<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
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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
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-OW
(A Georgia Public Limited Partnership)
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
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
</TABLE>
-2-
<PAGE>
WELLS REAL ESTATE FUND II-OW
(A Georgia Public Limited Partnership)
BALANCE SHEETS
June 30, December 31,
2000 1999
---------- -----------
ASSETS:
Investment in joint venture (Note 2) $1,122,936 $1,159,995
Cash and cash equivalents 1,522 3,865
Due from affiliate 27,724 25,335
---------- ----------
Total assets $1,152,182 $1,189,195
========== ==========
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accounts payable $ 382 $ 264
Partnership distributions payable 27,474 26,536
---------- ----------
Total liabilities 27,856 26,800
---------- ----------
Partners' capital:
Limited partners:
Class A--6,062 units 1,124,326 1,162,395
Class B--1,626 units 0 0
---------- ----------
Total partners' capital 1,124,326 1,162,395
---------- ----------
Total liabilities and partners' capital $1,152,182 $1,189,195
========== ==========
See accompanying condensed notes to financial statements.
-3-
<PAGE>
WELLS REAL ESTATE FUND II-OW
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
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) $7,300 $4,037 $15,932 $7,588
------ ------ ------- ------
EXPENSES:
Partnership administration 0 0 0 0
------ ------ ------- ------
Net income $7,300 $4,037 $15,932 $7,588
====== ====== ======= ======
NET INCOME ALLOCATED TO CLASS A $7,300 $4,037 $15,932 $7,588
LIMITED PARTNERS ====== ====== ======= ======
NET LOSS ALLOCATED TO CLASS B $ 0.00 $ 0.00 $ 0.00 $ 0.00
LIMITED PARTNERS ====== ====== ======= ======
NET INCOME PER CLASS A LIMITED $ 1.21 $ 0.67 $ 2.63 $ 1.25
PARTNER UNIT ====== ====== ======= ======
NET LOSS PER CLASS B LIMITED $ 0.00 $ 0.00 $ 0.00 $ 0.00
PARTNER UNIT ====== ====== ======= ======
CASH DISTRIBUTION PER CLASS A $ 4.53 $ 3.45 $ 8.91 $ 7.19
LIMITED PARTNER UNIT ====== ====== ======= ======
</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, 1999 AND
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 6,062 $1,236,239 1,626 $0 $1,236,239
Net income 0 20,918 0 0 20,918
Partnership distributions 0 (94,762) 0 0 (94,762)
----- ---------- ----- --- ----------
BALANCE, September 30, 1999 6,062 1,162,395 1,626 0 1,162,395
Net income 0 15,932 0 0 15,932
Partnership distributions 0 (54,001) 0 0 (54,001)
----- ---------- ----- --- ----------
BALANCE, June 30, 2000 6,062 $1,124,326 1,626 $0 $1,124,326
===== ========== ===== === ==========
</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>
Six Months Ended
------------------
June 30 June 30,
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,932 $ 7,589
-------- --------
Adjustments to reconcile net income to net cash provided
by operating activities:
Equity in income of joint ventures (15,932) (7,589)
Changes in assets and liabilities:
Accounts payable 117 858
-------- --------
Total adjustments (15,815) (6,731)
-------- --------
Net cash provided by operating activities 117 858
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures 50,603 41,532
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (53,063) (41,672)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (2,343) 718
CASH AND CASH EQUIVALENTS, beginning of year 3,865 669
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 1,522 $ 1,387
======== ========
</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., a Corporation,
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 among 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 among the Fund II-Fund II-OW Joint Venture and Wells Real Estate
Fund I ("the Tucker Joint Venture"); and (v) Fund I, II, II-OW, VI, VII
Joint Venture, a joint venture among Wells Real Estate Fund I, the Fund II-
Fund II-OW Joint Venture, Wells Real Estate Fund VI, L.P., and Wells Real
Estate Fund VII, L.P. ("Fund I, II, II-OW, VI, VII Joint Venture").
As of 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 (the "Heritage Place at
Tucker"); and (vi) a shopping center located in Cherokee County, Georgia
(the "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.
(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
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<PAGE>
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
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 ("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,
2000, the Partnership's equity interest in the 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-Fund II-OW:
FUND II-Fund II-OW
(A Georgia Joint Venture)
BALANCE SHEETS
<TABLE>
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 JOINT VENTURE
(A Georgia Joint Venture)
STATEMENTS OF INCOME
<TABLE>
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 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 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 $15,932 for the six months
ended June 30, 2000 from $7,588 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 $15,932 as of June 30, 2000, as compared to $7,588, 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 the
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 $27,724 and $20,900, 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 $3.45 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 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 and Fund II-OW
<TABLE>
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 5.3% 5.3% 5.3% 5.3%
======== ======== ======== =========
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 5% 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>
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 3.3% 3.3% 3.3% 3.3%
======== ======== ========= =========
Cash distributed to the Fund II-
Fund II-OW Joint Venture* $100,775 $130,417 $ 187,755 $ 220,049
======== ======== ========= =========
Net loss allocated to Fund II-
Fund II-OW Joint Venture* $(42,292) $ (8,835) $ (69,648) $ (62,481)
======== ======== ========= =========
</TABLE>
*The Partnership holds a 5% 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
expenses 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>
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 3.3% 3.3% 3.3% 3.3%
======= ======= ======== ========
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 5% 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 Property/Fund II, III, VI, VII Joint Venture
<TABLE>
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 0.8% 0.8% 0.8% 0.8%
======== ======== ======== ========
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 3.3% 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 periods as compared to the same periods 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 distributions to the Fund II-Fund III Joint Venture were increased for the
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>
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 2.4% 2.4% 2.4% 2.4%
======== ======== ======== ========
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 5% 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 additonal
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 Commons/Fund I, II, II-OW, VI, and VII Joint Venture
<TABLE>
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 2.9% 2.9% 2.9% 2.9%
======== ======== ======== ========
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 5% 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 estimated 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-OW
(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-
