<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999 or
---------------------- -------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
----------------------- -----------------------
Commission file number 0-18407
--------------------------------------------------------
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 No.)
incorporation or organization)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
-----------------------------
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund III, L.P.
--------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1999
and December 31, 1998........................................................ 3
Statements of Income for the Six Months
and Three Months
Ended June 30, 1999 and 1998................................................. 4
Statement of Partner's Capital for the
Six Months Ended June 30, 1999
and the Year Ended December 31, 1998......................................... 5
Statements of Cash Flows for the Six
Months Ended June 30, 1999 and 1998.......................................... 6
Condensed Notes to Financial Statements....................................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................................... 8
PART II. OTHER INFORMATION...................................................................... 17
</TABLE>
2
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets June 30, 1999 December 31, 1998
------ ------------- ------------------
<S> <C> <C>
Real estate, at cost:
Land $ 576,350 $ 576,350
Building and improvements, less accumulated
depreciation of $1,012,443 in 1999 and $931,559
in 1998 2,587,773 2,668,658
----------- -----------
Total real estate 3,164,123 3,245,008
----------- -----------
Cash and cash equivalents 100,112 156,648
Investment in joint ventures (Note 2) 11,755,975 12,132,961
Due from affiliates 366,113 334,162
Accounts receivable 15,979 8,000
Prepaid expenses and other assets 17,671 24,157
----------- -----------
Total assets $15,419,973 $15,900,936
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 20,717 $ 13,362
Partnership distributions payable 398,353 458,724
Due to affiliates 0 7,966
----------- -----------
Total liabilities 419,070 480,052
----------- -----------
Partners' capital:
Limited Partners:
Class A - 19,635,965 units outstanding 15,000,903 15,420,884
Class B - 2,544,540 units outstanding 0 0
----------- -----------
Total partners' capital 15,000,903 15,420,884
----------- -----------
Total liabilities and partners' capital $15,419,973 $15,900,936
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements
3
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- -----------------------------------
June 30, 1999 June 30, 1998 June 30,1999 June 30, 1998
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $133,449 $139,893 $272,160 $277,658
Equity in earnings of joint
ventures (Note 2) 179,282 145,157 318,307 262,420
Interest income (46) 390 (13) 1,019
-------- -------- -------- --------
312,685 285,440 590,454 541,097
-------- -------- -------- --------
Expenses:
Management & leasing fees 9,778 10,983 16,211 19,766
Operating costs-rental
property 21,550 48,244 77,974 94,601
Depreciation 40,443 39,577 80,885 79,154
Legal & accounting 6,993 9,148 12,647 13,919
Computer costs 1,477 1,838 3,169 3,848
Partnership administration 13,462 13,061 31,667 21,490
-------- -------- -------- --------
93,703 122,851 222,553 232,778
-------- -------- -------- --------
Net income $218,982 $162,589 $367,901 $308,319
======== ======== ======== ========
Net income allocated to
General Partners $ 0 $ 0 $ 0 $ 0
Net income allocated to Class
A Limited Partners $218,982 $162,589 $367,901 $308,319
Net loss allocated to Class B
Limited Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A
Limited Partner Unit $ .01 $ .01 $ 0.02 $ 0.02
Net loss per Class B
Limited Partner Unit $ 0.00 $ (0.00) $ (0.00) $ (0.00)
Cash distribution per Class A
Limited Partner Unit $ 0.02 $ 0.02 $ 0.04 $ 0.04
</TABLE>
See accompanying condensed notes to financial statements
4
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE SIX MONTHS ENDED
JUNE 30, 1999
<TABLE>
<CAPTION>
Limited Partners
----------------------------------------------------
Class A Class B Total
--------------------------- -------------------- Partners'
Units Amounts Units Amounts Capital
---------- ----------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 19,635,965 $16,383,705 2,544,540 $0 $16,383,705
Net income 0 608,058 0 0 608,058
Partnership distributions 0 (1,570,879) 0 0 (1,570,879)
---------- ----------- --------- -- -----------
BALANCE, December 31, 1998 19,635,965 15,420,884 2,544,540 0 15,420,884
Net income 0 367,901 0 0 367,901
Partnership distributions 0 (787,882) 0 0 (787,882)
---------- ----------- --------- -- -----------
BALANCE, June 30, 1999 19,635,965 $15,000,903 2,544,540 $0 $15,000,903
========== =========== ========= == ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $367,901 $308,319
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in income of joint ventures (318,307) (262,420)
Depreciation 80,885 79,154
Changes in assets and liabilities:
Accounts receivable (7,980) 13,927
Prepaids and other assets 6,485 (12,316)
Accounts payable 7,353 14,426
Due to affiliates (7,966) 4,877
-------- --------
Net cash provided by operating activities 128,371 145,967
-------- --------
Cash flow from investing activities:
Investment in joint ventures 0 (79,491)
Distributions received from joint ventures 663,345 604,639
-------- --------
Net cash provided by investing activities 663,345 525,148
Cash flow from financing activities:
Partnership distribution paid (848,252) (765,645)
-------- --------
Net decrease in cash and cash equivalents (56,536) (94,530)
Cash and cash equivalents, beginning of year 156,648 216,961
-------- --------
Cash and cash equivalents, end of period $100,112 $122,431
======== ========
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) 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 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.
The Partnership owns interests in properties through equity ownership in
the following joint ventures: (i) The Fund II - Fund III Joint Venture,
(ii) The Fund II, III, VI and VII Associates Joint Venture and (iii) The
Fund III - Fund IV Joint Venture.
As of June 30, 1999, the Partnership owned interest in the following
properties: (i) the Greenville Property, an office building in Greenville,
North Carolina, owned directly by the Partnership, (ii) Boeing at the
Atrium, an office building in Houston, Texas, owned directly by Fund II -
Fund III Joint Venture, (iii) the Brookwood Grill, a restaurant located in
Roswell, Georgia, owned by The Fund II - Fund III Joint Venture, (iv) the
Stockbridge Village Shopping Center, a retail shopping center located in
Stockbridge, Georgia, southeast of Atlanta, owned by Fund III - Fund IV
Joint Venture, (v) the G.E. Office Building located in Richmond, Virginia,
owned by Fund III - Fund IV Joint Venture, and (vi) the Holcomb Bridge Road
Property, an office/retail center in Roswell, Georgia, owned by Fund II,
III, VI and VII Joint Venture. All of the foregoing properties were
acquired on an all cash basis.
(b) Basis of Presentation
--------------------------
The financial statements of Wells Real Estate Fund III, L.P. have been
prepared in accordance with instructions to Form 10-Q and do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These quarterly
statements have not been examined by independent accountants, but in the
opinion of the General Partners, the statements for the unaudited interim
periods presented include all adjustments, which are of a normal and
recurring
7
<PAGE>
nature, necessary to present a fair presentation of the results for such
periods. For further information, refer to the financial statements and
footnotes included in the Partnership's Form 10-K for the year ended
December 31, 1998.
(2) Investment in Joint Ventures
----------------------------
The Partnership 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.
For a description of the joint ventures and properties owned by the
Partnership, please refer to the Partnership's Form 10-K for the year ended
December 31, 1998.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
The following discussion and analysis should be read in conjunction with
the accompanying financial statements of the Partnership and notes thereto.
This Report contains forward-looking statements, with the meaning of
Section 27A of the Securities Act of 1993 and 21E of the Securities
Exchange Act of 1934, including discussion and analysis of the financial
condition of the Partnership, anticipated capital expenditures required to
complete certain projects, amounts of cash distributions anticipated to be
distributed to Limited Partners in the future and certain other matters.
Readers of this Report should be aware that there are various factors that
could cause actual results to differ materially from any forward-looking
statement made in the Report, which include construction costs which may
exceed estimates, construction delays, lease-up risks, inability to obtain
new tenants upon the expiration of existing leases, and the potential need
to fund tenant improvements or other capital expenditures out of operating
cash flow.
Results in Operations and Changes in Financial Conditions
---------------------------------------------------------
General
-------
As of June 30, 1999, the properties owned by the Partnership were 94%
occupied. Gross revenues of the Partnership were $590,454 for the six
months ended June 30, 1999, as compared to $541,097 for the six months
ended June 30, 1998. The increase for 1999 over 1998 was due to increased
income from joint ventures, primarily the 880 Holcomb Bridge Road Property
and Stockbridge Village.
Expenses of the Partnership decreased from $232,778 for the six months
ended June 30, 1998, to $222,553 for the six months ended June 30, 1999.
The decrease in expenses was due primarily to common area maintenance
billings. Tenants are billed an estimated amount for the current year
common area maintenance which is then reconciled the second quarter of the
following year and the difference billed to the tenant.
8
<PAGE>
Net cash provided by operating activities decreased slightly in 1999
compared to 1998. Net cash provided by investing activities increased from
$525,148 in 1998, to $663,428 in 1999, due to increased distributions from
joint ventures and no additional investments in joint ventures.
Distributions to limited partners increased from $765,645 in 1998 to
$843,029 in 1999. As a result cash and cash equivalents decreased for the
six months ended June 30, 1999, as compared to the same period of 1998.
The Partnership's distributions paid and payable through the second quarter
of 1999 have been paid from net cash from operations and from distributions
received from its investments 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
requirements and budget demands through cash flows.
The Partnership is unaware of any know demands, commitments, events or
capital expenditures other than that which is required for the normal
operations of its properties or the properties in which it owns a joint
venture interest that will result in the Partnership's liquidity increasing
or decreasing in any material way.
Year 2000
---------
The Partnership is presently reviewing the potential impact of Year 2000
compliance issues on its information systems and business operations. A
full assessment of Year 2000 compliance issues was begun in late 1997 and
was completed by March 31, 1999. Renovations and replacements of equipment
have been and are being made as warranted. The costs incurred by the
Partnership and its affiliates thus far for renovations and replacements
have been immaterial. As of June 30, 1999 all testing of systems has been
completed.
As to the status of the Partnerships' information technology systems, it is
presently believed that all major systems and software are Year 2000
compliant. At the present time, it is believed that all major non-
information technology systems are Year 2000 compliant. The cost to
upgrade any noncompliance systems is believed to be immaterial.
The Partnership has confirmed with the Partnership's vendors, including
third-party service providers such as banks, that their systems are Year
2000 compliant.
The Partnership relies on computers and operating systems provided by
equipment manufacturers, and also on application software designed for use
with its accounting, property management and investment portfolio tracking.
The Partnership has preliminary determined that any costs, problems or
uncertainties associated with the potential consequences of Year 2000
issues are not expected to have a material impact on the future operations
or financial condition of the Partnership. The Partnership will perform
due diligence as to the Year 2000 readiness of each property owned by the
Partnership and each property contemplated for purchase by the Partnership.
The Partnership's reliance on embedded computer systems (i.e.
microcontrollers) is limited to facilities related matters, such as office
security systems and environmental control systems.
9
<PAGE>
The Partnership is currently formulating contingency plans to cover any
areas of concern. Alternate means of operating the business are being
developed in the unlikely circumstance that the computer and phone systems
are rendered inoperable. An off-site facility from which the Partnership
could operate is being sought as well as alternate means of communication
with key third-party vendors. A written plan is being developed for
testing and dispensation to each staff member of the General Partner of the
Partnership.
Management believes that the Partnership's risk of Year 2000 problems is
minimal. In the unlikely event there is a problem, the worst case
scenarios would include the risks that the elevator or security systems
within the Partnership's properties would fail or the key third-party
vendors upon which the Partnership relies would be unable to provide
accurate investor information. In the event that the elevator shuts down,
the Partnership has devised a plan for each building whereby the tenants
will use the stairs until the elevators are fixed. In the event that the
security system shuts down, the Partnership has devised a plan for each
building to hire temporary on-site security guards. In the event that a
third-party vendor has Year 2000 problems relating to investor information,
the Partnership intends to perform a full system back-up of all investor
information as of December 31, 1999, so that the Partnership will have
accurate hard-copy investor information.
10
<PAGE>
Property Operations
- -------------------
As of June 30, 1999, the Partnership owned interests in the following
properties:
The Greenville Property - Fund III
- ----------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $133,449 $139,893 $272,160 $277,658
-------- -------- -------- --------
Expenses:
Depreciation 40,443 39,577 80,885 79,154
Management & leasing expenses 18,656 19,995 35,225 36,969
Other operating expenses 12,673 39,232 58,960 77,398
-------- -------- -------- --------
71,772 98,804 175,070 193,521
-------- -------- -------- --------
Net income $ 61,677 $ 41,089 $ 97,090 $ 84,137
======== ======== ======== ========
Occupied % 78.5% 92.0% 78.5% 92.0%
Partnership Ownership % 100.0% 100.0% 100.0% 100.0%
Cash generated to the Partnership $105,949 $ 90,209 $184,613 $181,791
Net income generated to the
Partnership $ 61,677 $ 41,089 $ 97,090 $ 84,137
</TABLE>
Rental income decreased from 1999 to 1998, due to the decline in occupancy from
92% to 78.5%. Other operating expenses decreased significantly due to annual
common area maintenance billing in 1999 and a substantial HVAC reimbursement of
$45,000 for overtime usage in 1998.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the second quarter of the following year
and the difference billed to the tenant.
11
<PAGE>
Boeing at the Atrium/Fund II and Fund III Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $367,536 $367,536 $ 735,072 $ 735,072
Interest income 0 13,280 0 13,280
-------- -------- --------- ---------
367,536 380,816 735,072 748,352
-------- -------- --------- ---------
Expenses:
Depreciation 219,755 216,930 433,860 433,860
Management & leasing expenses 44,869 44,679 89,643 89,167
Other operating expenses 117,325 183,393 313,495 341,824
-------- -------- --------- ---------
381,949 445,002 836,998 864,851
-------- -------- --------- ---------
Net (loss) $(14,413) $(64,186) $(101,926) $(116,499)
======== ======== ========= =========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 38.7% 38.7% 38.7% 38.7%
Cash distributed to the Partnership $ 82,335 $ 66,712 $ 138,922 $ 138,019
Net loss allocated to the
Partnership $ (5,578) $(24,840) $ (39,446) $ (45,085)
</TABLE>
Rental income remained relatively stable in 1999 as compared to 1998. The
decrease in operating expenses in 1999, as compared to 1998, are due to
increased common area maintenance billings to tenants that were under estimated
in 1998.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the second quarter of the following year
and the difference billed to the tenant.
12
<PAGE>
The Brookwood Grill Property/Fund II and Fund III Joint Venture
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $56,187 $ 56,037 $112,375 $112,375
Equity in income of joint venture 6,248 16,943 39,304 33,074
------- -------- -------- --------
62,435 72,980 151,679 145,449
------- -------- -------- --------
Expenses:
Depreciation 13,503 13,503 27,006 27,006
Management & leasing expenses 7,955 6,492 16,683 13,525
Other operating expenses 805 (23,721) 6,330 (18,492)
------- -------- -------- --------
22,263 (3,726) 50,019 22,039
------- -------- -------- --------
Net income $40,172 $ 76,706 $101,660 $123,410
======= ======== ======== ========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 37.7% 37.7% 37.7% 37.7%
Cash distributed to the Partnership $30,184 $46,112 $ 69,703 $ 80,925
Net income allocated to the
Partnership $15,125 $28,880 $ 38,275 $ 46,464
</TABLE>
Operating expenses increased for the six months ended June 30, 1999, as compared
to the same period in 1998, due primarily to the billing of reimbursements
during the second quarter in 1998. As a result, net income and cash
distributions to the Partnership decreased for the six months ended June 30,
1999, as compared to the same period in 1998.
Tenants are billed an estimated amount for the current year common area
maintenance which is then reconciled the second quarter of the following year
and the difference billed to the tenant.
13
<PAGE>
Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $227,761 $208,645 $457,824 $421,880
-------- -------- -------- --------
Expenses:
Depreciation 94,128 94,129 188,257 188,033
Management & leasing expenses 42,063 29,888 80,937 59,252
Other operating expenses 387 13,797 24,781 36,830
-------- -------- -------- --------
136,578 137,814 293,975 284,115
-------- -------- -------- --------
Net income $ 91,183 $ 70,831 $163,849 $137,765
======== ======== ======== ========
Occupied % 94% 100% 94% 100.0%
Partnership Ownership % 9.1% 11.57% 9.1% 11.57%
Cash distributed to the Fund II -
Fund III Joint Venture $ 46,181 $ 41,990 $ 81,600 $ 83,158
Net income allocated to the
Fund II - Fund III Joint Venture $ 6,248 $ 16,943 $ 39,304 $ 33,074
</TABLE>
Rental income has increased for the six months ended June 30, 1999, as compared
to the same period in 1998, due primarily to a underestimate of straight line
rent adjustments in 1998. Tenants are billed an estimated amount for the
current year common area maintenance which is then reconciled the second quarter
of the following year and the difference billed to the tenant.
14
<PAGE>
The G.E. Building/Richmond-Fund III-Fund IV Joint Venture
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $131,856 $131,856 $263,712 $263,712
-------- -------- -------- --------
Expenses:
Depreciation 49,053 49,053 98,112 98,106
Management & leasing expenses 10,179 10,095 20,274 20,109
Other operating expenses 2,113 97 3,358 15,552
-------- -------- -------- --------
61,345 59,245 121,744 133,767
-------- -------- -------- --------
Net income $ 70,511 $ 72,611 $141,968 $129,945
======== ======== ======== ========
Occupied % 100.0% 100.0% 100.0% 100.0%
Partnership Ownership % 57.2% 57.3% 57.2% 57.3%
Cash distributed to the Partnership $ 73,674 $ 73,494 $146,467 $136,743
Net income allocated to the
Partnership $ 40,341 $ 41,618 $ 81,274 $ 74,480
</TABLE>
Rental income has remained constant for 1999 and 1998. Net income and cash
distributions generated from the G.E. Building increased for the six months
ended June 30, 1999, as compared to the same period in 1998, due to increased
expenses for extraordinary roof repairs in the first quarter of 1998.
The Partnership's ownership in the Fund III - Fund IV Joint Venture decreased in
1999, as compared to 1998, due to additional fundings by Wells Fund IV, which
decreased the Partnership's ownership in the Fund III - Fund IV Joint Venture.
15
<PAGE>
The Stockbridge Village Shopping Center Property/Fund III-Fund IV Joint Venture
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- -------------------------------
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $321,880 $300,521 $647,050 $585,885
Interest income 2,800 1,965 6,300 3,930
-------- -------- -------- --------
324,680 302,486 653,350 589,815
-------- -------- -------- --------
Expenses:
Depreciation 89,126 86,120 177,310 170,867
Management & leasing expenses 29,466 26,360 62,650 54,823
Other operating expenses (20,081) 16,925 (2,743) 38,633
-------- -------- -------- --------
98,511 129,405 237,217 264,323
-------- -------- -------- --------
Net income $226,169 $173,081 $416,133 $325,492
======== ======== ======== ========
Occupied % 100% 97% 100% 97%
Partnership Ownership % 57.2% 57.3% 57.2% 57.3%
Cash distributed to the Partnership $179,920 $146,046 $340,203 $269,528
Net income allocated to the
Partnership $129,395 $ 99,175 $238,204 $186,561
</TABLE>
Rental income increased for the six months ended June 30, 1999, as compared to
the same period in 1998, due to increased rental renewal rates and increased
occupancy. Other operating expenses decreased due primarily to differences in
the annual adjustment for prior year common area maintenance billings to tenants
and decreased expenditures for property taxes and parking lot repairs. Tenants
are billed an estimated amount for the current year common area maintenance
which is then reconciled the second quarter of the following year and the
difference billed to the tenant.
The Partnership's ownership in the Fund III - Fund IV Joint Venture decreased in
1999, as compared to 1998, due to additional fundings by the Wells Fund IV,
which decreased the Partnership's ownership in the Fund III - Fund IV Joint
Venture.
16
<PAGE>
PART II - OTHER INFORMATION
----------------------------
Item 6(b). No reports on Form 8-K were filed during the second quarter of 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WELLS REAL ESTATE FUND III, L.P.
(Registrant)
Dated: August 10, 1999 By: /s/Leo F. Wells, III
--------------------
Leo F. Wells, III, as Individual
General Partner and as President
and Chief Financial
Officer of Wells Capital, Inc.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 100,112
<SECURITIES> 11,755,975
<RECEIVABLES> 382,092
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,671
<PP&E> 4,176,566
<DEPRECIATION> 1,012,443
<TOTAL-ASSETS> 15,419,973
<CURRENT-LIABILITIES> 419,070
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 15,000,903
<TOTAL-LIABILITY-AND-EQUITY> 15,419,973
<SALES> 0
<TOTAL-REVENUES> 312,685
<CGS> 0
<TOTAL-COSTS> 93,703
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
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</TABLE>
