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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Exchange Act of 1934 (Amendment No. )
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[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
WELLS REAL ESTATE FUND I
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(Name of Registrant as Specified In Its Charter)
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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WELLS REAL ESTATE FUND I
6200 The Corners Parkway, Suite 250
Norcross, Georgia 30092
August ___, 2000
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AMENDED AND RESTATED
CONSENT SOLICITATION STATEMENT
TO THE LIMITED PARTNERS OF WELLS REAL ESTATE FUND I
Dear Limited Partner:
On June 25, 2000, we mailed you a Consent Solicitation Statement (the
Original Statement) requesting that you approve an amendment to Section 9.3 of
the Restated and Amended Certificate and Agreement of Limited Partnership (the
Partnership Agreement) of Wells Real Estate Fund I (Wells Fund I) relating to
the distribution of net sale proceeds upon the sale of the real estate
properties owned by Wells Fund I.
Since that date, we have received a number of letters and telephone calls
from limited partners requesting explanations and clarifications regarding the
Original Statement. In addition, it has recently been brought to our attention
that a technical provision contained in Section 16.2 of the Partnership
Agreement effectively prevents us from amending the Partnership Agreement in the
manner described in the Original Statement without obtaining the consent of each
limited partner holding Class A Units (Class A Limited Partner). Accordingly,
even though we received consent of limited partners of Wells Fund I owning in
excess of 50% of the outstanding units, due to the ramifications of Section 16.2
of the Partnership Agreement, we have now determined that we are unable to amend
the Partnership Agreement as intended without the consent of each of the Class A
Limited Partners.
As a result of the foregoing, we are mailing to you this Amended and
Restated Consent Solicitation Statement (the Restated Statement) on or about
August ___, 2000 in order to solicit the consent of each Class A Limited Partner
to the amendments to Sections 9.3 and 10.4 of the Partnership Agreement
described herein.
The Wells Fund I Bucket Chart
As we advised you in the Original Statement, during the fourth quarter of
1999, the general partners of Wells Fund I began the process of marketing for
sale certain of the real estate properties owned by Wells Fund I. In connection
with the initial implementation of this process, the general partners reviewed
the terms of the Partnership Agreement relating to the allocation and
distribution of net sale proceeds to the limited partners and discovered that
the technical provisions of the Partnership Agreement governing the distribution
of net sale proceeds were inconsistent with their original intent and, if
applied, would require a distribution of net sale proceeds which the general
partners believe would be unfair and inequitable to the limited partners holding
Class B Units (Class B Limited Partners).
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Attached as Exhibit "A" to this Restated Statement is a copy of the Wells
Fund I Bucket Chart which was prepared as a graphic illustration of how the
allocations and distributions under the Partnership Agreement were intended to
operate and was distributed to the limited partners at the time of their initial
investment in Wells Fund I. As you will note, the Wells Fund I Bucket Chart
reflects the following order of distribution of the proceeds from a sale or
financing of partnership properties:
. First, a cumulative return of 15% per annum to limited partners on their
investments.
. Second, a return to limited partners of their invested capital.
. Third, an additional cumulative return of 1% per annum on invested
capital to those limited partners who subscribed on or before December
31, 1984.
. Finally, 85% to the limited partners and 15% to the general partners.
The foregoing depiction is contrary to the technical language contained in
Section 9.3 of the Partnership Agreement which provides that net sale proceeds
be distributed to the partners in accordance with the positive balances in their
tax capital accounts. In order to conform the provisions of the Partnership
Agreement relating to the allocation and distribution of net sale proceeds to
the original intent of the general partners, as reflected by the attached Wells
Fund I Bucket Chart, we are soliciting the consent of each Class A Limited
Partner to amend the Partnership Agreement to make the allocation of net sale
proceeds to limited partners consistent with the original intent of the general
partners.
Inequitable Treatment of Class B Limited Partners
If the general partners were to distribute net sale proceeds based upon the
balances in limited partners' tax capital accounts, as would currently be
required by the terms of the Partnership Agreement, the Class A Limited Partners
would receive an unintended windfall at the expense of the Class B Limited
Partners due to the fact that the Class B Limited Partners have little or no
positive balances in their tax capital accounts. This would result in what we
believe to be unfair and inequitable treatment of the Class B Limited Partners,
who have received no distributions of cash flow from operations during the
entire term of the Partnership. Some Class A Limited Partners have expressed
the sentiment that we should leave the allocations and distributions alone
since, in their belief, the limited partners knew their respective rights and
benefits of their investments at the time of their original purchases. We
strongly believe that the Class B Limited Partners did not appreciate the
ramifications of the technical provisions of Section 9.3 of the Partnership
Agreement at the time they invested, especially in light of the contrary
information contained in the Wells Fund I Bucket Chart and subsequent
information we have distributed to the limited partners throughout the term of
the Partnership.
To date, each limited partner has received the intended attributes of his
investment. Class A Limited Partners have received cash distributions from
operating cash flow, and Class B Limited Partners have received allocations of
tax losses. At this point in time, the general partners intend to distribute
the net sale proceeds to the limited partners in a manner that would provide
both the Class B Limited Partners and the Class A Limited Partners with a
cumulative return on their investments of 15% to be followed by a return of
invested capital, consistent with the attached Wells Fund I Bucket Chart.
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Proposed Amendments to Partnership Agreement
Before the general partners proceed further with the marketing and sale of
partnership properties and the distribution of the net sale proceeds to the
limited partners, the general partners desire to obtain the consent of each
Class A Limited Partner to amend the Partnership Agreement to change and clarify
the manner in which net sale proceeds will be allocated and distributed among
the Class A Limited Partners and the Class B Limited Partners as follows:
. First, the Class B Limited Partners should receive distributions of net
sale proceeds in an amount necessary to provide them with cash
distributions on a per unit basis equal to the cash distributions
previously paid to the Class A Limited Partners on a per unit basis.
. Second, net sale proceeds, to the extent available, should be
distributed to the Class A Limited Partners and Class B Limited Partners
on a per unit basis until each limited partner receives distributions
equal to a 15% annual return on his invested capital.
. Third, net sale proceeds, to the extent available, should be distributed
to the Class A Limited Partners and Class B Limited Partners on a per
unit basis until each limited partners receives a return of his invested
capital.
. Fourth, net sale proceeds, to the extent available, should be
distributed to those Class A Limited Partners and Class B Limited
Partners who subscribed for their units on or before December 31, 1984
on a per unit basis until each such limited partner receives his Early
Investment Incentive Bonus in the amount of an additional 1% annual
return on his invested capital.
. Finally, any remaining net sale proceeds would be distributed 85% to the
Class A Limited Partners and the Class B Limited Partners on a per unit
basis and 15% to the general partners.
In addition, in order to fairly allocate the taxable gain resulting from
the proposed sale of the partnership's properties and to avoid unfairly
allocating taxable gain to Class A Limited Partners at times when they may not
be receiving distributions of net sale proceeds, the general partners are also
requesting that the Partnership Agreement be amended to allocate taxable gain
from the sale of properties in direct proportion to the distribution of net sale
proceeds.
The general partners believe that amending the Partnership Agreement in
accordance with this Restated Statement is the most fair and equitable method
for distributing net sale proceeds to the limited partners and is consistent
with the general partners' original intent as reflected by the Wells Fund I
Bucket Chart which was distributed to the limited partners.
Text of Proposed Amendments to the Partnership Agreement
It is recommended that Section 9.3 of Article IX of the Partnership
Agreement be deleted in its entirety and that the following provision be
inserted in lieu thereof:
"9.3 Net Sale Proceeds. Except as otherwise provided for in Section 9.4
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hereof in connection with a dissolution and liquidation of the Partnership,
and except for the potential reinvestment of Net Sale Proceeds as provided
in Section 11.3(g) hereof, Net Sale Proceeds, to the extent available,
shall be distributed as follows and in the following priority: (a) first,
to each Limited Partner holding Class B Units, in proportion to and to the
extent of, the amount, if any, necessary to give each Limited Partner
holding Class B Units an amount of Net Sale Proceeds equal to the excess
Cash Available for Distribution received prior to the Sale Date by each
Limited Partner holding Class A Units under Section 9.1(a)(i) hereof,
assuming said Limited
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Partners had purchased an equivalent number of Units on the same date; (b)
then, to the Limited Partners until each Limited Partner has received his
Cumulative Distribution; (c) then, to the Limited Partners until each
Limited Partner has received aggregate Partnership distributions in an
amount equal to his Capital Contribution; (d) then, to those Limited
Partners who subscribed for their Units on or before December 31, 1984,
until each such Limited Partner has received his Early Investment Incentive
Bonus; and (e) finally, eighty-five percent (85%) thereof to the Limited
Partners and fifteen percent (15%) thereof to the General Partners.
"Cumulative Distribution" means an amount equal to a cumulative (but not
compounded) fifteen percent (15%) per annum return on a Partner's Adjusted
Capital Contribution for the period commencing on the last day of the month
in which the capital was received by the Partnership and ending on the date
as of which such distribution is completed. "Early Investment Incentive
Bonus" means an additional cumulative (but not compounded) one percent (1%)
per annum return on a Partner's Adjusted Capital Contribution commencing on
the last day of the month in which the capital was received by the
Partnership and ending on the date as of which such distribution is
completed."
It is also recommended that Section 10.4 of Article X of the Partnership
Agreement be amended by deleting Section 10.4(c) in its entirety and inserting
the following provision in lieu thereof:
"(c) Then, to the Limited Partners, in proportion to and to the extent
of the amount of Net Sale Proceeds distributed to each such Limited Partner
pursuant to Section 9.3 hereof;"
Effect of Approval of the Proposed Amendments to the Partnership Agreement
If the amendments to the Partnership Agreement proposed hereby are
approved by each of the Class A Limited Partners, net sale proceeds will be
allocated and distributed as described in the "Proposed Amendments to
Partnership Agreement" and the "Text of Proposed Amendments to the Partnership
Agreement" sections of this Restated Statement rather than in accordance with
the tax capital account balances of the limited partners.
Cessation of Marketing and Sale Efforts
The general partners are not required to offer the partnership's properties
for sale at any stated time, and the general partners do not intend to further
market the real estate properties for sale until they receive the required
consents from the Class A Limited Partners necessary to approve the proposed
amendments to the Partnership Agreement. As a practical matter, until these
outstanding issues relating to the proper order of allocating and distributing
net sale proceeds are resolved, the general partners will have no basis for
distributing net sale proceeds among the limited partners resulting from any
such sales. Accordingly, the general partners do not intend to either market
properties or make distributions of net sale proceeds from properties sold until
they receive the required consent from the Class A Limited Partners necessary to
approve the proposed amendments to the Partnership Agreement.
If the amendments to the Partnership Agreement proposed in this Restated
Statement are approved by the Class A Limited Partners, the general partners
agree to continue the process of marketing the real estate properties owned by
Wells Fund I for sale and to use their best efforts to sell all such properties
and distribute the net sale proceeds received therefrom by December 31, 2002.
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Waiver of Property Management Fees
In the event that we receive a sufficient amount of votes of the Class A
Limited Partners to amend the Partnership Agreement, as proposed hereby, Wells
Management Company, Inc. (Wells Management), an affiliate of the general
partners, has agreed to forgive all property management fees owed by Wells Fund
I for property management services performed by Wells Management. The amount of
such fees owed to Wells Management is currently estimated to be $2,400,000, and
such fees continue to accrue on a monthly basis during the term of the
partnership as property management services are performed by Wells Management.
If Wells Management did not agree to forgive this obligation of Wells
Fund I, the first monies received by Wells Fund I upon the sale of a partnership
property would be required to be paid to Wells Management as reimbursement for
its deferred property management fees prior to making any distributions to
limited partners thereby substantially reducing the amount of net sale proceeds
remaining to be distributed to the limited partners.
Required Approval of Class A Limited Partners Only
Section 16.2 of the Partnership Agreement provides that the Partnership
Agreement shall not be amended to diminish the rights or benefits to which any
of the partners are entitled under the Partnership Agreement without the consent
of each partner who would be adversely affected thereby. Because of this
provision, the consent of each of the Class A Limited Partners is required to
authorize and approve the amendments to the Partnership Agreement proposed
hereby.
Recommendation of the General Partners
The general partners recommend that each Class A Limited Partner vote in
favor of the proposed amendments to the Partnership Agreement by checking the
"YES" box on the Consent Form enclosed. All Class A Limited Partners owning
units of Wells Fund I are requested to vote on this matter regardless of the
number of units you own. If you own both Class A Units and Class B Units, you
should vote all of your units. We are providing this Restated Statement to the
Class B Limited Partners for information purposes only, and Class B Limited
Partners do not need to return a Consent Form to us.
Upon obtaining the required consent from the Class A Limited Partners to
amend the Partnership Agreement as recommended hereby, the general partners
agree to continue the process of marketing the real properties owned by the
partnership for sale and to use their best efforts to sell all such properties
and distribute the net sale proceeds received therefrom by December 31, 2002.
Moreover, in the event that the requested approval from the Class A Limited
Partners is obtained, the general partners agree to cause Wells Management to
forgive the property management fees owed to it by Wells Fund I, which are
currently estimated to be $2,400,000 and which obligation continues to accrue on
a monthly basis as property management services are provided.
The general partners will receive no economic benefits as a result of the
approval of the proposed amendment to the Partnership Agreement.
Please review the information contained in this Restated Statement
carefully, and complete, sign and return the enclosed Consent Form as quickly as
possible. A postage-paid return envelope has been included for your
convenience.
The information contained in this Restated Statement is accurate only as of
the date above and the general partners undertake no obligation to update any
information contained in this Restated Statement after the date hereof.
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If you have any questions about the enclosed material, please contact Doug
Williams or Kim Comer at Wells Investor Services Department at (800) 557-4830.
Very truly yours,
WELLS REAL ESTATE FUND I
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How Wells Real Estate Fund I works for you. Exhibit A
[graph]
This graphic depicts an office building at the top with three pipes flowing down
to illustrate the various benefits of investing in Wells Real Estate Fund I.
The first pipe shows the sequence of annual cash distributions from operations.
This pipe flows downward into a bucket which represents the Class A Limited
Partners. The caption below this bucket reads "First...The Cash-First Investors
(Class A) receive a 9% return on their investment." The pipe continues downward
to another bucket which represents the Class B Limited Partners. The caption
below this bucket reads "Then...The Tax Advantaged Investors (Class B) receive a
return of 9% on their investment." The pipe continues downward to another
bucket which represents the General Partners. The caption below this bucket
reads "Then...The General Partners receive an amount equal to 9/10 of 1% of the
adjusted capital distributions." The pipe continues downward and branches out
into two separate pipes. The left pipe further branches into two separate pipes
into two buckets which represent the Class A Limited Partners and the Class B
Limited Partners. The right pipe continues down into a bucket which represents
the General Partners. The caption beside these buckets reads "And Finally...The
Class A and Class B Investors share 90% pro rata. And the General Partners
receive 10%."
The second pipe shows the annual tax benefits to be received by the investors.
The pipe branches into two separate pipes which empties into two buckets which
depicts the General Partners receiving 1% of such tax benefits and the Class B
Limited Partners receiving 99% of such tax benefits.
The third pipe shows the sequence of distributions each time there is a sale of
a property or a refinancing. The pipe flows downward and branches into two
separate pipes. The pipes each flow into a bucket which depicts the Class A
Limited Partners and the Class B Limited Partners receiving "Capital +15%". The
caption beside these buckets reads "*Cumulative return on investment to date
increased to 15% plus return of capital." A pipe flows out of each bucket and
continues downward and branches into two separate pipes. The left pipe further
branches into two separate pipes into two buckets which represent the Class A
Limited Partners and the Class B Limited Partners. The right pipe continues
down into a bucket which represents the General Partners. The caption beside
these buckets reads "*Then...Distribute 85% to the Class A and Class B Investors
and 15% to the General Partners. Early Incentive Bonus allocations made at this
time."
The bottom of the graph contains the following language: "This graphic contains
generalizations in order to illustrate the various distributions. Each investor
should refer to the prospectus for a more complete description of these
distributions. * Disproportionate allocations of cash available for
distribution and tax deductions may alter these percentages."
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CONSENT FORM
WELLS REAL ESTATE FUND I
CONSENT TO AMENDMENTS TO PARTNERSHIP AGREEMENT
OF WELLS REAL ESTATE FUND I
The undersigned Class A Limited Partner, having received the Amended and
Restated Consent Solicitation Statement (the "Restated Statement") requesting
consent to the proposed amendments to Sections 9.3 and 10.4 (the "Proposed
Amendments") of the Restated and Amended Certificate and Agreement of Limited
Partnership dated July 30, 1984 (the "Partnership Agreement"), as described
therein, does hereby vote all units held of record by the undersigned Class A
Limited Partner as follows:
This Consent Form when properly executed will be voted in the manner
directed herein by the undersigned Class A Limited Partner. If an executed
Consent Form is returned but no direction is made, this Consent Form will be
voted for the Proposed Amendments. This Consent Form must be signed and dated.
(Continued on Reverse Side)
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(Continued From Other Side)
THE GENERAL PARTNERS RECOMMEND THAT YOU VOTE
"FOR" THE PROPOSED AMENDMENTS AS DESCRIBED IN THE RESTATED STATEMENT
Proposal to approve the Proposed Amendments to Sections 9.3 and 10.4 of the
Partnership Agreement of Wells Real Estate Fund I as described in the
Restated Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Date: Signature
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Date: Signature
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[Insert ID Label]
Please sign exactly as name appears on this Consent Form. When units are held
by joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE CONSENT FORM PROMPTLY USING THE ENCLOSED
ENVELOPE.
