<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, 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)
Georgia 58-1678709
--------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) 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
----------------------
--------------------------------------------------------------------------------
(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
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets--June 30, 2000 and December 31, 1999 3
Statements of Income for the Three Months and Six Months
Ended June 30, 2000 and 1999 4
Statements of Partners' Capital for the Year
Ended December 31, 1999 and the Six Months
Ended June 30, 2000 5
Statements of Cash Flows for the Six Months
Ended June 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
-2-
<PAGE>
WELLS REAL ESTATE FUND II
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS:
Investment in joint venture (Note 2) $20,005,728 $20,666,589
Cash and cash equivalents 40,211 90,558
Due from affiliate 494,388 451,788
----------- -----------
Total assets $20,540,327 $21,208,935
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accounts payable $ 484 $ 3,385
Partnership distributions payable 500,119 483,167
----------- -----------
Total liabilities 500,603 486,552
----------- -----------
Partners' capital:
Limited partners:
Class A--108,572 units 20,039,724 20,722,383
Class B--30,221 units 0 0
----------- -----------
Total partners' capital 20,039,724 20,722,383
----------- -----------
Total liabilities and partners' capital $20,540,327 $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 Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Equity in income of joint venture (Note 2) $130,169 $71,997 $284,107 $135,324
Interest income 193 89 231 145
-------- ------- -------- --------
130,362 72,086 284,338 135,469
-------- ------- -------- --------
EXPENSES:
Partnership administration 0 0 0 0
-------- ------- -------- --------
NET INCOME $130,362 $72,086 $284,338 $135,469
======== ======= ======== ========
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $130,362 $72,086 $284,338 $135,469
======== ======= ======== ========
NET LOSS ALLOCATED TO CLASS B LIMITED PARTNERS $ 0.00 $ 0.00 $ 0.00 $ 0.00
======== ======= ======== ========
NET INCOME PER CLASS A LIMITED PARTNER UNIT $ 1.20 $ 0.66 $ 2.62 $ 1.25
======== ======= ======== ========
NET LOSS PER CLASS B LIMITED PARTNER UNIT $ 0.00 $ 0.00 $ 0.00 $ 0.00
======== ======= ======== ========
CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT $ 4.53 $ 3.43 $ 8.91 $ 7.15
======== ======= ======== ========
</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 SIX MONTHS ENDED JUNE 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 0 284,338 0 0 284,338
Partnership distributions 0 (966,997) 0 0 (966,997)
------- ----------- ------ -- -----------
BALANCE, June 30, 2000 108,572 $20,039,724 30,221 $0 $20,039,724
======= =========== ====== == ===========
</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, June 30,
2000 1999
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 284,338 $ 135,469
---------- ---------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Equity in income of joint venture (284,107) (135,324)
Changes in assets and liabilities:
Accounts payable (2,901) 1,034
---------- ---------
Total adjustments (287,008) (134,290)
---------- ---------
Net cash (used in) provided by operating activities (2,670) 1,179
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures 902,369 740,626
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (950,046) (733,168)
---------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (50,347) 8,637
CASH AND CASH EQUIVALENTS, beginning of year 90,558 27,011
---------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 40,211 $ 35,648
========== =========
</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 June 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 June 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
ventures; 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 June 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>
Following are the financial statements for Fund II-Fund II-OW:
FUND II-FUND II-OW
(A Georgia Joint Venture)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 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
$3,175,284 in 2000 and $2,991,452 in 1999 4,595,834 4,779,666
------------ -----------
Total real estate assets 5,963,690 6,147,522
------------ -----------
Investments in joint ventures 15,149,509 15,654,420
Cash and cash equivalents 119,422 162,241
Due from affiliates 402,135 312,901
Accounts receivable 0 2,149
Prepaid expenses and other assets 16,019 24,473
----------- -----------
Total assets $21,650,775 $22,303,706
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Partnership distributions payable $ 522,111 $ 477,122
----------- -----------
Partners' capital:
Wells Real Estate Fund II 20,005,728 20,666,589
Wells Real Estate Fund II-OW 1,122,936 1,159,995
----------- -----------
Total partners' capital 21,128,664 21,826,584
----------- -----------
Total liabilities and partners' capital $21,650,775 $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 Six Months Ended
----------------------- ----------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $211,018 $127,682 $422,036 $242,399
Equity in income of joint ventures 83,998 99,337 187,043 190,034
Interest income 46 (13) 184 92
-------- -------- -------- --------
295,062 227,006 609,263 432,525
-------- -------- -------- --------
EXPENSES:
Management and leasing fees 12,661 7,541 25,451 14,424
Lease acquisition costs 4,588 4,588 9,177 9,177
Operating costs--rental property 4,360 4,168 8,126 11,060
Depreciation 91,916 91,916 183,833 183,833
Legal and accounting 9,865 24,813 32,472 28,497
Computer costs 3,426 1,077 6,493 2,741
Partnership administration 30,777 16,869 43,672 39,881
-------- -------- -------- --------
157,593 150,972 309,224 289,613
-------- -------- -------- --------
NET INCOME $137,469 $ 76,034 $300,039 $142,912
======== ======== ======== ========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND II $130,169 $ 71,997 $284,107 $135,324
======== ======== ======== ========
NET INCOME ALLOCATED TO WELLS REAL ESTATE FUND II-OW $ 7,300 $ 4,037 $ 15,932 $ 7,588
======== ======== ======== ========
</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 June 30, 2000, the developed properties owned by the Fund II-Fund II-
OW Joint Venture were 97.4% occupied, as compared to 97.5% occupied as of
June 30, 1999.
Gross revenues of the Partnership increased to $284,338 for the six months
ended June 30, 2000 from $135,469 for the six months ended June 30, 1999
due to increased rental renewal rates at the Charlotte Property. Total
administrative expenses of the Partnership which are incurred at the joint
venture level increased slightly due to increased management and leasing
fees which are charges based on rental income. As a result, net income
increased to $284,338 as of June 30, 2000 as compared to $135,469 for the
same period of 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 June 30, 2000 and June 30, 1999 were $494,387 and $372,688,
respectively.
The Partnership made cash distributions to the Limited Partners holding
Class A Units for the second quarter of 2000 in the amount of $4.53 per
Unit as compared to $3.43 for the second 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 June 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 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 June 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 Six Months Ended
------------------- -------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $211,018 $127,682 $422,036 $242,399
-------- -------- -------- --------
Expenses:
Depreciation 91,916 91,916 183,833 183,833
Management and leasing expenses 17,250 12,129 34,629 23,601
Other operating expenses 4,315 4,180 7,942 10,968
-------- -------- -------- --------
113,481 108,225 226,404 218,402
-------- -------- -------- --------
Net income $ 97,537 $ 19,457 $195,632 $ 23,997
======== ======== ======== ========
Occupied percentage 100% 100% 100% 100%
======== ======== ======== ========
Partnership's ownership percentage 94.7% 94.7% 94.7% 94.7%
======== ======== ======== ========
Cash distributed to the Fund II-Fund II-OW Joint Venture* $194,043 $121,163 $388,643 $237,612
======== ======== ======== ========
Net income generated to the Fund II-Fund II-OW Joint Venture* $ 97,537 $ 19,457 $195,632 $ 23,997
======== ======== ======== ========
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint
Venture.
Rental income, net income, and cash distributions increased for the three
months and six months ended June 30, 2000, as compared to the same period
in 1999, due to an increased renewal rental rate beginning in May 1999.
Expenses increased as compared to the same periods in 1998 due primarily to
increased management and leasing fees which are charges based on rental
income.
-13-
<PAGE>
Boeing at the Atrium/Fund II and Fund III Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $366,176 $367,536 $ 733,712 $ 735,072
-------- -------- --------- ---------
Expenses:
Depreciation 218,290 219,755 435,220 433,860
Management and leasing expenses 48,478 44,869 93,538 89,643
Other operating expenses 168,391 117,325 318,573 313,495
-------- -------- --------- ---------
435,159 381,949 847,331 836,998
-------- -------- --------- ---------
Net loss $(68,983) $(14,413) $(113,619) $(101,926)
======== ======== ========= =========
Occupied percentage 100% 100% 100% 100%
======== ======== ========= =========
Partnership's ownership percentage 58% 58% 58% 58%
======== ======== ========= =========
Cash distributed to the Fund II-Fund II-OW Joint Venture* $100,775 $130,417 $ 187,755 $ 220,049
======== ======== ========= =========
Net loss allocated to the Fund II-Fund II-OW Joint Venture* $(42,292) $ (8,835) $ (69,648) $ (62,481)
======== ======== ========= =========
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income remained relatively stable for the three months and six months
ended June 30, 2000 as compared to the same period in 1999. Other operating
expense increased slightly due primarily to increased expenditures in
electricity, landscape repairs, and property tax accruals.
-14-
<PAGE>
The Brookwood Grill/Fund II and Fund III Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $56,238 $56,187 $112,425 $112,375
Equity in income of joint venture 16,415 21,813 33,318 39,304
------- ------- -------- --------
72,653 78,000 145,743 151,679
------- ------- -------- --------
Expenses:
Depreciation 13,503 13,503 27,006 27,006
Management and leasing expenses 5,327 7,955 12,031 16,683
Other operating expenses 1,233 805 11,325 6,330
------- ------- -------- --------
20,063 22,263 50,362 50,019
------- ------- -------- --------
Net income $52,590 $55,737 $ 95,381 $101,660
======= ======= ======== ========
Occupied percentage 100% 100% 100% 100%
======= ======= ======== ========
Partnership's ownership percentage 59% 59% 59% 59%
======= ======= ======== ========
Cash distributed to the Fund II-Fund II-OW Joint Venture* $63,820 $49,986 $121,530 $115,431
======= ======= ======== ========
Net income allocated to the Fund II-Fund II-OW Joint Venture* $32,790 $34,752 $ 59,470 $ 63,385
======= ======= ======== ========
</TABLE>
* The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Other operating expenses increased for the six months ended June 30, 2000 as
compared to the same period last year due to appraisal fees for this property
which is currently being marketed for sale.
-15-
<PAGE>
Holcomb Bridge Road/Fund II, III, VI, and VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $222,699 $227,761 $444,856 $457,824
-------- -------- -------- --------
Expenses:
Depreciation 104,130 94,128 208,260 188,257
Management and leasing expenses 26,480 42,063 57,066 80,937
Other operating expenses 23,890 387 41,108 24,781
-------- -------- -------- --------
154,500 136,578 306,434 293,975
-------- -------- -------- --------
Net income $ 68,199 $ 91,183 $138,422 $163,849
======== ======== ======== ========
Occupied percentage 100% 94% 100% 94%
======== ======== ======== ========
Partnership's ownership percentage 14.2% 14.2% 14.2% 14.2%
======== ======== ======== ========
Cash distributed to the Fund II-Fund III Joint Venture* $ 45,459 $ 46,181 $ 91,406 $ 81,600
======== ======== ======== ========
Net income allocated to the Fund II-Fund III Joint Venture* $ 16,415 $ 21,813 $ 33,318 $ 39,304
======== ======== ======== ========
</TABLE>
*The Partnership holds a 59.1% ownership in the Fund II-Fund III Joint Venture.
Rental income remained relatively stable for the three months ended June 30,
2000 as compared to the same period in 1999. Management and leasing fees
decreased in 2000, as compared to 1999, due to a catch-up of 1998 management
fees in 1999. Other operating expenses increased for the three month and six
month period, as compared to the same period last year, due to appraisal fees
for this property which is currently being marketed for sale and 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 contributions to the Fund II-Fund III Joint Venture were increased for six
month period 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.
-16-
<PAGE>
Heritage Place at Tucker Property/Fund I-Fund II Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $350,916 $343,044 $688,060 $679,903
Interest income 207 137 349 273
-------- -------- -------- --------
351,123 343,181 688,409 680,176
-------- -------- -------- --------
Expenses:
Depreciation 123,226 120,456 245,562 229,252
Management and leasing expenses 31,803 43,482 60,381 87,966
Other operating expenses 113,712 103,404 242,751 198,948
-------- -------- -------- --------
268,741 267,342 548,694 516,166
-------- -------- -------- --------
Net income $ 82,382 $ 75,839 $139,715 $164,010
======== ======== ======== ========
Occupied percentage 88% 91% 88% 91%
======== ======== ======== ========
Partnership's ownership percentage 42.5% 42.5% 42.5% 42.5%
======== ======== ======== ========
Cash distributed to the Fund II-Fund II-OW Joint Venture* $ 88,841 $ 31,293 $123,604 $ 90,742
======== ======== ======== ========
Net income allocated to the Fund II-Fund II-OW Joint Venture* $ 36,998 $ 34,059 $ 62,746 $ 73,657
======== ======== ======== ========
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income increased in 2000, as compared to 1999, even though there was a
decrease in the occupancy level of the property. This was due to existing
tenant renewals at a higher rate. Total expenses increased in 2000, as compared
to 1999, due primarily to increased depreciation expense on additional
capitalized tenant improvement, property taxes and repairs to the air condition
system. Management and leasing expenses decreased in 2000, as compared to 1999,
due to a decrease in leasing commissions and lease acquisition fees.
-17-
<PAGE>
Cherokee Property/Fund I, II, II-OW, VI, and VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $240,192 $237,232 $483,053 $464,615
Interest income 40 19 47 39
-------- -------- -------- --------
240,232 237,251 483,100 464,654
-------- -------- -------- --------
Expenses:
Depreciation 110,563 111,415 221,125 221,527
Management and leasing expenses 19,938 26,135 36,293 51,129
Other operating expenses 6,183 9,772 (20,785) (19,643)
-------- -------- -------- --------
136,684 147,322 236,633 253,013
-------- -------- -------- --------
Net income $103,548 $ 89,929 $246,467 $211,641
======== ======== ======== ========
Occupied percentage 97% 96% 97% 96%
======== ======== ======== ========
Partnership's ownership percentage 51.7% 51.7% 51.7% 51.7%
======== ======== ======== ========
Cash distributed to the Fund II-Fund II-OW Joint Venture* $118,700 $103,538 $259,064 $227,662
======== ======== ======== ========
Net income allocated to the Fund II-Fund II-OW Joint Venture* $ 56,497 $ 49,066 $134,475 $115,473
======== ======== ======== ========
</TABLE>
*The Partnership holds a 95% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income increased in 2000, as compared to 1999, due to increased occupancy
and 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 remain
negative for the six months ended June 30, 2000 and 1999 due to the billing of
common area maintenance to tenants. Tenants are billed an estimate amount for
the current year common area maintenance which is then reconciled in the
following year and the difference billed to the tenant.
-18-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 (b.) No reports on Form 8-K were filed during the second 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: August 11, 2000 By: /s/ Leo F. Wells, III
---------------------
Leo F. Wells, III, as Individual
General Partner, and as President
and Chief Financial Officer
of Wells Capital, Inc.,
the Corporate General Partner
-19-
