<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 June 30, 1999 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
-----
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1999
and December 31, 1998.................................... 3
Statements of Income for the Three Months and Six Months
Ended June 30, 1999 and 1998............................. 4
Statements of Partners' Capital for the Year Ended
December 31, 1998 and the Six Months
Ended June 30, 1999...................................... 5
Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998............................. 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................................................. 20
</TABLE>
2
<PAGE>
WELLS REAL ESTATE FUND II
(A Georgia Public Limited Partnership)
BALANCE SHEETS
Assets June 30, 1999 December 31,
------ ------------- ------------
Investment in joint venture (Note 2) $21,377,573 $22,019,064
Cash and cash equivalents 35,648 27,011
Due from affiliate 372,804 336,616
----------- -----------
Total assets $21,786,025 $22,382,691
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 2,288 $ 1,255
Partnership distributions payable 380,969 337,178
----------- -----------
Total liabilities 383,257 338,433
----------- -----------
Partners' capital:
Limited Partners:
Class A - 108,572 Units 21,402,768 22,044,258
Class B - 30,221 Units 0 0
----------- -----------
Total partners' capital 21,402,768 22,044,258
----------- -----------
Total liabilities and partners' capital $21,786,025 $22,382,691
=========== ===========
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 Six Months Ended
-------------------------------- -----------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Equity in income of joint
ventures (Note 2) $71,997 $48,821 $135,324 $93,587
Interest income 89 145 145 306
------- ------- -------- -------
72,086 48,966 135,469 93,893
------- ------- -------- -------
Expenses:
Partnership administration 0 0 0 80
------- ------- -------- -------
Net income $72,086 $48,966 $135,469 $93,813
======= ======= ======== =======
Net income allocated to
Class A Limited Partners $72,086 $48,966 $135,469 $93,813
Net loss allocated to Class
B Limited Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A
Limited Partner Unit $ 0.66 $ 0.46 $ 1.25 $ 0.87
Net loss per Class B Limited
Partner Unit $ 0.00 $ 0.00 $ 0.00 $ 0.00
Cash distribution per Class A
Limited Partner Unit $ 3.43 $ 3.72 $ 7.15 $ 7.25
</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, 1998 AND SIX MONTHS ENDED
JUNE 30, 1999
<TABLE>
<CAPTION>
Limited Partners
---------------------------------------------------------------------------------
Class A Class B Total
---------------------------------------- --------------------------------------- Partners'
Units Amounts Units Amounts Capital
------------------ -------------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 108,572 $23,460,451 30,221 $ 0 $23,460,451
Net income 0 93,162 0 (0) 93,162
Partnership distributions 0 (1,509,355) 0 0 (1,509,355)
------- ----------- ------ --- -----------
BALANCE, December 31, 1998 108,572 22,044,258 30,221 0 22,044,258
Net income 0 135,469 0 0 135,469
Partnership distributions 0 (776,959) 0 0 (776,959)
------- ----------- ------ --- -----------
BALANCE, June 30, 1999 108,572 $21,402,768 30,221 $ 0 $21,402,768
======= =========== ====== === ===========
</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>
Six Months Ended
------------------------------------------------------
June 30, 1999 June 30, 1998
-------------------------- --------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 135,469 $ 93,812
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Equity in (income) of joint ventures (135,324) (93,587)
Changes in assets and liabilities:
Accounts payable 1,034 (877)
--------- ---------
Total adjustments (134,290) (94,464)
--------- ---------
Net cash provided by (used in)
operating activities 1,179 (652)
--------- ---------
Cash flow from investing activities:
Investment in joint venture 0 0
Distributions received from joint venture 740,626 705,986
--------- ---------
740,626 705,986
--------- ---------
Cash flow from financing activities:
Distributions to partners (733,168) (705,751)
--------- ---------
Net increase (decrease) in cash and cash equivalents 8,637 (417)
Cash and cash equivalents, beginning of year 27,011 37,249
--------- ---------
Cash and cash equivalents, end of period $ 35,648 $ 36,832
========= =========
</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., 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 Joint Venture"); (iii) Fund II-
III-VI-VII Associates, a joint venture between 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 Joint Venture"); (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 Associates, a joint venture between 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, 1998 for additional information on the joint ventures and
properties in which the Partnership owns an interest.
As of June 30, 1999, 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 in
Fulton County, Georgia ("the Brookwood Grill"); (iv) an office/retail
center in Fulton County,
7
<PAGE>
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, 1998.
(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, 1998.
(2) Investment in Joint Ventures
----------------------------
The Partnership owned interests in six properties as of June 30, 1999. 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 June 30, 1999, the Partnership's equity interest in Wells 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.
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 June 30, 1999 December 31, 1998
------ ------------- -----------------
<S> <C> <C>
Real estate, at cost:
Land $ 1,367,856 $ 1,367,856
Building and improvements, less accumulated
depreciation of $2,807,617 in 1999 and
$2,623,785 in 1998 4,963,500 5,147,333
----------- -----------
Total real estate assets 6,331,356 6,515,189
----------- -----------
Investment in joint ventures 16,212,262 16,676,111
Cash and cash equivalents 76,315 94,367
Due from affiliates 316,642 267,581
Accounts receivable 1,265 23,184
Prepaid expenses and other assets 33,186 42,828
----------- -----------
Total assets $22,971,026 $23,619,260
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Partnership distributions payable $ 393,588 $ 355,370
Due to affiliates 0 8,988
----------- -----------
Total liabilities 393,588 364,358
----------- -----------
Partners' capital:
Wells Real Estate Fund II 21,377,573 22,019,064
Wells Real Estate Fund II-OW 1,199,865 1,235,838
----------- -----------
Total partners' capital 22,577,438 23,254,902
----------- -----------
Total liabilities and partners' capital $22,971,026 $23,619,260
=========== ===========
</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 Six Months Ended
----------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
-------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $127,682 $114,717 $242,399 $229,434
Equity in income of joint
ventures 99,337 84,001 190,034 148,340
Interest income (13) 114 92 244
-------- -------- -------- --------
227,006 198,832 432,525 378,018
-------- -------- -------- --------
Expenses:
Management and leasing fees 7,541 6,883 14,424 13,766
Lease acquisition costs 4,588 4,588 9,177 9,177
Operating costs-rental property 4,168 2,972 11,060 6,826
Depreciation 91,916 91,916 183,833 183,833
Legal and accounting 24,813 21,574 28,497 33,595
Computer costs 1,077 1,309 2,741 3,384
Partnership administration 16,869 18,032 39,881 28,602
-------- -------- -------- --------
150,972 147,274 289,613 279,183
-------- -------- -------- --------
Net income $ 76,034 $ 51,558 $142,912 $ 98,835
======== ======== ======== ========
Net income allocated to
Wells Real Estate Fund II $ 71,997 $ 48,821 $135,324 $ 93,587
Net income allocated to Wells
Real Estate Fund II-OW $ 4,037 $ 2,737 $ 7,588 $ 5,248
</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 June 30, 1999, the developed properties owned by the Fund II-Fund II-
OW Joint Venture were 97.5% occupied, as compared to 95% occupied as of
June 30, 1998.
The increase in gross revenues of the Partnership to $135,469 for the six
months ended June 30, 1999, as compared to $93,893 for the six months ended
June 30, 1998 is due to the increase occupancy of The Cherokee Commons and
Heritage Place. Total administrative expenses of the Partnership which are
incurred at the joint venture level, remained relatively stable for the six
months ended June 30, 1999, compared to the same period of 1998.
The Partnership's cash flow from investing activities and cash flow from
financing activities increased in 1999, compared to 1998, due to the
increase in distributions from joint ventures as occupancy increased. 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 six month periods ended June 30, 1999 and June 30, 1998
were $372,804 and $403,383 respectively.
The Partnership made cash distributions to the Limited Partners holding
Class A Units for the second quarter of 1999 in the amount of $3.43 per
Unit as compared to $3.72 for the
11
<PAGE>
second quarter 1998. No cash distributions were made by the Partnership to
the Limited Partners holding Class B Units.
As of June 30, 1999, the Fund II-Fund II-OW Joint Venture had used all of
the remaining funds available for investment in properties.
The Partnership is unaware of any known demands, commitments, events or
capital expenditures other than that which is required from the normal
operations of its properties that will result in the Partnership's
liquidity increasing or decreasing in any material way. The Partnership
expects to meet liquidity requirements and budgets demands through cash
flow from operations.
Year 2000
---------
The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A
full assessment of Year 2000 compliance issues was begun in late 1997 and
was completed by March 31, 1999. Renovations and replacements of equipment
have been and are being made as warranted as the assessment progresses.
The costs incurred by the Partnership and its affiliates thus far for
renovations and replacements have been immaterial. All testing of systems
has been completed as of June 30, 1999.
As to the status of the Partnership's information technology systems, it is
presently believed that all major systems and software packages are Year
2000 compliant. At the present time, it is believed that all major non-
information technology systems are Year 2000 compliant. The cost to
upgrade any non-compliant systems is believed to be immaterial.
The Partnership has confirmed with the Partnership's vendors, including
third-party service providers such as banks, that their systems are Year
2000 compliant.
The Partnership relies on computers and operating systems provided by
equipment manufacturers, and also on application software designed for use
with its accounting, property management and investment portfolio tracking.
The Partnership has preliminarily determined that any costs, problems or
uncertainties associated with the potential consequences of Year 2000
issues are not expected to have a material impact on the future operations
or financial condition of the Partnership. The Partnership will perform
due diligence as to the Year 2000 readiness of each property owned by the
Partnership and each property contemplated for purchase by the Partnership.
The Partnership's reliance on embedded computer systems (i.e.,
microcontrollers) is limited to facilities related matters, such as office
security systems and environmental control systems.
12
<PAGE>
The Partnership is currently formulating contingency plans to cover any
areas of concern. Alternate means of operating the business are being
developed in the unlikely circumstance that the computer and phone systems
are rendered inoperable. An off-site facility from which the Partnership
could operate is being sought as well as alternate means of communication
with key third-party vendors. A written plan is being developed for
testing and dispensation to each staff member of the General Partner of the
Partnership.
Management believes that the Partnership's risk of Year 2000 problems is
minimal. In the unlikely event there is a problem, the worst case
scenarios would include the risks that the elevator or security systems
within the Partnership's properties would fail or the key third-party
vendors upon which the Partnership relies would be unable to provide
accurate investor information. In the event that the elevator shuts down,
the Partnership has devised a plan for each building whereby the tenants
will use the stairs until the elevators are fixed. In the event that the
security system shuts down, the Partnership has devised a plan for each
building to hire temporary on-site security guards. In the event that a
third-party vendor has Year 2000 problems relating to investor information,
the Partnership intends to perform a full system back-up of all investor
information as of December 31, 1999 so that the Partnership will have
accurate hard-copy investor information.
13
<PAGE>
Property Operations
- -------------------
As of June 30, 1999, 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 Six Months Ended
---------------------------------- ----------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $127,682 $114,717 $242,399 $229,434
-------- -------- -------- --------
Expenses:
Depreciation 91,916 91,916 183,833 183,833
Management & leasing expenses 12,129 11,472 23,601 22,944
Other operating expenses 4,180 2,954 10,968 6,678
-------- -------- -------- --------
108,225 106,342 218,402 213,455
-------- -------- -------- --------
Net income $ 19,457 $ 8,375 $ 23,997 $ 15,979
======== ======== ======== ========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 94.7% 94.7% 94.7% 94.7%
Cash generated to the Fund II-
Fund II-OW Joint Venture* $121,163 $117,594 $237,612 $228,938
Net income generated to the Fund II-
Fund II-OW Joint Venture* $ 19,457 $ 8,375 $ 23,997 $ 15,979
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Property operations remained stable for the three and six months ended June 30,
1999 and 1998. Rental income has increased for the three months ended June 30,
1999, as compared to the same period in 1998, due primarily to an underestimate
of straight line rent adjustments in 1998.
14
<PAGE>
Boeing at the Atrium/Fund II and Fund III Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ---------------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $367,536 $367,536 $ 735,072 $ 735,072
Interest income 0 13,280 0 13,280
-------- -------- --------- ---------
367,536 380,816 735,072 748,352
-------- -------- --------- ---------
Expenses:
Depreciation 219,755 216,930 433,860 433,860
Management & leasing expenses 44,869 44,679 89,643 89,167
Other operating expenses 117,325 183,393 313,495 341,824
-------- -------- --------- ---------
381,949 445,002 836,998 864,851
-------- -------- --------- ---------
Net loss $(14,413) $(64,186) $(101,926) $(116,499)
======== ======== ========= =========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 58.0% 58.0% 58.0% 58.0%
Cash distributed to the Fund II-
Fund II-OW Joint Venture* $130,417 $105,670 $ 220,049 $ 218,619
Net loss allocated to the Fund II-
Fund II-OW Joint Venture* $ (8,835) $(39,346) $ (62,481) $ (71,414)
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income remained stable in 1999 as compared to 1998. The decrease in
operating expenses in 1999, as compared to 1998, are due to increased common
area maintenance billings to tenants that were under estimated in 1998. Tenants
are billed an estimated amount for the current year common area maintenance
which is then reconciled the second quarter of the following year and the
difference billed to the tenant.
15
<PAGE>
The Brookwood Grill Property/Fund II and Fund III Joint Venture
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- -------------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $56,187 $ 56,037 $112,375 $112,375
Equity in income of joint venture 6,248 16,943 39,304 33,074
------- -------- -------- --------
62,435 72,980 151,679 145,449
------- -------- -------- --------
Expenses:
Depreciation 13,503 13,503 27,006 27,006
Management & leasing expenses 7,955 6,492 16,683 13,525
Other operating expenses 805 (23,721) 6,330 (18,492)
------- -------- -------- --------
22,263 (3,726) 50,019 22,039
------- -------- -------- --------
Net income $40,172 $ 76,706 $101,660 $123,410
======= ======== ======== ========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 59.0% 59.0% 59.0% 59.0%
Cash distributed to the
Fund II-Fund II-OW Joint Venture* $49,986 $ 76,364 $115,431 $134,015
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $25,047 $ 47,826 $ 63,385 $ 76,946
</TABLE>
* The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Operating expenses increased for the six months ended June 30, 1999, as compared
to the same period in 1998, due primarily to the billings of reimbursements
during the second quarter in 1998. Tenants are billed an estimated amount for
the current year common area maintenance which is then reconciled the second
quarter of the following year and the difference billed to the tenant. As a
result net income and cash distributions to the Partnership decreased for the
six months ended June 30, 1999 as compared to the same period in 1998.
16
<PAGE>
Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------------- ---------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $227,761 $208,645 $457,824 $421,880
-------- -------- -------- --------
Expenses:
Depreciation 94,128 94,129 188,257 188,033
Management & leasing expenses 42,063 29,888 80,937 59,252
Other operating expenses 387 13,797 24,781 36,830
-------- -------- -------- --------
136,578 137,814 293,975 284,115
-------- -------- -------- --------
Net income $ 91,183 $ 70,831 $163,849 $137,765
======== ======== ======== ========
Occupied % 94% 100.0% 94% 100.0%
Partnership Ownership % 14.2% 14.2% 14.2% 14.2%
Cash distributed to the
Fund II-Fund III Joint Venture* $ 46,181 $ 41,990 $ 81,600 $ 83,158
Net income allocated to the
Fund II-Fund III Joint Venture* $ 6,248 $ 16,943 $ 39,304 $ 33,074
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income has increased for the six months ended June 30, 1999, as compared
to the same period in 1998 due primarily to a under estimate of straight line
rent adjustments. The expense decreases due to common area maintenance
reimbursement. Tenants are billed an estimated amount for the current year
common area maintenance which is then reconciled the second quarter of the
following year and the difference billed to the tenant.
17
<PAGE>
Heritage Place at Tucker Property/Fund I - Fund II Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -----------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $343,044 $311,526 $679,903 $611,887
Interest income 137 135 273 272
-------- -------- -------- --------
343,181 311,661 680,176 612,159
-------- -------- -------- --------
Expenses:
Depreciation 120,456 107,288 229,252 214,576
Management & leasing expenses 43,482 34,645 87,966 77,233
Other operating expenses 103,404 116,379 198,947 225,974
-------- -------- -------- --------
267,342 258,312 516,165 517,783
-------- -------- -------- --------
Net income $ 75,839 $ 53,349 $164,011 $ 94,376
======== ======== ======== ========
Occupied % 91.0% 82.0% 91.0% 82.0%
Partnership Ownership % 42.53% 42.53% 42.53% 42.53%
Cash distributed to the
Fund II-Fund II-OW Joint Venture*
$ 31,293 $ 51,429 $ 90,742 $ 95,993
Net income allocated to the
Fund II-Fund II-OW Joint
Venture* $ 34,059 $ 23,959 $ 73,657 $ 42,384
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income increased in 1999 from 1998, due primarily to the increase in
occupancy from 82% to 91%. Depreciation and leasing expenses increased over
prior year to date due to increased occupancy, tenant improvements and revenues.
Other operating expenses decreased, due primarily to prior year annual
adjustments for common area maintenance billings to tenants. Tenants are billed
an estimated amount for the current year common area maintenance which is then
reconciled the second quarter of the following year and the difference billed to
the tenant.
Cash distributed to the Fund II Fund II-OW Joint Venture decreased due to
capital improvements to the building of $101,350 and build out of tenant
improvements of $74,168.
18
<PAGE>
Cherokee Property - Fund I, II, II-OW, VI, VII Joint Venture
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------- ---------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $237,232 $225,705 $464,615 $454,682
Interest income 19 19 39 41
-------- -------- -------- --------
237,251 225,724 464,654 454,723
-------- -------- -------- --------
Expenses:
Depreciation 111,415 110,564 221,527 221,127
Management & leasing expenses 26,135 18,737 51,129 44,488
Other operating expenses 9,772 1,919 (19,643) 5,050
-------- -------- -------- --------
147,322 131,220 253,013 270,665
-------- -------- -------- --------
Net income $ 89,929 $ 94,504 $211,641 $184,058
======== ======== ======== ========
Occupied % 95.9% 91.0% 95.9% 91.0%
Partnership Ownership % 51.7% 51.7% 51.7% 51.7%
Cash distributed to the
Fund II-Fund II-OW Joint Venture*
$103,538 $115,766 $227,662 $218,466
Net income allocated to the
Fund II-Fund II-OW Joint
Venture* $ 49,066 $ 51,563 $115,473 $100,424
</TABLE>
*The Partnership holds a 95% ownership in the Fund-II - Fund II-OW Joint
Venture.
Rental income increased in 1999 over 1998, due to increased occupancy. The
decrease in operating expenses for the six month period ended June 30, 1999, as
compared to the same period in 1998, was due to common area maintenance
reimbursement billings. The increase in operating expense for the three month
period ended June 30, 1999 was due to increased expenditures for tenant
improvements, HVAC repairs and a partial demolition of a tenant suite.
19
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports on Form 8-K were filed during the second quarter of 1999
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: August 10, 1999 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
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 35,648
<SECURITIES> 21,377,573
<RECEIVABLES> 372,804
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,786,025
<CURRENT-LIABILITIES> 383,257
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21,402,768
<TOTAL-LIABILITY-AND-EQUITY> 21,786,025
<SALES> 0
<TOTAL-REVENUES> 135,469
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 135,469
<INCOME-TAX> 0
<INCOME-CONTINUING> 135,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,469
<EPS-BASIC> 1.25
<EPS-DILUTED> 0
</TABLE>
