 30,
2000.
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/30/
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/31/ $1,912,472
Total Acquisition Cost $34,543,412
___________________________
/30/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/31/ Includes improvements made after acquisitions through November 30,
2000.
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/32/ 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/33/ $347,824
Total Acquisition Cost $8,695,424
_________________________
/32/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/33/ Includes improvements made after acquisitions through November 30,
2000.
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/34/
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/35/ $920,379
Total Acquisition Cost $22,747,279
_________________________
/34/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/35/ Includes improvements made after acquisitions through November 30,
2000.
II-22
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Metris Tulsa 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/36/
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/37/ $521,072
Total Acquisition Cost $13,261,072
__________________________
/36/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/37/ Includes improvements made after acquisitions through November 30,
2000.
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/38/
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/39/ $597,264
Total Acquisition Cost $14,886,573
___________________________
/38/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/39/ Includes improvements made after acquisitions through November 30,
2000.
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/40/
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/41/ $727,185
Total Acquisition Cost $18,124,318
_________________________
/40/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/41/ Includes improvements made after acquisitions through November 30,
2000.
II-25
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Motorola Tempe 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/42/
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/43/ $669,639
Total Acquisition Cost $16,705,858
__________________________
/42/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/43/ Includes improvements made after acquisitions through November 30,
2000.
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/44/ 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 $12,852,059
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/45/ $1,440,430
Total Acquisition Cost $14,292,489
__________________________
/44/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/45/ Includes improvements made after acquisitions through November 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/46/
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/47/ $553,156
Total Acquisition Cost $13,822,658
__________________________
/46/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/47/ Includes improvements made after acquisitions through November 30,
2000.
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/48/
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/49/ $691,595
Total Acquisition Cost $20,612,927
__________________________
/48/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/49/ Includes improvements made after acquisitions through November 30,
2000.
II-29
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Motorola Plainfield Building
Location of property 1111 Durham Avenue, Plainfield, Middlesex
County, New Jersey
Type of property Three-story office building
Size of parcel 34.5 acres
Gross leasable space 236,710 sq. feet
Date of commencement of June 5, 1998
operations/50/
Date of purchase November 1, 2000
Mortgage financing at
date of purchase $22,800,150
Cash down payment $1,000,000
Contract purchase price
plus acquisition fee $33,814,566
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized/51/ $424,760
Total Acquisition Cost $34,239,326
__________________________
/50/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
/51/ Includes improvements made after acquisitions through November 30,
2000.
II-30
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Stone & Webster Building
Location of property 1430 Enclave Parkway, Harris County,
Houston, Texas
Type of property Six-story office building
Size of parcel 14.3 acres (9.96 acres developed and 4.34
available for expansion)
Gross leasable space 312,564 sq. feet
Date of commencement of June 5, 1998
operations/52/
Date of purchase December 21, 2000
Mortgage financing at
date of purchase $38,900,000
Cash down payment $1,000,000
Contract purchase price
plus acquisition fee $45,021,343
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized N/A
Total Acquisition Cost $45,021,343
__________________________
/52/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-31
<PAGE>
TABLE VI (continued)
--------------------
Wells REIT
----------
Name of property Metris Minnetonka Building
Location of property 10900 Wayzata Boulevard, Minnetonka,
Minnesota
Type of property Nine-story office building
Size of parcel 13.58 acres
Gross leasable space 300,633 sq. feet
Date of commencement of June 5, 1998
operations/53/
Date of purchase December 21, 2000
Mortgage financing at
date of purchase $52,800,000
Cash down payment N/A
Contract purchase price
plus acquisition fee $53,012,202
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized N/A
Total Acquisition Cost $53,012,202
__________________________
/53/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-32
<PAGE>
TABLE VI (continued)
--------------------
Wells Fund XII and REIT
-----------------------
Name of property AT&T Call Center Building
Location of property 3201 Quail Springs Parkway, Oklahoma County,
Oklahoma City, Oklahoma
Type of property one-story office building and a two-story
office building
Size of parcel 11.34 acres
Gross leasable space 128,500 sq. feet (aggregate)
Date of commencement of Fund XII - June 1, 1999
operations/54/ REIT - June 5, 1998
Date of purchase December 28, 2000
Mortgage financing at
date of purchase N/A
Cash down payment $300,000
Contract purchase price
plus acquisition fee $15,327,554
Other cash expenditures
expensed N/A
Other cash expenditures
capitalized $638,653
Total Acquisition Cost $15,966,207
__________________________
/54/ The date minimum offering proceeds were obtained and funds became
available for investment in properties.
II-33
<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 Amendment No.
1 to 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
10/th/ day of January, 2001.
------
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.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Leo F. Wells, III President (Chief Executive Officer), January 10, 2001
--------------------------- Treasurer and Sole Director of Wells
Leo F. Wells, III Capital, Inc.
</TABLE>
<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.
(previously filed in and incorporated by reference Registrant's
Registration Statement on Form S-11, Commission File No. 333-
48984, filed on October 31, 2000)
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 (previously filed in and
incorporated by reference Registrant's Registration Statement on
Form S-11, Commission File No. 333-48984, filed on October 31,
2000)
3.2(a) Certificate of Amendment to the Certificate of Limited
Partnership of Wells Real Estate Fund XIII, L.P. dated October
20, 2000 (previously filed in and incorporated by reference
Registrant's Registration Statement on Form S-11, Commission File
No. 333-48984, filed on October 31, 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
securities of Wells Real Estate Fund XIII, L.P. to be offered,
filed herewith
8 Opinion of Holland & Knight LLP regarding tax matters, filed
herewith
10.1 Form of Escrow Agreement between Wells Real Estate Fund XIII,
L.P. and Bank of America, N.A (previously filed in and
incorporated by reference Registrant's Registration Statement on
Form S-11, Commission File No. 333-48984, filed on October 31,
2000)
10.2 Form of Leasing and Tenant Coordinating Agreement between Wells
Real Estate Fund XIII, L.P. and Wells Management Company, Inc.
(previously filed in and incorporated by reference Registrant's
Registration Statement on Form S-11, Commission File No. 333-
48984, filed on October 31, 2000)
10.3 Form of Management Agreement between Wells Real Estate Fund XIII,
L.P. and Wells Management Company, Inc. (previously filed in and
incorporated by reference Registrant's Registration Statement on
Form S-11, Commission File No. 333-48984, filed on October 31,
2000)
23.1 Consent of Holland & Knight LLP (included in Exhibits 5.1 and 8)
23.2 Consent of Arthur Andersen LLP, filed herewith
