F-7
4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of
the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year
ended
December 31, 1995
or
[ ] Transition report pursuant to Section 13 or 15(d) of
the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period
from
to _____________________________
Commission file number 0-18407
Wells
Real
Estate Fund III, L.
P.
(Exact name of registrant as specified in its charter)
Georgia
58-1800833
(State or other jurisdiction
of
(I.R.S. Employer Identification Number)
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each
class
Name of exchange on which registered
None
None
Securities registered pursuant to Section 12(g) of the Act:
CLASS A UNITS
____________________________________________________________
_____
_____________
(Title of Class)
CLASS B UNITS
____________________________________________________________
_____
_____________
(Title of Class)
Indicate by check mark whether the registrant (1) has
filed
all reports required to be filed by Section 13 or 15(d) of
the
Securities Exchange Act of 1934 during the preceding 12
months
(or for such shorter period that the registrant was
required to
file such reports), and (2) has been subject to such
filing
requirements for the past 90 days.
Yes X No
Aggregate market value of the voting stock held by
non-
affiliates: Not
Applicable
PART I
ITEM 1. BUSINESS.
General
Wells Real Estate Fund III, L.P. (the "Partnership")
is a
Georgia public limited partnership having Leo F. Wells, III
and
Wells Capital, Inc., a Georgia corporation, as General
Partners.
The Partnership was formed on July 31, 1988, for the purpose
of
acquiring, developing, constructing, owning,
operating,
improving, leasing and otherwise managing for
investment
purposes income-producing commercial or industrial
properties.
On October 24, 1988, 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 October 23, 1990,
and
received gross proceeds of $22,206,319
representing
subscriptions from 2,700 Limited Partners, composed of
two
classes of limited partnership interests, Class A and
Class B
limited partnership units.
As of December 31, 1995, the Partnership owned interests in
the
following properties: (i) the Greenville Property, an
office
building in Greenville, North Carolina, (ii) the Atrium,
an
office building in Houston, Texas, (iii) the Brookwood
Grill, a
restaurant located in Roswell, Georgia, (iv) the
Stockbridge
Village Shopping Center, a retail shopping center located
in
Stockbridge, Georgia, southeast of Atlanta, (v) the G.E.
Office
Building located in Richmond, Virginia, and (vi)
an
office/retail center currently being developed in
Roswell,
Georgia. All of the foregoing properties were acquired on
an
all cash basis and are described in more detail in Item 2
below.
The lease on the Atrium Building in Houston, which
contributes
to the revenue of the Partnership, will expire in June,
1996.
If the Partnership is unable to obtain a new tenant, the
income
generated to the Partnership may decrease. See the
detail
discussion in Item 2.
Employees
The Partnership has no direct employees. The employees of
Wells
Capital, Inc., a General Partner of the Partnership
perform a
full range of real estate services including leasing
and
property management, accounting, asset management and
investor
relations for the Partnership. See Item 11 - compensation
of
General Partners and Affiliates for a summary of
the
compensation and fees paid to the General Partners and
their
affiliates during the fiscal year ended December 31, 1995.
Insurance
Wells Management Company, Inc., an affiliate of the
General
Partner, carries comprehensive liability and extended
coverage
with respect to all the properties owned directly or
indirectly
by the Partnership. In the opinion of management of
the
registrant, the properties are adequately
insured.
Competition
The Partnership will experience competition for tenants
from
owners and managers of competing projects which may include
the
General Partners and their affiliates. As a result,
the
Partnership may be required to provide free rent,
reduced
charges for tenant improvements and other inducements, all
of
which may have an adverse impact on results of operations.
At
the time the Partnership elects to dispose of its
properties,
the Partnership will also be in competition with sellers
of
similar properties to locate suitable purchasers for
its
properties.
ITEM 2. PROPERTIES.
The Partnership owns six properties directly or through
its
ownership in joint ventures of which three are office
buildings,
one a restaurant, one a retail building and one a
retail/office
project under construction. 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. As of
December
31, 1995, these properties were 97.25% occupied, down from
99.4%
at December 31, 1994, 98.6% at December 31, 1993, 98.67%
at
December 31, 1992, and up from 84.12% at December 31, 1991.
The following table shows lease expirations during
each of
the next ten years for all leases as of December 31,
1995,
assuming no exercise of renewal options or termination
rights:
Number of
Annualized
Partnership's Percentage of Percentage of
Year of Lease Leases Square
Gross
Share of Annualized Total Square Total Annualized
Expiration Expiring Feet Expiring Base
Rent(1)
Gross Base Rent(1) Feet Expiring Base Rent
1996 (2) 1 119,000 $1,996,852$686,917
48.8% 50.9%
1997 9 23,083 295,318
201,729 9.5% 7.5%
1998 6 15,548 181,253
118,718 6.4% 4.6%
1999 3 5,359 73,197
41,942 2.2% 1.9%
2000 (3) 1 43,000 527,425302,215
17.6% 13.5%
2001 (4) 2 30,762 694,824554,694
12.6% 17.7%
2002 2 7,130 151,599
86,866 2.9% 3.9%
2003 - - -
- - - -
2004 - - - - -
- -
2005 - -
- -
- - -. .
24 243,882 $3,920,468
$1,993,081 100.0%
100.0%
(1) Average monthly gross rent over the life of the
lease,
annualized.
(2) Expiration of Lockheed Engineering and Science
Company,
Inc. at The Atrium.
(3) Expiration of General Electric.
(4) Expiration of IBM with 23,322 square feet at the
Greenville
Property and the Brookwood
Grill with 7,440 square feet.
The following describes the properties in which the
Partnership
owns an interest as of December 31, 1995:
The Greenville Property
On June 30, 1990, the Partnership acquired a 2.34 acre
tract of
land located in Greenville, North Carolina (the
"Greenville
Property") for a purchase price of the land of
$576,350,
including acquisition expenses for the purpose of
developing,
constructing and operating a two-story office
building
containing approximately 34,300 rentable square feet.
The occupancy rate at the Greenville Property was 100% in
1995,
100% in 1994, 95% in 1993, 94% in 1992, and 67% in 1991.
The average effective annual rental per square foot at
the
Greenville Property was $17.01 for 1995, $16.73 for 1994,
$16.74
for 1993, $14.91 for 1992 and $9.75 for 1991.
Two tenants occupy ten percent or more of the rentable
square
footage - International Business Machines Corporation
("IBM"), a
business machine corporation and Team YASNY (McDonald's) a
fast-
food restaurant chain.
The Partnership entered into a net lease with IBM for a
portion
of the first floor and the entire second floor of the
Greenville
Property representing approximately 23,300 rentable square
feet
or approximately 67% of the Greenville Project. The
initial
term of the IBM lease is nine years and ten months and
commenced
in April of 1991. IBM has the option to extend the initial
term
of the lease for two consecutive five-year periods. The
annual
base rent payable under the IBM lease is $462,242, net of
all
expenses of operation, and is payable in monthly
installments of
$38,520.17. The annual base rent will increase in the
sixth
year of the initial term of the lease to $478,101 payable
in
equal monthly installments of $39,841.75 and will
remain
constant for each of the subsequent years in the initial
term of
the lease. In addition to the base rent, IBM is required to
pay
additional rent equal to its share of all operating
expenses
during the lease term.
The lease provides IBM with the right of first refusal
to
purchase the Greenville Project should the Partnership
receive a
bona fide offer from the third party to purchase the
Greenville
Project during the term of the lease. IBM also has the
right of
first refusal to lease all or a portion of any space which
may
from time to time become available. In addition, on April
15,
1996, five years after the commencement date of the lease,
IBM
is entitled to lease approximately 5,000 additional
rentable
square feet designated by the Partnership. Such space will
be
contiguous to the initial space taken by IBM under its
lease.
The IBM lease also provides that the Partnership will not
lease
or consent to any sublease to any entity which, as a major
part
of its business engages in sales and services similar to
those
of IBM.
Team YASNY's original lease represented 3,122 rentable
square
feet. In 1994, Team YASNY expanded and increased their
rentable
space on additional 1,232 square feet for a total of
4,354
rentable square feet. The Team YASNY lease calls for an
annual
rent of $50,150 in 1995, $51,717 in 1996, and $53,200 in
1997.
The Team YASNY lease expires September 30, 1997.
Fund II and Fund III Joint Venture
On April 3, 1989, the Partnership formed a joint venture,
Fund
II and Fund III Associates (the "Fund II-Fund III
Joint
Venture") with an existing joint venture (the "Fund II-Fund
II-
OW Joint Venture") formed by Wells Real Estate Fund II
("Wells
Fund II"), a Georgia public limited partnership having Leo
F.
Wells, III and Wells Capital, Inc., a Georgia corporation
as
General Partners; and Wells Real Estate Fund II-OW ("Wells
Fund
II-OW"), a Georgia public limited partnership having Leo
F.
Wells, III and Wells Capital, Inc., a Georgia corporation
as
General Partners; Wells Fund II and Wells Fund II-OW
are
affiliated with the Partnership through common general
partners
with investment objectives substantially identical to those
of
the Partnership. The Partnership owns interests in
the
following two properties through the Fund II-Fund III
Joint
Venture:
The Atrium
In April 1989, the Fund II-Fund III Joint Venture
acquired a
four-story office building located on a 5.6 acre tract of
land
adjacent to the Johnson Space Center in metropolitan
Houston, in
Nassau Bay, Harris County, Texas, known as "The Atrium at
Nassau
Bay" (the "Atrium").
The funds used by the Fund II-Fund III Joint Venture to
acquire
the Atrium were derived from capital contributions made to
the
Fund II-Fund III Joint Venture by the Fund II-Fund II-OW
Joint
Venture and the Partnership in the amounts of $8,327,856
and
$2,538,000, respectively, for total initial
capital
contributions of $10,865,856. As of December 31, 1995, the
Fund
II-Fund II-OW Joint Venture and the Partnership had made
total
capital contributions to the Fund II-Fund III Joint Venture
of
approximately $8,330,000 and $4,448,000, respectively, for
the
acquisition and development of the Atrium. The Fund II -
Fund
II-OW Joint Venture holds an approximately 66% equity
interest
in the Fund II - Fund III Joint Venture, and the
Partnership
holds approximately 34% equity interest in the Fund II -
Fund
III Joint Venture.
The Atrium was first occupied in 1987 and contains
approximately
119,000 net rentable square feet. Each floor of the Atrium
is
currently under a separate lease to Lockheed Engineering
and
Science Company, Inc., a wholly-owned subsidiary of the
Lockheed
Company, each of which leases have terms of approximately
eight
years and expire on June 30, 1996. The leases do not
contain
any provisions for extension. The Fund II-Fund III
Joint
Venture is responsible for operating expenses of up to $4.50
per
square foot for the first four years and $4.75 per square
foot
thereafter. The tenant under each lease is required to
pay
certain operating expenses including expenses relating to
its
share of the building in excess of $4.50 per square foot
paid by
the Joint Venture for the first four lease years and $4.75
per
square foot for the remaining term. Under the terms of each
of
the leases, the tenant is responsible for all maintenance
and
repair work, as well as all utilities, taxes, insurance
and
similar expenses with respect to the Atrium in excess of
the
amounts specified above. The leases for each of the four
floors
of the building are identical, except as to their base
monthly
rentals. The leases for the Atrium currently provide
for a
monthly base rent of $185,298 until the expiration of said
lease
in June 1996.
The occupancy rate at the Atrium Property was 100% and
the
average effective annual rental per square foot was $17.47
for
the five years ended December 31, 1995.
The Lockheed lease will expire on June 30, 1996, and renewal
is
not expected at this time. The Partnership has responded
to
various potential tenants regarding their leasing portions
of
the Atrium should Lockheed not renew. In the event
that
Lockheed does not renew its lease and the Partnership is
unable
to lease a substantial portion of the Atrium Property at
rates
at least comparable to the lease rates currently being
paid
under the Lockheed lease, the income generated from the
Atrium
Property could decrease significantly. In addition, even if
the
Partnership is able to obtain leases with new tenants for
the
Lockheed Project, such leases are likely to require
substantial
tenant finish and refurbishment expenditures by the
Partnership,
which could have the effect of substantially reducing
future
cash distributions to Limited Partners in the year tenants
are
acquired.
The Brookwood Grill Property
On January 31, 1990, the Fund II-Fund II-OW Joint
Venture
acquired a 5.8 acre tract of undeveloped real property at
the
intersection of Warsaw Road and Holcomb Bridge Road in
Roswell,
Fulton County, Georgia (the "880 Property"). The Fund II-
Fund
II-OW Joint Venture paid $1,848,561, including
acquisition
expenses, for the 5.8 acre tract of undeveloped property.
On September 20, 1991, the Fund II-Fund II-OW Joint
Venture
contributed the 880 Property, along with its interest
as
landlord under the lease agreement referred to below,
as a
capital contribution to the Fund II-Fund III Joint Venture.
As
of September 20, 1991, the Fund II-Fund II-OW Joint Venture
had
expended approximately $2,128,000 for the land acquisition
and
development of the 880 Property.
As of September 20, 1991, a lease agreement was entered
into
with the Brookwood Grill of Roswell, Inc. for the
development of
approximately 1.5 acres and the construction of a 7,440
square
foot restaurant. This site, which opened early March 1992,
is
the second location in the Atlanta area for what is
anticipated
as a southeastern chain of restaurants similar in concept
to
Houston's, Ruby Tuesday, and Friday's. This chain
is
principally owned by David Rowe, an Atlanta real
estate
developer of Kroger shopping centers, and several
operating
partners formerly with Houston's. The terms of the lease
call
for an initial term of 9 years and 11 months, with
two
additional 10-year option periods. The agreement calls
for a
base rental of $217,006 per year for Years 1 through 5,
with a
15% increase for the remainder of the initial term.
Rental
rates for all option periods will be based on the
prevailing
market values and rates for those periods. Under the terms
of
the lease, the Fund II-Fund III Joint Venture was required
to
make certain improvements for the development and
construction
of the restaurant building together with parking
areas,
driveways, landscaping and other improvements as agreed
The
Fund II-Fund III Joint Venture has expended
approximately
$1,100,000 for such improvements. In addition to the base
rent
described above, the tenant is required to pay "additional
rent"
in amounts equal to a 12% per annum return on all
amounts
expended for such improvements.
The occupancy rate for the Brookwood Grill, a sole tenant,
was
100% for 1995, 1994, 1993 and 1992. The average
effective
annual rental per square foot at the Brookwood Grill is
$30.21
for 1995, $30.21 for 1994 and 1993, and $24.60 for 1992,
the
first year of occupancy.
As of December 31, 1995, the Fund II-Fund II-OW Joint
Venture
and the Partnership had made total contributions to the Fund
II-
Fund III Joint Venture of approximately $2,128,000
and
$1,330,000, respectively, for the acquisition and
development of
the Brookwood Grill. The Fund II-Fund II-OW Joint Venture
holds
an approximately 62% equity interest in the Brookwood
Grill
property, and the Partnership holds an approximately 38%
equity
interest in the project.
On January 10, 1995, the remaining 4.3 acres of land
comprising
the 880 Property was contributed to a new joint venture,
Fund
II, III, VI and VII Associates by Fund II-Fund III
Joint
Venture. This property is described below.
Fund II, III, VI and VIII Associates/Holcomb Bridge
Road
Property.
On January 10, 1995, Fund II-Fund III Joint Venture; Wells
Real
Estate Fund VI, L.P. ("Wells Fund VI"), a Georgia public
limited
partnership having Leo F. Wells, III and Wells Partners,
L.P., a
Georgia limited partnership, as general partners; and Wells
Real
Estate Fund VII, L.P. ("Wells Fund VII"), a Georgia
public
limited partnership having Leo F. Wells, III and Wells
Partners,
L.P., a Georgia limited partnership, as general
partners,
entered into a Joint Venture Agreement known as Fund II,
III, VI
and VII Associates ("Fund II, III, VI and VII Joint
Venture").
Wells Partners, L.P. is a private limited partnership
having
Wells Capital, Inc., a General Partner of the Partnership,
as
its sole general partner. The investment objectives of
Wells
Fund VI and Wells Fund VII are substantially identical to
those
of the Partnership.
In January, 1995, the Fund II-Fund III Joint Venture
contributed
approximately 4.3 acres of land at the intersection of
Warsaw
Road and Holcomb Bridge Road in Roswell, Fulton County,
Georgia
(the Holcomb Bridge Road Property) including land
improvements
with a book value of $1,729,116 to the Fund II, III, VI and
VII
Joint Venture. Development is underway on two
buildings
containing a total of approximately 48,000 square feet;
26,000
square feet to be developed as office space and 22,000
square
feet to be developed as retail space. As of December 31,
1995,
leases were signed with Bertucci's Restaurant Corporation
for
5,935 square feet, Air Touch Cellular for 3,046 square feet
and
Townsend Tax for 1,389 square feet. Initial occupancy
occurred
in February 1996.
As of December 31, 1995, Fund II - Fund III Joint Venture
had
contributed $1,729,116 in land and improvements for
an
approximate 33% equity interest, Wells Fund VI had
contributed
$982,691 toward the construction for an approximate 19%
equity
interest, and Wells Fund VII had contributed $2,500,000 for
an
approximate 48% equity interest. As of December 31, 1995,
the
Partnership held an approximate 12% equity interest in the
Fund
II, III, VI, and VII Joint Venture. The total cost to
develop
the Holcomb Bridge Road Property, excluding land, is
currently
estimated to be approximately $4,000,000, and it is
anticipated
that the remaining approximate $517,000 will be
contributed
$260,000 by Wells Fund VI and $257,000 by Wells Fund VII.
The
Partnership is not obligated to provide any additional
funding
on the Holcomb Bridge Property.
Fund III and Fund IV Joint Venture
On March 27, 1991, the Partnership and Wells Real Estate
Fund
IV, L.P. ("Wells Fund IV"), a Georgia public limited
partnership
having Leo F. Wells, III and Wells Partners, L.P. as
General
Partners, entered into a Joint Venture Agreement known as
Fund
III and Fund VI Associates (the "Fund III - Fund IV
Joint
Venture"). As set forth above, Wells Partners, L.P.
is a
private limited partnership having Wells Capital,
Inc., a
General Partner of the Partnership, as its sold general
partner.
The investment objectives of Wells Fund IV are
substantially
identical to those of the Partnership. The Partnership
holds an
approximate 57.3% equity interest in the Fund III-Fund IV
Joint
Venture which owns and operates the multi-tenant retail
center
and an office building described below. As of December
31,
1995, the Partnership had contributed $8,119,603 and Wells
Fund
IV had contributed $6,131,677 for total contributions
of
$14,251,280 to the Fund III - Fund IV Joint Venture for
the
acquisition and development of the two properties as
described
below.
The Stockbridge Village Shopping Center
On April 4, 1991, the Fund III - Fund IV Joint Venture
purchased
13.62 acres of real property located in Clayton County,
Georgia,
for the purchase price of $3,057,729 including
acquisition
costs, for the purpose of developing, constructing and
operating
a shopping center known as the Stockbridge Village
Shopping
Center ("Stockbridge Property"). The Stockbridge
Property
consists of a multi-tenant shopping center
containing
approximately 113,011 square feet of which approximately
64,097
square feet is occupied by the Kroger Company, a retail
grocery
chain. The lease with the Kroger Company is for an initial
term
of 20 years commencing November 14, 1991, with an option
to
extend for four consecutive five-year periods. The annual
base
rent payable under the Kroger lease during the initial term
is
$492,692. The remaining 48,914 square feet is composed of
12
separate retail spaces and 3 free-standing buildings.
The
occupancy rates at the Stockbridge Property were 93% in
1995,
97% in 1994, 95% in 1993, 97% in 1992 and 84% in 1991.
The
average effective annual rental per square foot at
the
Stockbridge Property was $10.16 for 1995, $10.26 for 1994,
$9.13
for 1993, $7.34 for 1992 and $5.13 (annualized) for 1991.
As of December 31, 1995, the Partnership had contributed a
total
of $4,515,042 and Wells Fund IV had contributed a total
of
$5,047,132 to fund the total cost of approximately
$9,562,000
for the acquisition and development of the Stockbridge
Property.
The G.E. Building/Richmond
The G.E. Building is a two-story office building
containing
approximately 43,000 square feet located in Richmond,
Virginia
which was acquired by the Fund III-Fund IV Joint Venture on
July
1, 1992 for a purchase price of $4,687,600.
The entire G.E. Building is currently under a net lease
to
General Electric ("G.E."), a corporate office for the
lighting
division. The annual base rent payable is currently
$530,742
with annual base increases of 2% The G.E. lease expires
March
31, 2000, with an option to extend the lease for one
additional
five-year period. The occupancy rate at the G.E. Building
was
100% for the years ended December 31, 1995, 1994, 1993,
and
1992, the first year of ownership. The average effective
annual
rental per square foot at the G.E. Building is $12.27 for
1995,
1994, 1993, and 1992. As of December 31, 1995, a total
of
$4,689,106 had been incurred for the acquisition of the
G.E.
Building. Of this amount, Wells Fund IV contributed
$1,084,545
and the Partnership contributed $3,604,561 to the Fund III-
Fund
IV Joint Venture.
ITEM 3. LEGAL PROCEEDINGS.
There were no material pending legal proceedings or
proceedings
known to be contemplated by governmental authorities
involving
the Partnership during 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
No matters were submitted to a vote of the Limited
Partners
during the fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED
SECURITY
HOLDER MATTERS.
As of February 28, 1996, the Partnership had
19,635,965
outstanding Class A Units held by a total of 2,338
Limited
Partners and 2,544,540 outstanding Class B Units held by a
total
of 206 Limited Partners. The capital contribution per unit
is
$1.00. There is no established public trading market for
the
Partnership's limited partnership units, and it is
not
anticipated that a public trading market for the units
will
develop. Under the Partnership Agreement, the General
Partners
have the right to prohibit transfers of units.
Class A Unit holders are entitled to an annual 8% non-
cumulative
distribution preference over Class B Unit holders as
to
distributions from Net Cash From Operations, as defined in
the
Partnership Agreement to mean Cash Flow, less adequate
cash
reserves for other obligations of the Partnership for
which
there is no provision, but are initially allocated none of
the
depreciation, amortization, cost recovery and interest
expense.
These items are allocated to Class B Unit holders until
their
capital account balances have been reduced to zero.
Net Cash From Operations to the Limited Partners is
distributed
on a quarterly basis unless Limited Partners elect to have
their
cash distributions paid monthly. Cash distributions made to
the
Limited Partners during the two most recent fiscal years
were as
follows:
Per Class A Unit Per
Class B
Unit
Distributions For Total Cash Investment Return
of
General
Quarter Ended Distribution Income
Capital
Return of Capital Partner
March 31, 1994$392,719 $0.02 $0.00 $0.00
$0.00
June 30, 1994 $392,719 $0.02 $0.00
$0.00 $0.00
Sept. 30, 1994 $392,719 $0.02 $0.00
$0.00 $0.00
Dec. 31, 1994 $451,357 $0.02 $0.00
$0.02 $0.00
March 31, 1995$392,719 $0.02 $0.00 $0.00
$0.00
June 30, 1995 $392,719 $0.02 $0.00
$0.00 $0.00
Sept. 30, 1995 $392,719 $0.02 $0.00
$0.00 $0.00
Dec. 31, 1995 $611,487 $0.02
$0.00
$0.08$15,205
The fourth quarter distribution was accrued for
accounting
purposes in 1995, and was not actually paid to the
Limited
Partners holding Class A and Class B units until February
1996.
The General Partners anticipate that cash distributions
to
Limited Partners holding Class A units will continue in 1996
at
a level at least comparable with 1995 cash
distributions;
however, there is no guarantee of this.
ITEM 6. SELECTED FINANCIAL DATA.
The following sets forth a summary of the selected
financial
data for the fiscal years ended December 31, 1995, 1994,
1993,
1992, and 1991.
1995 1994 1993 1992
1991
Total assets
$18,059,571$18,561,131$19,006,762$19,417,510
$19,593,213
Total revenues 1,587,267 1,572,895 1,528,968
1,334,149 1,152,331
Net income 1,143,704 1,130,464 1,087,637
812,188 768,513
Net income allocated
to General Partners15,205 - - - -
Net income allocated to
Class A Limited Partners1,104,317 1,608,929 1,625,405
1,280,630 1,030,575
Net income (loss) allocated
to Class B Limited
Partners 24,182 (478,465) (537,768)
(468,442) (262,062)
Net income per Class A
Limited Partner Unit .06 .08 .08
.07
.05
Net income (loss) per Class B
Limited Partner Unit .01 (.19) (.21)
(.18)
(.10)
Cash Distributions to
Investors:
Investment Income
Class A Units .08 .08 .08
.06
.05
Return of Capital Class
A
Units
- - -
- -
- - -
Investment Income Class
B
Units
- - -
- -
- - -
Return of Capital Class
B Units .08 .02
- -
- - -
Cash Distribution to
General Partners $15,205
- - -
- - -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITIONS AND RESULTS OF OPERATION.
The following discussion and analysis should be read
in
conjunction with the Selected Financial Data and
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 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.
Results of Operations and Changes in Financial Conditions
General
Gross revenues of the Partnership were $1,587,267 for the
fiscal
year ended December 31, 1995, as compared to $1,572,895 for
the
fiscal year ended December 31, 1994, and $1,528,968 for
the
fiscal year ended December 31, 1993. The increase for 1995
over
1994 was due primarily to increase rental income at
the
Greenville Property due primarily to a full year of rent
from
the expansion of Team YASNY in late 1994. The increase for
1994
over 1993 was due primarily to increased income from
joint
ventures due to increased rental revenues.
Expenses of the Partnership remained relatively stable for
the
three year period and were $443,563 for the fiscal year
ended
December 31, 1995, $442,431 for the fiscal year ended
December
31, 1994 and $441,331 for the fiscal year ended December
31,
1993. In 1995, the increase in depreciation was offset
by a
decrease in operating expenses. Depreciation expense
increased
from 1994 to 1995 due to a change in the estimated useful
lives
of buildings and improvements from 40 years to 25 years.
For
further discussion of depreciation expense, please refer to
the
notes to the accompanying financial statements.
Net income of the Partnership was $1,143,704 for the fiscal
year
ended December 31, 1995, as compared to $1,130,464 for
the
fiscal year ended December 31, 1994, and $1,087,637 for
the
fiscal year ended December 31, 1993. The increase in net
income
for 1995 over 1994 is due primarily to increased rental
revenues
and for 1994 over 1993 is due primarily to increased income
from
joint ventures as noted above.
The Partnership's cash distributions to the Limited
Partners
holding Class A Units were $0.08 per unit for each of the
fiscal
year ended December 31, 1995, 1994 and 1993. Cash
distributions
to the Limited Partners holding Class B Units were $0.08
per
unit for fiscal year ended December 31, 1995 and $0.02 per
unit
for the fiscal year ended December 31, 1994.
These
distributions were a return of capital for the Class
B
Investors. No cash distributions were made to the
Limited
Partners holding Class B Units for the fiscal year
ended
December 31, 1993. The General Partners of the
Partnership
received cash distributions of $15,205 for the fiscal year
ended
December 31, 1995 since both Class A and Class B unit
holders
received the maximum of 8% per annum cash
distribution.
Distributions accrued for the fourth quarter of 1995,
which
include total distributions to Class B unit holders and
the
General Partners, were paid in February, 1996.
In March 1995, the Financial Accounting Standards Board
issued
Statement of Financial Accounting Standards ("SFAS") No.
121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-
Lived Assets to Be Disposed of", which is effective for
fiscal
years beginning after December 15, 1995. SFAS No.
121
establishes standards for determining when impairment losses
on
long-lived assets have occurred and how impairment losses
should
be measured. The joint ventures adopted SFAS No. 121,
effective
January 1, 1995. The impact of adopting SFAS No. 121 was
not
material to the financial statements of the joint ventures.
Property Operations
As of December 31, 1995, the Partnership owned interests in
the
following properties:
The Greenville Property
For the Year Ended
December
31
1995 1994 1993
Revenues:
Rental income $581,016 $573,942
$574,097
Other income 2,350 0
0
583,366 573,942 574,097
Expenses:
Depreciation 112,196 96,618
95,126
Management and leasing expenses 37,713
35,903 35,468
Other operating expenses 214,562
227,043 225,423
364,471 359,564 356,017
Net income $ 218,895 $214,378
$218,080
Occupied % 100% 100%
100%
Partnership's Ownership % in Property 100% 100%
100%
Cash Generated to the Partnership $340,569
$286,410 $300,095
Net Income Allocated to the Partnership $218,895
$214,378 $218,080
Rental income remained stable from 1993 to 1994 and
increased
from $573,942 for 1994 to $581,016 for 1995 due primarily
to a
full year of rent from the expansion of Team YASNY from
3,122
sq. ft. to 4,354 sq. ft. in late 1994. Expenses of
the
Greenville Property remained relatively stable for the
three
year period. In 1995, the increase in depreciation expense
due
to the change in the estimated useful lives of buildings
and
improvements as previously discussed under the "General"
section
of "Results of Operations and Changes in Financial
Conditions"
was offset by a decrease in other operating expenses.
The real estate taxes were $27,692 for 1995 and 1994,
and
$28,257 for 1993.
For comments on the general competitive conditions to which
the
property may be subject, see Item 1, Business, page 2.
For
additional information on the property, tenants, etc., see
Item
2, Properties, page 3.
The Atrium
For the Year
Ended
December 31
1995
1994 1993
Revenues:
Rental income $2,079,345$2,079,345
$2,079,345
Interest income 29,965
24,636 16,563
2,109,310 2,103,9812,095,908
Expenses:
Depreciation 517,507 475,928
481,196
Management and leasing expenses 142,761
142,735
141,362
Other operating expenses 451,362
504,609
493,449
1,111,630 1,123,2721,116,007
Net income $ 997,680$ 980,709
$ 979,901
Occupied % 100% 100%
100%
Partnership's Ownership % in Property 34.4%
34.4% 34.4%
Cash Distributed to the Partnership $ 589,206
$ 574,411 $
552,937
Net Income Allocated to the Partnership $ 343,202
$ 337,364 $
337,086
Revenues, expenses and net income have remained
relatively
stable for the years ended December 31, 1995, 1994 and 1993.
In
1995, the increase in depreciation expense due to the change
in
the estimated useful lives of buildings and improvements
as
previously discussed under the "General" section of "Results
of
Operations and Change in Financial Conditions" was offset
by a
decrease in other operating expenses. There were no
significant
decreases in any specific area of operating expenses.
The real estate taxes were $182,687 for 1995, $186,273 for
1994
and $232,609 for 1993.
The lease with Lockheed Company will expire on June 30,
1996,
and renewal is not anticipated at this time. The
Partnership
has responded to various potential tenants regarding
leasing
portions of the Atrium should Lockheed not renew. In the
event
that Lockheed does not renew its lease and the Partnership
is
unable to lease a substantial portion of the Atrium Property
at
rates at least comparable to the lease rates currently
being
paid under the Lockheed lease, the income generated from
the
Atrium Property could decrease significantly. In addition,
even
if the Partnership is able to obtain leases with new tenants
for
the Lockheed Project, such leases are likely to
require
substantial tenant finish and refurbishment expenditures by
the
Partnership, which could have the effect of
substantially
reducing future cash distributions to Limited Partners in
the
year tenants are acquired.
For comments on the general competitive conditions to which
the
property may be subject, see Item 1, Business, page 2.
For
additional information on the property, tenants, etc., see
Item
2, Properties, page 3.
The Brookwood Grill Property
For the Year
Ended
December 31
1995
1994
1993
Revenues - Rental income $230,316 $224,750
$224,750
Expenses:
Depreciation 63,446 58,659
58,659
Management and leasing expenses 29,351
30,217
30,768
Other operating expenses 45,175
44,553
43,442
137,972 133,429 132,869
Net income $92,344 $91,321
$91,881
Occupied % 100% 100%
100%
Partnership's Ownership % in Property 37.65%
37.65%
37.65%
Cash Distributed to the Partnership $ 58,009
$ 55,818 $
51,889
Net Income Allocated to the Partnership $ 34,767
$ 34,380 $
34,591
Rental income, expenses and net income have remained
relatively
stable for the years ended December 31, 1995, 1994 and 1993.
In
1995, the increase in depreciation expense due to the change
in
the estimated useful lives of buildings and improvements
as
previously discussed under the "General" section of "Results
of
Operations and Change in Financial Conditions" was offset
by a
decrease in other operating expenses which resulted
primarily
from an increase in expense reimbursements which are
netted
against operating expenses.
Real estate taxes were $39,668 for 1995, $38,091 for 1994,
and
$44,970 for 1993.
For comments on the general competitive conditions to which
the
property may be subject, see Item 1, Business, page 2.
For
additional information on the property, tenants, etc., see
Item
2, Properties, page 3.
The Stockbridge Village Shopping Center
For the Year
Ended
December 31
1995
1994
1993
Revenues:
Rental income $1,148,600$1,158,963
$1,031,545
Interest income 15,482
9,678 10,975
1,164,082 1,168,6411,042,520
Expenses:
Depreciation 249,689 218,742
188,957
Management and leasing expenses 105,251
124,458
113,626
Other operating expenses 101,047
84,646
127,085
455,987 427,846 429,668
Net income $708,095 $740,795
$612,852
Occupied % 93% 97%
95%
Partnership's Ownership % in Property 57.3%
57.3% 58.5%
Cash Distributed to the Partnership $605,097
$538,400
$455,102
Net Income Allocated to the Partnership $405,856
$425,777
$377,280
Rental income decreased to $1,148,600 for 1995 as compared
to
$1,158,963 in 1994 due to decreased occupancy resulting from
the
early termination of a lease for 8,025 square feet.
Rental
income increased to $1,158,963 for 1994 as compared
to
$1,031,545 in 1993 due to the development of a free
standing
building and increased occupancy at the property. Expenses
of
the property remained relatively stable for 1994 as compared
to
1993 but increased from $427,846 in 1994 to $455,987 in 1995
due
primarily to the increase in depreciation expense as a
result of
the change in the estimated useful lives of buildings
and
improvements as previously discussed under the "General"
section
of "Results of Operations and Change in Financial
Conditions".
Net income of the property increased to $740,795 in 1994
as
compared to $612,852 in 1993 due to increased occupancy,
as
discussed above, and decreased to $708,095 in 1995 as
compared
to $740,795 in 1994 due to increased depreciation
expense
discussed above.
Real estate taxes were $120,899 for 1995, $130,364 for 1994,
and
$108,420 for 1993.
The Partnership's ownership percentage in the Fund III -
Fund IV
Joint Venture decreased to 57.3% for 1995 and 1994 as
compared
to 58.5% in 1993 due to the additional investment by Wells
Fund
IV in the Joint Venture in 1994.
For comments on the general conditions to which the property
may
be subject, see Item 1, Business, page 2. For
additional
information on the property, tenants, etc., see Item
2,
Properties, page 3.
The G.E. Building/Richmond
For the Year
Ended
December 31
1995
1994
1993
Revenues:
Rental income $ 527,425$ 527,425
$ 527,425
Expenses:
Depreciation 132,727 112,639
112,639
Management and leasing expenses
23,696 26,572
38,721
Other operating expenses 25,438
63,144
69,453
181,861 202,355 220,813
Net Income $345,564 $325,070
$306,612
Occupied % 100% 100%
100%
Partnership's Ownership % in Property 57.3%
57.3% 58.5%
Cash Distributed to the Partnership $253,847
$242,675
$239,005
Net Income Allocated to the Partnership $198,065
$186,766
$189,388
Rental income remained constant for 1995, 1994, and 1993.
Total
expenses decreased to $181,861 in 1995 from $202,355 in 1994
and
$220,813 in 1993. In 1995, the increase in depreciation
expense
due to the change in the estimated useful lives of buildings
and
improvements as previously discussed under the "General"
section
of "Results of Operations and Change in Financial
Conditions"
was offset by a decrease in other operating expenses as
compared
to 1994 and 1993 which was primarily the result of
decreased
legal fees following settlement of the Thalhimer suit
described
below. Total expenses of $220,813 in 1993 were higher
than
total expenses of $202,355 in 1994 due to management and
leasing
fees.
On May 10, 1993, the leasing agent, Morton G. Thalhimer,
Inc.,
filed suit in the U.S. District Court for the Eastern
District
of Virginia, Richmond, Virginia, against the Partnership,
Wells
Fund IV and the General Partners for leasing commissions
due
over the original term of the G.E. lease (excluding
renewals)
estimated to be approximately $163,500. G.E. and the seller
of
the property were named as third party defendants in the
suit
alleging that they were the parties who should be
financially
responsible for these leasing commissions. Pursuant to
the
Settlement Agreement entered into with Thalhimer, commencing
in
January, 1994, and during each month thereafter, Thalhimer
is
only entitled to three percent (3%) of the monthly
rent
(exclusive of operating costs reimbursements, real estate
tax
and insurance pass-throughs and similar items) received by
the
landlord under the G.E. Lease (including any renewals
or
extensions of the lease or taking of additional space),
and
except as set forth in the Settlement Agreement, the
Landlord
(the Fund III-Fund IV Joint Venture) has no further
obligation
to Thalhimer or its successors or assigns under the Lease:
G.E.
has assumed 1 1/2% of the 3% and the Fund III-Fund IV
Joint
Venture has assumed the remaining 1 1/2% of the total 3%.
Due to decreased expenses in 1995 as compared to 1994 and
in
1994 as compared to 1993, net income increased to $345,564
for
1995, as compared to $325,564 in 1994 and $306,612 in 1993.
The Partnership's ownership percentage in the Fund III -
Fund IV
Joint Venture decreased to 57.3% for 1995 and 1994 as
compared
to 58.5% in 1993 due to the additional investment by Wells
Fund
IV in the Joint Venture in 1994 to fund further development
of
the Stockbridge Village Shopping Center.
Under the terms of the lease, G.E. pays the real estate
taxes
directly.
For comments on the general conditions to which the property
may
be subject, see Item 1, Business, page 2. For
additional
information on the property, tenants, etc., see Item
2,
Properties, page 3.
Liquidity and Capital Resources
During its offering, which terminated on October 23, 1990,
the
Partnership raised a total of $22,206,319 in capital through
the
sale of 22,206,310 units. No additional units will be sold
by
the Partnership. From the original funds raised,
the
Partnership has invested a total of $17,765,137 in
properties,
paid $1,554,442 in acquisition and advisory fees, $2,664,668
in
selling commissions and organization and offering expenses,
and
is maintaining a working capital reserve of $222,072.
Since the Partnership is an investment partnership formed
for
the purpose of acquiring, owning and operating income-
producing
real property and has invested all of its funds available
for
investment, it is highly unlikely that the Partnership
will
acquire interests in any additional properties, and
the
Partnership's capital resources are anticipated to
remain
relatively stable over the holding period of its
investments.
The Partnership is required to maintain working capital
reserves
in an amount equal to the cash operating expenses estimated
to
be required to operate the Partnership for a six month
period,
not to exceed 3% or be reduced below 1% of offering
proceeds
available for investment in properties. The General
Partners
believe such working capital reserves will be adequate.
The Partnership's net cash provided by operating
activities
remained relatively stable for 1993 and 1994 but increased
in
1995 to $182,077 from $57,271 in 1994 due to an increase in
net
income, distributions received from joint ventures, and
accounts
receivables. Net cash used in investing activities
decreased to
zero in 1995 due to all funds available for investing
having
been invested in prior years. Cash and cash
equivalents
remained relatively stable for the years ending December
31,
1995, 1994, and 1993. The Partnership distributes
cash
available less reserves, and as a result, the level of
cash
remains stable.
The Partnership's distributions paid and payable through
the
fourth quarter of 1995 have been paid from Net Cash
from
Operations and from distributions received from its
equity
investment in joint ventures and the Partnership
anticipates
that distributions will continue to be paid on a quarterly
basis
from such sources. The Partnership expects to meet
liquidity,
and budget demands through cash flow from operations.
The Partnership is unaware of any demands, commitments,
events
or capital expenditures other than that which is required
for
the normal operations of its properties that will result in
the
Partnership's liquidity increasing or decreasing in any
material
way. The Partnership is not obligated to provide any
additional
funding on the Holcomb Bridge Road Property. Additional
funding
for the Holcomb Bridge Road Property is anticipated to
be
provided by capital contributions from Wells Fund VI and
Wells
Fund VII, which have reserved sufficient capital for
this
purpose.
Inflation
Real Estate has not been affected significantly by inflation
in
the past three years due to the relatively low inflation
rate.
There are provisions in the majority of tenant leases
executed
by the Partnership to protect the Partnership from the
impact of
inflation. These leases contain common area maintenance
charges
(CAM charges), real estate tax and insurance reimbursements
on a
per square foot basis, or in some cases, annual
reimbursements
of operating expenses above a certain per square foot
allowance.
These provisions reduce the Partnership's exposure to
increases
in costs and operating expenses resulting from inflation.
In
addition, a number of the Partnership's leases are for terms
of
less than five years which may permit the Partnership to
replace
existing leases with new leases at higher base rental rates
if
the existing leases are below market rate. There is
no
assurance, however, that the Partnership would be able
to
replace existing leases with new leases at higher base
rentals.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Registrant and
supplementary
data are detailed under Item 14(a) and filed as part of
the
report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The Partnership's change in accountants during 1995
was
previously reported in the Partnership's Form 8-K
dated
September 11, 1995. There were no disagreements with
the
Partnership's accountants or other reportable events
during
1995.
PART III
ITEM 10. GENERAL PARTNERS OF THE PARTNERSHIP.
Wells Capital, Inc. Wells Capital, Inc. ("Capital")
is a
Georgia corporation formed in April 1984. The executive
offices
of Capital are located at 3885 Holcomb Bridge Road,
Norcross,
Georgia 30092. Leo F. Wells, III is the sole shareholder,
sole
Director and the President of Capital.
Leo F. Wells, III. Mr. Wells is a resident of Atlanta,
Georgia,
is 52 years of age and holds a Bachelor of
Business
Administration Degree in Economics from the University
of
Georgia. Mr. Wells is the President and sole Director
of
Capital. Mr. Wells is the President of Wells &
Associates,
Inc., a real estate brokerage and investment company formed
in
1976 and incorporated in 1978, for which he serves as
principal
broker. Mr. Wells is also currently the sole Director
and
President of Wells Management Company, Inc., a
property
management company he founded in 1983. In addition, Mr.
Wells
is the President and Chairman of the Board of Wells
Investment
Securities, Inc., Wells & Associates, Inc., and Wells
Management
Company, Inc., which are affiliates of the General
Partners.
From 1980 to February 1985, Mr. Wells served as Vice-
President
of Hill-Johnson, Inc., a Georgia corporation engaged in
the
construction business. From 1973 to 1976, he was
associated
with Sax Gaskin Real Estate Company and from 1970 to 1973,
he
was a real estate salesman and property manager for Roy
D.
Warren & Company, an Atlanta real estate
company.
ITEM 11. COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.
The following table summarizes the compensation and fees
paid to
the General Partners and their affiliates during the year
ended
December 31, 1995.
CASH COMPENSATION TABLE
(A)
(B)
(C)
Name of individual or Capacities in which
served
Cash Compensation
number in group - Form of Compensation
____________________________________________________________
____
____________
Wells Management Property Manager
- -
$204,671 (1)
Company, Inc. Management and Leasing
Fees
Wells Capital, Inc. General Partner -
Partnership
$ 12,164
cash flow distributions
Leo F. Wells, III General Partner -
Partnership
$ 3,041
cash flow distributions
(1) The majority of these fees are not paid directly by
the Partnership but are paid by the joint venture
entities which own properties for which the property
management and leasing services relate and include
management and leasing fees which were accrued for
accounting purposes in 1995 but not actually paid
until January, 1996.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND
MANAGEMENT.
No Limited Partner is known by the Partnership to
own
beneficially more than 5% of the outstanding units of
the
Partnership.
Set forth below is the security ownership of management as
of
February 29, 1996.
(1)
(2)
(3) (4)
Title of Class Name and Address of Amount
and
Nature Percent of Class
Beneficial Owner
of
Beneficial
Ownership
____________ __________________
_________________
______________
Class A Units Leo F. Wells, III
11,158.79
units (IRA, less than 1%
401(k) Plan)
Class B Units Leo F. Wells, III
1,750.00
units less than 1%
(401(k))
No arrangements exist which would, upon operation, result
in a
change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The compensation and fees paid or to be paid by the
Partnership
to the General Partners and their affiliates in connection
with
the operation of the Partnership are as follows:
Interest in Partnership Cash Flow and Net Sale
Proceeds. The General Partners will receive a
subordinated participation in net cash flow from
operations equal to 10% of net cash flow after the
Limited Partners have received preferential
distributions equal to 8% of their adjusted capital
contribution. For the year end December 31, 1995, the
General Partners received a cash distribution of
$15,205, allocated $12,164 to Wells Capital, Inc. and
$3,041 to Leo F. Wells, III. The General Partners
will also receive a subordinated participation in net
sale proceeds and net financing proceeds equal to 15%
of residual proceeds available for distribution after
the Limited Partners have received a return of their
adjusted capital contribution plus a 12% cumulative
return on their adjusted capital contribution. The
General Partners received no distribution from net
sales proceeds.
Property Management and Leasing Fees. Wells
Management Company, Inc., an affiliate of the General
Partners, will receive compensation for supervising
the management of the Partnership properties equal to
6% (3% management and 3% leasing) of rental income.
For the year ended December 31, 1995, Wells Management
Company, Inc. received $204,671 in management and
leasing fees. In no event will such fees exceed the
sum of (i) 6% of the gross receipts of each property,
plus (ii) a separate one-time fee for initial rent-up
or leasing-up of development properties in an amount
not to exceed the fee customarily charged in arm's-
length transactions by others rendering similar
services in the same geographic area for similar
properties. With respect to properties leased on a
net basis for a period of ten years or longer,
property management fees will not exceed 1% of gross
revenues from such leases, plus a one-time initial
leasing fee of 3% of the gross revenues which are
payable over the first five years of the term of such
net leases.
Real Estate Commissions. In connection with the
sale of Partnership properties, the General Partners
or their affiliates may receive commissions not
exceeding the lesser of (A) 50% of the commissions
customarily charged by other brokers in arm's-length
transactions involving comparable properties in the
same geographic area or (B) 3% of the gross sales
price of the property, and provided that payments of
such commissions will be made only after Limited
Partners have received prior distributions totalling
100% of their capital contributions plus a 6%
cumulative return on their adjusted capital
contributions. During 1995, no real estate
commissions were paid to the General Partners.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON
FORM 8-K.
(a) 1. Financial Statements
Information with respect to this item is contained on
Pages
F-2 to F-30 of this
Annual Report on Form 10-K. See Index to
Financial
Statements on Page F-1.
(a) 2. Financial Statement Schedule III
Information with respect to this item begins on Page S-
1 of
this Annual
Report on Form 10-K. See Index to Financial
Statements on
Page F-1.
(a) 3. The Exhibits filed in response to Item 601
of
Regulation S-K are listed on the Exhibit
Index attached hereto.
(b) No reports on Form 8-K were filed with the
Commission
during the fourth quarter of
1994.
(c) The Exhibits filed in response to Item 601 of
Regulation S-
K are listed on the Exhibit
Index attached hereto.
(d) See (a) 2 above.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of
the
Securities Exchange Act of 1934, the Registrant has duly
caused
this report to be signed on its behalf by the
undersigned,
thereunto duly authorized this 27th day of March, 1996.
Wells Real Estate Fund III,
L.P.
(Registrant)
By: /s/ Leo F. Wells, III
Leo F.
Wells, III
Individual General
Partner and as President
of Wells Capital, Inc., the
Corporate General Partner
Pursuant to the requirements of the Securities Exchange
Act
of 1934, this report has been signed below by the
following
person on behalf of the registrant and in the capacity as
and on
the date indicated.
Signature Title
/s/ Leo F. Wells, III
Individual
General Partner, March 27, 1996
Leo F. Wells, III President
and
Sole Director
of
Wells
Capital, Inc.
Corporate General Partner
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS
FILED
PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRARS WHICH
HAVE
NOT BEEN REGISTERED PURSUANT TO SECTION 12 OF THE ACT.
No annual report or proxy material relating to an
annual or
other meeting of security holders has been sent to
security
holders.
INDEX TO THE FINANCIAL STATEMENTS
Financial Statements
Page
Independent Auditor's Report
F2
Balance Sheets as of December 31, 1995 and 1994
F4
Statements of Income for the Years ended
December 31, 1995, 1994, and 1993
F5
Statements of Partners' Capital for the Years ended
December 31, 1995, 1994, and 1993
F6
Statements of Cash Flows for the Years ended
December 31, 1995, 1994 and 1993
F7
Notes to Financial Statements for December 31, 1995,
1994, AND 1993
F8
WELLS REAL ESTATE FUND III, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
1995 1994
REAL ESTATE ASSETS, at cost (Note 1):
Land $ 576,350 $
576,350
Building and improvements, less accumulated
depreciation of $454,905 and $342,709 at
December 31, 1995 and 1994, respectively
3,110,696 3,222,892
Total real estate assets 3,687,046 3,799,242
INVESTMENT IN JOINT VENTURES (Note 3)13,446,045 13,970,314
CASH AND CASH EQUIVALENTS (Note 1)500,327 318,250
DUE FROM AFFILIATES (Note 2) 336,216 352,504
ACCOUNTS RECEIVABLE 60,841 85,796
PREPAID EXPENSES AND OTHER ASSETS 29,096 35,025
Total assets $18,059,571 $18,561,131
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses$ 5,035 $19,136
Partnership distributions payable617,810 458,890
Due to affiliates 6,269 6,708
Total liabilities 629,114 484,734
COMMITMENTS AND CONTINGENCIES (Note 9)
PARTNERS' CAPITAL:
Limited partners:
Class A 17,430,457 17,897,016
Class B 0 179,381
Total partners' capital 17,430,457 18,076,397
Total liabilities and partners' capital$18,059,571 $18,561,131
The accompanying notes are an integral part of these balance
sheets.
WELLS REAL ESTATE FUND III, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND
1993
1995 1994 1993
REVENUES:
Rental income (Note 5)$ 581,016 $ 573,942
$574,097
Equity in income of joint
ventures (Note 3) 981,890 984,287 938,344
Interest income 22,011 14,666 16,527
Other income 2,350 0 0
1,587,267 1,572,895 1,528,968
EXPENSES:
Management and leasing fees
(Note 2) 37,713 35,903 35,468
Lease acquisition costs
(Note 2) 34,981 35,644 35,901
Operating costs--rental
property 179,581 191,400 189,522
Depreciation and amortization112,196 96,618 103,157
Legal and accounting 16,984 17,677 18,396
Computer costs 5,852 6,270 5,540
Partnership administration
(Note 2) 56,256 58,919 53,347
443,563 442,431 441,331
NET INCOME $1,143,704
$1,130,464$1,087,637
NET INCOME ALLOCATED TO
GENERAL PARTNERS $ 15,205 $ 0 $ 0
NET INCOME ALLOCATED TO
CLASS A LIMITED PARTNERS$1,104,316 $1,608,929 $1,625,405
NET INCOME (LOSS) ALLOCATED
TO CLASS B LIMITED PARTNERS$ 24,183 $ (478,465) $ (537,768)
NET INCOME PER CLASS A
LIMITED PARTNER UNIT$ 0
.06$
0.08$
0.08
NET INCOME (LOSS) PER CLASS B
LIMITED PARTNER UNIT$ 0
.01$
(0.19)$
(0.21)
CASH DISTRIBUTION TO
GENERAL PARTNERS $ 15,205 $ 0 $ 0
CASH DISTRIBUTION PER CLASS A
LIMITED PARTNER UNIT$
0.08$
0.08$
0.08
CASH DISTRIBUTION PER CLASS B
LIMITED PARTNER UNIT$ 0
.08$
0.02$
0.00
The accompanying notes are an integral part of hese
statements.
WELLS REAL ESTATE FUND III, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995,
1994, AND 1993
Limited Partners Total
Class A Class B
General Partners'
Units Amount Units Amount Partners Capital
$10,000)
BALANCE,
December 31, 1992 19,635,965
$17,771,8342,544,540 $1,254,250
$0 $19,026,084
Net income (loss) 0 1,625,405 0 (537,768) 0 1,087,637
Partnership distributions 0(1,538,274) 0 0 0
(1,538,274)
BALANCE,
December 31, 1993 19,635,96517,858,965
2,544,540 716,482 018,575,447
Net income (loss) 0 1,608,929 0 (478,465) 0 1,130,464
Partnership distributions 0(1,570,878) 0 (58,636)
0 (1,629,514)
BALANCE,
December 31, 1994 19,635,96517,897,016
2,544,540 179,381 018,076,397
Net income 0 1,104,3160 24,183 15,205 1,143,704
Partnership distributions 0(1,570,875) 0 (203,564)
(15,205)(1,789,644)
BALANCE,
December 31, 1995 19,635,965$17,430,457 2,544,540 $
0 $ 0 $17,430,457
The accompanying notes are an integral
part of these statements.
WELLS REAL ESTATE FUND III, L.P.
(A GEORGIA PUBLIC LIMITED
PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1995, 1994, AND 1993
1995
1994
1993
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $1,143,704 $1,130,464 $1,087,637
Adjustments to reconcile net income
to net cash provided by
operating activities:
Equity in income of joint ventures(9
81,890) (984,287) (938,344)
Distributions received from joint
ventures 1,522,447 1,379,536 1,303,959
Distributions to partners from
accumulated earnings (1,630,724) (1,568,752) (1,509,545)
Depreciation and amortization112,196 96,618 103,157
Changes in assets and liabilities:
Accounts receivable 24,955 2,715 (19,378)
Prepaids and other assets 5,929 8,321 386
Accounts payable (14,101) (5,983) 7,649
Due to affiliates (439) (1,361) 3,511
Total adjustments (961,627) (1,073,193) (1,048,605)
Net cash provided by operating
activities 182,077 57,271 39,032
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in real estate 0 (51,984) (24,863)
Investment in joint ventures 0 0 (51,568)
Net cash used in investing
activities 0 (51,984) (76,431)
NET INCREASE (DECREASE) IN CASH AND
CASH
EQUIVALENTS 182,077 5,287 (37,399)
CASH AND CASH EQUIVALENTS, beginning
of year 318,250 312,963 350,362
CASH AND CASH EQUIVALENTS, end of
year $ 500,327 $ 318,250 $ 312,963
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES:
Deferred project costs applied to
joint venture properties$
0 $ 5,653 $ 17,503
The accompanying notes are an integral part of these
statements.
Wells Real Estate Fund III, L.P.
(A Georgia Public Limited Partnership)
Financial Statements as of December 31, 1995, 1994, and 1993
Together With
Auditors' Report
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Wells Real Estate Fund III,
L.P.:
We have audited the accompanying balance sheet of WELLS
REAL ESTATE FUND III, L.P. (a Georgia public limited
partnership) as of December 31, 1995 and the related
statements of income, partners' capital, and cash flows
for the year then ended. These financial statements
and the schedule referred to below are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these
financial statements and schedule based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
schedule are free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Wells Real Estate Fund III, L.P.
as of December 31, 1995 and the results of its
operations and its cash flows for the year then ended
in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a
whole. Schedule III--Real Estate Investments and
Accumulated Depreciation for the year ended
December 31, 1995 is presented for purposes of
complying with the Securities and Exchange Commission's
rules and is not part of the basic financial
statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states
in all material respects the financial data required to
be set forth therein in relation to the basic financial
statements taken as a whole.
Atlanta, Georgia
January 12, 1996
WELLS REAL ESTATE FUND III, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Wells Real Estate Fund III, L.P. (the
"Partnership") is a public limited partnership
organized on July 31, 1988, under the laws of the
state of Georgia. The general partners are Leo F.
Wells III and Wells Capital, Inc. (the "Company").
The Partnership has two classes of limited
partnership interests, Class A and Class B units.
Limited partners owning a majority of the units may
vote to, among other things, (a) amend the
partnership agreement, subject to certain
limitations, (b) change the business purpose or
investment objectives of the Partnership, and
(c) remove a general partner. Each limited
partnership unit has equal voting rights,
regardless of class.
The Partnership was formed to acquire and operate
commercial real properties, including properties
which are either to be developed, currently under
development or construction, newly constructed, or
have operating histories. The Partnership owns an
office building in Greenville, North Carolina,
directly. In addition, the Partnership owns an
interest in the following properties through joint
ventures between the Partnership and other Wells
Real Estate funds: (i) The Atrium, an office
building in Houston, Texas, (ii) the Brookwood
Grill, a restaurant located in Roswell, Georgia,
(iii) the Stockbridge Village Shopping Center, a
retail shopping center located in Stockbridge,
Georgia, southeast of Atlanta, Georgia, (iv) the
G.E. Lighting National Customer Center, a two-story
office building located in Richmond, Virginia, and
(v) an office/retail center currently being
developed in Roswell, Georgia (Note 3).1
Use of Estimates and Factors Affecting the
Partnership
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. Actual
results could differ from those estimates.
One significant tenant contributed approximately
22% of rental income to the Partnership for the
year ended December 31, 1995. This tenant's lease
expires in June 1996. In the event that the
Partnership is unable to lease a substantial
portion of The Atrium at lease rates at least
comparable to the lease rates being paid under the
current lease, the income generated from The Atrium
could decrease significantly following the
expiration of the lease. In addition, even if the
Partnership is able to obtain leases with new
tenants for The Atrium, such leases are likely to
require substantial tenant finish and refurbishment
expenditures by the Partnership, which could have
the effect of substantially reducing future cash
distributions to the partners.
Income Taxes
The Partnership is not subject to federal or state
income taxes, and therefore, none have been
provided for in the accompanying financial
statements. The partners are required to include
their respective share of profits and losses in
their individual income tax returns.
Distribution of Net Cash From Operations
Cash available for distribution is distributed on a
cumulative noncompounded basis to limited partners
quarterly. In accordance with the partnership
agreement, distributions first are paid to limited
partners holding Class A units until they have
received an 8% return on their adjusted capital
contributions, as defined. Cash available for
distribution is then distributed to limited
partners holding Class B units until they have
received an 8% return on their adjusted capital
contributions, as defined.
Distribution of Sales Proceeds
Upon sales of properties, the net sales proceeds
are distributed in the following order:
To limited partners until all limited
partners have received 100% of their
adjusted capital contributions, as defined
To limited partners holding Class B units
until they receive an amount equal to the
net cash available for distribution received
by the limited partners holding Class A
units
To all limited partners until they receive a
cumulative 12% per annum return on their
adjusted capital contributions, as defined
To all limited partners until they receive
an amount equal to their respective
cumulative distributions
To all the general partners until they have
received 100% of their capital contributions
Thereafter, 80% to the limited partners and
20% to the general partners
Allocation of Net Income, Net Loss, and Gain on Sale
Net income, as defined, of the Partnership will be
allocated each year in the same proportions that
net cash from operations is distributed to the
partners. To the extent the Partnership's net
income in any year exceeds net cash from
operations, it will be allocated 99% to the limited
partners and 1% to the general partners.
Net loss, depreciation, amortization, and cost
recovery deductions for each fiscal year will be
allocated as follows: (a) 99% to the limited
partners holding Class B units and 1% to the
general partners until their capital accounts are
reduced to zero, (b) then to any partner having a
positive balance in his capital account in an
amount not to exceed such positive balance, and
(c) thereafter to the general partners.
Gain on the sale or exchange of the Partnership's
properties will be allocated generally in the same
manner that the net proceeds from such sale are
distributed to partners after the following
allocations are made, if applicable,
(a) allocations made pursuant to a qualified income
offset provision in the partnership agreement,
(b) allocations to partners having negative
accounts until all negative capital accounts have
been restored to zero; and (c) allocations to
Class B limited partners in amounts equal to
deductions for depreciation, amortization, and cost
recovery previously allocated to them with respect
to the specific partnership property sold, but not
in excess of the amount of gain on sale recognized
by the Partnership with respect to the sale of such
property.
Real Estate Assets
Real estate assets held by the Partnership directly
or through investments in affiliated joint ventures
are stated at the lower of depreciated cost or net
realizable value, which is calculated based upon
the sum of undiscounted estimated future cash flows
from each real estate project. Major improvements
and betterments are capitalized when they extend
the useful life of the related asset. All ordinary
repairs and maintenance are expensed as incurred.
In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting
Standards ("SFAS") No. 121 , "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which is effective for
fiscal years beginning after December 15, 1995.
SFAS No. 121 establishes standards for determining
when impairment losses on long-lived assets have
occurred and how impairment losses should be
measured. The Partnership and the entities in
which it holds a joint venture interest adopted
SFAS No. 121, effective January 1, 1995. The
impact of adopting SFAS No. 121 was not material to
the financial statements of the Partnership or its
affiliated joint ventures.
Management continually monitors events and changes
in circumstances that could indicate carrying
amounts of real estate assets may not be
recoverable. When events or changes in
circumstances are present that indicate the
carrying amount of real estate assets may not be
recoverable, management assesses the recoverability
of real estate assets under SFAS No. 121 by
determining whether the carrying value of such real
estate assets will be recovered through the future
cash flows expected from the use of the asset and
its eventual disposition. Management has
determined that there has been no impairment in the
carrying value of real estate assets held by the
Partnership or its affiliated joint ventures as of
December 31, 1995.
Depreciation for buildings and improvements is
calculated using the straight-line method over the
useful lives of the real estate assets. Effective
October 1, 1995, the Partnership and its affiliated
joint ventures revised their estimate of the useful
lives of buildings and improvements from 40 to 25
years. This change was made to better reflect the
estimated periods during which such assets will
remain in service. The change had the effect on
the Partnership, directly and through its ownership
interest in joint ventures, of increasing
depreciation expense approximately $61,167 in the
fourth quarter of 1995.
Revenue Recognition
All leases on real estate assets held by the
Partnership are classified as operating leases and
the related rental income is recognized on a
straight-line basis over the terms of the
respective leases.
Deferred Lease Acquisition Costs
Costs incurred to procure operating leases are
capitalized and amortized on a straight-line basis
over the terms of the related lease.
Investment in Joint Ventures
The Partnership does not have control over the
operations of the joint ventures; however, it does
exercise significant influence. Accordingly,
investments in joint ventures are recorded using
the equity method of accounting. The joint
ventures follow the same significant accounting
policies as the Partnership. Cash is paid from the
joint ventures to the Partnership quarterly.
Cash available for distribution and allocations of
profit and loss to the Partnership by the joint
ventures are made in accordance with the terms of
the individual joint venture agreements.
Generally, these items are allocated in proportion
to the partners' respective ownership interests.
2Cash and Cash Equivalents
For the purposes of the statements of cash flows,
the Partnership considers all highly liquid
investments purchased with an original maturity of
three months or less to be cash equivalents. Cash
equivalents include cash and short-term
investments. Short-term investments are stated at
cost, which approximates fair value, and consist of
investments in money market accounts.
Per Unit Data
Net income per unit with respect to the Partnership
for the years ended December 31, 1995, 1994, and
1993 is computed based on the weighted average
number of shares outstanding during the period.
Reclassifications
Certain 1993 and 1994 items have been reclassified
to conform with 1995 financial statement
presentation.3
2. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1995 and 1994
represents the Partnership's share of cash to be
distributed for the fourth quarters of 1995 and
1994, respectively, as follows:
1995 1994
Fund III and IV Associates $197,113 $203,077
Fund II and III Associates--The Atrium 125,725
126,392
880 Property--Brookwood Grill13,378 23,035
$336,216 $352,504
The Partnership entered into a property management
agreement with Wells Management Company, Inc.
("Wells Management"), an affiliate of the general
partners. In consideration for supervising the
management of the Partnership's properties, the
Partnership will generally pay Wells Management
management and leasing fees equal to (a) 3% of the
gross revenues for management and 3% of the gross
revenues for leasing (aggregate maximum of 6%) plus
a separate fee for the one-time initial lease-up of
newly constructed properties in an amount not to
exceed the fee customarily charged in arm's-length
transactions by others rendering similar services
in the same geographic area for similar properties
or (b) in the case of commercial properties which
are leased on a long-term net basis (ten or more
years), 1% of the gross revenues except for initial
leasing fees equal to 3% of the gross revenues over
the first five years of the lease term.
The Partnership incurred, both directly and at the
joint venture level, management and leasing fees
and lease acquisition costs of $204,671, $201,112,
and $200,195 for the years ended December 31, 1995,
1994 and 1993, respectively, which were paid to
Wells Management.
The Company performs certain administrative
services for the Partnership, such as accounting
and other partnership administration, and incurs
the related expenses. Such expenses are allocated
among the various Wells Real Estate funds based on
time spent on each fund by individual
administrative personnel. In the opinion of
management, such allocation is a reasonable
estimation of such expenses.
The general partners are also general partners of
other Wells Real Estate funds. As such, there may
exist conflicts of interest where the general
partners, while serving in the capacity as general
partners of other Wells Real Estate funds, may be
in competition with the Partnership for tenants in
similar geographic markets.
3. INVESTMENT IN JOINT VENTURES
4The Partnership's investment and percentage
ownership in the joint ventures at December 31,
1995 and 1994 are summarized as follows:
1995 1994
Amount Percent Amount
Percent
10% 10%
Fund III and IV Associates$ 8,234,366 57% $ 8,489,389 57%
Fund II and III Associates--
The Atrium 3,815,165 34 4,061,169 34
880 Property--Brookwood Grill 1,396,514 38 1,419,756 38
$13,446,045 $13,970,314
The following is a roll forward of the
Partnership's investment in joint ventures for the
years ended December 31, 1995 and 1994:
1995 1994
Investment in joint ventures, beginning of period $13,970,314
$14,397,329
Equity in income of joint ventures981,890 984,287
Distributions from joint ventures(1,506,159) (1,411,302)
Investment in joint ventures, end of period
$13,446,045 $13,970,314
Fund II and III Associates
On April 3, 1989, the Partnership entered into a
joint venture agreement with Fund II and II-OW
joint venture The new joint venture, Fund II and
III Associates, was formed for the purpose of
investing in commercial real properties. In April
1989, Fund II and III Associates acquired The
Atrium at Nassau Bay, a four-story office building
located in Nassau Bay, Texas. In 1991, Fund II and
II-OW joint venture contributed its interest in a
parcel of land known as the 880 Property located in
Roswell, Georgia, to Fund II and III Associates.
The property is a 5.8 acre tract of land. A
restaurant was developed on 1.3 acres and is
currently operating as the Brookwood Grill
restaurant. The remaining 4.6 acres of the 880
Property were transferred to the Fund II, III, VI,
and VII Associates joint venture during 1995.
Fund II and III Associates' investment in this
transferred parcel of the 880 Property was
$1,729,116 at December 31, 1995, which represented
a 33% interest.
Following are the financial statements for Fund II
and III Associates--The Atrium:
FUND II AND III ASSOCIATES--THE ATRIUM
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
Assets
1995 1994
Real estate assets, at cost:
Land $ 1,504,743 $ 1,504,743
Building and improvements, less accumulated
depreciation of $3,177,917 in 1995 and
$2,660,410 in 1994 9,489,637 9,991,643
Total real estate assets 10,994,380 11,496,386
Cash and cash equivalents 846,173 684,753
Accounts receivable 113,362 340,086
Prepaid expenses and other assets35,21635,216
Total assets $11,989,131 $12,556,441
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 527,751 $364,387
Partnership distributions payable365,481 367,424
Due to affiliates 6,802 20,405
Total liabilities 900,034 752,216
Partners' Capital:
Fund II and II-OW 7,273,932 7,743,056
Wells Real Estate Fund III3,815,165 4,061,169
Total partners' capital 11,089,097 11,804,225
Total liabilities and partners' capital$11,989,131
$12,556,441
FUND II AND III ASSOCIATES--THE ATRIUM
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1995 1994 1993
Revenues:
Rental income $2,079,345 $2,079,345 $2,079,345
Interest income 29,965 24,636 16,563
2,109,310 2,103,981 2,095,908
Expenses:
Management and leasing fees142,761 142,735 141,362
Operating costs--rental property 419,152 419,752 444,547
Depreciation 517,507 475,928 481,196
Legal and accounting 7,384 51,238 11,159
Computer costs 1,749 2,760 3,176
Partnership administration23,077 30,816 34,394
Amortization of organization costs 0 43 173
1,111,630 1,123,272 1,116,007
Net income $ 997,680 $ 980,709 $ 979,901
Net income allocated to Fund II
and II-OW $ 654,478 $ 643,344 $ 642,815
Net income allocated to Wells Real
Estate Fund III $ 343,202 $ 337,365 $ 337,086
FUND II AND III ASSOCIATES--THE ATRIUM
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Fund II
and
II-OW Wells Real
Estate
Fund III Total
Partners'
Capital
$1,000,000)
Balance, December 31, 1992$8,606,722 $4,514,066 $13,120,788
Net income 642,815 337,086 979,901
Partnership distributions(1,054,437) (552,936) (1,607,373)
Balance, December 31, 19938,195,100 4,298,216 12,493,316
Net income 643,344 337,365 980,709
Partnership distributions(1,095,388) (574,412) (1,669,800)
Balance, December 31, 19947,743,056 4,061,169 11,804,225
Net income 654,478 343,202 997,680
Partnership distributions(1,123,602) (589,206) (1,712,808)
Balance, December 31, 1995$7,273,932 $3,815,165 $11,089,097
FUND II AND III--THE ATRIUM
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1995 1994 1993
Cash flows from operating activities:
Net income $ 997,680 $ 980,709 $ 979,901
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 517,507 475,928 481,196
Changes in assets and liabilities:
Accounts receivable 226,724 226,768 262,786
Accounts payable 163,364 (146,603) 26,885
Due to affiliates (13,603) (13,604) (17,869)
Total adjustments 893,992 542,489 762,998
Net cash provided by operating activities 1,891,672 1,523,198 1,742,899
Cash flows from investing activities:
Investment in real estate assets(15,501) 0 (6,495)
Cash flows from financing activities:
Distributions to joint venture partners (1,714,751) (1,721,820)
(1,536,619)
Net increase (decrease) cash and cash
equivalents 161,420 (198,622) 199,785
Cash and cash equivalents, beginning of year 684,753 883,375 683,590
Cash and cash equivalents, end of year $ 846,173 $ 684,753 $
883,375
Following are the financial statements for 880
Property--Brookwood Grill:
880 Holcomb Bridge--Brookwood Grill
Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
Operating property:
Real estate assets, at cost:
Land $ 745,223
$2,070,465
Building and improvements, less accumulated
depreciation of $167,689 in 1995 and $154,727 in 1994 1,105,124
1,572,444
Construction in progress 0 30,173
Total operating real estate assets1,850,347 3,673,082
Investment in joint venture 1,729,116 0
Cash and cash equivalents 33,892 32,239
Accounts receivable 104,724 97,536
Prepaid expenses and other assets 34,184 39,752
Total assets $3,752,263
$3,842,609
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 1,180 $4,611
Due to affiliate 6,079 5,614
Partnership distributions payable 35,533 61,183
Total liabilities 42,792 71,408
Partners' capital:
Wells Real Estate Fund III 1,396,514 1,419,756
Fund II and II-OW 2,312,957 2,351,445
Total partners' capital 3,709,471 3,771,201
Total liabilities and partners' capital$3,752,263
$3,842,609
880 Holcomb Bridge--Brookwood Grill
Statements of Income
For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
Revenues:
Rental income $230,316 $224,750 $224,750
Expenses:
Management and leasing fees 23,783 24,649 25,195
Lease acquisition costs 5,568 5,568 5,573
Operating costs--rental property 15,508 24,397 20,120
Depreciation 63,446 58,659 58,659
Legal and accounting 14,028 8,984 5,853
Computer costs 1,749 2,676 3,042
Partnership administration 13,890 8,496 14,427
137,972 133,429 132,869
Net income $ 92,344 $ 91,321 $ 91,881
Net income allocated to Fund II and II-OW $ 57,577 $ 56,941 $ 57,290
Net income allocated to Wells Real Estate Fund III $
34,767 $ 34,380 $ 34,591
880 Holcomb Bridge--Brookwood Grill
Statements of Partners' Capital
For the Years Ended December 31, 1995, 1994, and 1993
Fund II
and II-OW Wells Real
Estate
Fund III Total
Partners'
Capital
$1,000,000)
Balance, at December 31, 1992$2,415,600 $1,458,492 $3,874,090
Net income 57,290 34,591 91,881
Partnership distributions (85,940) (51,889) (137,829)
Balance, at December 31, 19932,386,950 1,441,194 3,828,142
Net income 56,941 34,380 91,321
Partnership distributions (92,446) (55,818) (148,262)
Balance, at December 31, 19942,351,445 1,419,756 3,771,201
Net income 57,577 34,767 92,344
Partnership distributions (96,065) (58,009) (154,074)
Balance, at December 31, 1995$2,312,957 $1,396,514 $3,709,471
800 Property--Brookwood Grill
(A Georgia Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
Cash flows from operating activities:
Net income $ 92,344 $ 91,321 $ 91,881
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 63,446 58,659 58,659
Changes in assets and liabilities:
Accounts receivable (7,188) 30,281 (25,478)
Prepaids and other assets 5,568 (2,182) (13,177)
Accounts payable (3,431) (30,157) 32,591
Due to affiliates 465 374 556
Total adjustments 58,860 56,975 53,151
Net cash provided by operating activities 151,204 148,296 145,032
Cash flows from financing activities:
Advances (paid to) received from affiliate 30,173 (30,173)
0
Distributions to joint venture partners (179,724)(123,966) (118,580)
Net cash used in financing activities(149,551) 154,139
(118,586)
Net increase (decrease) in cash and cash equivalents 1,653 (5,843) 26,452
Cash and cash equivalents, beginning of year 32,239 38,082 11,630
Cash and cash equivalents, end of year $33,892 $ 32,239 $ 38,082
Supplemental disclosure of noncash items:
Transfer of real estate assets to joint venture for
partnership interest, net of accumulated
depreciation of $50,484 $1,729,116 $ 0 $ 0
Fund II, III, VI, and VII Associates
5On January 1, 1995, the Fund II and III Associates joint
venture entered into a joint venture agreement with Fund II
and II-OW, Wells Real Estate Fund VI, L.P., and Wells Real
Estate Fund VII, L.P. The joint venture was formed for the
purpose of acquiring, developing, operating, and selling real
properties. During 1995, Fund II and III Associates
contributed a 4.3-acre tract of land from its 880 Property to
the Fund II, III, VI, and VII Associates joint venture. The
land is currently under development.
The following is the balance sheet for Fund II, III, VI, and
VII Associates:
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Balance Sheet
December 31, 1995
Assets
Nonoperating real estate assets, at cost:
Land $1,325,242
Land improvements 403,874
Construction in progress 2,662,448
Total real estate assets 4,391,564
Cash and cash equivalents 1,321,378
Other assets 41,028
Total assets $5,753,970
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 474,905
Partners' capital:
Fund II and III Associates 1,729,116
Wells Real Estate Fund VI 1,028,210
Wells Real Estate Fund VII 2,521,739
Total partners' capital 5,279,065
Total liabilities and partners' capital $5,753,970
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statement of Partners' Capital
For the Period From Inception (January 1, 1995) to December 31,
1995
Fund II and
III-Associate Wells
Real Estate
Fund VI Wells Real
Estate
Fund VII Total
Partners'
Capital
$1,000,000) $1,000,000 $1,000,000
Balance, January 1, 1995$ 0 $ 0 $ 0
$ 0
Partnership contributions 1,729,116 1,028,210 2,521,739
5,279,065
Balance, at December 31, 1995 $1,729,116
$1,028,210 $2,521,739 $5,279,065
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statement of Cash Flows
For the Period From Inception (January 1, 1995) to
December 31, 1995
Cash flows from operating activities:
Net income $ 0
Adjustments to reconcile net income to net cash provided by
operating activities:
Changes in assets and liabilities:
Other assets (41,028)
Accounts payable 41,028
Total adjustments 0
Net cash used in operating activities 0
Cash flows from investing activities:
Investment in real estate (2,228,571)
Cash flows from financing activities:
Contributions from joint venture partners 3,549,949
Net increase in cash and cash equivalents 1,321,378
Cash and cash equivalents, beginning of year 0
Cash and cash equivalents, end of year $1,321,378
Supplemental disclosure of noncash activities:
Contributions of real estate assets $1,729,116
6Fund III and IV Associates
On March 27, 1991, the Partnership entered into a joint
venture with Wells Real Estate Fund IV, L.P. The joint
venture, Fund III and IV Associates, was formed for the
purpose of developing, constructing, and operating a shopping
center known as the Stockbridge Village Shopping Center in
Stockbridge, Georgia. In addition, in July 1992, Fund III
and IV Associates purchased an office building know as the
G.E. Lighting National Customer Center in Richmond, Virginia.
The following are the financial statements for Fund III and
IV Associates:
FUND III AND IV ASSOCIATES
(A GEORGIA JOINT VENTURE)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
Assets
1995 1994
Real estate assets, at cost:
Land $ 3,331,775 $
3,331,775
Building and improvements, less accumulated
depreciation of $1,257,846 in 1995 and $875,430 in 1994 10,819,438
11,172,645
Total real estate assets 14,151,213 14,504,420
Cash and cash equivalents 250,903 236,039
Accounts receivable 294,278 367,660
Prepaid expenses and other assets 54,342 108,607
Total assets $14,750,736
$15,216,726
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 33,221 $35,949
Partnership distributions payable 343,902 354,025
Due to affiliates 7,151 15,412
Total liabilities 384,274 405,386
Partners' capital:
Wells Real Estate Fund III 8,234,366 8,489,389
Wells Real Estate Fund IV 6,132,096 6,321,951
Total partners' capital 14,366,462 14,811,340
Total liabilities and partners' capital$14,750,736
$15,216,726
FUND III AND IV ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1995 1994 1993
Revenues:
Rental income $1,676,025 $1,686,388 $1,558,970
Interest income 15,482 9,678 10,975
1,691,507 1,696,066 1,569,945
Expenses:
Management and leasing fees 93,024 96,042 94,926
Lease acquisition costs 78,766 54,988 57,420
Operating costs--rental property40,195 5,785 74,557
Depreciation 382,416 331,381 301,596
Legal and accounting 10,928 93,193 55,574
Computer costs 5,790 3,666 6,559
Property administration 26,364 44,781 59,483
Amortization of organization costs 366 366 366
637,849 630,202 650,481
Net income $1,053,658 $1,065,864 $ 919,464
Net income allocated to Wells Real Estate Fund III $
603,921 $ 612,543 $ 566,667
Net income allocated to Wells Real Estate Fund IV $
449,737 $ 453,321 $ 352,797
FUND III AND IV ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Wells Real
Estate
Fund III Wells Real
Estate
Fund IV Total
Partners'
Capital
Balance, December 31, 1992$8,721,985 $5,233,957 $13,955,942
Net income 566,667 352,797 919,464
Partnership contributions63,376 981,459 1,044,835
Partnership distributions(694,107) (431,222) (1,125,329)
Balance, December 31, 19938,657,921 6,136,991 14,794,912
Net income 612,543 453,321 1,065,864
Partnership contributions 0 309,595 309,595
Partnership distributions(781,075) (577,956) (1,359,031)
Balance, December 31, 19948,489,389 6,321,951 14,811,340
Net income 603,921 449,737 1,053,658
Partnership contribution 0 59 59
Partnership distributions(858,944) (639,651) (1,498,595)
7
Fund III and IV Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1995, 1994, and 1993
Wells Wells Total
Real Real Partners'
Estate Estate Capital
Fund III Fund IV
Balance, December 31, 1993 $8,657,9 $6,136,9 $14,794,9
21 91 12
Partnership contributions 0 309,596 309,596
Net income 612,543 453,321 1,065,864
Partnership distributions (781,075 (577,957 (1,359,03
) ) 2)
Balance, December 31, 1994 8,489,38 6,321,95 14,811,34
9 1 0
Contribution 0 59 59
Net income 603,921 449,737 1,053,658
Partnership distributions (858,944 (639,651 (1,498,59
) ) 5)
Balance, December 31, 1995 $8,234,3 $6,132,0 $14,366,4
66 96 62
Fund III and IV Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
Cash flows from operating
activities:
Net income $1,053,6 $1,065,8 $
58 64 919,464
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 382,416 331,381 301,596
Changes in assets and liabilities:
Accounts receivable 73,382 (87,950) (81,980)
Prepaids and other assets 54,265 9,599 (26,880)
Accounts payable (2,728) (140,979 102,873
)
Due to affiliates (8,261) (33,820) 32,932
Total adjustments 499,074 78,231 328,541
Net cash provided by operating
activities 1,552,73 1,144,09 1,248,00
2 5 5
Cash flows from investing
activities:
Investment in real estate (29,209) (221,528 (1,128,0
) 31)
Investment in joint ventures 59 309,696 1,044,83
5
Net cash provided by (used in)
investing activities (29,150) 88,068 (83,196)
Cash flows from financing
activities:
Partnership distributions paid (1,508,7 (1,276,8 (1,157,6
18) 79) 82)
Net increase (decrease) in cash and
cash equivalents 14,864 (44,716) 7,126
Cash and cash equivalents, beginning236,039 280,753 273,627
of year
Cash and cash equivalents, end of $ $ $
year 250,903 236,039 280,753
Supplemental disclosure of noncash
investing activities:
Deferred project costs contributed
by partners $ $ $
0 19,988 75,262
Balance, December 31, 1995 $8,234,366 $6,132,096
$14,366,462
FUND III AND IV ASSOCIATES
(A GEORGIA JOINT VENTURE)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1995 1994 1993
Cash flows from operating activities:
Net income $1,053,658 $1,065,864 $ 919,464
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 382,416 331,381 301,596
Changes in assets and liabilities:
Accounts receivable 73,382 (87,950) (81,980)
Prepaids and other assets 54,265 9,599 (26,880)
Accounts payable (2,728) (140,979) 102,873
Due to affiliates (8,261) (33,820) 32,932
Total adjustments 499,074 78,231 328,541
Net cash provided by operating activities 1,552,732 1,144,095 1,248,005
Cash flows from investing activities:
Investment in real estate (29,209) (221,528)
(1,128,033)
Cash flows from financing activities:
Contributions from joint venture partners 59 309,602 1,044,836
Distributions to joint venture partners (1,508,718) (1,276,883)
(1,157,682)
Net cash used in financing activities (1,508,659) (967,281) (112,846)
Net increase (decrease) in cash
and cash equivalents 14,864 (44,714) 7,126
Cash and cash equivalents, beginning of year 236,039 280,753 273,627
Cash and cash equivalents, end of year $ 250,903 236,039 $
280,753
Supplemental disclosure of noncash investing activities:
Deferred project costs applied by funds $ 0 $19,988 $
75,262
4. INCOME TAX EARNINGS AND PARTNERS' CAPITAL
The Partnership's income tax earnings for the years ended December 31, 1995,
1994, and 1993 are calculated as follows:
1995 1994 1993
Financial statement net income $1,143,704 $1,130,464
$1,087,637
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 61,167 0 0
Rental income accrued for financial reporting purposes
in excess of amounts for income tax purposes (3,371) (62,660)
(5,579)
Expenses added (deductible) when paid for income tax
purposes, accrued for financial reporting purposes 104,161 (25,331)
22,204
Income tax basis net income $1,305,661 $1,042,473
$1,104,262
The Partnership's income tax basis partners' capital at December 31, 1995,
1994, and 1993 is computed as follows:
1995 1994 1993
Financial statement partners' capital$17,430,457 $18,076,397
$18,575,447
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 61,167 0 0
Capitalization of syndication costs for income tax
purposes, which are accounted for as cost of capital
for financial reporting purposes2,624,555 2,624,555 2,624,555
Accumulated rental income accrued for financial
reporting purposes in excess of amounts for
income tax purposes (361,990) (358,619) (295,959)
Accumulated expenses deductible when paid for
income tax purposes, accrued for financial
reporting purposes 127,059 22,898 48,229
Partnership distributions payable for tax purposes619,021 458,890
394,537
Other 2,154 2,155 2,154
Income tax basis partners' capital$20,502,423 $20,826,276
$21,348,963
S8 5. RENTAL INCOME
The future minimum rental income due from the Partnership's
direct investment in real estate or its respective ownership
interest in joint ventures under noncancelable operating
leases at December 31, 1995 is as follows:
Year ending December 31:
1996 $ 2,034,081
1997 1,574,968
1998 1,358,103
1999 1,316,848
2000 1,051,196
Thereafter 4,035,852
$11,371,048
9Four significant tenants contributed 12%, 12%, 22%, and 29%
of revenues for the year ended December 31, 1995. In
addition, two significant tenants will contribute 21% and 51%
of future minimum rental income.
The future minimum rental income due Fund II, III, VI, and
VII Associates under noncancelable operating leases at
December 31, 1995 is as follows:
Year ending December 31:
1996 $ 149,448
1997 195,991
1998 198,378
1999 185,895
2000 177,121
Thereafter 642,597
$1,549,430
Two significant tenants will contribute approximately 78% and
17% of future minimum rental income.
The future minimum rental income due Fund III and IV
Associates under noncancelable operating leases at
December 31, 1995 is as follows:
Year ending December 31:
1996 $ 1,644,297
1997 1,536,513
1998 1,312,213
1999 1,259,368
2000 797,802
Thereafter 6,586,093
$13,136,286
Two significant tenants contributed 29% and 31% of revenues
for the year ended December 31, 1995. In addition, two
significant tenants will contribute approximately 60% and 17%
of future minimum rental income.
The future minimum rental income due Fund II and III
Associates--The Atrium under noncancelable operating leases
at December 31, 1995 is as follows:
Year ending December 31:
1996 $1,153,035
1997 0
1998 0
1999 0
2000 0
Thereafter 0
$1,153,035
One significant tenant contributed 100% of revenues for the
year ended December 31, 1995. In addition, one significant
tenant will contribute 100% of future minimum rental income.
The future minimum rental income due 880 Property--Brookwood
Grill under noncancelable operating leases at December 31,
1995 is as follows:
Year ending December 31:
1996 $ 217,000
1997 230,563
1998 249,550
1999 249,550
2000 249,550
Thereafter 270,346
$1,466,559
One significant tenant contributed 100% of revenues for the
year ended December 31, 1995. In addition, one significant
tenant will contribute 100% of future minimum rental income.
6. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the years ended December 31, 1995 and 1994:
1995 Quarters Ended
March 31 June 30 September 30 December 31
$100,000 $100,000)
Revenues $434,041 $434,562 $436,431
$282,233
Net income 341,183 317,668 332,156 152,697
Net income allocated to general partners 0 0 0
15,205
Net income (loss) allocated to Class A
limited partners 476,874 361,358 332,156 (66,072)
Net (loss) income allocated to Class B
limited partners (135,691) (43,690) 0
203,564
Net income per Class A limited partner unit $0.02 $0.02 $0.02
$0.00
Net (loss) income per Class B limited
partner unit (0.05) (0.02) 0 0.08
Cash distributed to general partners 0 0 0
15,205
Cash distribution per Class A limited
partner unit 0.02 0.02 0.02 0.02
Cash distribution per Class B limited
partner unit 0.00 0.00 0.00 0.08
1994 Quarters Ended
March 31 June 30 September 30 December 31
$100,000) $100,000)
Revenues $379,900 $394,522 $412,694
$385,779
Net income 274,606 282,598 306,007 267,253
Net income allocated to Class A
limited partners 405,844 419,500 443,885 339,700
Net loss allocated to Class B
limited partners (131,238) (136,902) (137,877)
(72,448)
Net income per Class A
limited partner unit $0.02 $0.02 $0.02 $0.02
Net loss per Class B limited partner unit (0.05) (0.06)
(0.05) (0.03)
Cash distribution per Class A limited
partner unit 0.02 0.02 0.02 0.02
Cash distribution per Class B limited
partner unit 0.00 0.00 0.00 0.02
7. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal
counsel, is not aware of any significant
litigation or claims against the Company. In
the normal course of business, the Company may
become subject to such litigation or claims.
Independent Auditors' Report
The Partners
Wells Real Estate Fund III, L.P.:
We have audited the accompanying balance sheet of Wells
Real Estate Fund III, L.P. (a limited partnership) as
of DecemberE31, 1994, and the related statements of
income, partners' capital, and cash flows for the years
ended DecemberE31, 1994 and 1993. In connection with
our audits of the financial statements, we have also
audited the information for the years ended
DecemberE31, 1994 and 1993 included in the DecemberE31,
1995 financial statement Schedule III D Real Estate and
Accumulated Depreciation. These financial statements
and information included in the financial statement
schedule are the responsibility of the Partnership's
management. Our responsibility is to express an
opinion on these financial statements and information
included in the financial statement schedule based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Wells Real Estate Fund III, L.P.
as of December 31, 1994, and the results of its
operations and its cash flows for the years ended
DecemberE31, 1994 and 1993 in conformity with generally
accepted accounting principles. Also in our opinion,
the related information for 1994 and 1993 included in
the financial statement schedule referred to above,
when considered in relation to the basic financial
statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
January 13, 1995
Atlanta, Georgia
_______________________________
1deleted March 19, 1996
Fund II and II-OW referred to as Fund II and III Associates
(Note 5). The Partnership also owns an interest in several
properties through a joint venture between the Partnership and
Wells Real Estate Fund IV ("Fund IV") referred to as Fund III and
IV Associates (Note 5).
2deleted March 19, 1996
Fair Value of Financial Instruments
The carrying value of all financial instruments, as reflected in
the accompanying balance sheets, approximate their estimated fair
values because substantially all financial assets are current and
bear current rates.
3deleted March 19, 1996
2. DEFERRED PROJECT COSTS
The Partnership paid a percentage of limited partner
contributions to Well's Capital for acquisition and advisory
services. These payments, as stipulated by the partnership
agreement, can be up to 6% of the limited partner
contributions, subject to certain overall limitations
contained in the partnership agreement. Fees paid through
December 31, 1995 were $1,554,441 and ultimately amounted to
7% of the limited partner contributions received. These fees
are allocated to specific properties as they are purchased or
developed and are included in capitalized assets at the joint
ventures. Deferred project costs at December 31, 1995 and
1994 represent fees not yet applied to properties.
4deleted March 19, 1996
The Partnership has investments in Fund III and IV Associates,
Fund II and III Associates which owns The Atrium and 880
Property--Brookwood Grill.
5On April 3, 1989, the Partnership entered into a joint
venture agreement with the existing joint venture, Fund II
and Fund II-OW, formed by Wells Real Estate Fund II
("Fund II") and Wells Real Estate Fund II-OW ("Fund II-OW").
The joint venture, Fund II and Fund III Associates, was
formed for the purpose of investing in commercial and
industrial real properties. In April 1989, Fund II and
III Associates acquired The Atrium at Nassau Bay, a
four-story office building located in Nassau Bay, Texas.
On March 27, 1991, the Partnership entered into a second joint
venture with Wells Real Estate Fund IV, L.P. ("Fund IV"). The
joint venture, Fund III-Fund IV Joint Venture ("III and
IV Associates"), was formed for the purpose of developing,
constructing, and operating a shopping center to be known as the
Stockbridge Village Shopping Center in Stockbridge, Georgia. In
addition, in July 1992, III and IV Associates purchased an office
building known as the G.E. Lighting National Customer Center in
Richmond, Virginia.
6
Fund II and II-OW
In 1991, Fund II and II-OW contributed its interest in a
parcel of land ("880 Property"), located in Roswell, Georgia,
to Fund II and III Associates. Construction of a restaurant
was completed during 1992 on a portion of the land, and the
remainder is not yet developed. Under the terms of the
Fund II and III Associates partnership agreement, The
partnership's percentage ownership in The Atrium at Nassau
Bay and the 880 Property remained unchanged.
The following are the financial statements for Fund II and
II-OW:
(TO FOLLOW)
7deleted 20mar 96
Following are the financial statements for Fund II and III
Associates:
Fund II and III Associates--The Atrium
(A Georgia Joint Venture)
Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
Real estate, at cost:
Land $ 1,504,743 $ 1,504,743
Building and improvements, less accumulated depreciation of
$3,177,917 in 1995 and $2,660,410 in 1994
9,489,637
9,991,643
Total real estate 10,994,380 11,496,386
Cash and cash equivalents (Note 2) 846,173 684,753
Accounts receivable 113,362 340,086
Prepaid expenses and other assets 35,216 35,216
Total assets $11,989,131 $12,556,441
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 534,553 $ 364,387
Partnership distributions payable 365,481 367,424
Due to affiliates (Note 4) 0 20,405
Total liabilities 900,034 752,216
Partners' capital:
Fund II and Fund II-OW 7,273,932 7,743,056
Wells Real Estate Fund III 3,815,165 4,061,169
Total partners' capital 11,089,097 11,804,225
Total liabilities and partners' capital $11,989,131 $12,556,441
Fund II and III Associates--The Atrium
(A Georgia Joint Venture)
Statements of Income
For The Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
Revenues:
Rental income $2,079,345 $2,079,345 $2,079,345
Interest income 29,965 24,636 16,563
2,109,310 2,103,981 2,095,908
Expenses:
Management and leasing fees (Note 4) 142,761 142,736 141,362
Operating costs--rental property 419,152 419,753 444,547
Depreciation 517,507 475,928 481,196
Legal and accounting 7,384 51,238 11,159
Computer costs 1,749 2,760 3,176
Partnership administration 23,077 30,816 34,394
Amortization of organization costs 0 43 173
1,111,630 1,123,274 1,116,007
Net Income $ 997,680 $ 980,707 $ 979,901
Net Income Allocated To Fund II And Fund II-OW
$ 654,478
$ 643,345
$ 642,815
Net Income Allocated To Wells Real Estate Fund III
$ 343,202
$ 337,364
$ 337,086
Fund II and III Associates--The Atrium
(A Georgia Joint Venture)
Statements of Partners' Capital
For The Years Ended December 31, 1995, 1994, and 1993
Fund II
and
Fund II-OW Wells Real
Estate
Fund III Total
Partners'
Capital
$1,000,000)
Balance, December 31, 1993 $8,195,099 $4,298,217 $12,493,316
Net income 643,345 337,364 980,709
Partnership distributions (1,095,388) (574,412) (1,669,800)
Balance, December 31, 1994 7,743,056 4,061,169 11,804,225
Net income 654,478 343,202 997,680
Partnership distributions (1,123,602) (589,206) (1,712,808)
Balance, December 31, 1995 $7,273,932 $3,815,165 $11,089,097
Following are the financial statements for Fund III and IV
Associates:
Fund III and IV Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
Real estate, at cost:
Land $ 3,331,775 $ 3,331,775
Building and improvements, less accumulated depreciation of
$1,257,846 in 1995 and $875,430 in 1994
10,819,438
11,172,645
Total real estate 14,151,213 14,504,420
Cash and cash equivalents (Note 2) 250,903 236,039
Accounts receivable 294,278 367,660
Prepaid expenses and other assets 54,342 108,607
Total assets $14,750,736 $15,216,726
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 33,221 $ 35,949
Partnership distributions payable 343,902 354,025
Due to affiliates (Note 4) 7,151 15,412
Total liabilities 384,274 405,386
Partners' capital:
Wells Real Estate Fund III 8,234,366 8,489,389
Wells Real Estate Fund IV 6,132,096 6,321,951
Total partners' capital 14,366,462 14,811,340
Total liabilities and partners' capital $14,750,736 $15,216,726
Fund III and IV Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
Revenues:
Rental income $1,676,025 $1,686,388 $1,558,970
Interest income 15,482 9,678 10,975
1,691,507 1,696,066 1,569,945
Expenses:
Management and leasing fees (Note 4) 93,024 96,042 94,926
Lease acquisition costs (Note 4) 78,766 54,988 57,420
Operating costs--rental property 40,195 5,785 74,557
Depreciation 382,416 331,381 301,596
Legal and accounting 10,928 93,193 55,574
Computer costs 5,790 3,666 6,559
Property administration 26,364 44,781 59,483
Amortization of organization costs 366 366 366
637,849 630,202 650,481
Net income $1,053,658 $1,065,864 $919,464
Net income allocated to Wells Real Estate Fund III
$ 603,921
$ 612,543
$ 566,667
Net income allocated to Wells Real Estate Fund IV
$ 449,737
$ 453,321
$ 352,797
8The following are the condensed financial statements for III
and IV Associates, The Atrium at Nassau Bay, and
880 Property:
III and IV Associates
Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
Real estate:
Land $ 3,331,775 $ 3,331,775
Buildings and improvements, net 10,867,822 11,172,645
14,199,597 14,504,420
Cash and cash equivalents 250,903 236,039
Receivables and other assets 348,620 476,267
Total assets $14,799,120 $15,216,726
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 33,221 $
35,949
Due to affiliates 7,151 15,412
Partnership distributions payable 343,902 354,025
Total liabilities 384,274 405,386
Partners' capital:
Wells Real Estate Fund III, L.P. 8,262,098 8,489,389
Wells Real Estate Fund IV, L.P. 6,152,748 6,321,951
Total partners' capital 14,414,846 14,811,340
Total liabilities and partners' capital $14,799,120 $15,216,726
III and IV Associates
Statements of Earnings
for the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
Revenues:
Rental income $1,676,024 $1,686,388 $1,558,970
Interest income 15,482 9,678 10,975
1,691,506 1,696,066 1,569,945
Expenses:
Depreciation 334,032 331,381 301,596
Management and leasing expenses 172,156 151,030 152,347
Other operating expenses 83,277 147,791 196,538
589,465 630,202 650,481
Net earnings $1,102,041 $1,065,864 $ 919,464
Row deleted to prevent unwanted page break
The Atrium at Nassau Bay
Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
Real estate:
Land $ 1,504,743 $ 1,504,743
Buildings and improvements, net 9,539,029 9,991,643
11,043,771 11,496,386
Cash and cash equivalents 846,173 684,753
Receivables and other assets 148,578 375,302
Total assets $12,038,522 $12,556,441
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 534,552 $
364,387
Due to affiliates 0 20,405
Partnership distributions payable 365,481 367,424
Total liabilities 900,033 752,216
Partners' capital:
Fund II and Fund II-OW 7,306,334 7,743,056
Wells Real Estate Fund III, L.P. 3,832,155 4,061,169
Total partners' capital 11,138,489 11,804,225
Total liabilities and partners' capital $12,038,522 $12,556,441
The Atrium at Nassau Bay
Statements of Earnings
for the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
Revenues:
Rental income $2,079,345 $2,079,345 $2,079,345
Interest income 29,965 24,636 16,563
2,109,310 2,103,981 2,095,908
Expenses:
Depreciation 468,116 475,928 481,196
Management and leasing expenses 142,761 142,735 141,362
Other operating expenses 451,362 504,609 493,449
1,062,239 1,123,272 1,116,007
Net earnings $1,047,071 $ 980,709 $ 979,901
Row deleted to prevent unwanted page break
880 Property
Balance Sheets
December 31, 1995 and 1994
Assets
1995 1994
Real estate:
Land $ 745,223 $2,070,465
Building and improvements, net 1,109,911 1,572,444
Construction in progress 0 30,173
1,855,134 3,673,082
Cash 33,892 32,239
Receivables and other assets 1,868,024 137,288
Total assets $3,757,050 $3,842,609
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 1,180 $
4,611
Due to affiliate 6,079 5,614
Partnership distributions payable 35,533 61,183
Total liabilities 42,792 71,408
Partners' capital:
Fund II and II-OW 2,315,940 2,351,445
Wells Real Estate Fund III, L.P. 1,398,318 1,419,756
Total partners' capital 3,714,258 3,771,201
Total liabilities and partners' capital $3,757,050 $3,842,609
Row deleted to prevent unwanted page break
880 Property
Statements of Earnings
for the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
Revenues:
Rental income $230,317 $224,750 $224,750
Expenses:
Depreciation 58,659 58,659 58,659
Management and leasing expenses 29,351 30,217 30,768
Other operating expenses 45,176 44,553 43,442
133,186 133,429 132,869
Net earnings $ 97,131 $ 91,321 $ 91,881
Buildings and improvements for all properties are stated at cost
and include deferred project costs allocated by Fund II,
Fund II-OW, Fund IV, and the Partnership (Note 3). Net earnings
and cash available for distribution for the joint venture III and
IV Associates and each individual property in II and
III Associates are computed on a quarterly basis and are
allocated based on each investor's total contributions at the end
of the applicable period. Cash available for distribution is
distributed quarterly and is included in the Partnership's
quarterly distributions to investors.
9DELETED ON 7 MARCH 96
The future minimum rents due under noncancelable operating
leases through Fund II & III Associates investment in real
estate and joint ventures at December 31, 1995 are as
follows:
Year ending December 31:
1996 $
1997
1998
1999
2000
Thereafter
The future minimum rents due under noncancelable operating
leases from properties which Fund II-Fund II-OW JV holds a
joint venture interest at December 31, 1995 are as
follows:
Tucker Cherokee The Atrium 880 Property
$10,000 $100,000 $100,000 $100,000
Year ended December 31:
1996 $ $ $ $
1997
1998
1999
2000
Thereafter
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 500,327
<SECURITIES> 13,446,045
<RECEIVABLES> 397,057
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,096
<PP&E> 4,141,951
<DEPRECIATION> 454,905
<TOTAL-ASSETS> 18,059,571
<CURRENT-LIABILITIES> 629,114
<BONDS> 0
<COMMON> 0
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0
<OTHER-SE> 17,430,457
<TOTAL-LIABILITY-AND-EQUITY> 18,059,571
<SALES> 0
<TOTAL-REVENUES> 1,587,267
<CGS> 0
<TOTAL-COSTS> 443,563
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 1,143,704
<INCOME-TAX> 1,143,704
<INCOME-CONTINUING> 1,143,704
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<EXTRAORDINARY> 0
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<NET-INCOME> 1,143,704
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