<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] Amendment No. 1 to Form 10-K
[_] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1996 or
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[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
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Commission file number 0-17876
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Wells Real Estate Fund II-OW
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(Exact name of registrant as specified in its charter)
Georgia 58-1754703
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3885 Holcomb Bridge Road Norcross, Georgia 30092
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
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Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12 (g) of the Act:
CLASS A UNITS
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(Title of Class)
CLASS B UNITS
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(Title of Class)
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
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Aggregate market value of the voting stock held by non-affiliates:
Not Applicable
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<PAGE>
The information contained in the Form 10-K of Wells Real Estate Fund
II-OW dated December 31, 1996 (File No. 0-17876) is hereby amended to (i)
include the financial statements for the Charlotte Property which are contained
on pages F-1 through F-9 of this Form 10-K/A and (ii) amend Item 14 of Part IV
of the Form 10-K to list the additional financial statements filed in this
Amendment.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K
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Paragraph (a)1. of Item 14 of Part IV of the Form 10-K of Wells Real
Estate Fund II-OW dated December 31, 1996, is hereby amended and restated as
follows:
"(a)1 Financial Statements
Information with respect to this item is contained on Pages F-2 to F-38
of the Annual Report on Form 10-K dated December 31, 1996. See Index to
Financial Statements on page F-1 of said Annual Report on Form 10-K.
Additional financial statements for the Charlotte Property are
submitted at the end of this Amendment on Pages F-1 through F-9 of this
Amendment to Form 10-K and are hereby incorporated herein by reference.
The following Financial Statements are filed as a part of this
Amendment:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-2
Balance Sheets for the Charlotte F-3
Property dated December 31, 1996
and 1995
Statements of Income for the Charlotte F-4
Property for the years ended
December 31, 1996, 1995 and 1994
Statements of Partners' Capital for F-5
the Charlotte Property for the
years ended December 31, 1996,
1995 and 1994
Statements of Cash Flow for the F-6
Charlotte Property for the years
ended December 31, 1996, 1995 and
1994
Notes to Financial Statements F-7"
</TABLE>
2
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SIGNATURES
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Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 12th day of September,
1997
Wells Real Estate Fund II-OW
(Registrant)
By: /s/ Leo F. Wells, III
--------------------------
Leo F. Wells, III
Individual General Partner and
as President of Wells Capital,
Inc., the Corporate General
Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant and in
the capacity as and on the date indicated.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C> <C>
/s/ Leo F. Wells, III Individual General Partner, September 12, 1997
- --------------------- President and Sole Director
Leo F. Wells, III of Wells Capital, Inc.,
the Corporate General Partner
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRARS WHICH HAVE NOT BEEN REGISTERED PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material relating to an annual or other meeting of
security holders has been sent to security holders.
3
<PAGE>
ARTHUR ANDERSEN LLP
The Charlotte Property
Financial Statements
as of December 31, 1996, 1995, and 1994
Together With
Auditors' Report
F-1
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Wells Real Estate Fund II
and Wells Real Estate Fund II-OW:
We have audited the accompanying balance sheets of THE CHARLOTTE PROPERTY as of
December 31, 1996 and 1995 and the related statements of income, partners'
capital, and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the property's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Charlotte Property as of
December 31, 1996 and 1995 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
Atlanta, Georgia /s/Arthur Andersen LLP
June 26, 1997
F-2
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THE CHARLOTTE PROPERTY
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
REAL ESTATE ASSETS:
Land $1,367,856 $1,367,856
Building and improvements, less accumulated depreciation of $1,888,451 in
1996 and $1,520,784 in 1995 5,882,667 6,250,334
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Total real estate assets 7,250,523 7,618,190
CASH AND CASH EQUIVALENTS 88,038 97,635
ACCOUNTS RECEIVABLE 114,560 95,202
PREPAID EXPENSES AND OTHER ASSETS 79,538 97,894
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Total assets $7,532,659 $7,908,921
========== ==========
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
LIABILITIES:
Payable to joint venture partners $ 107,463 $ 115,902
Due to affiliates 5,708 4,616
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Total liabilities 113,171 120,518
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COMMITMENTS AND CONTINGENCIES (Note 4)
PARTNERS' CAPITAL:
Wells Real Estate Fund II 7,040,352 7,390,416
Wells Real Estate Fund II-OW 379,136 397,987
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Total partners' capital 7,419,488 7,788,403
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Total liabilities and partners' capital $7,532,659 $7,908,921
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
THE CHARLOTTE PROPERTY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Rental income $ 460,920 $ 458,867 $ 305,911
--------- --------- ---------
EXPENSES:
Depreciation 367,667 235,794 194,278
Legal and accounting 6,750 169 13,587
Management and leasing fees 27,532 27,532 18,355
Lease acquisition costs 18,355 18,355 12,237
Operating costs 10,349 18,930 144,192
Computer costs 1,410 1,749 2,989
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432,063 302,529 385,638
--------- --------- ---------
NET INCOME (LOSS) $ 28,857 $ 156,338 $ (79,727)
========= ========= =========
NET INCOME (LOSS) ALLOCATED TO WELLS REAL ESTATE FUND II $ 27,383 $ 148,349 $ (75,653)
========= ========= =========
NET INCOME (LOSS) ALLOCATED TO WELLS REAL ESTATE FUND II-OW $ 1,474 $ 7,989 $ (4,074)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
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THE CHARLOTTE PROPERTY
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
Wells Real Wells Real Total
Estate Estate Partners'
Fund II Fund II-OW Capital
---------- ---------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1993 $7,775,250 $418,711 $8,193,961
Net loss (75,653) (4,074) (79,727)
Distributions (107,441) (5,786) (113,227)
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BALANCE, December 31, 1994 7,592,156 408,851 8,001,007
Net income 148,349 7,989 156,338
Distributions (350,089) (18,853) (368,942)
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BALANCE, December 31, 1995 7,390,416 397,987 7,788,403
Net income 27,383 1,474 28,857
Distributions (377,447) (20,325) (397,772)
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BALANCE, December 31, 1996 $7,040,352 $379,136 $7,419,488
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
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THE CHARLOTTE PROPERTY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ 28,857 $156,338 $ (79,727)
--------- -------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 367,667 235,794 194,278
Changes in assets and liabilities:
Accounts receivable (19,358) (63,604) (31,598)
Prepaid expenses and other assets 18,356 18,355 (116,248)
Accounts payable 0 (54,599) 54,599
Due to affiliates 1,092 2,770 1,846
--------- -------- -----------
Total adjustments 367,757 138,716 102,877
--------- -------- -----------
Net cash provided by operating activities 396,614 295,054 23,150
--------- -------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to joint venture partners (406,211) (366,265) (1,078,904)
--------- -------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (9,597) (71,211) (1,055,754)
CASH AND CASH EQUIVALENTS, beginning of year 97,635 168,846 (1,224,600)
--------- -------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 88,038 $ 97,635 $ 168,846
========= ======== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
THE CHARLOTTE PROPERTY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, AND 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Charlotte Property ("Charlotte") is a two-story office building
located in Charlotte, North Carolina. The property is owned by Fund II and
II-OW, a joint venture between Wells Real Estate Fund II ("Fund II") and
Wells Real Estate Fund II-OW ("Fund II-OW"). Fund II owns 95% of Fund II
and II-OW and Fund II-OW owns 5% of Fund II and II-OW at December 31,
1996, 1995, and 1994. Allocation of net income (loss) and distributions
are made in accordance with ownership percentages.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Income Taxes
Charlotte is not deemed to be a taxable entity for federal income tax
purposes.
Real Estate Assets
Real estate assets held by Charlotte are stated at cost, less accumulated
depreciation. Major improvements and betterments are capitalized when they
extend the useful life of the related asset. All repairs and maintenance
are expensed as incurred.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which was effective for fiscal years beginning after December 15,
1995. SFAS No. 121 establishes standards for determining when impairment
of long-lived assets have occurred and how impairment losses should be
measured. Charlotte adopted SFAS No. 121 effective January 1, 1995. The
impact of adopting SFAS No. 121 was not material to the financial
statements of Charlotte.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events
F-7
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or changes in circumstances are present which indicate that the carrying
amount of real estate assets may not be recoverable, management assesses
the recoverability of real estate assets under SFAS No. 121 by determining
whether the carrying value of such real estate assets will be recovered
through the future cash flows expected from the use of the asset and its
eventual disposition. Management has determined that there has been no
impairment in the carrying value of Charlotte's real estate assets as of
December 31, 1996.
Depreciation is calculated using the straight-line method over estimated
useful lives of the real estate assets. Effective October 1, 1995,
Charlotte revised its estimate of the useful lives of buildings and
improvements from 40 years to 25 years. This change was made to better
reflect the estimated periods during which such assets will remain in
service. The change had the effect of increasing depreciation expense
approximately $41,516 in the fourth quarter of 1995 and $173,389 in the
year ended December 31, 1996.
Revenue Recognition
The lease on Charlotte's real estate assets is classified as an operating
lease, and the related rental income is recognized on a straight-line
basis over the term of the lease.
Deferred Lease Acquisition Costs
Costs incurred to procure operating leases are capitalized and amortized
on a straight-line basis over the terms of the related leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, Charlotte considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents include cash and
short-term investments. Short-term investments are stated at cost, which
approximates fair value, and consist of investments in money market
accounts.
2. RENTAL INCOME
The future minimum rental income due Charlotte under noncancelable
operating leases at December 31, 1996 is as follows:
<TABLE>
Year ended December 31:
<S> <C>
1997 $ 477,984
1998 512,967
1999 174,875
----------
$1,165,826
==========
</TABLE>
One tenant at Charlotte contributed 100% of rental income for the year
ended December 31, 1996 and represents 100% of the future minimum rental
income above.
F-8
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3. RELATED-PARTY TRANSACTIONS
Charlotte entered into a property management agreement with Wells
Management Company, Inc. ("Wells Management"), an affiliate of Charlotte.
In consideration for supervising the management of Charlotte, Charlotte
will generally pay Wells Management management and leasing fees equal to
(a) 3% of the gross revenues for management and 3% of the gross revenues
for leasing (aggregate maximum of 6%) plus a separate fee for the one-time
initial lease-up of newly constructed properties in an amount not to
exceed the fee customarily charged in arm's-length transactions by others
rendering similar services in the same geographic area for similar
properties or (b) in the case of commercial properties which are leased on
a long-term net basis (ten or more years), 1% of the gross revenues except
for initial leasing fees equal to 3% of the gross revenues over the first
five years of the lease term.
Charlotte incurred management and leasing fees and lease acquisition costs
of $27,532, $27,532, and $18,355 for the years ended December 31, 1996,
1995, and 1994, respectively, which were paid to Wells Management.
4. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against Charlotte. In the normal course
of business, Charlotte may become subject to such litigation or claims.
F-9
