<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996 or
-------------------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
---------------------- -------------------------
Commission file number 0-14463
---------------------------------------------------------
Wells Real Estate Fund I
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1565512
- - ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
-----------------------------
- - -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund I and Subsidiaries
-----------------------------------------
INDEX
-----
Page No.
--------
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets - March 31, 1996
and December 31, 1995.................................... 3
Consolidated Statements of Income for
Three Months Ended March 31, 1996 and 1995............... 4
Statements of Partners' Capital
for the Three Months Ended March 31, 1996
and the Year Ended December 31, 1995..................... 5
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1996 and 1995........... 6
Condensed Notes to Consolidated Financial Statements..... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 14
PART 11. OTHER INFORMATION................................................ 21
2
<PAGE>
WELLS REAL ESTATE FUND I AND SUBSIDIARIES
(A Georgia Public Limited Partnership)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets March 31, 1996 December 31, 1995
------ -------------- -----------------
<S> <C> <C>
Real Estate, at cost (Note 2)
Land $ 2,894,193 $ 2,894,193
Building and improvements, less
accumulated depreciation of $ 4,647,188
in 1996 and $4,391,172 in 1995 14,721,090 14,894,955
----------- -----------
Total real estate 17,615,283 17,789,148
----------- -----------
Investments in joint ventures (Note 2) 7,457,476 7,560,948
Cash and cash equivalents 295,447 323,786
Due from affiliates 135,491 124,999
Deferred lease acquisition costs 18,835 14,964
Accounts receivable 199,942 218,136
Prepaid expenses and other assets 60,430 54,279
----------- -----------
8,167,621 8,297,112
----------- -----------
Total assets $25,782,904 $26,086,260
----------- -----------
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 131,699 $ 85,610
Due to affiliates 1,303,280 1,267,152
Refundable security deposits 56,245 52,277
Partnership distribution payable 352,307 422,320
----------- -----------
Total assets $ 1,843,531 $ 1,827,359
----------- -----------
Minority interest 136,369 137,051
Partners' capital
Limited Partners:
Class A - 98,716 Units Outstanding 21,478,544 21,442,415
Class B - 42,568 Units Outstanding 2,324,460 2,679,435
----------- -----------
Total Partners' capital 23,803,004 24,121,850
----------- -----------
Total liabilities and Partners' capital $25,782,904 $26,086,260
----------- -----------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND I AND SUBSIDIARIES
(A Georgia Public Limited Partnership)
Consolidated Statement of Income
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996 March, 31, 1995
--------------- ----------------
<S> <C> <C>
Revenues:
Rental Income $ 466,091 $ 474,720
Interest Income 4,796 5,350
Equity in earnings of Joint ventures (Note 2) 32,019 50,472
--------- ---------
502,906 530,542
--------- ---------
Expenses:
Management and leasing fees 30,084 28,926
Lease acquisition costs 9,931 10,666
Operating costs - rental properties,
net of tenant reimbursements 139,725 88,647
Bad debt recovery 0 (1,407)
Depreciation 256,015 122,373
Legal Expenses 7,086 6,330
Computer Sales 1,023 2,761
Partnership administration 27,825 21,008
Minority interest 763 482
--------- ---------
472,352 279,786
--------- ---------
Net income $ 30,554 $ 250,756
--------- ---------
Net income allocated to
General Partners $ 0 $ 0
Net income allocated to
Class A Limited Partners $ 385,530 $ 441,618
Net loss allocated to Class
B Limited Partners $(354,975) $(190,862)
Net income per Class A
Limited Partner Unit $ 3.91 $ 4.47
Net loss per Class B
Limited Partner Unit $ (8.34) $ (4.48)
Cash distribution per Class
A Limited Partner Unit $ 2.54 $ 4.40
</TABLE>
See accompanying condensed notes to consolidated financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND I AND SUBSIDIARIES
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Limited Partners
-----------------------------------------------------------
Class A Class B Total
------- ------- Partners'
Units Amounts Units Amounts Capital
------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 98,716 $21,487,254 42,568 $ 0 $25,077,737
Net Income (loss) 0 1,657,310 0 (911,048) 746,262
Partnership distributions 0 (1,702,149) 0 0 (1,702,149)
------ ----------- ------ ---------- -----------
BALANCE, December 31, 1995 98,716 21,442,415 42,568 2,679,435 24,121,850
------ ----------- ------ ---------- -----------
Net Income (loss) 0 385,529 0 (354,975) 30,554
Partnership distributions 0 (349,400) 0 0 (349,400)
------ ----------- ------ ---------- -----------
BALANCE, March 31, 1996 98,716 $21,478,544 42,568 $2,324,460 $23,803,004
====== =========== ====== ========== ===========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND I AND SUBSIDIARIES
(A Georgia Public Limited Partnership)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
March 31, 1996 March, 31, 1995
--------------- ----------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 30,554 $ 250,756
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Equity in earnings of joint ventures (32,019) (50,472)
Minority interest 763 482
Distribution received from joint ventures 124,999 91,300
Partnership distribution paid (419,413) (450,646)
Depreciation 256,015 122,373
Accrued management and leasing fees 30,084 36,099
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable 18,195 (28,372)
Increase in prepaids and other assets (10,023) (11,038)
Increase (Decrease) in accounts payable
and refundable security deposits 50,056 (17,093)
Increase (Decrease) in due to affiliates 4,600 (92,366)
--------- ---------
Net cash provided by (used in)
operating activities 53,811 (148,977)
Cash flow from investing activities:
Additional investment in Joint Venture 0 5,321
Additional investment in real estate (82,150) (34,366)
--------- ---------
Net cash used in
investing activities (82,150) (29,015)
--------- ---------
Net decrease in cash and cash equivalents (28,339) (177,992)
Cash and cash equivalents, beginning of year 323,786 395,165
--------- ---------
Cash and cash equivalents, end of period $ 295,447 $ 217,173
========= =========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND 1 AND SUBSIDIARIES
(A Georgia Public Limited Partnership)
Condensed Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
-------
Wells Real Estate Fund I (the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Capital, Inc.,
a Georgia corporation, as General Partners. The Partnership was formed
on April 26, 1984, for the purpose of acquiring, developing,
constructing, owning, operating, improving, leasing and otherwise
managing for investment purposes income-producing commercial or
industrial properties.
On September 6, 1984, the Partnership commenced a public offering of
its limited partnership units pursuant to a Registration Statement
filed on Form S-11 under the Securities Act of 1933. The Partnership
terminated its offering on September 5, 1986, and received gross
proceeds of $35,321,000 representing subscriptions from 4,895 Limited
Partners, composed of two classes of limited partnership interest,
Class A and Class B limited partnership units.
As of March 31, 1996, the Partnership owned directly or though its
ownership in joint ventures, interests in the following properties:
(i) The Howell Mill Road Property, a medical office building located
in Atlanta, Georgia, (ii) The Crowe's Crossing Property, a shopping
center located in DeKalb County, Georgia, (iii) The Black Oak Plaza
Property, a shopping center located in Knoxville, Tennessee, (iv) The
Peachtree Place Property, two commercial office buildings located in
Atlanta, Georgia, (v) The Tucker Property, a retail shopping and
commercial office complex located in Tucker, Georgia, and (vi) The
Cherokee Property, a shopping center located in Cherokee County,
Georgia. All of the foregoing properties were acquired on all cash
basis.
(b) Basis of Presentation
----------------------
The consolidated financial statements of Wells Real Estate Fund I and
subsidiaries (the "Partnership") have been prepared in accordance with
instructions to Form 10-Q and do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. These quarterly statements have not
been examined by independent accountants, but in the opinion of the
General Partners, the statements for the unaudited interim periods
presented include all adjustments, which are of a normal and recurring
nature, necessary to present a fair presentation of the results for
such periods. For further information, refer to the consolidated
financial statements and footnotes included in the Partnership's Form
10-K for the year ended December 31, 1995.
7
<PAGE>
(c) Employees
---------
The Partnership has no direct employees. The employees of Wells
Capital, Inc., a General Partner of the Partnership, perform a full
range of real estate services including leasing and property
management, accounting, asset management and investor relations for
the Partnership.
(d) Insurance
---------
Wells Management Company, Inc., an affiliate of the General Partners,
carries comprehensive liability and extended coverage with respect to
all the properties owned directly or indirectly by the Partnership.
In the opinion of management, the properties are adequately insured.
(e) Competition
-----------
The Partnership will experience competition for tenants from owners
and managers of competing projects which may include the General
Partners and their affiliates. As a result, the Partnership may be
required to provide free rent, reduced charges for tenant improvements
and other inducements, all of which may have an adverse impact on
results of operations. At the time the Partnership elects to dispose
of its properties, the Partnership will also be in competition with
sellers of similar properties to locate suitable purchasers for its
properties.
(2) Real Estate and Rental Income
-----------------------------
The following describes the properties in which the Partnership owns an
interest as March 31, 1996:
The Howell Mill Property
------------------------
On December 27, 1985, the Partnership acquired a three-story medical
office building on 1.65 acres of land located on Howell Mill Road in
metropolitan Atlanta, Fulton County, Georgia, directly across from the
West Paces Ferry Hospital (the "Howell Mill Road Property") for a
purchase price of $3,443,203. The Howell Mill Road Property contains
approximately 32,339 of net rentable square feet, and the entire
building is currently occupied by HCA Realty, Inc. and Hospital
Corporation of America (collectively, "HCA"). HCA is a medical
support staff group which supplies health care workers to West Paces
Ferry Hospital. HCA is currently leasing the premises on a month-to-
month basis, and the Partnership is in the process of attempting to
negotiate a new lease with HCA. There is no assurance, however, that
the Partnership will be able to sign a new lease with HCA.
8
<PAGE>
The occupancy rate at the Howell Mill Road Property for the quarters
ended March 31 was 100% in 1996, 1995, 1994, 1993, and 1992.
The average effective annual rental per square foot at the Howell Mill
Road Property was $16.86 for 1996, 1995, 1994, 1993, and 1992.
Crowe's Crossing Property
-------------------------
On December 31, 1986, the Partnership acquired a retail shopping
center known as "Crowe's Crossing Shopping Center" located in
metropolitan Atlanta, DeKalb County, Georgia (the "Crowe's Crossing
Property"). The Crowe's Crossing Property consists of approximately
93,728 net rentable square feet. The Crowe's Crossing Property is
anchored by a 45,528 square foot lease with Kroger Food/Drug which
expires in 2011. The annual base rent payable under the Kroger lease
is $295,932. The remaining 48,200 square feet of the center is
composed of 31 separate retail spaces whose tenants operate retail
businesses typical of multi-tenant shopping centers.
The occupancy rate at the Crowe's Crossing Property for each quarter
ended March 31 was 83% in 1996, 90% in 1995, 86% in 1994 and 1993, and
78% in 1992.
The average annual rental per square foot at the Crowe's Crossing
Property was $6.79 for 1996, $7.60 for 1995, $7.49 for 1994, $7.56 for
1993, and $7.96 for 1992.
As of March 31, 1996, the Partnership had contributed a total of
$8,317,176 for the acquisition of the Crowe's Crossing Property.
Black Oak Plaza Property
------------------------
On December 31, 1986, the Partnership acquired a retail shopping
center known as "Black Oak Plaza" located in Metropolitan Knoxville,
Knox County, Tennessee. Black Oak Plaza was initially developed in
1981. Although Black Oak Plaza contained a total of approximately
175,000 square feet of space including a K-Mart department store and a
Kroger Food/Drug ("Kroger"), the Partnership acquired only the space
located in the shopping center other than the space occupied by K-Mart
and Kroger. The portion of the shopping center owned and operated by
the Partnership contains approximately 69,046 net rentable square
feet. As of March 31, 1996, Black Oak Plaza was approximately 69%
leased to 22 tenants. There are no tenants whose leases are for 10%
or more of the total square footage of the center. The occupancy rate
at Black Oak Plaza for the quarters ended March 31 was 69% in 1996,
84% in 1995 and 1994, 76% in 1993, and 55% in 1992. The average
annual rental per square foot at Black Oak Plaza was $5.96 for 1996,
$6.14 for 1995, $6.37 for 1994, $5.31 for 1993, and $5.04 for 1992.
9
<PAGE>
As of March 31, 1996, the Partnership had contributed a total of
$4,564,521 for the acquisition of Black Oak Plaza.
Peachtree Place Property
------------------------
In 1985, the Partnership acquired an interest in two commercial office
buildings located at 3875 and 3867 Holcomb Bridge Road, Norcross,
Gwinnett County, Georgia (the "Peachtree Place Property"). The
Peachtree Place Property, which contains approximately 17,245 net
rentable square feet, is owned through a joint venture between the
Partnership and Wells & Associates, Inc., a Georgia corporation
affiliated with the General Partners. The land upon which the
Peachtree Place Property was developed was originally purchased by
Wells & Associates, Inc. for a purchase price of $187,087, and, upon
the formation of the joint venture with the Partnership, Wells &
Associates, Inc. contributed the land to the joint venture as its
capital contribution. As of March 31, 1996, the Partnership had made
total capital contributions of $1,552,367 to the joint venture. The
Partnership holds a 89.95% equity interest in the joint venture and
Wells & Associates, Inc. holds a 10.05% equity interest in the joint
venture. As of March 31, 1996, the buildings at the Peachtree Place
Property were 100% leased to 7 tenants.
The occupancy rate at the Peachtree Place Property for each quarter
ended March 31 was 100% in 1996, 86% in 1995, and 100% in 1994, 1993,
and 1992.
The average effective annual rental per square foot at the Peachtree
Place Property was $15.73 for 1996, $13.62 for 1995, $14.31 for 1994,
$13.18 for 1993, and $14.38 for 1992.
Three tenants occupy ten percent or more of the rentable square
footage--REMAX, a realtor; Dr. Keith Broome, a dentist; and Dr.
Christian Loetscher, an oral surgeon. The other tenants in the office
park provide typical commercial office services.
REMAX is not currently under a lease, but is occupying 4,483 rentable
square feet on a month-to-month basis. The monthly base rent is
$6,164.13. The Partnership is in the process of negotiating a new
lease with REMAX. There is no assurance, however, that the
Partnership will be able to sign a new lease with REMAX.
Dr. Loetscher's original lease represented 2,067 rentable square feet.
In 1995, he expanded and increased his rentable space an additional
2,333 square feet for a total of 4,400 rentable square feet. Dr.
Loetscher's lease provides for annual base rent of $73,258 in 1996,
$71,591 in 1997 and $29,333 in 1998. The lease expires May 31, 1998.
10
<PAGE>
Dr. Keith Broome's lease represents 2,016 rentable square feet. The
annual base rent under the lease is $34,272 for 1996, $35,196 for 1997
and $2,940 for 1998. The lease expires January 31, 1998.
(3) Investments in Joint Ventures
-----------------------------
The Partnership owns interests in the following properties through joint
ventures. The Partnership does not have control over the operations of the
joint ventures; however, it does exercise significant influence.
Accordingly, investments in joint ventures is recorded on the equity
method.
Tucker Property
---------------
The Tucker Property consists of a retail shopping center and a
commercial office building complex located in Tucker, DeKalb County,
Georgia (the "Tucker Property"). The retail shopping center at the
Tucker Property contains approximately 29,858 net rentable square
feet. The commercial office space at the Tucker Property, which is
divided into seven separate buildings, contains approximately 67,465
net rentable square feet.
On September 4, 1986, the Partnership acquired an 11.17 acre tract of
land located at Hugh Howell Road and Tucker Industrial Boulevard,
Tucker, DeKalb County, Georgia. In January 1987, the Partnership
transferred and contributed this tract of land to a joint venture (the
"Tucker Joint Venture"), which was formed in 1987 between the
Partnership and Wells Real Estate Fund II ("Wells Fund II"). Wells
Fund II is a Georgia public limited partnership affiliated with the
Partnership through common general partners. The investment
objectives of Wells Fund II are substantially identical to those of
the Partnership. On March 1, 1988, Wells Fund II formed a joint
venture (the "Fund II-Fund II-OW Joint Venture") with Wells Real
Estate Fund II-OW ("Wells Fund II-OW"). Wells Fund II-OW is a Georgia
public limited partnership affiliated with the Partnership through
common general partners. The investment objectives of Wells Fund II-
OW are substantially identical to those of the Partnership. Upon the
formation of the Fund II-Fund II-OW Joint Venture, Wells Fund II
contributed its joint venture interest in the Tucker Joint Venture to
the Fund II-Fund II-OW Joint Venture as part of its capital
contribution.
Both the Partnership and the Fund II-Fund II-OW Joint Venture have
funded the costs of completing the Tucker Property through capital
contributions which were paid as progressive stages of construction
were completed. As of March 31, 1996, the Partnership had contributed
a total of $6,399,854, and the Fund II-Fund II-OW Joint Venture had
contributed a total of $4,833,346 to the Tucker Property. As of March
31, 1996, the Partnership had an approximately 55% equity interest in
the Tucker Property, and the Fund II - Fund II-OW Joint Venture held
approximately at 45% equity interest in the Tucker Property. As of
March 31, 1996, the Tucker Property was 84% occupied by 34 tenants.
11
<PAGE>
There are no tenants in the project occupying ten percent or more of
the rentable square footage. The principal businesses, occupations,
and professions carried on in the building are typical retail
shopping/commercial office services.
The occupancy rate at the Tucker Property for the quarters ended March
31 was 84% in 1996, 96% in 1995, 93% in 1994, 89% in 1993, and 80% in
1992.
The average effective annual rental per square foot at the Tucker
Property was $11.76 for 1996, $12.61 for 1995, $12.63 for 1994, $11.37
for 1993, and $11.37 for 1992.
Cherokee Property
-----------------
The Cherokee Property consists of a retail shopping center known as
"Cherokee Commons Shopping Center" located in metropolitan Atlanta,
Cherokee County, Georgia (the "Cherokee Property"). The Cherokee
Property consists of approximately 103,755 net rentable square feet.
On June 30, 1987, the Partnership acquired an interest in the Cherokee
Property through a joint venture (the "Cherokee Joint Venture")
between the Partnership and Wells Fund II-Fund II-OW Joint Venture
described above.
On August 1, 1995, the Partnership, Fund II-Fund II-OW Joint Venture,
Wells Real Estate Fund VI, L.P., a Georgia public limited partnership
having Leo F. Wells, III and Wells Partners, L.P., a Georgia limited
partnership, as general partners ("Wells Fund VI"), and Wells Real
Estate Fund VII, L.P., a Georgia public limited partnership having Leo
F. Wells, III and Wells Partners, L.P., a Georgia limited partnership,
as general partners ("Wells Fund VII"), entered into a joint venture
agreement known as Fund I, II, II-OW, VI, and VII Associates (the
"Fund I, II, II-OW, VI, VII Joint Venture"), which was formed to own
and operate the Cherokee Property. Wells Partners, L.P. is a private
limited partnership having Wells Capital, Inc., a General Partner of
the Partnership, as its sole general partner. The investment
objectives of the Fund II-Fund II-OW Joint Venture, Wells Fund VI and
Wells Fund VII are substantially identical to those of the
Partnership.
As of March 31, 1996, the Partnership had contributed property with a
book value of $2,139,900, the Fund II-Fund II-OW Joint Venture had
contributed property with a book value of $4,860,100, Wells Fund VI
had contributed cash in the amount of $953,798 and Wells Fund VII had
contributed cash in the amount of $953,798 to the Fund I, II, II-OW,
VI, VII Joint Venture. As of March 31, 1996, the equity interests in
the Cherokee Property were as follows: the Partnership - 23%, Fund
II-Fund II-OW Joint Venture - 55%, Wells Fund VI - 11% and Wells Fund
VII - 11%.
12
<PAGE>
The Cherokee Property is anchored by a 67,115 square foot lease with
Kroger Food/Drug ("Kroger") which expires in 2011. Kroger's original
lease was for 45,528 square feet. In 1994, Kroger expanded to the
current 67,115 square feet which is approximately 65% of the total
rentable square feet in the Cherokee Property. As of March 31, 1996,
the Cherokee Property was approximately 95% occupied by 19 tenants,
including Kroger.
Kroger is the only tenant occupying ten percent or more of the
rentable square footage. Kroger is a retail grocery chain. The other
tenants in the shopping center provide typical retail shopping
services.
The Kroger lease provides for an annual rent of $392,915 which
increased to $589,102 on August 16, 1995, due to the expansion from
45, 528 square feet to 67,115 square feet. The lease expires March
31, 2011 with Kroger entitled to five successive renewals each for a
term of five years.
The occupancy rate at the Cherokee Property for the quarters ended
March 31 was 95% in 1996 and 1995, 86% in 1994, 89% in 1993, and 88%
in 1992.
The average effective annual rental per square foot at the Cherokee
Property was $8.58 for 1996, $7.50 for 1995, $5.53 for 1994, $6.47 for
1993, and $6.46 for 1992.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
- - -------------
The following discussion and analysis should be read in conjunction with the
accompanying financial statements of the Partnership and notes thereto. This
Report contains forward-looking statements, within the meaning of Section 27A
of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934,
including discussion and analysis of the financial condition of the Partnership,
anticipated capital expenditures required to complete certain projects, amounts
of cash distributions anticipated to be distributed to Limited Partners in the
future and certain other matters. Readers of this Report should be aware that
there are various factors that could cause actual results to differ materially
from any forward-looking statement made in the Report, which include
construction costs which may exceed estimates, construction delays, lease-up
risks, inability to obtain new tenants upon the expiration of existing leases,
and the potential need to fund tenant improvements or other capital expenditures
out of operating cash flow.
Results of Operations and Changes in Financial Conditions
- - ---------------------------------------------------------
General
- - -------
Gross revenues of the Partnership were $502,906 for the three months ended March
31, 1996, as compared to $530,542 for three months ended March 31, 1995. The
decrease for 1996 over 1995 was due to decreased earnings from joint ventures
also due to decreased revenues from decreased occupancy.
Expenses of the Partnership were $472,352 for the three months ended March 31,
1996, as compared to $279,786 for the three months ended March 31, 1995. The
increase for 1996 over 1995 was due primarily to the increase in depreciation
expense. Depreciation increased from 1995 to 1996 due to a change in the
estimated useful lives of buildings and improvements from 40 years to 25 years.
Expenses also increased in 1996 over 1995 due to an increase in operating
expenses for Crowe's Crossing.
Net cash provided by operating activities increased from a use of cash of
$148,977 in 1995 to a source of cash of $53,811 in 1996, due primarily to the
change in distributions received from joint ventures, due to affiliates and
accounts payable. Net cash used in investing activities increased from $29,015
in 1995 to $82,150 in 1996 due to an increase in investment in real estate.
Cash and cash equivalents increased from $217,173 in 1995 to $295,447 in 1996
due primarily to the increase in accounts payable which required cash to be
reserved. The Partnership distributes cash available less reserves, and as a
result, the level of cash remains relatively stable.
The Partnership's cash distributions to the Limited Partners holding Class A
units was $2.54 per unit for three months ended March 31, 1996, as compared to
$4.40 for 1995. No cash distributions were made to the Limited Partners holding
Class B units or to the General Partners for the three months ended March 31,
1996 and 1995.
14
<PAGE>
Property Operations
- - -------------------
As of March 31, 1996, the Partnership owned interests in the following
properties:
Howell Mill Road Property
- - -------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rental income $136,287 $136,287
Expenses:
Depreciation 62,930 30,437
Management and leasing expenses 8,177 8,177
Other operating expenses 1,708 187
-------- --------
72,815 38,801
-------- --------
Net income $ 63,472 $ 97,486
======== ========
Occupied % 100% 100%
Partnership's Ownership % 100% 100%
Cash generated to the Partnership $134,579 $136,100
Net income allocated to the Partnership $ 63,472 $ 97,486
</TABLE>
Rental income, all expenses (with the exception of depreciation), and cash
generated to the Partnership remained stable for the period ending March 31,
1996 and 1995. The increase in depreciation expense from 1995 to 1996 was due
to the change in the estimated useful lives of buildings and improvements as
previously discussed under the "General" section of "Results of Operations and
Changes in Financial Condition". Net income was lower in 1996 as compared to
1995 due to the increase in depreciation expense. HCA is currently leasing the
premises on a month-to-month basis, and the Partnership is in the process of
negotiating a new lease.
15
<PAGE>
Crowe's Crossing Property
- - -------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
--------- --------
<S> <C> <C>
Revenues:
Rental income $159,185 $175,435
Expenses
Depreciation 99,922 49,351
Management and leasing expenses 10,746 10,002
Other operating expenses 73,993 19,988
-------- --------
184,661 79,341
-------- --------
Net income (loss) $(25,476) $ 96,094
======== ========
Occupied % 83% 90%
Partnership's Ownership % 100% 100%
Cash generated to the Partnership $ 74,781 $173,746
Net income (loss) allocated to the Partnership $(25,476) $ 96,094
</TABLE>
Rental income decreased for the first quarter of 1996, compared to the same
period in 1995 due to decreased occupancy at the property. The decrease in net
income for the three months ended March 31, 1996 over the same period last year
is primarily due to timing differences in billing and payment of tenant expense
reimbursements and the increase in depreciation due to the change in the
estimated useful lives of buildings and improvements as previously discussed
under "General" section of "Results of Operations and Changes in Financial
Condition" and the increase in other operating expenses. Other operating
expenses increased in 1996 compared to 1995 due primarily to the reimbursement
of approximately $41,000 for 1994 taxes received in 1995 and the increase in
security and repairs and maintenance at the property. Net income decreased for
the period ended March 31, 1996 as compared to the same period of 1995 due to
the changes mentioned above. Cash generated to the Partnership decreased in
1996 over 1995 due primarily to the decreased rental income, tenant
reimbursements and capital expenditures for tenant improvements of approximately
$11,000.
16
<PAGE>
Black Oak Plaza Property
- - ------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
--------- --------
<S> <C> <C>
Revenues:
Rental income $102,811 $107,053
Interest income 44 296
-------- --------
102,855 107,349
Expenses:
Depreciation 71,975 31,983
Management and leasing expenses 8,684 8,329
Other operating expenses 30,497 31,745
-------- --------
111,156 72,057
-------- --------
Net income (loss) $ (8,301) $ 35,292
======== ========
Occupied % 69% 84%
Partnership's Ownership % 100% 100%
Cash generated to the Partnership $ 22,784 $ 34,497
Net income (loss) allocated to the Partnership $ (8,301) $ 35,292
</TABLE>
Rental income decreased to $102,811 for 1996, as compared to $107,053 in 1995,
due to decreased occupancy at the property. Depreciation increased for 1996 as
compared to 1995 due to the change in the estimated useful lives of buildings
and improvements as previously discussed under the "General" section of "Results
of Operations and Changes in Financial Conditions". Net income for the three
months ended March 31, 1996 decreased as compared to the same period of 1995
primarily as a result of the increase in depreciation. Cash generated to the
Partnership decreased in 1996 over 1995 due primarily to decreased revenues of
approximately $4,500 and increased capital expenditures at the property of
approximately $52,000 in 1996 compared to $46,000 in 1995.
17
<PAGE>
Peachtree Place Property
- - ------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
--------- --------
<S> <C> <C>
Revenues:
Rental income $67,807 $56,445
Interest income 7 270
------- -------
67,814 56,715
Expenses:
Depreciation 21,188 10,602
Management and leasing expenses 5,493 5,589
Other operating expenses 33,540 35,820
------- -------
60,221 52,011
------- -------
Net income $ 7,593 $ 4,704
======= =======
Occupied % 100% 86%
Partnership's Ownership % 89.95% 89.76%
Cash generated to the Partnership $12,941 $17,684
Net income allocated to the Partnership $ 6,830 $ 4,222
</TABLE>
Rental income and net income increased for the quarter ending March 31, 1996, as
compared to the same period for 1995, due chiefly to an increase in tenant
occupancy for 1996. Operating expenses and management and leasing expenses were
relatively stable for 1996 and 1995. In 1996, the increase in depreciation
expenses was due to the change in the estimated useful lives of buildings and
improvements as previously discussed under the "General" section of "Results of
Operations and Changes in Financial Conditions". Cash distributions decreased
in 1996 as compared to 1995 due to capital improvements of approximately $18,000
made during the first quarter of 1996 which was offset by collections of 1995
accounts receivable. The property was 100% leased as of March 31, 1996 as
compared to 86% leased as of March 31, 1995.
18
<PAGE>
Tucker Property
- - ---------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rental income $286,147 $321,964
Interest income 252 1,351
-------- --------
286,399 323,315
Expenses:
Depreciation 103,800 60,007
Management and leasing expenses 32,087 35,791
Other operating expenses 115,916 162,578
-------- --------
251,803 258,376
-------- --------
Net income $ 34,596 $ 64,939
======== ========
Occupied % 84% 96%
Partnership's Ownership % 55.09% 55.09%
Cash distribution to the Partnership $ 90,398 $ 85,396
Net income allocated to the Partnership $ 19,059 $ 35,775
</TABLE>
Rental income decreased from 1995 to 1996 due primarily to decreased tenant
occupancy. Operating expenses decreased in 1996 over 1995 due to a decrease in
utilities and other repairs and maintenance. The increase in depreciation
expense for 1996 as compared to 1995 is a result of the change in the estimate
useful lives of buildings and improvements as previously discussed under the
"General" section of "Results of Operations and Changes in Financial Condition".
Net income of the property decreased to $34,596 in 1996 from $64,939 in 1995 due
to increased depreciation and decreased occupancy as discussed above.
The property was 84% leased as of March 31, 1996, as compared to 96% as of
March 31, 1995 due to three tenants vacating space totaling 9,884 square feet.
19
<PAGE>
Cherokee Property
- - -----------------
<TABLE>
<CAPTION>
Three Months Ended March 31
----------------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Rental income $222,621 $145,838
Interest income 19 25
-------- --------
222,640 145,863
Expenses:
Depreciation 107,183 45,527
Management and leasing expenses 12,634 7,068
Other operating expenses 48,872 45,223
-------- --------
168,689 97,818
-------- --------
Net income $ 53,951 $ 48,045
======== ========
Occupied % 95% 95%
Partnership's Ownership % 23.0% 30.6%
Cash distribution to the Partnership $ 45,094 $ 12,653
Net income allocated to the Partnership $ 12,961 $ 14,697
</TABLE>
Rental income increased in 1996 over 1995 due to the Kroger expansion which was
completed in November 1994; however, the additional rent was billed
retroactively and paid in September, 1995. The increase in depreciation expense
for 1996 as compared to 1995 is a result of the change in the estimate useful
lives of the buildings and improvements as previously discussed under the
"General" section of "Results of Operation and Changes in Financial Conditions".
Management and leasing expenses increased in 1996 as compared to 1995 due to the
increased revenue. Net income of the property increased to $53,951 in 1996
from $48,045 in 1995 due to the increase in revenue.
A lease amendment executed with Kroger in 1994 provided for the expansion of its
existing store at the Cherokee Commons Shopping Center from 45,528 square feet
to 66,918 square feet. In November, 1994, construction was completed on the
Kroger expansion and remodeling of the center. The total costs for both the
Kroger expansion and remodeling of the Center was $2,807,367. The costs of this
expansion were funded in the following amounts: the Partnership $94,679, and
the Fund II-Fund II-OW Joint Venture $805,092, Wells Fund VI $953,798, and Wells
Fund VII $953,798 as of March 31, 1996. Due to these additional investments, the
Partnership's ownership percentage in the Cherokee Commons Shopping Center
decreased from 30.6% in 1995 to 23.0% as of March 31, 1996. Wells Fund VI and
Wells Fund VII did not make their respective capital contributions until August,
1995.
20
<PAGE>
PART II - OTHER INFORMATION
Item 6(b). No reports on Form 8-K were filed during the first quarter of 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WELLS REAL ESTATE FUND I
Dated: May 13, 1996 By: /s/ Leo F. Wells, III
--------------------
Leo F. Wells, III, as Individual General
Partner and as President, Sole Director and Chief
Financial Officer of Wells Capital,
Inc., the Corporate General Partner
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 295,447
<SECURITIES> 7,457,476
<RECEIVABLES> 335,433
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 79,265
<PP&E> 22,262,471
<DEPRECIATION> 4,647,188
<TOTAL-ASSETS> 25,782,904
<CURRENT-LIABILITIES> 1,843,531
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,803,004
<TOTAL-LIABILITY-AND-EQUITY> 25,782,904
<SALES> 0
<TOTAL-REVENUES> 502,906
<CGS> 0
<TOTAL-COSTS> 472,352
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 30,554
<INCOME-TAX> 30,554
<INCOME-CONTINUING> 30,554
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,554
<EPS-PRIMARY> 3.91
<EPS-DILUTED> 0
</TABLE>
