<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999 or
-------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------ --------------
Commission file number 0-16518
-------
Wells Real Estate Fund II-OW
------------------------------------------------------
(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-OW
----------------------------
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1999
and December 31, 1998............................... 3
Statements of Income for the Three Months and
Six Months Ended June 30, 1999 and 1998............. 4
Statements of Partners' Capital for the Year
Ended December 31, 1998 and the Six Months
Ended June 30, 1999................................. 5
Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998........................ 6
Condensed Notes to Financial Statements.............. 7
Item 2. Management's Discussion and Analysis of Financial
Financial Condition and Results of Operations........ 11
PART II. OTHER INFORMATION........................................... 20
2
<PAGE>
WELLS REAL ESTATE FUND II-OW
(A Georgia Public Limited Partnership)
BALANCE SHEETS
Assets June 30, 1999 December 31, 1998
------ ------------- -----------------
Investment in joint venture (Note 2) $1,199,865 $1,235,838
Cash and cash equivalents 1,387 669
Due from affiliate 20,900 18,870
---------- ----------
Total assets $1,222,152 $1,255,377
========== ==========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 1,022 $ 164
Partnership distributions payable 20,864 18,974
---------- ----------
Total liabilities 21,886 19,138
---------- ----------
Partners' Capital:
Limited Partners:
Class A - 6,062 units 1,200,266 1,236,239
Class B - 1,626 units 0 0
---------- ----------
Total partners' capital 1,200,266 1,236,239
---------- ----------
Total liabilities and partners' capital $1,222,152 $1,255,377
========== ==========
See accompanying condensed notes to financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND II-OW
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- ----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Equity in income of joint
ventures (Note 2) $4,037 $2,737 $7,588 $5,248
------ ------ ------ ------
Expenses:
Partnership administration 0 0 0 0
------ ------ ------ ------
Net income $4,037 $2,737 $7,588 $5,248
====== ====== ====== ======
Net income allocated to
Class A Limited Partners $4,037 $2,737 $7,588 $5,248
Net loss allocated to Class
B Limited Partners $ 0.00 $ 0.00 $ 0.00 $ 0.00
Net income per Class A
Limited Partner Unit $ 0.67 $ 0.46 $ 1.25 $ 0.87
Net loss per Class B Limited
Partner Unit $ 0.00 $ 0.00 $ 0.00 $ 0.00
Cash distribution per Class A
Limited Partner Unit $ 3.45 $ 3.73 $ 7.19 $ 7.27
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND II-OW
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1998 AND SIX MONTHS ENDED
JUNE 30, 1999
<TABLE>
<CAPTION>
Limited Partners
-----------------------------------
Class A Class B Total
------------------- -------------- Partners'
Units Amounts Units Amounts Capital
----- ----------- ----- ------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 6,062 $1,315,655 1,626 $0 $1,315,655
Net income 0 5,190 0 0 5,190
Partnership distributions 0 (84,606) 0 0 (84,606)
----- ---------- ----- -- ----------
BALANCE, December 31, 1998 6,062 1,236,239 1,626 0 1,236,239
Net income 0 7,589 0 0 7,589
Partnership distributions 0 (43,562) 0 0 (43,562)
----- ---------- ----- -- ----------
BALANCE, June 30, 1999 6,062 $1,200,266 1,626 $0 $1,200,266
===== ========== ===== == ==========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND II-OW
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,589 $ 5,248
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in (income) of joint ventures (7,589) (5,248)
Changes in assets and liabilities:
Accounts payable 858 (72)
-------- --------
Total adjustments (6,731) (5,320)
-------- --------
Net cash provided by (used in)
operating activities 858 (72)
-------- --------
Cash flow from investing activities:
Distributions received from joint venture 41,532 39,590
-------- --------
41,532 39,590
Cash flow from financing activities:
Distributions to partners (41,672) (39,591)
-------- --------
Net increase (decrease) in cash and cash equivalents 718 (73)
Cash and cash equivalents, beginning of year 669 741
-------- --------
Cash and cash equivalents, end of period $ 1,387 $ 668
======== ========
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND II-OW
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
------------
Wells Real Estate Fund II-OW(the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Capital, Inc., as
General Partners. The Partnership was formed on October 23, 1987, for the
purpose of acquiring, developing, constructing, owning, operating,
improving, leasing and otherwise managing for investment purposes income-
producing commercial or industrial properties.
On November 6, 1987, 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 $1,922,000
representing subscriptions from 219 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 (the
"Fund II-Fund II-OW Joint Venture"); (ii) Fund II-Fund III Joint Venture, a
joint venture between the Fund II-Fund II-OW Joint Venture and Wells Real
Estate Fund III, L.P. ("Fund II-Fund III Joint Venture"); (iii) Fund II-
III-VI-VII Associates, a joint venture between the Fund II-Fund III Joint
Venture, Wells Real Estate Fund VI, L.P., and Wells Real Estate Fund VII,
L.P. ("Fund II, III, VI, VII Joint Venture"); (iv) Fund I-Fund II Joint
Venture, a joint venture between the Fund II-Fund II-OW Joint Venture and
Wells Real Estate Fund I ("the Tucker Joint Venture"); and (v) Fund I, II,
II-OW, VI, VII Associates, a joint venture between Wells Real Estate Fund
I, the Fund II-Fund II-OW Joint Venture, Wells Real Estate Fund VI, L.P.,
and Wells Real Estate Fund VII, L.P. ("Fund I, II, II-OW, VI, VII Joint
Venture"). Please refer to the Partnership's Form 10-K for the year ended
December 31, 1998 for additional information on the joint ventures and
properties in which the Partnership owns an interest.
As of June 30, 1999, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a
two-story office building located in Charlotte, North Carolina ("First
Union at Charlotte"); (ii) a four-story office building located in
metropolitan Houston, Texas (the "Atrium"); (iii) a restaurant located in
Fulton County, Georgia ("the Brookwood Grill"); (iv) an office/retail
center developed in Fulton
7
<PAGE>
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, 1998.
(b) Basis of Presentation
--------------------------
The financial statements of Wells Real Estate Fund II-OW (the
"Partnership") have been prepared in accordance with instructions to Form
10-Q and do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
These quarterly statements have not been examined by independent
accountants, but in the opinion of the General Partners, the statements for
the unaudited interim periods presented include all adjustments, which are
of a normal and recurring nature, necessary to present a fair presentation
of the results for such periods. For further information, refer to the
financial statements and footnotes included in the Partnership's Form 10-K
for the year ended December 31, 1998.
(2) Investment in Joint Ventures
----------------------------
The Partnership owned interests in six properties as of June 30, 1999. The
Partnership does not have control over the operations of the joint
ventures; however, it does exercise significant influence. Accordingly,
investment in joint ventures is recorded on the equity method.
Fund II-Fund II-OW Joint Venture
--------------------------------
The Partnership owns all of its properties through a joint venture (the
"Fund II-Fund II-OW Joint Venture") formed on March 1, 1988, between the
Partnership and Wells Real Estate Fund II ("Wells Fund II). Wells Fund II
is a Georgia public limited partnership affiliated with the Partnership
through common general partners. The investment objectives of Wells Fund
II are substantially identical to those of the Partnership. As of June 30,
1999, the Partnership's equity interest in Wells Fund II-Fund II-OW Joint
Venture was approximately 5%, and the equity interest of Wells Fund II was
approximately 95%.
8
<PAGE>
Following are the financial statements for Fund II and II-OW:
FUND II and II-OW
(A Georgia Joint Venture)
BALANCE SHEETS
Assets June 30, 1999 December 31, 1998
------ ------------- -----------------
Real estate, at cost:
Land $ 1,367,856 $ 1,367,856
Building and improvements, less
accumulated depreciation of $2,807,617
in 1999 and $2,623,785 in 1998 4,963,500 5,147,333
----------- -----------
Total real estate assets 6,331,356 6,515,189
----------- -----------
Investment in joint ventures 16,212,262 16,676,111
Cash and cash equivalents 76,315 94,367
Due from affiliates 316,642 267,581
Accounts receivable 1,265 23,184
Prepaid expenses and other assets 33,186 42,828
----------- -----------
Total assets $22,971,026 $23,619,260
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Partnership distributions payable $ 393,588 $ 355,370
Due to affiliates 0 8,988
----------- -----------
Total liabilities 393,588 364,358
----------- -----------
Partners' capital:
Wells Real Estate Fund II 21,377,573 22,019,064
Wells Real Estate Fund II-OW 1,199,865 1,235,838
----------- -----------
Total partners' capital 22,577,438 23,254,902
----------- -----------
Total liabilities and
partners' capital $22,971,026 $23,619,260
=========== ===========
See accompanying condensed notes to financial statements.
9
<PAGE>
FUND II and II-OW
(A Georgia Joint Venture)
STATEMENTS OF (LOSS) INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $127,682 $114,717 $242,399 $229,434
Equity in income of joint
ventures 99,337 84,001 190,034 148,340
Interest income (13) 114 92 244
-------- -------- -------- --------
227,006 198,832 432,525 378,018
-------- -------- -------- --------
Expenses:
Management and leasing fees 7,541 6,883 14,424 13,766
Lease acquisition costs 4,588 4,588 9,177 9,177
Operating costs-rental property 4,168 2,972 11,060 6,826
Depreciation 91,916 91,916 183,833 183,833
Legal and accounting 24,813 21,574 28,497 33,595
Computer costs 1,077 1,309 2,741 3,384
Partnership administration 16,869 18,032 39,881 28,602
-------- -------- -------- --------
150,972 147,274 289,613 279,183
-------- -------- -------- --------
Net income $ 76,034 $ 51,558 $142,912 $ 98,835
======== ======== ======== ========
Net income allocated to
Wells Real Estate Fund II $ 71,997 $ 48,821 $135,324 $ 93,587
Net income allocated to Wells
Real Estate Fund II-OW $ 4,037 $ 2,737 $ 7,588 $ 5,248
</TABLE>
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -----------------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
The following discussion and analysis should be read in conjunction with the
accompanying financial statements of the Partnership and notes thereto. This
Report contains forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934,
including discussion and analysis of the financial condition of the Partnership,
anticipated capital expenditures required to complete certain projects, amounts
of cash distributions anticipated to be distributed to Limited Partners in the
future and certain other matters. Readers of this Report should be aware that
there are various factors that could cause actual results to differ materially
from any forward-looking statement made in the Report, which include
construction costs which may exceed estimates, construction delays, lease-up
risks, inability to obtain new tenants upon the expiration of existing leases,
and the potential need to fund tenant improvements or other capital expenditures
out of operating cash flow.
Results of Operations and Changes in Financial Conditions
- ---------------------------------------------------------
General
- -------
As of June 30, 1999, the developed properties owned by the Fund II-Fund II-OW
Joint Venture were 97.5% occupied, as compared to 95% occupied as of June 30,
1998.
The increase in gross revenues of the Partnership to $7,588 for the six months
ended June 30, 1999, as compared to $5,248 for the six months ended June 30,
1998 , is due to the increase occupancy of Cherokee Commons and Heritage Place.
Total administrative expenses of the Partnership which are incurred at the joint
venture level, remained relatively stable for the six months ended June 30,
1999, compared to the same period of 1998. The Partnership's cash flow from
investing activities and cash flow from financing activities increased in 1999,
compared to 1998, due to the increase in distributions from joint ventures as
occupancies 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 six month periods ended June 30, 1999 and June 30, 1998 were $20,900 and
$22,621, respectively.
The Partnership made cash distributions in the amount of $3.45 per Unit to the
Limited Partners holding Class A Units for the second quarter of 1999. No cash
distributions were made by the Partnership to the Limited Partners holding Class
B Units.
11
<PAGE>
As of June 30, 1999, the Fund II-Fund II-OW Joint Venture had used all of the
remaining funds available for investment in properties.
The Partnership is unaware of any known demands, commitments, events or capital
expenditures other than that which is required form 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 demands through cash flow from operations.
Year 2000
- ---------
The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A full
assessment of Year 2000 compliance issues was begun in late 1997 and was
completed by March 31, 1999. Renovations and replacements of equipment have been
and are being made as warranted as the assessment progresses. The costs incurred
by the Partnership and its affiliates thus far for renovations and replacements
have been immaterial. All testing of systems has been completed as of June 30,
1999.
As to the status of the Partnership's information technology systems, it is
presently believed that all major systems and software packages are Year 2000
compliant. At the present time, it is believed that all major non-information
technology systems are Year 2000 compliant. The cost to upgrade any non-
compliant systems is believed to be immaterial.
The Partnership has confirmed with the Partnership's vendors, including third-
party service providers such as banks, that their systems are Year 2000
compliant.
The Partnership relies on computers and operating systems provided by equipment
manufacturers, and also on application software designed for use with its
accounting, property management and investment portfolio tracking. The
Partnership has preliminarily determined that any costs, problems or
uncertainties associated with the potential consequences of Year 2000 issues are
not expected to have a material impact on the future operations or financial
condition of the Partnership. The Partnership will perform due diligence as to
the Year 2000 readiness of each property owned by the Partnership and each
property contemplated for purchase by the Partnership.
The Partnership's reliance on embedded computer systems (i.e., microcontrollers)
is limited to facilities related matters, such as office security systems and
environmental control systems.
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
12
<PAGE>
that the computer and phone systems are rendered inoperable. An off-site
facility from which the Partnership could operate is being sought as well as
alternate means of communication with key third-party vendors. A written plan is
being developed for testing and dispensation to each staff member of the General
Partner of the Partnership.
Management believes that the Partnership's risk of Year 2000 problems is
minimal. In the unlikely event there is a problem, the worst case scenarios
would include the risks that the elevator or security systems within the
Partnership's properties would fail or the key third-party vendors upon which
the Partnership relies would be unable to provide accurate investor information.
In the event that the elevator shuts down, the Partnership has devised a plan
for each building whereby the tenants will use the stairs until the elevators
are fixed. In the event that the security system shuts down, the Partnership has
devised a plan for each building to hire temporary on-site security guards. In
the event that a third-party vendor has Year 2000 problems relating to investor
information, the Partnership intends to perform a full system back-up of all
investor information as of December 31, 1999 so that the Partnership will have
accurate hard-copy investor information.
13
<PAGE>
Property Operations
- -------------------
As of June 30, 1999, the Partnership owned interests in the following properties
through the Fund II-Fund II-OW Joint Venture:
First Union at Charlotte/Fund II and II-OW Joint Venture
- --------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $127,682 $114,717 $242,399 $229,434
-------- -------- -------- --------
Expenses:
Depreciation 91,916 91,916 183,833 183,833
Management & leasing expenses 12,129 11,472 23,601 22,944
Other operating expenses 4,180 2,954 10,968 6,678
-------- -------- -------- --------
108,225 106,342 218,402 213,455
-------- -------- -------- --------
Net income $ 19,457 $ 8,375 $ 23,997 $ 15,979
======== ======== ======== ========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 5.3% 5.3% 5.3% 5.3%
Cash generated to the Fund II-
Fund II-OW Joint Venture* $121,163 $117,594 $237,612 $228,938
Net income generated to the Fund II-
Fund II-OW JointVenture* $ 19,457 $ 8,375 $ 23,997 $ 15,979
</TABLE>
* The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Property operations remained stable for the three and six months ended June
30, 1999 and 1998. Rental income has increased for the three months ended
June 30, 1999, as compared to the same period in 1998, due primarily to an
underestimate of straight line rent adjustments in 1998.
14
<PAGE>
Boeing at the Atrium/Fund II and Fund III Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $367,536 $367,536 $ 735,072 $ 735,072
Interest income 0 13,280 0 13,280
-------- -------- --------- ---------
367,536 380,816 735,072 748,352
-------- -------- --------- ---------
Expenses:
Depreciation 219,755 216,930 433,860 433,860
Management & leasing expenses 44,869 44,679 89,643 89,167
Other operating expenses 117,325 183,393 313,495 341,824
-------- -------- --------- ---------
381,949 445,002 836,998 864,851
-------- -------- --------- ---------
Net loss $(14,413) $(64,186) $(101,926) $(116,499)
======== ======== ========= =========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 3.25% 3.2% 32.5% 3.2%
Cash distributed to the Fund II-
Fund II-OW Joint Venture* $130,417 $105,670 $ 220,049 $ 218,619
Net loss allocated to the Fund II-
Fund II-OW Joint Venture* $ (8,835) $(39,346) $ (62,481) $ (71,414)
</TABLE>
* The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income remained stable for 1999 as compared to 1998. The decrease in
operating expenses in 1999, as compared to 1998, are due to increased common
area maintenance billings to tenants that were under estimated in 1998.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the second quarter of the following year
and the difference billed to the tenant.
15
<PAGE>
The Brookwood Grill Property/Fund II and Fund III Joint Venture
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $56,187 $ 56,037 $112,375 $112,375
Equity in income of joint venture 6,248 16,943 39,304 33,074
------- -------- -------- --------
62,435 72,980 151,679 145,449
------- -------- -------- --------
Expenses:
Depreciation 13,503 13,503 27,006 27,006
Management & leasing expenses 7,955 6,492 16,683 13,525
Other operating expenses 805 (23,721) 6,330 (18,492)
------- -------- -------- --------
22,263 (3,726) 50,019 22,039
------- -------- -------- --------
Net income $40,172 $ 76,706 $101,660 $123,410
======= ======== ======== ========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 3.3% 3.3% 3.3% 3.3%
Cash distributed to the Fund II-
Fund II-OW Joint Venture* $49,986 $ 76,364 $115,431 $134,015
Net income allocated to the Fund II-
Fund II-OW Joint Venture* $25,047 $ 47,826 $ 63,385 $ 76,946
</TABLE>
* The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Operating expenses increased for the six months ended June 30, 1999, as
compared to the same period in 1998, due primarily to the billings of
reimbursements during the second quarter in 1998. Tenants are billed an
estimated amount for the current year common area maintenance which is then
reconciled the second quarter of the following year and the difference billed
to the tenant. As a result net income and cash distributions to the
Partnership decreased for the six months ended June 30, 1999, as compared to
the same period 1998.
16
<PAGE>
Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $227,761 $208,645 $457,824 $421,880
-------- -------- -------- --------
Expenses:
Depreciation 94,128 94,129 188,257 188,033
Management & leasing expenses 42,063 29,888 80,937 59,252
Other operating expenses 387 13,797 24,781 36,830
-------- -------- -------- --------
136,578 137,814 293,975 284,115
-------- -------- -------- --------
Net income $ 91,183 $ 70,831 $163,849 $137,765
======== ======== ======== ========
Occupied % 94% 100.0% 94% 100.0%
Partnership Ownership % 0.8% 0.8% 0.8% 0.8%
Cash distributed to the Fund II-
Fund III Joint Venture* $ 46,181 $ 41,990 $ 81,600 $ 83,158
Net income allocated to the Fund II-
Fund III Joint Venture* $ 6,248 $ 16,943 $ 39,304 $ 33,074
</TABLE>
* The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income has increased for the six months ended June 30, 1999 as
compared to the same period in 1998 due primarily to an underestimate of
straight line rent adjustments in 1998. The expense decreases due to common
area maintenance reimbursement. Tenants are billed an estimated amount for
the current year common area maintenance which is then reconciled the second
quarter of the following year and the difference billed to the tenant.
17
<PAGE>
Heritage Place at Tucker Property/Fund I - Fund II Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $343,044 $311,526 $ 679,903 $611,887
Interest income 137 135 273 272
-------- -------- --------- --------
343,181 311,661 680,176 612,159
-------- -------- --------- --------
Expenses:
Depreciation 120,456 107,288 229,252 214,576
Management & leasing expenses 43,482 34,645 87,966 77,233
Other operating expenses 103,404 116,379 198,948 225,974
-------- -------- --------- --------
267,342 258,312 516,166 517,783
-------- -------- --------- --------
Net income $ 75,839 $ 53,349 $ 164,010 $ 94,376
======== ======== ========= ========
Occupied % 91.0% 82.0% 91.0% 82.0%
Partnership Ownership % 2.4% 2.4% 2.4% 2.4%
Cash distributed to the
Fund II-Fund II-OW Joint Venture* $ 31,293 $ 51,429 $ 90,742 $ 95,993
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 34,059 $ 23,959 $ 73,657 $ 42,384
</TABLE>
* The Partnership holds a 95% ownership in the Fund II - Fund II-OW Joint
Venture.
Rental income increased in 1999 from 1998, due primarily to the increase in
occupancy from 82% to 91%. Depreciation, management and leasing expenses
increased over prior year to date, due to increased occupancy, tenant
improvements and revenues. Other operating expenses decreased due primarily
to prior year adjustments for common area maintenance billings to tenants.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the second quarter of the following year
and the difference billed to the tenant.
Cash distributions to the Fund IIII-OW Joint Venture decreased due to capital
improvements to the building of $101,350 and build out of tenant improvements
of $74,168.
18
<PAGE>
Cherokee Property - Fund I, II, II-OW, VI, VII Joint Venture
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $237,232 $225,705 $464,615 $454,682
Interest income 19 19 39 41
-------- -------- -------- --------
237,251 225,724 464,654 454,723
-------- -------- -------- --------
Expenses:
Depreciation 111,415 110,564 221,527 221,127
Management & leasing expenses 26,135 18,737 51,129 44,488
Other operating expenses 9,772 1,919 (19,643) 5,050
-------- -------- -------- --------
147,322 131,220 253,013 270,665
-------- -------- -------- --------
Net income $ 89,929 $ 94,504 $211,641 $184,058
======== ======== ======== ========
Occupied % 95.9% 91.0% 95.9% 91.0%
Partnership Ownership % 2.9% 2.9% 2.9% 2.9%
Cash distributed to the
Fund II-Fund II-OW Joint Venture* $103,538 $115,766 $227,662 $218,466
Net income allocated to the
Fund II-Fund II-OW Joint Venture* $ 49,066 $ 51,563 $115,473 $100,424
</TABLE>
* The Partnership holds a 95% ownership in the Fund II - Fund II-OW Joint
Venture.
Rental income increased in 1999 over 1998, due to increased occupancy. The
decrease in operating expenses for the six month period ended June 30, 1999,
as compared to the same period in 1998, was due to common area maintenance
reimbursement billings. The increase in operating expense for the three month
period ended June 30, 1999 was due to increased expenditures for tenant
improvements, HVAC repairs and a partial demolition of a tenant suite.
19
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6(b). No reports on Form 8-K were filed during the second quarter of 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WELLS REAL ESTATE FUND II-OW
(Registrant)
Dated: August 10, 1999 By: /s/ Leo F. Wells, III
---------------------------------
Leo F. Wells, III, as Individual
General Partner and as President,
Sole Director and Chief Financial
Officer of Wells Capital, Inc.
the Corporate General Partner
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,387
<SECURITIES> 1,199,865
<RECEIVABLES> 20,900
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,222,152
<CURRENT-LIABILITIES> 21,886
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,200,266
<TOTAL-LIABILITY-AND-EQUITY> 1,222,152
<SALES> 0
<TOTAL-REVENUES> 7,588
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,588
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,588
<EPS-BASIC> 1.25
<EPS-DILUTED> 0
</TABLE>
