<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, 1998 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 0-16518
---------------------------------------------------------
Wells Real Estate Fund II
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1678709
- -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
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 II
-------------------------
INDEX
-----
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1998
and December 31, 1997........................ 3
Statements of Income for the Three Months
Ended March 31, 1998 and 1997................ 4
Statements of Partners' Capital for the Year
Ended December 31, 1997 and the Three Months
Ended March 31, 1998......................... 5
Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997................ 6
Condensed Notes to Financial Statements....... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 11
PART II. OTHER INFORMATION.................................... 19
2
<PAGE>
WELLS REAL ESTATE FUND II
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets March 31, 1998 December 31, 1997
------ -------------- -----------------
<S> <C> <C>
Investment in joint venture (Note 2) $23,096,962 $23,435,256
Cash and cash equivalents 38,004 37,249
Due from affiliate 383,060 322,925
Prepaid and other assets 70 0
----------- -----------
Total assets $23,518,096 $23,795,430
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 3,642 $ 3,014
Partnership distributions payable 392,297 331,965
----------- -----------
Total liabilities $ 395,939 $ 334,979
----------- -----------
Partners' capital:
Limited Partners:
Class A - 108,572 Units 23,122,157 23,460,451
Class B - 30,221 Units 0 0
----------- -----------
Total partners' capital 23,122,157 23,460,451
----------- -----------
Total liabilities and
partners' capital $23,518,096 $23,795,430
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND II
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
------------------
<S> <C> <C>
March 31, 1998 March 31, 1997
-------------- --------------
Revenues:
Equity in income (loss) of joint venture (Note 2) $44,766 $(135,151)
Interest income 161 59
------- ---------
$44,927 $(135,092)
------- ---------
Expenses:
Partnership administration $ 80 $ 0
------- ---------
Net income (loss) $44,847 $(135,092)
======= =========
Net income allocated to
Class A Limited Partners $44,847 $ 27,591
Net loss allocated to
Class B Limited Partners $ 0.00 $(162,683)
Net income per Class A
Limited Partner Unit $ 0.41 $ .00
Net loss per Class B
Limited Partner Unit $ 0.00 $ (4.47)
Cash distribution per Class A
Limited Partner Unit $ 3.53 $ .00
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND II
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THREE MONTHS ENDED
MARCH 31, 1998
<TABLE>
<CAPTION>
LIMITED PARTNERS
------------------------------------------
CLASS A CLASS B TOTAL
---------------------- ------------------ PARTNERS'
UNITS AMOUNTS UNITS AMOUNTS CAPITAL
------ ------- ----- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 108,572 $24,281,269 30,221 $ 162,683 $24,443,952
Net loss 0 (168,693) 0 (162,683) (331,376)
Partnership distributions 0 (652,125) 0 0 (652,125)
------- ----------- ------ --------- -----------
BALANCE, DECEMBER 31, 1997 108,752 23,460,451 30,221 0 23,460,451
Net income 0 44,847 0 0 44,847
Partnership distributions 0 (383,141) 0 0 (383,141)
------- ----------- ------ --------- -----------
BALANCE, MARCH 31, 1998 108,572 $23,122,157 30,221 $ 0 $23,122,157
======= =========== ====== ========= ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND II
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1998 March 31, 1997
-------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 44,847 $(135,092)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in (income) loss of joint ventures (44,766) 135,151
Changes in assets and liabilities:
Withholdings and accounts payable 629 (379)
Due from shareholders (70) 0
--------- ---------
Total adjustments (44,207) 134,772
--------- ---------
Net cash provided by (used in)
operating activities 640 (320)
--------- ---------
Cash flow from investing activities:
Distributions received from joint ventures 322,925 127,344
--------- ---------
Cash flow from financing activities:
Partnership distribution paid (322,810) (150,696)
--------- ---------
Net increase (decrease) in cash and cash equivalents 755 (23,672)
Cash and cash equivalents, beginning of year 37,249 62,741
--------- ---------
Cash and cash equivalents, end of period $ 38,004 $ 39,069
========= =========
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND II
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
------------
Wells Real Estate Fund II (the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Capital, Inc., a
non-public Georgia limited partnership, as General Partners. The
Partnership was formed on June 23, 1986, 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 8, 1986, 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 7, 1988, and received gross proceeds of $34,948,250
representing subscriptions from 4,440 Limited Partners, composed of two
classes of limited partnership interests, Class A and Class B limited
partnership units.
The Partnership owns equity interests in properties through its ownership
in the following joint ventures: (i) Fund II-Fund II-OW Joint Venture, a
joint venture between the Partnership and Wells Real Estate Fund II-OW (the
"Fund II-Fund II-OW Joint Venture"); (ii) Fund II-Fund III Joint Venture, a
joint venture between the Fund II-Fund II-OW Joint Venture and Wells Real
Estate Fund III, L.P. ("Fund II-Fund III Associates"); (iii) Fund II-III-
VI-VII Joint Venture, a joint venture among the Fund II-Fund III Joint
Venture, Wells Real Estate Fund VI, L.P., and Wells Real Estate Fund VII,
L.P. ("Fund II, III, VI, VII Associates"); (iv) Fund I-Fund II Joint
Venture, a joint venture between the Fund II-Fund II-OW Joint Venture and
Wells Real Estate Fund I (the "Tucker Joint Venture"); and (v) Fund I, II,
II-OW, VI, VII Joint Venture, a joint venture among Wells Real Estate Fund
I, the Fund II-Fund II-OW Joint Venture, Wells Real Estate Fund VI, L.P.,
and Wells Real Estate Fund VII, L.P. ("Fund I, II, II-OW, VI, VII Joint
Venture"). Please refer to the Partnership's Form 10-K for the year ended
December 31, 1997 for additional information on the joint ventures and
properties in which the Partnership owns an interest.
As of March 31, 1998, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a
two-story office building located in Charlotte, North Carolina ("First
Union at Charlotte"); (ii) a four-story office building located in
metropolitan Houston, Texas (the "Atrium"), (iii) a restaurant located
7
<PAGE>
in Fulton County, Georgia ("the Brookwood Grill"); (iv) an office/retail
center currently being developed in Fulton County, Georgia ("Holcomb Bridge
Road"); (v) a retail shopping and commercial office complex located in
Tucker, Georgia ("Heritage Place at Tucker"); and (vi) a shopping center
located in Cherokee County, Georgia ("Cherokee Commons"). All of the
foregoing properties were acquired on an all cash basis. For further
information regarding these joint ventures and properties, refer to the
Partnership's Form 10-K for the year ended December 31, 1997.
(b) Basis of Presentation
--------------------------
The financial statements of Wells Real Estate Fund II (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 financial
statements and footnotes included in the Partnership's Form 10-K for the
year ended December 31, 1997.
(2) Investment in Joint Venture
---------------------------
The Partnership owned interests in six properties as of March 31, 1998
through its interest in the Fund II-Fund II-OW Joint Venture. The
Partnership does not have control over the operations of the joint
ventures; however, it does exercise significant influence. Accordingly,
investment in joint ventures is recorded on the equity method.
FUND II-FUND II-OW JOINT VENTURE
--------------------------------
The Partnership owns all of its properties through a joint venture (the
"Fund II-Fund II-OW Joint Venture") formed on March 1, 1988, between the
Partnership and 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.
As of March 31, 1998, the Partnership's equity interest in the Fund II-Fund
II-OW Joint Venture was approximately 95%, and the equity interest of Wells
Fund II-OW was approximately 5%. The Partnership does not have control
over the operations of the joint venture; however, it does exercise
significant influence. Accordingly, investment in joint venture is
recorded on the equity method.
For a description of the various joint ventures and properties owned by the
Partnership, please refer to the Partnership's Form 10-K for the year ended
December 31, 1997.
8
<PAGE>
Following are the financial statements for Fund II and II-OW:
FUND II and II-OW
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets March 31, 1998 December 31, 1997
------ -------------- -----------------
Real estate, at cost:
<S> <C> <C>
Land $ 1,367,856 $ 1,367,856
Building and improvements, less accumulated
depreciation of $2,348,034 in 1998 and
$2,256,118 in 1997 5,423,084 5,515,000
----------- -----------
Total real estate assets 6,790,940 6,882,856
----------- -----------
Investment in joint ventures 17,481,320 17,734,845
Cash and cash equivalents 82,250 84,392
Due from affiliates 317,854 248,623
Accounts receivable 72,623 84,207
Prepaid expenses and other assets 56,900 61,183
----------- -----------
Total assets $24,801,887 $25,096,106
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Partnership distributions payable $ 404,541 $ 341,034
Due to affiliates 4,099 4,561
----------- -----------
Total liabilities 408,640 345,595
----------- -----------
Partners' capital:
Wells Real Estate Fund II 23,096,962 23,435,256
Wells Real Estate Fund II-OW 1,296,285 1,315,255
----------- -----------
Total partners' capital 24,393,247 24,750,511
----------- -----------
Total liabilities and partners' capital $24,801,887 $25,096,106
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
9
<PAGE>
FUND II AND II-OW
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $114,717 $ 114,717
Equity in income (loss) of joint ventures 64,339 (121,612)
Interest income 130 102
-------- ---------
179,186 (6,793)
-------- ---------
Expenses:
Management & leasing expenses 6,883 6,883
Lease acquisition costs 4,589 4,589
Operating costs rental property 3,854 983
Depreciation 91,917 91,917
Legal and accounting 12,021 12,645
Computer costs 2,075 2,793
Partnership administration 10,570 16,127
-------- ---------
131,909 135,937
-------- ---------
Net income (loss) $ 47,277 $(142,730)
======== =========
Net income (loss) allocated to Wells
Real Estate Fund II $ 44,766 $(135,151)
Net income (loss) allocated to Wells
Real Estate Fund II-OW $ 2,510 $ (7,579)
</TABLE>
10
<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
-------
As of March 31, 1998, the developed properties owned by the Fund II-Fund
II-OW Joint Venture were 95% occupied, as compared to 64% occupied as of
March 31, 1997. The increase in the occupied percentages for 1998 compared
to 1997 is due to the occupancy of The Atrium by the Boeing Company in May
1997.
The increase in gross revenues of the Partnership to $44,927 for the three
months ended March 31, 1998, as compared to $(135,092) for the three months
ended March 31, 1997 is due to the occupancy of The Atrium by Boeing
Company in May 1997. Administrative expenses of the Partnership which are
incurred at the joint venture level, decreased for the three months ended
March 31, 1998, compared to the same period of 1997, due primarily to
decreases in professional fees, printing and other general and
administrative expenses.
The Partnership's cash flow from investing activities and cash flow from
financing activities increased in 1998, compared to 1997, due to the
increase in income which resulted from the new lease at The Atrium. Since
all cash received from joint ventures is distributed currently, cash and
cash equivalents remain stable.
Distributions accrued to the Partnership from Fund II-Fund II-OW Joint
Venture for the three month periods ended March 31, 1998 and March 31, 1997
were $383,060 and $184,190, respectively.
The Partnership made cash distributions to the Limited Partners holding
Class A Units for the first quarter of 1998 in the amount of $3.53 per
Unit. No cash distributions were made
11
<PAGE>
to Limited Partners holding Class A Units for first quarter 1997, due to
the reserve required to fund tenant improvements at The Atrium. No cash
distributions were made by the Partnership to the Limited Partners holding
Class B Units.
As of March 31, 1998, the Fund II-Fund II-OW Joint Venture had used all of
the remaining funds available for investment in properties.
The General Partners have verified that all operational computer systems
are year 2000 compliant. This includes systems supporting accounting,
property management and investor services. Also, as part of this review,
all building control systems have been verified as compliant. The current
line of business applications are based on compliant operating systems and
database servers. All of these products are scheduled for additional
upgrades before the year 2000. Therefore, it is not anticipated that the
year 2000 will have significant impact on operations.
RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", requires certain transactions (e.g., unrealized
gains/losses on available for sale securities) that are not reflected in
net income to be displayed as other comprehensive income. The Statement
also requires an entity to report total comprehensive income (i.e., net
income plus other comprehensive income) for every period in which an income
statement is presented. SFAS No. 130 is effective for annual and interim
periods beginning after December 15, 1997. None of the transactions
required to be reported in other comprehensive income pertain to the
Partnership; consequently, adoption of this Statement had no impact on the
partnership's disclosures.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
<PAGE>
PROPERTY OPERATIONS
- -------------------
As of March 31, 1998, the Partnership owned interests in the following
properties through the Fund II-Fund II-OW Joint Venture:
First Union at Charlotte /Fund II and II-OW Joint Venture
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $114,717 $114,717
Expenses:
Depreciation 91,917 91,917
Management & leasing expenses 11,472 11,472
Other operating expenses 3,724 983
-------- --------
107,113 104,372
-------- --------
Net income $ 7,604 $ 10,345
======== ========
Occupied % 100% 100%
Partnership's Ownership % 94.7% 94.7%
Cash distributions to the
Fund II-Fund II-OW Joint Venture* $111,344 $105,796
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 7,604 $ 10,345
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income remained stable for the three months ended March 31, 1998 and
1997. The decrease in net income for the first quarter of 1998 compared to 1997
was primarily due to the increase in accounting fees and administrative fees of
approximately $2,200. Cash generated to the joint venture increased from
$105,796 in first quarter 1997 to $111,344 in first quarter 1998 due primarily
to the receipt of a refund of 1997 insurance premiums.
13
<PAGE>
Boeing at the Atrium/Fund II and Fund III Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $367,536 $ 0
Interest income 0 2,517
-------- ---------
367,536 2,517
-------- ---------
Expenses:
Depreciation 216,930 168,642
Management & leasing expenses 44,488 0
Other operating expenses 158,431 97,967
-------- ---------
419,849 266,609
-------- ---------
Net (loss) $(52,313) $(264,092)
======== =========
Occupied % 100% 0%
Partnership's Ownership % 58.0% 62.1%
Cash distributions to the
Fund II-Fund II-OW Joint Venture* $112,949 $ 0
Net (loss) allocated to the
Fund II-Fund II-OW Joint Venture* $(32,067) $(173,244)
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income increased for the three months ended March 31, 1998, compared to
the same period in 1997, due to the vacancy of the Atrium for the first four and
a half months of 1997.
Depreciation, management and leasing, and other expenses increased in 1998
compared to 1997 with the occupancy of the building by Boeing. Cash generated
to the joint venture increased, due primarily to the increase in rental revenues
and reimbursement of tenant improvements of approximately $12,000 received from
Boeing.
14
<PAGE>
The Brookwood Grill /Fund II and Fund III Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $56,338 $56,544
Equity in income of joint venture 16,131 10,857
------- -------
72,469 67,401
------- -------
Expenses:
Depreciation 13,503 13,503
Management & leasing expenses 7,033 6,761
Other operating expenses 5,229 2,259
------- -------
25,765 22,523
------- -------
Net income $46,704 $44,878
======= =======
Occupied % 100% 100%
Partnership's Ownership % 59.0% 59.0%
Cash distributions to the
Fund II-Fund II-OW Joint Venture* $57,651 $47,131
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $29,120 $27,982
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income increased for the three months ended March 31, 1998, as compared
to 1997, due primarily to the increase in equity of joint venture, which is the
result of increased occupancy at the Holcomb Bridge Road Property. The increase
in operating expenses for the first quarter of 1998 over the same period of 1997
is due primarily to billing of reimbursements in first quarter 1997. The
increase in net income is due primarily to the increase of approximately $5,000
in the equity in income of the joint venture which was partially offset by the
decrease in billing of reimbursements noted above.
15
<PAGE>
Holcomb Bridge Road /Fund II, III, VI, VII Joint Venture
- --------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $213,235 $160,185
Expenses:
Depreciation 93,904 66,130
Management & leasing expenses 29,364 20,580
Other operating expenses 23,033 30,307
-------- --------
146,301 117,017
-------- --------
Net income $ 66,934 $ 43,168
======== ========
Occupied % 94.1% 63.0%
Partnership's Ownership % 14.2% 14.9%
Cash distributions to the
Fund II-Fund III Joint Venture* $ 41,168 $ 27,496
Net income allocated to the
Fund II-Fund III Joint Venture* $ 16,131 $ 10,857
</TABLE>
*The Partnership holds a 59.04% ownership in the Fund II-Fund III Joint Venture.
In January 1995, the Fund II-Fund III Joint Venture contributed 4.3 acres of
land and land improvements at 880 Holcomb Bridge Road to the Fund II, III, VI,
VII Joint Venture. Development is being completed on two buildings with a total
of approximately 49,500 square feet.
As of March 31, 1998, fourteen tenants are occupying approximately 46,600 square
feet of space in the retail and office building under leases of varying lengths.
Increases in revenues, expenses and net income for the quarter ended March 31,
1998, compared to the same quarter of 1997, are due to the five additional
tenants occupying the property in 1998, as compared to the first quarter of
1997.
The Partnership's ownership percentage in the Fund II, III, VI, VII Joint
Venture decreased to 14.2% in 1998, as compared to 14.9% in 1997, due to
additional fundings by Wells Real Estate Fund VI, L.P. and Wells Real Estate
Fund VII, L.P. which decreased the Partnership's ownership percentage in the
Fund II, III, VI, VII Joint Venture.
16
<PAGE>
Heritage Place at Tucker Property/Fund I - Fund II Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $300,361 $261,866
Interest income 137 129
-------- --------
300,498 261,995
-------- --------
Expenses:
Depreciation 107,288 97,668
Management & leasing expenses 42,588 20,190
Other operating expenses 109,595 157,408
-------- --------
259,471 275,266
-------- --------
Net income (loss) $ 41,027 $(13,271)
======== ========
Occupied % 83% 76%
Partnership's Ownership % 42.5% 42.5%
Cash distributions to the
Fund II-Fund II-OW Joint Venture* $ 44,564 $ 35,883
Net income (loss) allocated to the
Fund II-Fund II-OW Joint Venture* $ 18,425 $ (5,960)
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income increased in 1998 from 1997, due primarily to the increase in
occupancy from 76% to 83%. Management and leasing expenses increased over prior
year, due to increased occupancy and revenues. Other operating expenses
decreased, due to a significant decrease in landscaping expenses and plumbing
and roofing repairs.
17
<PAGE>
Cherokee Commons/Fund I, II, II-OW, VI & VII Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $228,977 $217,439
Interest income 22 18
-------- --------
228,999 217,457
-------- --------
Expenses:
Depreciation 110,563 107,525
Management & leasing expenses 25,751 31,541
Other operating expenses 3,131 24,119
-------- --------
139,445 163,185
-------- --------
Net income $ 89,554 $ 54,272
======== ========
Occupied % 91% 91%
Partnership's Ownership % 51.7% 51.7%
Cash distributed to the
Fund II-Fund II-OW Joint Venture* $102,700 $ 99,723
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 48,861 $ 29,611
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income increased in 1998 over 1997, due primarily to a one time
adjustment made to the straight-line rent schedule. Management and leasing
expenses decreased in 1998, as compared to 1997, due to decreased leasing
commissions. The decrease in operating expenses in 1998, as compared to 1997,
are due to decreased expenditures for tenant improvements, common area expenses,
and legal fees.
18
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports on Form 8-K were filed during the first quarter of 1998.
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 II
(Registrant)
Dated: May 11, 1998 By: /s/Leo F. Wells, III
---------------------------
Leo F. Wells, III, as Individual
General Partner and as President
and Chief Financial Officer
of Wells Capital, Inc.
the Corporate General Partner
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 38,004
<SECURITIES> 23,096,962
<RECEIVABLES> 383,060
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 70
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,518,096
<CURRENT-LIABILITIES> 395,939
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,122,157
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</TABLE>
