<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, 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
-----
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1999
and December 31, 1998..........................................3
Statements of Income for the Three Months
Ended March 31, 1999 and 1998..................................4
Statements of Partners' Capital for the Year Ended
December 31, 1998 and the Three Months
Ended March 31, 1999...........................................5
Statements of Cash Flows for the Three Months
Ended March 31, 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................................................12
2
<PAGE>
WELLS REAL ESTATE FUND II
(A Georgia Public Limited Partnership)
BALANCE SHEETS
Assets March 31, 1999 December 31, 1998
- ------ -------------- -----------------
Investment in joint venture (Note 2) $21,678,264 $22,019,064
Cash and cash equivalents 36,190 27,011
Due from affiliate 404,242 336,616
----------- -----------
Total assets $22,118,695 $22,382,691
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 1,255 $ 1,255
Partnership distributions payable 413,981 337,178
----------- -----------
Total liabilities 415,236 338,433
----------- -----------
Partners' capital:
Limited Partners:
Class A - 108,572 Units 21,703,459 22,044,258
Class B - 30,221 Units 0 0
----------- -----------
Total partners' capital 21,703,459 22,044,258
----------- -----------
Total liabilities and partners' capital $22,118,695 $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
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
Revenues:
Equity in income of joint venture (Note 2) $63,327 $44,766
Interest income 56 161
------- -------
$63,383 $44,927
------- -------
Expenses:
Partnership administration $ 0 $ 80
------- -------
Net income $63,383 $44,847
======= =======
Net income allocated to
Class A Limited Partners $63,383 $44,847
Net loss allocated to
Class B Limited Partners $ 0.00 $ 0.00
Net income per Class A
Limited Partner Unit $ 0.58 $ 0.41
Net loss per Class B
Limited Partner Unit $ 0.00 $ 0.00
Cash distribution per Class A
Limited Partner Unit $ 3.72 $ 3.53
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 THREE MONTHS ENDED
MARCH 31, 1999
<TABLE>
<CAPTION>
Limited Partners Total
----------------------------------------
Class A Class B Partners'
------------------ -----------------
Units Amounts Units Amounts Capital
------ -------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 108,752 $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 63,383 0 0 63,383
Partnership distributions 0 (404,182) 0 0 (404,182)
------- ----------- ------ ------ -----------
BALANCE, March 31, 1999 108,572 $21,703,459 30,221 $ 0 $21,703,459
======= =========== ====== ====== ===========
</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, 1999 March 31, 1998
-------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 63,383 $ 44,847
--------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in (income) of joint ventures (63,327) (44,766)
Changes in assets and liabilities:
Withholdings and accounts payable 0 629
Due from shareholders 0 (70)
--------- ---------
Total adjustments (63,327) (44,207)
--------- ---------
Net cash provided by
operating activities 56 640
--------- ---------
Cash flow from investing activities:
Distributions received from joint ventures 336,500 322,925
--------- ---------
Cash flow from financing activities:
Partnership distributions paid (327,377) (322,810)
--------- ---------
Net increase in cash and cash equivalents
9,179 755
Cash and cash equivalents, beginning of year 27,011 37,249
--------- ---------
Cash and cash equivalents, end of period $ 36,190 $ 38,004
========= =========
</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
Corporation, 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").
As of March 31, 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 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
7
<PAGE>
further information regarding these joint ventures and properties, refer to
the Partnership's Form 10-K for the year ended December 31, 1998.
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.
(b) Basis of Presentation
--------------------------
The financial statements of Wells Real Estate Fund II 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.
(2) Investment in Joint Venture
---------------------------
The Partnership owned interests in six properties as of March 31, 1999
through its interest in the Fund II-Fund II-OW Joint Venture. 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.
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, 1999, 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.
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, 1999 March 31, 1998
----- -------------- --------------
<S> <C> <C>
Real estate, at cost:
Land $ 1,367,856 $ 1,367,856
Building and improvements, less accumulated
depreciation of $2,715,701 in 1999 and
$2,623,785 in 1998 5,055,417 5,147,333
----------- -----------
Total real estate assets 6,423,273 6,515,189
----------- -----------
Investment in joint ventures 16,428,159 16,676,111
Cash and cash equivalents 87,519 94,367
Due from affiliates 339,398 267,581
Accounts receivable 6,745 23,184
Prepaid expenses and other assets 37,015 42,828
----------- -----------
Total assets $23,322,109 $23,619,260
=========== ===========
Liabilities and Partners' Capital
- ---------------------------------
Liabilities:
Partnership distributions payable $ 426,789 $ 355,370
Due to affiliates 329 8,988
----------- -----------
Total liabilities 427,118 364,358
----------- -----------
Partners' capital:
Wells Real Estate Fund II 21,678,264 22,019,064
Wells Real Estate Fund II-OW 1,216,727 1,235,838
----------- -----------
Total partners' capital 22,894,991 23,254,902
----------- -----------
Total liabilities and partners' capital $23,322,109 $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
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $114,717 $114,717
Equity in income of joint ventures 90,697 64,339
Interest income 105 130
-------- --------
205,519 179,186
-------- --------
Expenses:
Management & leasing expenses 6,883 6,883
Lease acquisition costs 4,589 4,589
Operating costs rental property 6,892 3,854
Depreciation 91,917 91,917
Legal and accounting 3,684 12,021
Computer costs 1,664 2,075
Partnership administration 23,012 10,570
-------- --------
138,641 131,909
-------- --------
Net income $ 66,878 $ 47,277
======== ========
Net income allocated to Wells
Real Estate Fund II $ 63,327 $ 44,766
Net income allocated to Wells
Real Estate Fund II-OW $ 3,551 $ 2,510
</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, 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
March 31, 1998.
The increase in gross revenues of the Partnership to $63,383 for the three
months ended March 31, 1999, as compared to $44,927 for the three months
ended March 31, 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 three months ended March 31, 1999, compared to
the same period of 1998, with increased administrative expenses offset by
decreased legal expenses.
The Partnership's cash flow from investing activities and cash flow from
financing activities increased slightly 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 remained stable.
Distributions accrued to the Partnership from Fund II-Fund II-OW Joint
Venture for the three month periods ended March 31, 1999 and March 31, 1998
were $404,242 and $336,616, respectively.
The Partnership made cash distributions to the Limited Partners holding
Class A Units for the first quarter of 1999 in the amount of $3.72 per Unit
as compared to $3.53 for the first quarter of 1998. No cash distributions
were made by the Partnership to the Limited Partners holding Class B Units.
11
<PAGE>
As of March 31, 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. The costs incurred by the
Partnership and its affiliates thus far for renovations and replacements
have been immaterial. Some testing of systems has begun and all testing is
expected to be complete by 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 with the
exception of the accounting and property management package are Year 2000
compliant. The Partnership's affiliated entities are purchasing the upgrade
for the accounting and property management package system; however, it is
not slated to be available until the end of the second quarter of 1999. At
the present time, it is believed that all non-major information technology
systems are Year 2000 compliant. The cost to upgrade any non-compliant
systems is believed to be immaterial.
The Partnership is in the process of confirming with the Partnership's
vendors, including third-party service providers such as banks, that their
systems will be Year 2000 compliant. Based on the information received thus
far, the primary third-party service providers with which the Partnership
has relationships have confirmed their Year 2000 readiness.
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.
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.
12
<PAGE>
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 March 31, 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
------------------
March 31, 1999 March 31, 1999
-------------- --------------
<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 6,787 3,724
-------- --------
110,176 107,113
-------- --------
Net income $ 4,541 $ 7,604
======== ========
Occupied % 100% 100%
Partnership's Ownership % 94.7% 94.7%
Cash generated to the
Fund II-Fund II-OW Joint Venture* $116,449 $111,344
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 4,541 $ 7,604
</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, 1999 and
1998. The decrease in net income for the first quarter of 1999 compared to 1998
was primarily due to the increase in accounting fees and property insurance. A
refund of 1997 insurance premiums was received in the first quarter of 1998.
Since actual rents received was higher in the first three months ended March 31,
1999 than the same period in 1998, offset by the increase in expenses, cash
generated increased in 1999 as compared to 1998.
14
<PAGE>
Boeing at the Atrium/Fund II and Fund III Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $367,536 $367,536
-------- --------
Expenses:
Depreciation 214,105 216,930
Management & leasing expenses 44,774 44,488
Other operating expenses 196,170 158,431
-------- --------
455,049 419,849
-------- --------
Net (loss) $(87,513) $(52,313)
======== ========
Occupied % 100% 100%
Partnership's Ownership % 58.0% 58.0%
Cash distributions to the
Fund II-Fund II-OW Joint Venture* $ 89,632 $112,949
Net (loss) allocated to the
Fund II-Fund II-OW Joint Venture* $(53,646) $(32,067)
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income and occupancy remained the same for the three months ended March
31, 1999 and 1998. Expenses increased due to additional landscaping and HVAC
repairs in 1999 and a reimbursement of tenant improvements of approximately
$12,000 received from Boeing in 1998 that reduced expenses for that year. As a
result net loss increased and cash distributions to the Partnership decreased
for the period ended March 31, 1999.
15
<PAGE>
The Brookwood Grill /Fund II and Fund III Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $56,188 $56,338
Equity in income of joint venture 33,056 16,131
------- -------
89,244 72,469
------- -------
Expenses:
Depreciation 13,503 13,503
Management & leasing expenses 8,728 7,033
Other operating expenses 5,525 5,229
------- -------
27,756 25,765
------- -------
Net income $61,488 $46,704
======= =======
Occupied % 100% 100%
Partnership's Ownership % 59.0% 59.0%
Cash distributions to the
Fund II-Fund II-OW Joint Venture* $65,445 $57,651
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $38,338 $29,120
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income have increased for the three months ended March 31, 1999 as
compared to 1998, due primarily to the increase in equity in income of joint
venture, which is the result of increased occupancy at the Holcomb Bridge
Property for the full three months of 1999 compared to 1998. Expenses remained
relatively stable with a minor increase in leasing expense. As a result net
income and cash distributions to the partnership increased for the three months
ended March 31, 1999 as compared to the same period of 1998.
16
<PAGE>
Holcomb Bridge Road /Fund II, III, VI, VII Joint Venture
- --------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $230,063 $213,235
Expenses:
Depreciation 94,129 93,904
Management & leasing expenses 38,874 29,364
Other operating expenses 24,394 23,033
-------- --------
157,397 146,301
-------- --------
Net income $ 72,666 $ 66,934
======== ========
Occupied % 94.0% 94.1%
Partnership's Ownership % 14.2% 14.2%
Cash distributions to the
Fund II-Fund III Joint Venture* $ 35,418 $ 41,168
Net income allocated to the
Fund II-Fund III Joint Venture* $ 33,056 $ 16,131
</TABLE>
*The Partnership holds a 59.0% ownership in the Fund II-Fund III Joint Venture.
While occupancy remained the same at march 31, 1999 and March 31, 1998, rental
income, management and leasing fees and net income have increased as compared to
1998 due primarily to two tenants occupying space at the property late in the
first quarter of 1998.
17
<PAGE>
Heritage Place at Tucker Property/Fund I - Fund II Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $336,859 $300,361
Interest income 136 137
-------- --------
336,995 300,498
-------- --------
Expenses:
Depreciation 108,796 107,288
Management & leasing expenses 44,484 42,588
Other operating expenses 95,544 109,595
-------- --------
248,824 259,471
-------- --------
Net income $ 88,171 $ 41,027
======== ========
Occupied % 91% 83%
Partnership's Ownership % 42.5% 42.5%
Cash distributions to the
Fund II-Fund II-OW Joint Venture* $ 59,448 $ 44,564
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 39,598 $ 18,425
</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 83% to 91%. Management and leasing expenses increased over prior
year, due to increased occupancy and revenues. Other operating expenses
decreased, due primarily to a significant decrease in landscaping expenses.
18
<PAGE>
Cherokee Commons/Fund I, II, II-OW, VI & VII Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31, 1999 March 31, 1998
--------------- --------------
<S> <C> <C>
Revenues:
Rental income $227,383 $228,977
Interest income 20 22
-------- --------
227,403 228,999
-------- --------
Expenses:
Depreciation 110,112 110,563
Management & leasing expenses 26,135 25,751
Other operating expenses (30,556) 3,131
-------- --------
105,691 139,445
-------- --------
Net income $121,712 $ 89,554
======== ========
Occupied % 96% 91%
Partnership's Ownership % 51.7% 51.7%
Cash distributed to the
Fund II-Fund II-OW Joint Venture* $124,124 $102,700
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 66,407 $ 48,861
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income remained relatively stable in 1999 as compared to 1998. The
decrease in operating expenses in 1999, as compared to 1998, are due to
increased CAM billings to tenants that were under accrued in 1998.
19
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports on Form 8-K were filed during the first 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: May 11, 1999 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
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 36190
<SECURITIES> 21678264
<RECEIVABLES> 404242
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 22118695
<CURRENT-LIABILITIES> 415236
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21703459
<TOTAL-LIABILITY-AND-EQUITY> 22118695
<SALES> 0
<TOTAL-REVENUES> 63383
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
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