<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 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>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1999
and December 31, 1998..................................... 3
Statements of Income for the Three Months and Nine Months
Ended September 30, 1999 and 1998......................... 4
Statement of Partner's Capital for the
Nine Months Ended September 30, 1999
and the Year Ended December 31, 1998...................... 5
Statements of Cash Flows for the Nine
Months Ended September 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 September 30, 1999 December 31, 1998
------ ------------------ ------------------
<S> <C> <C>
Real estate, at cost:
Land $ 576,350 $ 576,350
Building and improvements, less accumulated
depreciation of $1,052,887 in 1999 and $931,559
in 1998 2,547,331 2,668,658
----------- -----------
Total real estate 3,123,681 3,245,008
----------- -----------
Cash and cash equivalents 161,118 156,648
Investment in joint ventures (Note 2) 11,559,998 12,132,961
Due from affiliates 334,530 334,162
Accounts receivable 11,531 8,000
Prepaid expenses and other assets 24,357 24,157
----------- -----------
Total assets $15,215,215 $15,900,936
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 27,399 $ 13,362
Partnership distributions payable 403,403 458,724
Due to affiliates 0 7,966
----------- -----------
Total liabilities 430,802 480,052
----------- -----------
Partners' capital:
Limited Partners:
Class A - 19,635,965 units outstanding 14,784,413 15,420,884
Class B - 2,544,540 units outstanding 0 0
----------- -----------
Total partners' capital 14,784,413 15,420,884
----------- -----------
Total liabilities and partners' capital $15,215,215 $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 Nine Months Ended
-------------------------------------- --------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30,1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $138,090 $150,184 $410,250 $427,842
Equity in income of
joint ventures (Note 2) 135,083 119,907 453,390 382,327
Interest income 36 25 23 1,044
-------- -------- -------- --------
273,209 270,116 863,663 811,213
-------- -------- -------- --------
Expenses:
Management and leasing fees 18,747 29,656 53,972 66,625
Operating costs - rental
property 23,777 (13,861) 82,735 63,538
Depreciation and Amortization 40,444 45,018 121,329 124,172
Legal and Accounting 199 531 12,846 14,450
Computer costs 2,158 2,325 5,327 6,173
Partnership administration 11,376 20,883 43,043 42,373
-------- -------- -------- --------
96,699 84,553 319,252 317,331
-------- -------- -------- --------
Net income $176,510 $185,563 $544,411 $493,882
======== ======== ======== ========
Net income allocated to
General Partners $ 0 $ 0 $ 0 $ 0
Net income allocated to
Class A Limited Partners $176,510 $185,563 $544,411 $493,882
Net loss allocated to Class
B Limited Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A
Limited Partner Unit $ 0.01 $ 0.01 $ 0.03 $ 0.03
Net loss per Class B Limited
Partner Unit $ 0 $ 0 $ 0 $ 0
Cash distribution per Class A
Limited Partner Unit $ 0.02 $ 0.02 $ 0.06 $ 0.06
</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 NINE MONTHS ENDED
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Limited Partners Total
-----------------------------------------------
Class A Class B 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 40,949 649,007
Partnership distributions 0 (1,570,879) 0 (40,949) (1,611,828)
---------- ----------- --------- -------- -----------
BALANCE, December 31, 1998 19,635,965 $15,420,884 2,544,540 0 $15,420,884
---------- ----------- --------- -------- -----------
Net income 0 544,410 0 0 544,410
Partnership distributions 0 (1,180,881) 0 0 (1,180,881)
---------- ----------- --------- -------- -----------
BALANCE, September 30, 1999 19,635,965 $14,784,413 2,544,540 $ 0 $14,784,413
========== =========== ========= ======== ===========
</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>
Nine Months Ended
-----------------------------------------------
September 30, 1999 September 30, 1998
----------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 544,411 $ 493,882
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in income of joint ventures (453,390) (382,327)
Depreciation and Amortization 121,329 124,172
Changes in assets and liabilities:
Accounts receivable (3,531) 29,653
Prepaids and other assets ( 200) (14,571)
Accounts payable 14,037 22,307
Due to affiliates (7,966) 20,169
----------- -----------
Net cash provided by operating activities 214,690 293,285
----------- -----------
Cash flow from investing activities:
Investment in joint ventures 0 (93,820)
Distributions received from joint ventures 1,025,985 941,306
----------- -----------
Net cash provided by investing activities 1,025,985 847,486
Cash flow from financing activities:
Partnership distributions paid (1,236,205) (1,158,281)
----------- -----------
Net increase in cash and cash equivalents 4,470 17,510
Cash and cash equivalents, beginning of year 156,648 216,961
----------- -----------
Cash and cash equivalents, end of period $ 161,118 $ 199,451
=========== ===========
</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 directly and through equity
ownership in the following joint ventures: (i) The Fund II - Fund III
Joint Venture, (ii) The Fund II, III, VI and VII Joint Venture, and (iii)
The Fund III - Fund IV Joint Venture.
As of September 30, 1999, the Partnership owned interest in the following
properties: (i) the Greenville Property, an office building in Greenville,
North Carolina, owned by the Partnership, (ii) Boeing at the Atrium, an
office building in Houston, Texas, owned 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
7
<PAGE>
statements. These quarterly statements have not been examined by
independent accountants, but in the opinion of the General Partners, the
statements for the unaudited interim periods presented include all
adjustments, which are of a normal and recurring nature, necessary to
present a fair presentation of the results for such periods. For further
information, refer to the financial statements and footnotes included in
the Partnership's Form 10-K for the year ended December 31, 1998.
(2) Investment in Joint Ventures
----------------------------
The Partnership 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 1933 and 21E of the Securities
Exchange Act of 1934, including discussion and analysis of the financial
condition of the Partnership, anticipated capital expenditures required to
complete certain projects, amounts of cash distributions anticipated to be
distributed to Limited Partners in the future and certain other matters.
Readers of this Report should be aware that there are various factors that
could cause actual results to differ materially from any forward-looking
statement made in the Report, which include construction costs which may
exceed estimates, construction delays, lease-up risks, inability to obtain
new tenants upon the expiration of existing leases, and the potential need
to fund tenant improvements or other capital expenditures out of operating
cash flow.
Results in Operations and Changes in Financial Conditions
---------------------------------------------------------
General
-------
As of September 30, 1999, the properties owned by the Partnership were 94%
occupied. Gross revenues of the Partnership were $863,663 for the nine
months ended September 30, 1999, as compared to $811,213 for the nine
months ended September 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.
8
<PAGE>
Expenses of the Partnership remained relatively stable for the nine months
ended September 30, 1999, but increased from $84,553 for the three months
ended September 30, 1998, to $96,699 for the three months ended September
30, 1999, due to timing differences in the prior year common area
maintenance reconciliation.
Net cash provided by operating activities decreased in 1999, compared to
1998. Net cash provided by investing activities increased from $847,486 in
1998, to $1,025,985 in 1999, due to the increased distributions from joint
ventures. Distributions to limited partners increased from $1,158,281 in
1998 to $1,236,205 in 1999. As a result, cash and cash equivalents
increased for the nine months ended September 30, 1999.
The Partnership made cash distributions to the Limited Partners holding
Class A Units of $.02 per Class A Unit for the three months ended September
30, 1999 and 1998. No cash distributions were made to the Limited Partners
holding Class B Units or the General Partners for the nine months ended
September 30, 1999 and 1998.
The Partnership's distributions paid and payable through the third quarter
of 1999 have been paid from net cash from operations and from distributions
received from its investments in joint ventures.
The Partnership has recently been notified that General Electric has
elected not to renew its current lease for the G.E. Building, which expires
March 31, 2000. Management has recently begun efforts to market and lease
this building to one or more new tenants. At the current time, the
estimated cost of refurbishments, tenant improvements and building
maintenance is anticipated to be approximately $750,000, which may vary
significantly depending upon the ultimate tenant or tenants actually
obtained for this property. It is likely that these costs will be required
to be funded out of cash from operations of the Partnership and Wells Fund
IV, which is likely to cause a substantial reduction to distributions
payable to Limited Partners in the year 2000.
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 September 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 packages are Year
2000 compliant. At the present time, it is believed that all major non-
information technology systems are Year
9
<PAGE>
2000 compliant. The cost to upgrade any noncompliant 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.
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 September 30, 1999, the Partnership owned interests in the following
properties:
The Greenville Property- Fund III
- ---------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------- ----------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $138,090 $150,184 $410,250 $427,842
-------- -------- -------- --------
Expenses:
Depreciation 40,442 45,018 121,327 124,172
Management and leasing
expenses 18,747 29,656 53,972 66,625
Other operating expenses 23,777 (13,861) 82,737 63,537
-------- -------- -------- --------
82,966 60,813 258,036 254,334
-------- -------- -------- --------
Net income $ 55,124 $ 89,371 $152,214 $173,508
======== ======== ======== ========
Occupied % 78.5% 92% 78.5% 92%
Partnership's Ownership % 100% 100% 100% 100%
Cash generated to the
Partnership $ 98,884 $128,433 $283,497 $310,224
Net income allocated to the
Partnership $ 55,124 $ 89,371 $152,214 $173,508
</TABLE>
Rental income decreased for the nine month period ended September 30, 1999, as
compared to the same period in 1998, due to a decline in occupancy from 92% to
78.5%. Operating expenses increased for the three month and nine month period
ended September 30, 1999, due to additional tenant reimbursements of
approximately $63,000 during the third quarter of 1998.
11
<PAGE>
Boeing at The Atrium/Fund II and Fund III Joint Venture
- -------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------- ----------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $367,536 $367,536 $1,102,608 $1,102,608
Other income 0 0 0 13,280
-------- -------- ---------- ----------
367,536 367,536 1,102,608 1,115,888
-------- -------- ---------- ----------
Expenses:
Depreciation 216,930 216,930 650,790 650,790
Management and leasing
expenses 45,060 44,775 134,703 133,942
Other operating expenses 185,397 174,424 498,892 516,248
-------- -------- ---------- ----------
447,387 436,129 1,284,385 1,300,980
-------- -------- ---------- ----------
Net (loss) $(79,851) $(68,593) $ (181,777) $ (185,092)
======== ======== ========== ==========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 38.7% 38.7% 38.7% 38.7%
Cash distributions to the
Partnership $ 65,387 $ 65,091 $ 204,309 $ 203,110
Net loss allocated
to the Partnership $(30,903) $(26,582) $ (70,348) $ (71,667)
</TABLE>
Rental income remained stable for the nine months ended September 30, 1999, as
compared to the nine months ended September 30, 1998. Operating expenses
decreased for the nine months ended September 30, 1999, as compared to the nine
months ended September 30, 1998, due primarily to increased common area
maintenance billings to the 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 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 Nine Months Ended
---------------------------------------- ----------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $56,188 $56,488 $168,563 $168,863
Equity income of
joint venture 23,307 20,308 62,611 53,382
------- ------- -------- --------
79,495 76,796 231,174 222,245
------- ------- -------- --------
Expenses:
Depreciation 13,503 13,503 40,509 40,509
Management and leasing
expenses 6,704 6,250 23,387 19,775
Other operating expenses 2,467 8,271 8,797 (10,221)
------- ------- -------- --------
22,674 28,024 72,693 50,063
------- ------- -------- --------
Net income $56,821 $48,772 $158,481 $172,182
======= ======= ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 37.7% 37.7% 37.7% 37.7%
Cash distributions to the
Partnership $35,993 $35,220 $105,696 $116,145
Net income allocated to the
Partnership $21,393 $17,911 $ 59,668 $ 64,375
</TABLE>
Although rental income remained relatively stable, total revenues increased for
the three month and nine month periods ended September 30, 1999, as compared to
the same periods in 1998, due to the increased equity in income from the Fund
II, III, VI, and VII Joint Venture, as the Holcomb Bridge Road property became
more profitable this year.
Operating expenses increased for the nine months ended September 30, 1999, as
compared to the same periods in 1998, due primarily to a change in the rental
agreement of billing water reimbursements to the tenant in 1998, which was
overestimated for the year.
13
<PAGE>
Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Sept 30, 1999 Sept 30, 1998 Sept 30, 1999 Sept 30, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $213,028 $226,233 $670,852 $648,113
-------- -------- -------- --------
Expenses:
Depreciation 79,605 94,128 277,862 282,161
Management & leasing expenses 22,263 20,198 93,200 79,450
Other operating expenses 14,889 27,664 39,670 64,494
-------- -------- -------- --------
116,757 141,990 410,732 426,105
-------- -------- -------- --------
Net income $ 96,271 $ 84,243 $260,120 $222,008
======== ======== ======== ========
Occupied % 94% 100% 94% 100%
Partnership's Ownership % 9.1% 9.1% 9.1% 9.1%
Cash Distribution to Fund II-Fund III Joint
Venture $ 41,093 $ 45,561 $122,693 $128,719
Net Income Allocated to the
Fund II-Fund III Joint Venture $ 23,307 $ 20,308 $ 62,611 $ 53,382
</TABLE>
* The Partnership holds a 37.65% ownership in the Fund II - Fund III Joint
Venture.
Rental income has increased for the nine months ended September 30, 1999, as
compared to the nine months ended September 30, 1998, due primarily to an
underestimate of straight line rent adjustments in 1998. Expenses decreased due
to a decrease in 1999 property tax.
14
<PAGE>
The G.E. Building/Richmond-Fund III-Fund IV Joint Venture
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------- ----------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $131,857 $131,857 $395,569 $395,569
-------- -------- -------- --------
Expenses:
Depreciation 49,053 49,056 147,165 147,162
Management and leasing
expenses 10,178 10,095 30,452 30,204
Other operating expenses (44) 1,918 3,314 17,470
-------- -------- -------- --------
59,187 61,069 180,931 194,836
-------- -------- -------- --------
Net income $ 72,670 $ 70,788 $214,638 $200,733
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 57.2% 57.3% 57.2% 57.3%
Cash distribution to the
Partnership $ 74,909 $ 72,449 $221,376 $209,192
Net income allocated to the
Partnership $ 41,575 $ 40,573 $122,849 $115,053
</TABLE>
Rental income has remained constant for 1999 and 1998. Net income and cash
distributions generated from the G.E. Building increased for the nine months
ended September 30, 1999, as compared to the same period in 1998, due to
increased expenses in the first quarter of 1998 for extraordinary roof repairs.
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.
G.E. has decided not to renew their lease which expires March 31, 2000.
Management has begun its efforts to lease the building to one or more tenants.
At this time, the cost for new tenant buildout and building maintenance is
anticipated to be approximately $750,000.
15
<PAGE>
The Stockbridge Village Shopping Center Property/Fund III-Fund IV Joint Venture
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------- ----------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $310,697 $312,855 $957,747 $898,740
Interest income 2,800 2,425 9,100 6,355
-------- -------- -------- --------
313,497 315,280 966,847 905,095
-------- -------- -------- --------
Expenses:
Depreciation 89,214 87,501 266,524 258,368
Management and leasing
expenses 28,163 29,558 90,813 84,381
Other operating expenses 16,059 44,681 13,316 83,314
-------- -------- -------- --------
133,436 161,740 370,653 426,063
-------- -------- -------- --------
Net income $180,061 $153,540 $596,194 $479,032
======== ======== ======== ========
Occupied % 95% 97% 95% 97%
Partnership's Ownership % 57.2% 57.3% 57.2% 57.3%
Cash distributed to the
Partnership $154,770 $136,306 $494,973 $405,834
Net income allocated to the
Partnership $103,016 $ 88,004 $341,220 $274,565
</TABLE>
Rental income increased for the nine months ended September 30, 1999, as
compared to the same periods in 1998, due to increased rental renewal rates.
Rental income decreased in the third quarter of 1999, due to two leases which
expired and were not renewed. Other operating expenses decreased due primarily
to differences in the adjustment for prior year common area maintenance billings
to tenants and decreased expenditures for property taxes and parking lot repairs
in 1999. Tenants are billed an estimated amount for the current year common
area maintenance which is then reconciled the following year and the difference
billed to the tenant.
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 third 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: November 10, 1999 By: /s/ Leo F. Wells, III
---------------------
Leo F. Wells, III, as Individual
General Partner and as President,
Sole Director and Chief Financial
Officer of Wells Capital, Inc.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 161,118
<SECURITIES> 11,559,998
<RECEIVABLES> 346,061
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,357
<PP&E> 4,176,568
<DEPRECIATION> 1,052,887
<TOTAL-ASSETS> 15,215,215
<CURRENT-LIABILITIES> 430,802
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,784,413
<TOTAL-LIABILITY-AND-EQUITY> 15,215,215
<SALES> 0
<TOTAL-REVENUES> 863,663
<CGS> 0
<TOTAL-COSTS> 319,252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 544,411
<INCOME-TAX> 544,411
<INCOME-CONTINUING> 544,411
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<CHANGES> 0
<NET-INCOME> 544,411
<EPS-BASIC> .03
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</TABLE>
