<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 September 30, 2000 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)
<TABLE>
<S> <C>
Georgia 58-1678709
-------------------------------------------------------------- ---------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
6200 The Corners Pkwy., Norcross, Georgia 30092
-------------------------------------------------------------- ---------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
---------------------------------------
</TABLE>
________________________________________________________________________________
(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
(A Georgia Public Limited Partnership)
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets--September 30, 2000 and December 31, 1999 3
Statements of Income for the Three Months and Nine Months Ended September 30, 2000 and
1999 4
Statements of Partners' Capital for the Nine Months Ended September 30, 2000 and for
the Year Ended December 31, 1999 5
Statements of Cash Flows for the Nine Months Ended September 30, 2000
and 1999 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
</TABLE>
-2-
<PAGE>
WELLS REAL ESTATE FUND II
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
ASSETS:
Investment in joint venture (Note 2) $19,635,898 $20,666,589
Cash and cash equivalents 46,899 90,558
Due from affiliate 472,123 451,788
----------- -----------
Total assets $20,154,920 $21,208,935
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accounts payable $ 2,710 $ 3,385
Partnership distributions payable 483,117 483,167
----------- -----------
Total liabilities 485,827 486,552
----------- -----------
Partners' capital:
Limited partners:
Class A--108,572 units 19,669,093 20,722,383
Class B--30,221 units 0 0
----------- -----------
Total partners' capital 19,669,093 20,722,383
----------- -----------
Total liabilities and partners' capital $20,154,920 $21,208,935
=========== ===========
</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 Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Equity in income of joint venture (Note 2) $102,293 $147,033 $386,400 $282,357
Interest income 2,061 182 2,282 327
-------- -------- -------- --------
104,354 147,215 388,682 282,684
-------- -------- -------- --------
EXPENSES:
Partnership Administration 0 0 0 0
-------- -------- -------- --------
NET INCOME $104,354 $147,215 $388,682 $282,684
======== ======== ======== ========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $104,354 $147,215 $388,682 $282,684
======== ======== ======== ========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ 0.00 $ 0.00 $ 0.00 $ 0.00
======== ======== ======== ========
NET INCOME PER CLASS A LIMITED PARTNER UNIT $ 0.96 $ 1.35 $ 3.58 $ 2.60
======== ======== ======== ========
NET LOSS PER CLASS B LIMITED PARTNER UNIT $ 0.00 $ 0.00 $ 0.00 $ 0.00
======== ======== ======== ========
CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT $ 4.37 $ 4.07 $ 13.28 $ 11.22
======== ======== ======== ========
</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, 1999
AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Limited Partners
--------------------------------------------------------
Class A Class B Total
-------------------------- ---------------------- Partners'
Units Amounts Units Amounts Capital
--------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 108,572 $22,044,258 30,221 $ 0 $22,044,258
Net income 0 371,178 0 0 371,178
Partnership distributions 0 (1,693,053) 0 0 (1,693,053)
------- ----------- ------ ---------- -----------
BALANCE, December 31, 1999 108,572 20,722,383 30,221 0 20,722,383
Net income 0 388,682 0 0 388,682
Partnership distributions 0 (1,441,972) 0 0 (1,441,972)
------- ----------- ------ ---------- -----------
BALANCE, September 30, 2000 108,572 $19,669,093 30,221 $ 0 $19,669,093
======= =========== ====== ========== ===========
</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>
Nine Months Ended
----------------------------------
September 30, September 30,
2000 1999
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 388,682 $ 282,684
----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in income of joint venture (386,400) (282,357)
Changes in assets and liabilities:
Accounts payable (675) 1,519
----------- -----------
Total adjustments (387,075) (280,838)
----------- -----------
Net cash provided by operating activities 1,607 1,846
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures 1,396,756 1,113,051
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (1,442,022) (1,096,148)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (43,659) 18,749
CASH AND CASH EQUIVALENTS, beginning of year 90,558 27,011
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 46,899 $ 45,760
=========== ===========
</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 ("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 September 30, 2000, 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, 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, 1999.
-7-
<PAGE>
(b) Basis of Presentation
The financial statements of the Partnership have been prepared in
accordance with instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These quarterly statements
have not been examined by independent 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 September 30, 2000
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
the 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 September 30, 2000, 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 the joint venture is
recorded using the equity method.
-8-
<PAGE>
FUND II-FUND II-OW
(A Georgia Joint Venture)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS:
Real estate, at cost:
Land $ 1,367,856 $ 1,367,856
Building and improvements, less accumulated depreciation of
$3,267,202 in 2000 and $2,991,452 in 1999 4,503,917 4,779,666
----------- -----------
Total real estate assets 5,871,773 6,147,522
----------- -----------
Investments in joint ventures 14,855,445 15,654,420
Cash and cash equivalents 153,867 162,241
Due from affiliates 344,540 312,901
Accounts receivable 0 2,149
Prepaid expenses and other assets 11,068 24,473
----------- -----------
Total assets $21,236,693 $22,303,706
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Partnership distributions payable $ 498,599 $ 477,122
----------- -----------
Partners' capital:
Wells Real Estate Fund II 19,635,898 20,666,589
Wells Real Estate Fund II-OW 1,102,196 1,159,995
----------- -----------
Total partners' capital 20,738,094 21,826,584
----------- -----------
Total liabilities and partners' capital $21,236,693 $22,303,706
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
-9-
<PAGE>
FUND II-FUND II-OW
(A Georgia Joint Venture)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $211,018 $264,259 $633,054 $506,658
Equity in income of joint ventures 20,475 27,064 207,518 217,098
Interest income 6,922 155 7,106 247
------------- ------------- ------------- -------------
238,415 291,478 847,678 724,003
------------- ------------- ------------- -------------
EXPENSES:
Management and leasing fees 12,661 15,855 38,112 30,279
Lease acquisition costs 4,589 4,589 13,766 13,766
Operating costs--rental property 3,054 4,756 11,180 15,816
Depreciation 91,917 91,917 275,750 275,750
Legal and accounting 5,513 (650) 37,985 27,847
Computer costs 2,354 2,661 8,847 5,402
Partnership administration 10,298 17,071 53,970 56,952
------------- ------------- ------------- -------------
130,386 136,199 439,610 425,812
------------- ------------- ------------- -------------
NET INCOME $108,029 $155,279 $408,068 $298,191
============= ============= ============= =============
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND II $102,293 $147,033 $386,400 $282,357
============= ============= ============= =============
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND II-OW
$ 5,736 $ 8,246 $ 21,668 $ 15,834
============= ============= ============= =============
</TABLE>
See accompanying condensed notes to financial statements.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS 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 Section 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 this 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.
1. RESULTS OF OPERATIONS AND CHANGES IN FINANCIAL CONDITIONS
General
As of September 30, 2000, the developed properties owned by the Fund II-
Fund II-OW Joint Venture were 97.1% occupied, as compared to 97.5% occupied
as of September 30, 1999.
Gross revenues of the Partnership increased to $388,692 for the nine months
ended September 30, 2000 from $282,684 for the nine months ended September
30, 1999 due to increased rental renewal rates at the Charlotte Property
but decreased for the three months ended September 30, 2000, as compared to
the same period in 1999, due to a catch up of May and June increased
Charlotte rentals in July 1999. Total administrative expenses of the
Partnership which are incurred at the joint venture level increased
slightly for the nine month period ended September 30, 2000 due to
increased management and leasing fees which are charges based on rental
income. As a result, net income increased to $388,682 for the nine months
ended September 30, 2000 as compared to $282,684 for the same period during
1999.
The Partnership's net cash provided by investing activities and net cash
used in financing activities increased in 2000, compared to 1999, due to
increases in distributions from joint ventures as net income increased at
the Charlotte property.
Fund II-Fund II-OW Joint Venture distributions accrued to the Partnership
as of September 30, 2000 and 1999 were $472,123 and $494,582, respectively.
The Partnership made cash distributions to the Limited Partners holding
Class A units for the third quarter of 2000 in the amount of $4.37 per unit
as compared to $4.07 for the third quarter of 1999. No cash distributions
were made by the Partnership to the Limited Partners holding Class B units
or to the General Partner.
As of September 30, 2000, 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 budget demands through cash flow
from operations.
-11-
<PAGE>
At this time, four properties are being marketed for sale. CB Richard Ellis
is marketing the sale of 880 Holcomb Bridge, Brookwood Grill, and Cherokee
Commons. The marketing piece is being broadly distributed to investors
throughout the country. The Heritage Place at Tucker property is being
marketed by The First Fidelity Companies. To maximize the disposition
value, the management team is separating the retail and creating a
condominium for the office buildings. The legal and site work should be
complete so that the management team can market this property to investors
in early fall. The Partnership's goal is to have all these properties sold
by the end of 2002. As the properties are sold, all proceeds will be
returned to the Limited Partners in accordance with the Partnership's
prospectus. Management estimates that the fair market value of each of the
properties exceeds the carrying value of the corresponding real estate
assets; consequently, no impairment loss has been recorded. In the event
that the net sales proceeds are less than the carrying value of the
property sold, the Partnership would recognize a loss on the sale.
Management is not contractually or financially obligated to sell any of its
properties, and it is management's current intent to fully realize the
Partnership's investment in real estate. The success of the Partnership's
future operations and the ability to realize investment in its assets will
be dependent on the Partnership's ability to maintain rental rates,
occupancy, and an appropriate level of operating expenses in future years.
Management believes that the steps that it is taking will enable the
Partnership to realize its investment in its assets.
-12-
<PAGE>
2. PROPERTY OPERATIONS
As of September 30, 2000, the Partnership owned interests in the following
properties through the Fund II-Fund II-OW Joint Venture:
First Union at Charlotte/Fund II-Fund II-OW Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $211,018 $264,259 $633,054 $506,658
------------- ------------- ------------- -------------
Expenses:
Depreciation 91,917 91,917 275,750 275,750
Management and leasing expenses 17,249 20,444 51,878 44,045
Other operating expenses 2,932 4,601 10,874 15,569
------------- ------------- ------------- -------------
112,098 116,962 338,502 335,364
------------- ------------- ------------- -------------
Net income $ 98,920 $147,297 $294,552 $171,294
============= ============= ============= =============
Occupied percentage 100% 100% 100% 100%
============= ============= ============= =============
Partnership's ownership percentage 94.7% 94.7% 94.7% 94.7%
============= ============= ============= =============
Cash generated to the
Fund II-Fund II-OW Joint Venture* $195,426 $243,802 $584,069 $481,414
============= ============= ============= =============
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 98,920 $147,297 $294,552 $171,294
============= ============= ============= =============
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint
Venture.
Rental income, net income, and cash generated to the Fund II-Fund II-OW
Joint Venture increased for the nine months ended September 30, 2000, as
compared to the same period in 1999, due to a renewed, increased rent
beginning in May 1999, but decreased for the three month period due to a
catch up of May and June increased rentals in July 1999. Other operating
expenses for the three months and nine months ended September 30, 2000
decreased as compared to the same periods in 1999 due primarily to
decreased accounting fees.
-13-
<PAGE>
Boeing at the Atrium/Fund II-Fund III Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- -----------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 367,536 $367,536 $1,101,248 $1,102,608
--------------- --------------- --------------- ---------------
Expenses:
Depreciation 221,010 216,930 656,230 650,790
Management and leasing expenses 45,748 45,060 139,286 134,703
Other operating expenses 226,070 185,397 544,643 498,892
--------------- --------------- --------------- ---------------
492,828 447,387 1,340,159 1,284,385
--------------- --------------- --------------- ---------------
Net loss $(125,292) $(79,851) $ (238,911) $ (181,777)
=============== =============== =============== ===============
Occupied percentage 100% 100% 100% 100%
=============== =============== =============== ===============
Partnership's ownership percentage 58% 58% 58% 58%
=============== =============== =============== ===============
Cash distribution to the Fund II-Fund
II-OW Joint Venture* $ 75,001 $130,572 $ 262,756 $ 323,621
=============== =============== =============== ===============
Net loss allocated to the Fund II-Fund
II-OW Joint Venture* $ (76,805) $(48,948) $ (146,453) $ (111,429)
=============== =============== =============== ===============
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint
Venture.
Rental income remained stable for the three months and nine months ended
September 30, 2000, as compared to the same periods in 1999. Net income and
cash distributions have decreased for the three month and nine month
periods, as compared to the same periods in 1999, due primarily to
increased expenditures in electricity, HVAC repairs, plumbing repairs, and
glass maintenance in the building.
-14-
<PAGE>
The Brookwood Grill/Fund II-Fund III Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 56,188 $56,188 $168,613 $168,563
Equity in income of joint venture 12,668 23,307 45,986 62,611
------------- ------------- ------------- -------------
68,856 79,495 214,599 231,174
------------- ------------- ------------- -------------
Expenses:
Depreciation 13,503 13,503 40,509 40,509
Management and leasing expenses 6,878 6,704 18,909 23,387
Other operating expenses (11,256) 2,467 69 8,797
------------- ------------- ------------- -------------
9,125 22,674 59,487 72,693
------------- ------------- ------------- -------------
Net income $ 59,731 $56,821 $155,112 $158,481
============= ============= ============= =============
Occupied percentage 100% 100% 100% 100%
============= ============= ============= =============
Partnership's ownership percentage 59% 59% 59% 59%
============= ============= ============= =============
Cash distribution to the
Fund II-Fund II-OW Joint Venture* $ 68,167 $59,606 $189,697 $175,037
============= ============= ============= =============
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 37,242 $35,428 $ 96,712 $ 98,813
============= ============= ============= =============
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint
Venture.
Although rental income remained stable, total revenues decreased for the
three months and nine months ended September 30, 2000, as compared to the
same periods in 1999, due to decreased equity in income from the Fund II,
III, VI, and VIII Joint Venture, as the Holcomb Bridge Road property
decreased its occupancy rate during the third quarter of this year.
Other operating expenses decreased for the three months and nine months
ended September 30, 2000, as compared to the same periods in 1999, due to
2000 property tax reimbursement being charged to the tenant in the third
quarter of 2000 instead of being charged in the fourth quarter in 1999.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
-15-
<PAGE>
Holcomb Bridge Road/Fund II, III, VI, VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $214,051 $213,028 $658,907 $670,852
------------- ------------- ------------- -------------
Expenses:
Depreciation 104,129 79,605 312,389 277,862
Management and leasing expenses 28,099 22,263 85,165 93,200
Other operating expenses 29,194 14,889 70,302 39,670
------------- ------------- ------------- -------------
161,422 116,757 467,856 410,732
------------- ------------- ------------- -------------
Net income $ 52,629 $ 96,271 $191,051 $260,120
============= ============= ============= =============
Occupied percentage 92% 94% 92% 94%
============= ============= ============= =============
Partnership's ownership percentage 14.2% 14.2% 14.2% 14.2%
============= ============= ============= =============
Cash distribution to the Fund II-Fund III
Joint Venture* $ 41,546 $ 41,093 $132,952 $122,693
============= ============= ============= =============
Net income allocated to the Fund II-Fund
III Joint Venture* $ 12,668 $ 23,307 $ 45,986 $ 62,611
============= ============= ============= =============
</TABLE>
*The Partnership holds a 59.1% ownership in the Fund II-Fund III Joint
Venture.
Rental income decreased for the nine months ended September 30, 2000, as
compared to the same period in 1999, due to decreased occupancy. Other
operating expenses increased for the three month and nine month periods
ended September 30, 2000, as compared to the same periods in 1999, due to
appraisal fees for this property which is currently being marketed for sale
and a decrease in common area maintenance reimbursements from tenants.
Monthly common area maintenance billings were increased in 1999 to offset
1998 underpayment. Tenants are billed an estimated amount for the current
year common area maintenance which is then reconciled the following year
and the difference billed to the tenant.
Cash distributions to the Partnership increased for the three months and
nine months ended September 30, 2000, as compared to the same period in
1999, even though there is a decrease in net income this year due to lease
acquisition fees and procurement fees paid in 1999.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
-16-
<PAGE>
Heritage Place at Tucker Property/Fund I-Fund II Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $341,100 $351,124 $1,029,160 $1,031,027
Interest income 187 53 536 326
------------- ------------- ------------- -------------
341,287 351,177 1,029,696 1,031,353
------------- ------------- ------------- -------------
Expenses:
Depreciation 123,119 127,287 368,681 356,539
Management and leasing expenses 32,737 36,741 93,118 124,707
Other operating expenses 122,566 165,238 365,317 364,186
------------- ------------- ------------- -------------
278,422 329,266 827,116 845,432
------------- ------------- ------------- -------------
Net income $ 62,865 $ 21,911 $ 202,580 $ 185,921
============= ============= ============= =============
Occupied percentage 88% 88% 88% 88%
============= ============= ============= =============
Partnership's ownership percentage 42.5% 42.5% 42.5% 42.5%
============= ============= ============= =============
Cash distributed to the Fund II-Fund II-OW
Joint Venture* $ 82,244 $ 39,495 $ 205,848 $ 130,236
============= ============= ============= =============
Net income generated to the Fund II-Fund
II-OW Joint Venture* $ 28,233 $ 9,840 $ 90,979 $ 83,497
============= ============= ============= =============
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint
Venture.
Rental income remained relatively stable in 2000, as compared to 1999.
Total expenses decreased in 2000, as compared to 1999, due to a decrease in
management and leasing expenses in 2000. The decrease in management and
leasing expenses was due to a decrease in leasing commissions and lease
acquisition fees. As a result, net income increased for the three months
and nine months ended September 30, 2000 as compared to the same periods in
1999.
The property is currently being marketed for sale by The First Fidelity
Companies. To maximize the disposition value, the management team is
separating the retail and creating a condominium for the office buildings.
The legal and site work should be complete so that the management team can
market this property to investors in early fall. The Partnership's goal is
to have this property sold by the end of 2002.
-17-
<PAGE>
Cherokee Commons/Fund I, II, II-OW, VI, VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $249,102 $238,923 $713,717 $703,538
Interest income 32 8 71 47
------------- ------------- ------------- -------------
249,134 238,931 713,788 703,585
------------- ------------- ------------- -------------
Expenses:
Depreciation 110,562 111,379 331,687 332,906
Management and leasing expenses 10,360 22,863 46,653 73,992
Other operating expenses 51,473 48,342 30,688 28,699
------------- ------------- ------------- -------------
172,395 182,584 409,028 435,597
------------- ------------- ------------- -------------
Net income $ 76,739 $ 56,347 $304,760 $267,988
============= ============= ============= =============
Occupied percentage 97% 97% 97% 97%
============= ============= ============= =============
Partnership's ownership percentage 51.7% 51.7% 51.7% 51.7%
============= ============= ============= =============
Cash distribution to the Fund II-Fund
II-OW Joint Venture* $ 89,127 $ 94,923 $348,191 $322,585
============= ============= ============= =============
Net income generated to the Fund II-Fund
II-OW Joint Venture* $ 31,805 $ 30,743 $166,280 $146,217
============= ============= ============= =============
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint
Venture.
Rental income increased for the three months and nine months ended
September 30, 2000, as compared to the same periods in 1999, due to
increased rental renewal rates. Management and leasing expenses decreased
in 2000, as compared to 1999, due to increased leasing commissions for 1999
and a catch-up of 1998 management fees in 1999. Other operating expenses
remained relatively stable for the nine months ended September 30, 2000, as
compared to the same period in 1999. Net income increased for the three
months and the nine months ended September 30, 2000, as compared to the
same periods in 1999, due to the lower management and leasing expenses.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
-18-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 (b.) No reports on Form 8-K were filed during the third quarter of 2000.
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: November 10, 2000 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
-19-
