<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000 or
------------------
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________________ to ______________________
Commission file number 0-17876
--------------------------------------------------------
WELLS REAL ESTATE FUND II-OW
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Georgia 58-1754703
--------------------------------------------------------- ---------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
6200 The Corners Pkwy., Norcross, Georgia 30092
--------------------------------------------------------- ---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets--September 30, 2000 and December 31, 1999 3
Statements of Income for the Three Months and Nine Months Ended September 30, 2000
and 1999 4
Statements of Partners' Capital for the Year Ended December 31, 1999 and the Nine
Months Ended September 30, 2000 5
Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999 6
Condensed Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 11
PART II. OTHER INFORMATION 19
</TABLE>
-2-
<PAGE>
WELLS REAL ESTATE FUND II-OW
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
ASSETS:
Investment in joint venture (Note 2) $ 1,102,196 $ 1,159,995
Cash and cash equivalents 1,860 3,865
Due from affiliate 26,476 25,335
------------- -------------
Total assets $ 1,130,532 $ 1,189,195
============= =============
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accounts payable $ 381 $ 264
Partnership distributions payable 27,475 26,536
------------- -------------
Total liabilities 27,856 26,800
------------- -------------
Partners' capital:
Limited partners:
Class A--6,062 units 1,102,676 1,162,395
Class B--1,626 units 0 0
------------- -------------
Total partners' capital 1,102,676 1,162,395
------------- -------------
Total liabilities and partners' capital $ 1,130,532 $ 1,189,195
============= =============
</TABLE>
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 Nine Months Ended
----------------------------- --------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Equity in income of joint venture (Note 2) $5,736 $8,246 $21,668 $15,834
Other income 89 130 89 130
------ ------ ------- -------
NET INCOME $5,825 $8,376 $21,757 $15,964
====== ====== ======= =======
NET INCOME ALLOCATED TO CLASS A LIMITED
PARTNERS $5,825 $8,376 $21,757 $15,964
====== ====== ======= =======
NET LOSS ALLOCATED TO CLASS B LIMITED
PARTNERS $ 0.00 $ 0.00 $ 0.00 $ 0.00
====== ====== ======= =======
NET INCOME PER CLASS A LIMITED PARTNER UNIT $ 0.96 $ 1.38 $ 3.59 $ 2.63
====== ====== ======= =======
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 $ 4.06 $ 13.44 $ 11.25
====== ====== ======= =======
</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
NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Limited Partners
------------------------------------------------
Class A Class B Total
----------------------- -------------------- Partners'
Units Amounts Units Amounts Capital
------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 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, December 31, 1999 6,062 1,162,395 1,626 0 1,162,395
Net income 0 21,757 0 0 21,757
Partnership distributions 0 (81,476) 0 0 (81,476)
-------- ---------- -------- ---------- ------------
BALANCE, September 30, 2000 6,062 $1,102,676 1,626 $ 0 $ 1,102,676
======== ========== ======== ========== ============
</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>
Nine Months Ended
------------------------------------
September 30, September 30,
2000 1999
--------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,757 $ 15,964
-------------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in income of joint ventures (21,668) (15,834)
Changes in assets and liabilities:
Accounts payable 117 57
-------------- -----------
Total adjustments (21,551) (15,777)
-------------- -----------
Net cash provided by operating activities 206 187
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from joint ventures 78,325 62,431
-------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (80,536) (62,536)
-------------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,005) 82
CASH AND CASH EQUIVALENTS, beginning of year 3,865 669
-------------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,860 $ 751
============== ===========
</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 September 30, 2000, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a
two-story office building located in Charlotte, North Carolina ("First
Union at Charlotte"); (ii) a four-story office building located in
metropolitan Houston, Texas (the "Atrium"); (iii) a restaurant located in
Fulton County, Georgia (the "Brookwood Grill"); (iv) an office/retail
center in Fulton County, Georgia ("Holcomb Bridge Road"); (v) a retail
shopping and commercial office complex located in Tucker, Georgia (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
-7-
<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 September 30, 2000
through its interest in the Fund II-Fund II-OW Joint Venture. The
Partnership does not have control over the operations of the joint
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 September
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>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS:
Real estate, at cost:
Land $ 1,367,856 $ 1,367,856
Building and improvements, less accumulated depreciation of
$3,267,202 in 2000 and $2,991,452 in 1999 4,503,917 4,779,666
------------- ------------
Total real estate assets 5,871,773 6,147,522
------------- ------------
Investments in joint ventures 14,855,445 15,654,420
Cash and cash equivalents 153,867 162,241
Due from affiliates 344,540 312,901
Accounts receivable 0 2,149
Prepaid expenses and other assets 11,068 24,473
------------- ------------
Total assets $21,236,693 $22,303,706
============= =============
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Partnership distributions payable $ 498,599 $ 477,122
------------- -------------
Partners' capital:
Wells Real Estate Fund II 19,635,898 20,666,589
Wells Real Estate Fund II-OW 1,102,196 1,159,995
------------- -------------
Total partners' capital 20,738,094 21,826,584
------------- -------------
Total liabilities and partners' capital $21,236,693 $22,303,706
============= =============
</TABLE>
See accompanying condensed notes to financial statements.
-9-
<PAGE>
FUND II-FUND II-OW Joint Venture
(A Georgia Joint Venture)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 211,018 $ 264,259 $ 633,054 $ 506,658
Equity in income of joint ventures 20,475 27,064 207,518 217,098
Interest income 6,922 155 7,106 247
------------ ------------ ------------ ----------
238,415 291,478 847,678 724,003
------------ ------------ ------------ ----------
EXPENSES:
Management and leasing fees 12,661 15,855 38,112 30,279
Lease acquisition costs 4,589 4,589 13,766 13,766
Operating costs--rental property 3,054 4,756 11,180 15,816
Depreciation 91,917 91,917 275,750 275,750
Legal and accounting 5,513 (650) 37,985 27,847
Computer costs 2,354 2,661 8,847 5,402
Partnership administration 10,298 17,071 53,970 56,952
------------ ------------ ------------ ----------
130,386 136,199 439,610 425,812
------------ ------------ ------------ ----------
NET INCOME $ 108,029 $ 155,279 $ 408,068 $ 298,191
============ ============ ============ ==========
NET INCOME ALLOCATED TO WELLS REAL ESTATE
FUND II $ 102,293 $ 147,033 $ 386,400 $ 282,357
============ ============ ============ ==========
NET INCOME ALLOCATED TO WELLS REAL ESTATE
FUND II-OW $ 5,736 $ 8,246 $ 21,668 $ 15,834
============ ============ ============ ==========
</TABLE>
See accompanying condensed notes to financial statements.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 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 September 30, 2000, the developed properties owned by the Fund II-Fund
II-OW Joint Venture were 97.1% occupied as compared to 97.5% occupied as of
September 30, 1999.
Gross revenues of the Partnership increased to $21,757 for the nine months
ended September 30, 2000 from $15,964 for the nine months ended September 30,
1999 due to increased rental renewal rates at the Charlotte Property but
decreased for the three months ended September 30, 2000, as compared to the
same period in 1999, due to a catch up of May and June increased Charlotte
rentals in July 1999. Total administrative expenses of the Partnership which
are incurred at the joint venture level increased slightly for the nine month
period ended September 30, 2000 due to increased management and leasing fees
which are charges based on rental income. As a result, net income increased
to $21,757 for the nine months ended September 30, 2000, as compared to
$15,964, for the same period during 1999.
The Partnership's net cash provided by investing activities and net cash used
in financing activities increased in 2000, compared to 1999, due to 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 September 30, 2000 and 1999 were $26,476 and $27,735, respectively.
The Partnership made cash distributions to the Limited Partners holding Class
A units for the third quarter of 2000 in the amount of $4.53 per unit as
compared to $4.06 for the third quarter of 1999. No cash distributions were
made by the Partnership to the Limited Partners holding Class B units or to
the General Partner.
As of September 30, 2000, the Fund II-Fund II-OW Joint Venture had used all
of the remaining funds available for investment in properties.
The Partnership is unaware of any known demands, commitments, events, or
capital expenditures other than that which is required from the normal
operations of its properties that will result in the
-11-
<PAGE>
Partnership's liquidity increasing or decreasing in any material way. The
Partnership expects to meet liquidity requirements and demands through cash flow
from operations.
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 September 30, 2000, the Partnership owned interests in the following
properties through the Fund II-Fund II-OW Joint Venture:
First Union at Charlotte/Fund II-Fund II-OW Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 211,018 $ 264,259 $ 633,054 $ 506,658
------------- ------------- ------------- -------------
Expenses:
Depreciation 91,917 91,917 275,750 275,750
Management and leasing expenses 17,249 20,444 51,878 44,045
Other operating expenses 2,932 4,601 10,874 15,569
------------- ------------- ------------- -------------
112,098 116,962 338,502 335,364
------------- ------------- ------------- -------------
Net income $ 98,920 $ 147,297 $ 294,552 $ 171,294
============= ============= ============= =============
Occupied percentage 100% 100% 100% 100%
============= ============= ============= =============
Partnership's ownership percentage 5.3% 5.3% 5.3% 5.3%
============= ============= ============= =============
Cash generated to the Fund II-
Fund II-OW Joint Venture* $ 195,426 $ 243,802 $ 584,069 $ 481,414
============= ============= ============= =============
Net income allocated to the Fund II-
Fund II-OW Joint Venture* $ 98,920 $ 147,297 $ 294,552 $ 171,294
============= ============= ============= =============
</TABLE>
*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income, net income, and cash generated to the Fund II-Fund II-OW Joint
Venture increased for the nine months ended September 30, 2000, as compared to
the same period in 1999, due to a renewed, increased rent beginning in May 1999,
but decreased for the three month period due to a catch up of May and June
increased rentals in July 1999. Other operating expenses for the three months
and nine months ended September 30, 2000 decreased as compared to the same
period in 1999 due primarily to decreased accounting fees.
-13-
<PAGE>
Boeing at the Atrium/Fund II-Fund III Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 367,536 $ 367,536 $ 1,101,248 $ 1,102,608
------------ ------------ ------------- ------------
Expenses:
Depreciation 221,010 216,930 656,230 650,790
Management and leasing expenses 45,748 45,060 139,286 134,703
Other operating expenses 226,070 185,397 544,643 498,892
------------ ------------ ------------- ------------
492,828 447,387 1,340,159 1,284,385
------------ ------------ ------------- ------------
Net loss $ (125,292) $ (79,851) $ (238,911) $ (181,777)
============ ============ ============= ============
Occupied percentage 100% 100% 100% 100%
============ ============ ============= ============
Partnership's ownership percentage 3.3% 3.3% 3.3% 3.3%
============ ============ ============= ============
Cash distribution to the Fund II-
Fund II-OW Joint Venture* $ 75,001 $ 103,572 $ 262,756 $ 323,621
============ ============ ============= ============
Net loss allocated to Fund II-
Fund II-OW Joint Venture* $ (76,805) $ (48,948) $ (146,453) $ (111,429)
============ ============ ============= ============
</TABLE>
*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income remained stable for the three months and nine months ended
September 30, 2000, as compared to the same periods in 1999. Net income and cash
distributions have decreased for the three month and nine month periods, as
compared to the same periods in 1999, due primarily to increased expenditures in
electricity, HVAC repairs, plumbing repairs, and glass maintenance in the
building.
-14-
<PAGE>
The Brookwood Grill/Fund II-Fund III Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- ------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 56,188 $56,188 $ 168,613 $168,563
Equity in income of joint venture 12,668 23,307 45,986 62,611
------------- ------------- ------------- -------------
68,856 79,495 214,599 231,174
------------- ------------- ------------- -------------
Expenses:
Depreciation 13,503 13,503 40,509 40,509
Management and leasing expenses 6,878 6,704 18,909 23,387
Other operating expenses (11,256) 2,467 69 8,797
------------- ------------- ------------- -------------
9,125 22,674 59,487 72,693
------------- ------------- ------------- -------------
Net income $ 59,731 $56,821 $ 155,112 $158,481
============= ============= ============= =============
Occupied percentage 100% 100% 100% 100%
============= ============= ============= =============
Partnership's ownership percentage 3.3% 3.3% 3.3% 3.3%
============= ============= ============= =============
Cash distribution to the Fund II-
Fund II-OW Joint Venture* $ 68,167 $59,606 $ 189,697 $175,037
============= ============= ============= =============
Net income allocated to the Fund II-
Fund II-OW Joint Venture* $ 37,242 $35,428 $ 96,712 $ 98,813
============= ============= ============= =============
</TABLE>
* The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Although rental income remained stable, total revenues decreased for the three
months and nine months ended September 30, 2000, as compared to the same periods
in 1999, due to decreased equity in income from the Fund II, III, VI, and VII
Joint Venture, as the Holcomb Bridge Road property decreased its occupancy rate
during the third quarter of this year.
Other operating expenses decreased for the three months and nine months ended
September 30, 2000, as compared to the same periods in 1999, due to 2000
property tax reimbursement being charged to the tenant in the third quarter of
2000 instead of being charged in the fourth quarter in 1999.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
-15-
<PAGE>
Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 214,051 $ 213,028 $ 658,907 $ 670,852
------------- ------------- ------------- -------------
Expenses:
Depreciation 104,129 79,605 312,389 277,862
Management and leasing expenses 28,099 22,263 85,165 93,200
Other operating expenses 29,194 14,889 70,302 39,670
------------- ------------- ------------- -------------
161,422 116,757 467,856 410,732
------------- ------------- ------------- -------------
Net income $ 52,629 $ 96,271 $ 191,051 $ 260,120
============= ============= ============= =============
Occupied percentage 92% 94% 92% 94%
============= ============= ============= =============
Partnership's ownership percentage 0.8% 0.8% 0.8% 0.8%
============= ============= ============= =============
Cash distribution to the Fund II-
Fund III Joint Venture* $ 41,546 $ 41,093 $ 132,952 $ 122,693
============= ============= ============= =============
Net income allocated to the Fund II-
Fund III Joint Venture* $ 12,668 $ 23,307 $ 45,986 $ 62,611
============= ============= ============= =============
</TABLE>
*The Partnership holds a 3.3% ownership in the Fund II-Fund III Joint Venture.
Rental income decreased for the nine months ended September 30, 2000, as
compared to the same period in 1999, due to decreased occupancy. Other operating
expenses increased for the three months and nine months ended September 30,
2000, as compared to the same periods in 1999, due to appraisal fees for this
property which is currently being marketed for sale and a decrease in common
area maintenance reimbursements from tenants. Monthly common area maintenance
billings were increased in 1999 to offset 1998 underpayment. Tenants are billed
an estimated amount for the current year common area maintenance which is then
reconciled the following year and the difference billed to the tenant.
Cash distributions to the Partnership increased for the three months and nine
months ended September 30, 2000, as compared to the same periods in 1999, even
though there is a decrease in net income this year due to lease acquisition fees
and procurement fees paid in 1999.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
-16-
<PAGE>
Heritage Place at Tucker/Tucker Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 341,100 $ 351,124 $ 1,029,160 $ 1,031,027
Interest income 187 53 536 326
------------- ------------- ------------- -------------
341,287 351,177 1,029,696 1,031,353
------------- ------------- ------------- -------------
Expenses:
Depreciation 123,119 127,287 368,681 356,539
Management and leasing expenses 32,737 36,741 93,118 124,707
Other operating expenses 122,566 165,238 365,317 364,186
------------- ------------- ------------- -------------
278,422 329,266 827,116 845,432
------------- ------------- ------------- -------------
Net income $ 62,865 $ 21,911 $ 202,580 $ 185,921
============= ============= ============= =============
Occupied percentage 88% 88% 88% 88%
============= ============= ============= =============
Partnership's ownership percentage 2.4% 2.4% 2.4% 2.4%
============= ============= ============= =============
Cash distribution to the
Fund II-Fund II-OW Joint Venture* $ 82,244 $ 39,495 $ 205,848 $ 130,236
============= ============= ============= =============
Net income generated to the
Fund II-Fund II-OW Joint Venture* $ 28,233 $ 9,840 $ 90,979 $ 83,497
============= ============= ============= =============
</TABLE>
*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income remained relatively stable in 2000 as compared to 1999. Total
expenses decreased in 2000, as compared to 1999, due to a decrease in management
and leasing expenses in 2000. The decrease in management and leasing expenses
was due to a decrease in leasing commissions and lease acquisition fees. As a
result, net income increased for the three months and nine months ended
September 30, 2000 as compared to the same periods in 1999.
This property is currently being marketed for sale by The First Fidelity
Companies. To maximize the disposition value, the management team is separating
the retail and creating a condominium for the office buildings. The legal and
site work should be complete so that the management team can market this
property to investors in early fall. The Partnership's goal is to have this
property sold by the end of 2002.
-17-
<PAGE>
Cherokee Commons/Fund I, II, II-OW, VI, VII Joint Venture
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $249,102 $238,923 $713,717 $703,538
Interest income 32 8 71 47
----------- ------------ ----------- ------------
249,134 238,931 713,788 703,585
----------- ------------ ----------- ------------
Expenses:
Depreciation 110,562 111,379 331,687 332,906
Management and leasing expenses 10,360 22,863 46,653 73,992
Other operating expenses 51,473 48,342 30,688 28,699
----------- ------------ ----------- ------------
172,395 182,584 409,028 435,597
----------- ------------ ----------- ------------
Net income $ 76,739 $ 56,347 $304,760 $267,988
=========== ============ =========== ============
Occupied percentage 97% 97% 97% 97%
=========== ============ =========== ============
Partnership's ownership percentage 2.9% 2.9% 2.9% 2.9%
=========== ============ =========== ============
Cash distribution to the
Fund II-Fund II-OW Joint Venture* $ 89,127 $ 94,923 $348,191 $322,585
=========== ============ =========== ============
Net income generated to the
Fund II-Fund II-OW Joint Venture* $ 31,805 $ 30,743 $166,280 $146,217
=========== ============ =========== ============
</TABLE>
*The Partnership holds a 5% ownership in the Fund II-Fund II-OW Joint Venture.
Rental income increased for the three months and nine months ended September 30,
2000, as compared to the same periods in 1999, due to increased rental renewal
rates. Management and leasing expenses decreased in 2000, as compared to 1999,
due to increased leasing commissions for 1999 and a catch-up of 1998 management
fees in 1999. Other operating expenses remained relatively stable for the nine
months ended September 30, 2000, as compared to the same period in 1999. Net
income increased for the three months and nine months ended September 30, 2000,
as compared to the same periods in 1999, due to the lower management and leasing
expenses.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the
country. The Partnership's goal is to have this property sold by the end of
2002.
-18-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6 (b.) No reports on Form 8-K were filed during the third quarter of 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WELLS REAL ESTATE FUND II-OW
(Registrant)
Dated: November 10, 2000 By: /s/ Leo F. Wells, III
---------------------
Leo F. Wells, III, as Individual
General Partner, and as President,
Sole Director, and Chief Financial
Officer of Wells Capital, Inc., the
Corporate General Partner
-19-
