<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, 1997
___________________________________________ 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 Identification Number)
incorporation or organization)
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
------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Balance Sheets - March 31, 1997
and December 31, 1996............................... 3
Consolidated Statements of Income for
Three Months Ended
March 31, 1997 and 1996............................. 4
Statements of Partners' Capital
for the Three months Ended March 31, 1997
and the Year Ended December 31, 1996................ 5
Consolidated Statements of Cash Flows for
the Three months Ended March 31, 1997 and 1996...... 6
Condensed Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................................... 8
PART II. OTHER INFORMATION............................................ 15
</TABLE>
2
<PAGE>
WELLS REAL ESTATE FUND I
(A Georgia Public Limited Partnership)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets March 31, 1997 December 31, 1996
------ -------------- -----------------
<S> <C> <C>
Real Estate, at cost
Land $ 2,894,193 $ 2,894,193
Building and improvements, less
accumulated depreciation of $ 5,619,806
in 1997 and $5,369,635 in 1996 13,972,441 14,176,266
----------- -----------
Total real estate assets 16,866,634 17,070,459
----------- -----------
Investments in joint ventures (Note 2) 7,034,700 7,117,920
Cash and cash equivalents 188,309 204,176
Due from affiliates 88,948 111,552
Deferred lease acquisition costs 41,032 35,808
Accounts receivable 295,974 363,662
Prepaid expenses and other assets 81,320 65,309
----------- -----------
7,730,283 7,898,427
----------- -----------
Total assets $24,596,917 $24,968,886
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 122,757 $ 131,340
Due to affiliates 1,434,931 1,412,572
Refundable security deposits 68,244 62,876
Partnership distribution payable 283,850 285,687
----------- -----------
Total liabilities 1,909,782 1,892,475
----------- -----------
Minority interest 126,079 128,619
Partners' capital
Limited partners:
Class A - 98,716 Units Outstanding 21,544,648 21,583,091
Class B - 42,568 Units Outstanding 1,016,408 1,364,701
----------- -----------
Total partners' capital 22,561,056 22,947,792
----------- -----------
Total liabilities and partners' capital $24,596,917 $24,968,886
=========== ===========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND I
(A Georgia Public Limited Partnership)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, 1997 March 31, 1996
--------------- ---------------
<S> <C> <C>
Revenues:
Rental income $ 380,844 $ 466,091
Interest income 2,391 4,796
Equity in income of Joint Ventures (Note 2) 5,726 32,019
--------- ---------
388,961 502,906
--------- ---------
Expenses:
Management and leasing fees 29,465 30,084
Lease acquisition costs 5,934 9,931
Operating costs-rental properties,
net of tenant reimbursements 182,955 139,725
Depreciation 253,678 256,015
Legal and accounting expenses 3,583 7,086
Computer expenses 2,443 1,023
Partnership administration 16,262 27,825
Minority interest 1,689 763
--------- ---------
496,009 472,352
--------- ---------
Net (loss) income $(107,048) $ 30,554
========= =========
Net income allocated to
Class A Limited Partners $ 241,246 $ 385,530
Net loss allocated to
Class B Limited Partners $(348,293) $(354,975)
Net income per Class A
Limited Partner Unit $ 2.44 $ 3.91
Net loss per Class B
Limited Partner Unit $ (8.18) $ (8.34)
Cash distribution per Class A
Limited Partner Unit $ 2.83 $ 2.54
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND I
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THREE MONTHS ENDED
MARCH 31, 1997
<TABLE>
<CAPTION>
Limited Partners
--------------------
Class A Class B Total
------- ------- Partners'
Units Amounts Units Amounts Capital
------ ------------ ------ ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 98,716 $21,442,415 42,568 $ 2,679,435 $24,121,850
NET INCOME (LOSS) 0 1,416,538 0 (1,314,734) 101,804
PARTNERSHIP DISTRIBUTIONS 0 (1,275,862) 0 0 (1,275,862)
------ ----------- ------ ----------- -----------
BALANCE, DECEMBER 31, 1996 98,716 $21,583,091 42,568 $ 1,364,701 $22,947,792
NET INCOME (LOSS) 0 $ 241,246 0 $ (348,293) $ (107,047)
PARTNERSHIP DISTRIBUTIONS 0 (279,689) 0 0 (279,689)
------ ----------- ------ ----------- -----------
BALANCE, MARCH 31, 1997 98,716 $21,544,648 42,568 $ 1,016,408 $22,561,056
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
WELLS REAL ESTATE FUND I
(A Georgia Public Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months Ended
------------------
March 31, 1997 March 31, 1996
-------------- ----------------
<S> <C> <C>
Cash flow from operating activities:
Net (loss) income $(107,048) $ 30,554
Adjustments to reconcile net (loss) income
to net cash provided by
operating activities:
Equity in income of joint ventures (5,726) (32,019)
Minority interest 4,229 763
Distribution received from joint ventures 111,552 124,999
Partnership distribution paid (281,526) (419,413)
Depreciation 253,678 256,015
Accrued management and leasing fees 28,979 30,084
Changes in assets and liabilities:
Accounts receivable 67,689 18,195
Prepaids and other assets (21,236) (10,023)
Accounts payable and refundable
security deposits (3,214) 50,056
Due to affiliates (13,388) 4,600
--------- ---------
Net cash provided by
operating activities 33,989 53,811
--------- ---------
Cash flow from investing activities:
Additional investment in real estate (49,855) (82,150)
--------- ---------
Net cash used in investing activities (49,855) (82,150)
--------- ---------
Net decrease in cash and cash equivalents (15,866) (28,339)
Cash and cash equivalents, beginning of year 204,176 323,786
--------- ---------
Cash and cash equivalents, end of period $ 188,310 $ 295,447
========= =========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND I
(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 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.
The Partnership owns an equity interest in the following joint ventures:
(i) Fund I and Wells & Associates Joint Venture, (ii) Fund I-Fund II Tucker
and (iii) Fund I, II, II-OW, VI and VII.
As of March 31, 1997, the Partnership owned directly or through its
ownership in joint ventures, interests in the following properties: (i)
Paces Pavilion/The Howell Mill Road Property, a medical office building
located in Atlanta, Georgia, owned directly by Fund I, (ii) The Crowe's
Crossing Property, a shopping center located in DeKalb County, Georgia,
owned by Fund I, (iii) The Black Oak Plaza Property, a shopping center
located in Knoxville, Tennessee, owned by Fund I, (iv) The Peachtree Place
Property, two commercial office buildings located in Atlanta, Georgia,
owned by Fund I and Wells & Associates Joint Venture, (v) The Tucker
Property, a retail shopping and commercial office complex located in
Tucker, Georgia, owned by Fund I-Fund II Tucker and (vi) The Cherokee
Property, a shopping center located in Cherokee County, Georgia, owned by
Fund I, II, II-OW, VI, VII Joint Venture. All of the foregoing properties
were acquired on an all cash basis.
(b) Basis of Presentation
---------------------------
The consolidated financial statements of 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
7
<PAGE>
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, 1996.
(2) Investment in Joint Venture
---------------------------
The Partnership owned an interest in six properties as of March 31, 1997,
through investment or directly. The Partnership does not have control over
the operations of the joint ventures; however, it does exercise significant
influence. Accordingly, investment in the joint venture is recorded on the
equity method.
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
- -------
Revenues of the Partnership were $449,841 for the period ended March 31, 1997,
as compared to $502,906 for the three months ended March 31, 996. The decrease
for 1997 over 1996 was due primarily to decreased income from the joint
ventures. Rental income was decreased due to lowered occupancy rates at Paces
Pavilion after the move-out of HCA from the premises in December of 1996.
Income from the joint ventures was decreased due to high expenses and lowered
occupancy resulting in decreased rental income at the Tucker and Cherokee
properties.
Expenses of the Partnership were $556,889 for the period ending March 31, 1997,
as compared to $472,352 for the three months ended March 31, 1996. The increase
in expenses for 1997 over 1996 was due primarily to increased repairs and
maintenance; however, approximately $30,000 was written off to bad debt at
Crowe's Crossing further increasing the Partnership's expenses.
8
<PAGE>
Net cash provided by operating activities decreased from $53,811 in 1996 to
$33,987 at March 31, 1997, due primarily to the decrease in net income. Net
cash used in investing activities decreased from $82,150 in 1996 to $49,855 in
1997 due to a decrease in capital expenditures made in 1997. As a result, cash
and cash equivalents decreased from $295,447 in 1996 to $188,310 in 1997.
The Partnership's cash distributions to the Limited Partners holding Class A
units was $2.83 per unit for three months ended March 31, 1997, as compared to
$2.54 for 1996. 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,
1997 and 1996.
The Partnership's distributions paid and payable through the first quarter of
1997 have been paid from net cash from operations and from distributions
received from its equity investment in joint ventures, and the Partnership
anticipates that distributions will continue to be paid on a quarterly basis
from such sources. The Partnership expects to meet liquidity requirements and
budget demands through cash flows.
The Partnership is unaware of any known demands, commitments, events or capital
expenditures other than that which is required for the normal operations of its
properties or the properties in which it owns a joint venture interest that will
result in the Partnership's liquidity increasing or decreasing in any material
way.
Property Operations
- -------------------
As of March 31, 1997, the Partnership owned interests in the following
properties:
Paces Pavilion/Howell Mill Road Property - Fund I
- ---------------------------------------------------------
Three Months Ended
-------------------
March 31, 1997 March 31, 1996
-------------- --------------
Revenues:
Rental income $ 28,974 $136,287
Expenses:
Depreciation 67,562 62,930
Management and leasing expenses 2,190 8,177
Other operating expenses 24,857 1,708
-------- --------
94,609 72,815
-------- --------
Net (loss) income $(64,761) $ 63,472
======== ========
Occupied % 26.8% 100%
Partnership's Ownership % 100% 100%
Cash generated to the Partnership $ 4,991 $134,579
Net (loss) income allocated to the $(64,761) $ 63,472
Partnership
9
<PAGE>
Rental income decreased from $136,287 in 1996 to $28,974 in 1997 due to
decreased tenant occupancy after HCA vacated the premises at December 31, 1996.
Management and leasing fees decreased in 1997 to $2,190 over $8,177 in 1996 due
to lowered tenant occupancy. Other operating expenses increased to $24,857 in
1997 over $1,708 in 1996 primarily due to repairs and maintenance costs.
As of March 31, 1997, capital improvements and renovations totaling $51,865 have
been incurred at Paces Pavilion in preparation for re-leasing the formerly HCA
occupied space. Currently, there are five tenants occupying the premises.
Management is actively seeking a replacement tenant or tenants.
Crowe's Crossing Property- Fund I
- ---------------------------------
Three Months Ended
--------------------------------
March 31, 1997 March 31, 1996
--------------- ---------------
Revenues:
Rental income $171,637 $159,185
Expenses:
Depreciation 103,613 99,922
Management and leasing expenses 15,611 10,746
Other operating expenses 126,179 73,993
-------- --------
245,403 184,661
-------- --------
Net loss $(73,766) $(25,476)
======== ========
Occupied % 89% 83%
Partnership's Ownership % 100% 100%
Cash generated to the Partnership $ 52,226 $ 74,781
Net (loss) allocated to the Partnership $(73,766) $(25,476)
Rental income increased for the first quarter of 1997, compared to the same
period in 1996 due to scheduled rental increases and increased occupancy at the
property. The decrease in net income for the three months ended March 31, 1997
over the same period last year is primarily due to the write-off of
approximately $33,000 in tenant receivables which have been turned over for
collection. Other operating expenses increased in 1997 compared to 1996 due
primarily to the write-off noted above and an increase in repairs and
maintenance of the property. Cash generated to the Partnership decreased in
1997, as compared 1996, due primarily to the expenditures for repairs and
maintenance at the property.
10
<PAGE>
Black Oak Plaza Property - Fund I
- ---------------------------------
Three Months Ended
------------------
March 31, 1997 March 31, 1996
--------------- ---------------
Revenues:
Rental income $111,215 $102,811
Interest income 12 44
-------- --------
111,227 102,855
Expenses:
Depreciation 62,613 71,975
Management and leasing expenses 10,015 8,684
Other operating expenses 6,236 30,497
-------- --------
78,864 111,156
-------- --------
Net income (loss) $ 32,363 $ (8,301)
======== ========
Occupied % 72% 69%
Partnership's Ownership % 100% 100%
Cash generated to the Partnership $ 97,049 $ 22,784
Net income (loss) allocated to the $ 32,363 $ (8,301)
Partnership
Rental income increased to $111,227 for 1997, as compared to $102,855 in 1996,
due primarily to scheduled rent increases. Depreciation decreased for 1997, as
compared to 1996, due to an overstatement of depreciation expense in first
quarter of 1996, which was adjusted in the final quarter of that year. The
increase in management and leasing expenses in first quarter 1997 compared to
the same quarter of 1996 are due to the payment of lease acquisition fees for
new tenants in February and March of 1997. Other operating expenses decreased
in 1997, as compared to 1996, due primarily to timing differences of CAM
reimbursements to tenants and decreases in security and other repair and
maintenance expenses. Cash generated to the Partnership increased in 1997 over
1996 due primarily to decreased capital expenditures of approximately $52,000
and the decrease in expenses noted above.
11
<PAGE>
Peachtree Place Property - Fund I and Wells & Associates Joint Venture
- ----------------------------------------------------------------------
Three Months Ended
------------------
March 31, 1997 March 31, 1996
--------------- ---------------
Revenues:
Rental income $69,017 $67,807
Interest income 7 7
------- -------
69,024 67,814
Expenses:
Depreciation 19,890 21,188
Management and leasing expenses 5,654 5,493
Other operating expenses 26,671 33,540
------- -------
52,215 60,221
------- -------
Net income $16,809 $ 7,593
======= =======
Occupied % 100% 100%
Partnership's Ownership % 89.95% 89.95%
Cash generated to Fund I and Wells &
Associates $37,851 $12,941
Joint Venture*
Net income allocated to Fund I and
Wells & Associates Joint Venture* $15,120 $ 6,830
* The Partnership holds a 90% ownership in the Fund I and Wells & Associates
Joint Venture as of March 31, 1997.
Rental income increased for the quarter ending March 31, 1997, as compared to
the same period for 1996, due to scheduled rental increases. Operating expenses
were down from $33,540 in 1996 to $26,671 in 1997 due to lower repairs and
maintenance expenses required. Management and leasing expenses were relatively
stable for 1997 and 1996. Cash distributions increased in 1997 as compared to
1996 due to increased revenue and decreased expenses. The property was 100%
leased as of March 31, 1997 and 1996.
12
<PAGE>
Heritage Place at Tucker Property/Fund I - Fund II Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1997 March 31, 1996
--------------- ---------------
<S> <C> <C>
Revenues:
Rental income $261,866 $286,147
Interest income 129 252
-------- --------
261,995 286,399
Expenses:
Depreciation 97,668 103,800
Management and leasing expenses 20,190 32,087
Other operating expenses 157,408 115,916
-------- --------
275,266 251,803
-------- --------
Net (loss) income $(13,271) $ 34,596
======== ========
Occupied % 76% 84%
Partnership Ownership % 55.09% 55.09%
Cash distribution to the Partnership $ 44,017 $ 90,398
Net (loss) income allocated to the Partnership $ (7,311) $ 19,059
</TABLE>
Rental income decreased in 1997 from 1996 due primarily to lowered revenue
resulting from decreased occupancy. Occupancy rate is down due to tenant move-
out and the unavailability of leasable space while fire damage is being
repaired. It is anticipated that repairs will be completed prior to the end of
May, 1997. Operating expenses increased in 1997 over 1996 due to increase in
landscaping contract and supplies and other repairs and maintenance. The
decrease in depreciation in 1997 over 1996 is due to the loss of property due to
the fire in September 1996. Net income of the property decreased to $(13,271)
in 1997 from $34,596 in 1996 due to increased depreciation and decreased
occupancy as discussed above.
The property was 76% leased as of March 31, 1997, as compared to 84% leased, as
of March 31, 1996, due to vacant space during restoration from fire damage.
13
<PAGE>
Cherokee Property - Funds I-II-II-OW-VI-VII Joint Venture
- ---------------------------------------------------------
Three Months Ended
--------------------------------
March 31, 1997 March 31, 1996
--------------- ---------------
Revenues:
Rental income $217,439 $222,621
Interest income 18 19
-------- --------
217,457 222,640
Expenses:
Depreciation 107,525 107,183
Management and leasing expenses 31,541 12,634
Other operating expenses 24,119 48,872
-------- --------
163,185 168,689
-------- --------
Net income $ 54,272 $ 53,951
======== ========
Occupied % 91% 95%
Partnership Ownership % 24.0% 24.0%
Cash distribution to the Partnership $ 44,931 $ 45,094
Net income allocated to the Partnership $ 13,037 $ 12,961
Rental income decreased in 1997 over 1996 due primarily to a decrease in
occupancy. Management and leasing expenses increased in 1997, as compared to
1996, due to the one-time payment of lease acquisition fees. Operating expenses
decreased due primarily to a timing difference in billings to tenants for
property taxes.
14
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports on Form 8-K were filed during the first quarter of 1997.
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
(Registrant)
Dated: May 13, 1997 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.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 188309
<SECURITIES> 7034700
<RECEIVABLES> 384922
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 122352
<PP&E> 22486440
<DEPRECIATION> (5619806)
<TOTAL-ASSETS> 24596917
<CURRENT-LIABILITIES> 2035861
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22561056
<TOTAL-LIABILITY-AND-EQUITY> 24596917
<SALES> 0
<TOTAL-REVENUES> 388961
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 496009
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107048)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
