<PAGE>
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, 1999 or
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[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period to
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Commission file number 0-18407
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Wells Real Estate Fund III, L.P.
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(Exact name of registrant as specified in its charter)
Georgia 58-1800833
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6200 The Corners Parkway
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Suite 250, Norcross, Georgia 30092
- ------------------------------ --------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (770) 449-7800
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
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NONE NONE
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Securities registered pursuant to Section 12(g) of the Act:
CLASS A UNITS
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(Title of Class)
CLASS B UNITS
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(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 ____
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Aggregate market value of the voting stock held by non-affiliates: Not
--------------
Applicable
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PART I
ITEM 1. BUSINESS
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General
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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 $22,206,310 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 December 31, 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) The Atrium, an office building
in Houston, Texas, owned by the 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, owned by the Fund III - Fund IV
Joint Venture, (v) the G.E. Office Building located in Richmond, Virginia, owned
by the Fund III - Fund IV Joint Venture, and (vi) an office/retail center in
Roswell, Georgia, owned by the Fund II, III, VI and VII Joint Venture. All of
the foregoing properties were acquired on an all cash basis.
Employees
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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, 1999.
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Insurance
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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,
the properties are adequately insured.
Competition
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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
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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
center and one a retail/office project. 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, 1999, these properties were 93.7% occupied, compared
to 98.0% at December 31, 1998, 96.0% at December 31, 1997, and 98.0% at December
31, 1996.
The following table shows lease expirations during each of the next ten years
for all leases as of December 31, 1999, assuming no exercise of renewal options
or termination rights:
<TABLE>
<CAPTION>
Partnership Percentage of
Share of Total
Number of Annualized Annualized Percentage of Annualized
Year of Lease Leases Square Feet Gross Base Gross Base Total Square Gross Base
Expiration Expiring Expiring Rent (1) Rent (1) Feet Expiring Rent
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<S> <C> <C> <C> <C> <C> <C>
2000(2) 4 47,248 $ 549,764 $ 327,907 16.34% 13.53%
2001(3) 7 38,225 737,973 40,061 13.22% 16.79%
2002(4) 19 175,238 2,583,173 977,149 60.62% 58.77%
2003 4 11,234 169,648 113,756 3.89% 3.86%
2004 2 6,095 88,995 18,799 2.11% 2.02%
2005 0 0 0 0 0.00% 0.00%
2006 1 5,935 127,575 11,635 2.05% 2.90%
2007 0 0 0 0 0.00% 0.00%
2008 1 5,124 93,341 53,400 1.77% 2.12%
2009 0 0 0 0 0.00% 0.00%
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38 289,099 $4,395,469 $1,542,707 100.00% 100.00%
</TABLE>
(1) Average monthly gross rent over the life of the lease, annualized.
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(2) Expiration of General Electric.
(3) Expiration of IBM with 23,322 square feet at the Greenville Property and
the Brookwood Grill with 7,440 square feet.
(4) Expiration of Boeing at The Atrium with 119,040 square feet.
The following describes the properties in which the Partnership owns an interest
as of December 31, 1999:
The Greenville Property/ Fund III
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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. As of December 31, 1999, the
Partnership had expended approximately $3,778,000 for the acquisition,
development and construction of the Greenville Project.
The occupancy rate at the Greenville Property at year end was 76% in 1999, 92%
in 1998 and 1997, 100% in 1996 and 1995.
The average effective annual rental per square foot at the Greenville Property
was $16.18 for 1999, $16.41 for 1998, $16.66 for 1997, $17.40 for 1996 and
$17.01 for 1995.
One tenant occupies ten percent or more of the rentable square footage -
International Business Machines Corporation ("IBM"), a computer sales and
service corporation.
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
Property. 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 Property should the Partnership receive a bona fide offer from the
third party to purchase the Greenville Property 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. The IBM lease also provides that
the
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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.
The Atrium/Fund II - Fund III Joint Venture
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On April 3, 1989, the Partnership formed a joint venture (the "Fund II - Fund
III Joint Venture") with an existing joint venture (the "Fund II - Fund II-OW
Joint Venture") previously formed between Wells Real Estate Fund II ("Wells Fund
II") and Wells Real Estate Fund II-OW ("Wells Fund II-OW"). Wells Fund II and
Wells Fund II-OW are public limited partnerships affiliated with the Partnership
through common general partners with investment objectives substantially
identical to those of the Partnership.
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, 1999, 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 Atrium was first occupied in 1987 and contains approximately 119,000 net
rentable square feet. Each floor of the Atrium was originally under a separate
lease to Lockheed Engineering and Science Company, Inc., a wholly-owned
subsidiary of the Lockheed Company, each of which leases had terms of
approximately eight years and expired on June 30, 1996, and upon which date
Lockheed vacated the property.
On March 3, 1997, a lease was signed with The Boeing Company for the entire
Atrium building. The lease is for a period of five years with an option to renew
for an additional five year term. The rental rate for the first three years of
the lease term is $12.25 per square foot and $12.50 per square foot for the
final two years of initial lease term. The rate for the optional five year term
will be determined based upon then current market rates. Upon 150 day prior
written notice, Boeing has the right to cancel its lease in the event that NASA
or another prime contractor were to cancel or substantially reduce its contract.
In addition, there is a no-cause cancellation provision at the end of the first
three year period. If this no-cause cancellation is exercised, Boeing would be
required to pay unamortized, up-front tenant improvement costs. The lease also
provides that tenant will pay certain operating expenses in excess of $5.50 per
square foot on an annual basis.
Boeing began the move-in phase of its occupancy on April 15, 1997, and occupied
The Atrium and began paying rent on May 15, 1997. The total cost of completing
the required tenant improvements and outside broker commissions of approximately
$1.4 million was funded out of reserves and cash
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flows of the Partnership, Wells Fund II and Wells Fund II-OW. As of December 31,
1999, the Partnership had contributed approximately $659,810, Fund II had
contributed approximately $387,752, Wells Fund II OW had contributed
approximately $21,744, and Fund II Fund III Joint Venture had contributed
$330,694 to fund the tenant improvements and outside broker commissions
required. As of December 31, 1999, the Fund II, Fund II-OW Joint Venture holds
an equity interest of approximately 61%, and the Partnership holds an equity
interest of approximately 39% in the Atrium Project.
The occupancy rate at the Atrium property was 100% as of December 31, 1999, 1998
and 1997. The average effective rental per square foot at the Atrium is $12.35
for 1999 and 1998, $7.77 for 1997, $8.81 for 1996 and $15.89 for 1995.
The Brookwood Grill Property/Fund II - Fund III Joint Venture
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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 "Holcomb Bridge
Road 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
approximately 1.5 acres of the Holcomb Bridge Road Property (the "Brookwood
Grill 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 Brookwood Grill 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 restaurant, which opened
early in March 1992, similar in concept to Houston's, Ruby Tuesday, and
Friday's. It 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. The Fund II -
Fund III Joint Venture has expended approximately $1,100,000 for the development
and construction of the restaurant building together with parking areas,
driveways, landscaping and other 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% as of
December 31, 1999, 1998, 1997, 1996 and 1995. The average effective annual
rental per square foot at the
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Brookwood Grill is $30.22 for 1999, $30.26 for 1998 and 1997, $30.29 for 1996
and $30.21 for 1995.
As of December 31, 1999, the Partnership and Fund II - Fund II-OW Joint Venture
had made total contributions to the Fund II - Fund III Joint Venture of
approximately $1,330,000 and $2,128,000, 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 undeveloped acres of land comprising the
Holcomb Bridge Road 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.
Holcomb Bridge Road Property/Fund II, III, VI and VII Associates
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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 to the Fund
II-III-VI-VII Joint Venture 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 for the development
and construction of two buildings with a total of 49,500 square feet. Fifteen
tenants occupied the Holcomb Bridge Property as of December 31, 1999 for an
occupancy rate of 100% in 1999, 94% in 1998 and 1997. The average effective
annual rental per square foot was $19.26 for 1999, $17.63 for 1998, $13.71 for
1997 and $9.87 for 1996.
As of December 31, 1999, Fund II and Fund III Joint Venture had contributed
$1,729,116 in land and improvements for an equity interest of approximately
24.1%, Wells Fund VI had contributed $1,929,541 for an equity interest of
approximately 26.9%, and Wells Fund VII had contributed $3,525,041 for an
equity interest of approximately 49.0%. The total cost to develop the Holcomb
Bridge Road Property was approximately $5,454,582, excluding land.
Fund III - Fund IV Joint Venture
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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 Capital, Inc., a Georgia corporation, as General Partners, formed a Joint
Venture known as Fund III and Fund IV
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Associates (the "Fund III - Fund IV Joint Venture"). The investment objectives
of Wells Fund IV are substantially identical to those of the Partnership. The
Partnership holds an approximate 57.2% of equity interest in the Fund III - Fund
IV Joint Venture which includes a multi-tenant retail center and an office
building. As of December 31, 1999, the Partnership had contributed $8,178,808
and Wells Fund IV had contributed $6,199,047 for total contributions of
$14,377,855 to the Fund III - Fund IV Joint Venture. The Partnership owns
interests in the following two properties through the Fund III - Fund IV Joint
Venture.
The Stockbridge Village Shopping Center/Fund III and Fund IV Joint Venture
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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 112,891 square feet of
which approximately 64,097 square feet is occupied by the Kroger Company, a
retail grocery chain. This is the only tenant which occupies mores than ten
percent of the rentable square feet. 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 at the same rental rate as the
original lease. The annual base rent payable under the Kroger lease during the
initial term is $492,692. The remaining 48,794 square feet is composed of 12
separate retail spaces and 3 free-standing buildings. As of December 31, 1999,
the Partnership had contributed a total of $4,574,247 and Wells Fund IV had
contributed a total of $5,114,502 to fund total costs of approximately
$9,688,749 to fund the acquisition and development of the Stockbridge Property.
The occupancy rate at year end for the Stockbridge Property was 95% in 1999,
100% in 1998, 93% in 1997, 1996 and 1995. The average effective annual rental
per square foot at the Stockbridge Property was $11.23 for 1999, $10.82 for
1998, $9.86 for 1997, $9.59 for 1996 and $10.16 for 1995.
The G.E. Building/Fund III - Fund IV Joint Venture
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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. As of
December 31, 1999, a total of $4,689,106 had been incurred for the acquisition
of the G.E. Building. Of this amount, the Partnership contributed $3,604,561
and Wells Fund IV contributed $1,084,545 to the Fund III - Fund IV Joint
Venture.
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 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
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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.
The occupancy rate at year end for the G.E. Building was 100% for the years
ended December 31, 1999, 1998 and 1997. The average effective annual rental per
square foot at the G.E. Building is $12.27 for 1999, 1998, 1997, 1996 and 1995.
ITEM 3. LEGAL PROCEEDINGS
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There were no material pending legal proceedings known to be contemplated by
governmental authorities involving the Partnership during 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of the Limited Partners during the fourth
quarter of 1999.
PART II
ITEM 5. MARKET FOR PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS
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As of February 28, 2000, the Partnership had 19,635,965 outstanding Class A
Units held by a total of 2,319 Limited Partners and 2,544,540 outstanding Class
B Units held by a total of 202 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.
The General Partners have estimated the investment value of properties held by
the Partnership as of December 31, 1999 to be $1.09 per Class A unit and $1.65
per Class B unit based on market conditions existing in early December, 1999.
This value was confirmed as reasonable by an independent MAI appraiser, David L.
Beal Company, although no actual MAI appraisal was performed due to the
inordinate expense involved with such an undertaking. The valuation does not
include any fractional interest valuation.
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
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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:
<TABLE>
<CAPTION>
Per Class A Per Class A Per Class B
Unit Unit Unit
Distribution for Total Cash Investment Return of Return of General
Quarter Ended Distributed Income Capital Capital Partner
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March, 31, 1998 $372,249 $0.01 $0.01 $0.00 $0.00
June 30, 1998 $392,720 $0.01 $0.01 $0.00 $0.00
September 30, 1998 $393,035 $0.01 $0.01 $0.00 $0.00
December 31, 1998 $494,774 $0.01 $0.01 $0.02 $0.00
March, 31, 1999 $394,882 $0.01 $0.01 $0.00 $0.00
June 30, 1999 $393,000 $0.01 $0.01 $0.00 $0.00
September 30, 1999 $393,000 $0.01 $0.01 $0.00 $0.00
December 31, 1999 $427,979 $0.01 $0.01 $0.01 $0.00
</TABLE>
The fourth quarter distribution was accrued for accounting purposes in 1999 and
was not actually paid to the Limited Partners holding Class A units and Class B
units until February 2000. The General Partners anticipate that cash
distributions to Limited Partners holding Class A units will likely be
substantially reduced in 2000 due to the vacancy at the G.E. Building and the
cost necessary to lease up the property as previously discussed.
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ITEM 6. SELECTED FINANCIAL DATA.
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The following sets forth a summary of the selected financial data for the fiscal
years ended December 31, 1999, 1998, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Assets $14,962,288 $15,900,936 $16,791,667 $17,114,963 $18,059,571
Total Revenues 1,136,759 1,099,102 850,058 1,155,615 1,587,267
Net Income 709,412 649,007 385,224 731,244 1,143,704
Net Income
allocated to
General Partners 0 0 0 0 15,205
Net Income
allocated to Class
A Limited Partners 674,433 608,058 385,224 731,244 1,104,316
Net Income
allocated to Class
B Limited Partners 34,979 40,949 0 0 24,183
Net Income
per Class A Limited
Partner Unit .03 .03 .02 .04 .06
Net Income per
Class B Limited
Partner Unit .01 .02 .00 .00 .01
Cash Distributions to
Investors--
Investment Income
Class A Units: .04 .04 .04 .07 .08
Return of Capital
Class A Units: .04 .04 .00 .00 .00
Return of Capital
Class B Units: .01 .02 .00 .00 .08
Cash Distribution to
General Partners .00 .00 .00 .00 15,205
</TABLE>
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
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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
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Gross revenues of the Partnership were $1,136,759 for the fiscal year ended
December 31, 1999, as compared to $1,099,102 for the fiscal year ended December
31, 1998, and $850,058 for the fiscal year ended December 31, 1997. The
increases for 1999 and 1998 over 1997 is due primarily to an increase in equity
in income of joint venture. In 1999, increased rental renewal rates at
Stockbridge Village caused revenues to increase. The increase for 1998 over 1997
is due primarily to the occupancy of Boeing at The Atrium in May, 1997 and
increased occupancy and rental renewal rates at Stockbridge Village.
Expenses of the Partnership were $427,347 for the fiscal year ended December 31,
1999, as compared to $450,095 for the fiscal year ended December 31, 1998 and
$464,834 for the fiscal year ended December 31, 1997. The decrease in 1999 as
compared to 1998 is due primarily to no bad debt expense in 1999. Operating
expenses decreased for the period ended December 31, 1998 as compared to 1997,
due to additional tenant reimbursements of approximately $63,000 during the
third quarter of 1998.
Net income of the Partnership was $709,412 for the fiscal year ended December
31, 1999, as compared to $649,007 for the fiscal year ended December 31, 1998,
and $385,224 for the fiscal year ended December 31, 1997. The increase in net
income is due primarily to reasons discussed above.
The Partnership's cash distributions to the Limited Partners holding Class A
Units were $0.08 per unit for the fiscal year ended December 31, 1999 and $0.08
for 1998. Cash distributions to the Limited Partners holding Class B Units were
$0.01 for 1999 and $0.02 for 1998.
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Property Operations
- -------------------
As of December 31, 1999, the Partnership's ownership interest in the Greenville
Property is 100%, Fund II - Fund III Joint Venture is 39% and Fund III - Fund IV
Joint Venture is 57%.
As of December 31, 1999, the Partnership owned interests in the following
properties:
The Greenville Property/Fund III
- --------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
----------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental Income $554,956 $562,951 $571,555
Other Income 58 350 0
-------- -------- --------
555,014 563,301 571,555
-------- -------- --------
Expenses:
Depreciation 164,864 160,038 158,308
Management and
leasing expenses 74,807 81,424 71,075
Other operating expenses 111,241 115,693 145,667
------- ------- -------
350,912 357,155 375,050
------- ------- -------
Net income $204,102 $206,146 $196,505
======== ======== ========
Occupied % 76% 92% 92%
Partnership Ownership % 100% 100% 100%
Cash Generated to the
Partnership $380,319 $396,626 $380,298
Net Income Allocated to
the Partnership $204,102 $206,146 $196,505
</TABLE>
Rental income decreased for the period ended December 31, 1999, as compared to
the same period in 1998, due to a decline in occupancy from 92% in 1998 to 76%
in 1999. The decrease in operating expenses from $115,693 in 1998, to $111,241
in 1999, was due to a decrease in janitorial contract and supplies. Operating
expenses decreased significantly from $145,667 in 1997 to $115,693 in 1998 due
to additional tenant reimbursements of approximately $63,000 during the third
quarter of 1998.
The real estate taxes were $29,228 for 1999 and 1998 and $27,945 for 1997.
The Partnership's ownership percentage remained constant at 100% for 1999, 1998
and 1997.
13
<PAGE>
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/Fund II - Fund III Joint Venture
- -------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
---------------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Revenues:
Rental Income $1,470,144 $1,470,144 $ 924,769
Interest Income 0 0 2,617
Other Income 4,000 13,280 8,638
---------- ---------- ----------
1,474,144 1,483,424 936,024
---------- ---------- ----------
Expenses:
Depreciation 867,720 866,778 795,829
Management and
leasing expenses 179,762 186,102 111,576
Other operating expenses 720,595 713,955 841,456
---------- ---------- ----------
1,768,077 1,766,835 1,748,861
---------- ---------- ----------
Net (loss) $ (293,933) $ (283,411) $ (812,837)
========== ========== ==========
Occupied % 100.00% 100.00% 100.00%
Partnership Ownership % 38.70% 38.72% 38.72%
Cash distributed to the
Partnership $ 243,400 $ 256,165 $ 85,283
Net loss allocated
to the Partnership $ (113,752) $ (109,680) $ (303,212)
</TABLE>
Rental income remained stable for 1999 and 1998. The lower income and management
and leasing expenses in 1997 is due primarily to the Atrium vacancy until the
Boeing lease began in May, 1997. Management and leasing expenses decreased, as
compared to 1998, due to an over accrual of fees in 1998. Operating expenses
increased in 1999, as compared to 1998, due to an increase in property tax in
1999. Other operating expense was higher in 1997 due primarily to the vacancy of
Lockheed.
The real estate taxes were $175,360 for 1999, $148,006 for 1998 and $140,366 for
1997.
For comments on the general conditions to which the property may be subject, see
Item 1, Business, page 1. For additional information on the property, tenants,
etc., see Item 2, Properties, page 3.
14
<PAGE>
The Brookwood Grill Property/Fund II - Fund III Joint Venture
- -------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
---------------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Revenues:
Rental Income $224,801 $ 225,100 $225,106
Equity in Income (Loss)
of Joint Venture 81,669 78,791 27,213
-------- -------- --------
306,470 303,891 252,319
-------- -------- --------
Expenses:
Depreciation 54,016 54,012 54,014
Management and
leasing expenses 30,096 23,349 28,464
Other operating expenses (463) (24,632) 23,887
-------- -------- --------
83,649 52,727 106,365
-------- -------- --------
Net income $222,821 $ 251,162 $145,954
======== ======== ========
Occupied % 100% 100% 100%
Partnership Ownership % in the
Fund II - Fund III Joint Venture 37.7% 37.7% 37.7%
Cash distributed to the
Partnership $153,210 $ 163,576 $115,125
Income allocated to the
Partnership $ 83,892 $ 94,562 $ 54,952
</TABLE>
Although rental income remained relatively stable in 1999, 1998 and 1997, total
revenues increased in 1999 and 1998 due to the increase in equity income from
Fund II, III, VI, VII Joint Venture, as the Holcomb Bridge Property increased
its occupancy rate.
Management and leasing expenses increased in 1999 as compared to 1998, due to an
underaccrual of management fees in 1998. Other operating expenses decreased in
1998, as compared to 1997, due primarily to a change in the rental agreement of
billing water reimbursements to the tenant in 1998. However, these
reimbursements were over estimated in 1998 thus 1999 operating expenses
increased as compared to 1998.
Real estate taxes were $18,055 for 1999, $16,270 for 1998, $25,711 for 1997 and
$33,494 for 1996.
15
<PAGE>
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.
Holcomb Bridge Road Property / Fund II - III - VI - VII Joint Venture
---------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental Income $953,952 $872,978 $679,268
Other Income 23,843 36,000 0
-------- -------- --------
977,795 908,978 679,268
-------- -------- --------
Expenses:
Depreciation 415,165 376,290 325,974
Management & leasing expenses 129,798 97,701 48,962
Other operating expenses 93,534 107,418 195,567
-------- -------- --------
638,497 581,409 570,503
-------- -------- --------
Net income $339,298 $327,569 $108,765
======== ======== ========
Occupied % 100% 94% 94%
Partnership's Ownership % 9.0% 9.0% 9.1%
Cash Distribution to Partnership $182,886 $179,198 $109,242
Net Income Allocated to the
Partnership $ 81,669 $ 78,791 $ 27,213
</TABLE>
Rental income increased in 1999, as compared to 1998, due primarily to increased
tenant occupancy. The lower rental income in 1997, is due to the 94% occupancy
starting in late 1997. Depreciation expense increased as occupancy rate
increased due to tenant improvement taking place when tenant moved in.
Management and leasing expenses increased due primarily to increased
management's fees that are charges based on rental income. Other operating
expenses decreased in 1999, as compared to 1998, due primarily to an over
accrual of property taxes in 1998. Other operating expenses were higher in 1997
due primarily to water/sewer reimbursement paid by Fulton County Water that did
not begin until 1998.
For comments on the general competitive conditions to which the property may be
subject, see Item, Business page 2. For additional information on tenants, etc.
refer to Item 2, Properties, page 3.
16
<PAGE>
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
- -------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31
------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $527,425 $527,425 $527,425
-------- -------- --------
Expenses
Depreciation 196,220 196,220 196,220
Management & leasing expenses 40,631 40,300 38,435
Other operating expenses 18,164 18,876 3,708
-------- -------- --------
255,015 255,396 238,363
-------- -------- --------
Net income $272,410 $272,029 $289,062
======== ======== ========
Occupied % 100% 100% 100%
Partnership's Ownership % in the
Fund III-Fund IV Joint Venture 57.2% 57.3% 57.3%
Cash distribution to the Partnership $287,763 $281,937 $284,890
Net income allocated to the
Partnership $155,902 $155,918 $165,680
</TABLE>
Rental income remained constant for 1999, 1998 and 1997.
Total expenses remained constant in 1999, as compared to 1998, but increased for
both years as compared to $238,363 in 1997 due to engineering expenditures in
1999 and roof repairs in 1998.
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.
The Partnership's ownership in the Fund III - Fund IV Joint Venture decreased in
1999, as compared to 1998 and 1997, due to additional fundings in 1999 by Wells
Fund IV, which decreased the Partnership's ownership.
Under the terms of the lease, G.E. pays the real estate taxes directly.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, Page 2. For additional information on tenants,
etc. refer to Item 2, Properties, Page 3.
17
<PAGE>
The Stockbridge Village Shopping Center / Fund III - Fund IV Joint Venture
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year For the Ended December 31
------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Rental income $1,267,823 $1,222,417 $1,113,238
Interest income 11,790 9,368 12,308
---------- ---------- ----------
1,279,613 1,231,785 1,125,546
---------- ---------- ----------
Expenses
Depreciation 355,737 346,144 338,989
Management & leasing expenses 117,889 114,581 107,578
Other operating expenses 9,687 83,952 68,797
---------- ---------- ----------
483,313 554,677 515,364
---------- ---------- ----------
Net income 796,300 687,108 $ 610,182
========== ========== ==========
Occupied % 95% 100% 93%
Partnership's Ownership % in the
Fund III-Fund IV Joint Venture 57.2% 57.3% 57.3%
Cash distribution to the Partnership $ 660,742 $ 566,769 $ 560,166
Net income allocated to the
Partnership $ 455,704 $ 393,827 $ 349,736
</TABLE>
Rental income increased for the year ended December 31, 1999, as compared to
1998 and 1997, due to increased rental renewal rates. Other operating expenses
decreased due primarily to differences in 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.
Real estate taxes were $109,806 for 1999, $110,891 for 1998 and $98,138 for
1997.
The Partnership's ownership in the Fund III - Fund IV Joint Venture decreased in
1999, as compared to 1998 and 1997, due to additional fundings in 1999 by Wells
Fund IV, which decreased the Partnership's ownership in the Fund III - Fund IV
Joint Venture.
For comments on the general competitive conditions to which the property may be
subject, See Item 1, Business, Page 2. For additional information on tenants,
etc. refer to Item 2, Properties, Page 3.
18
<PAGE>
Liquidity and Capital Resources
- -------------------------------
During its offering, which terminated on October 23, 1990, the Partnership
raised a total of $22,206,310 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 $17,983,843 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 $3,357.
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 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.
Pursuant to the terms of the Partnership Agreement, the Partnership is required
to maintain working capital reserves in an amount equal to the cash operating
expenses required to operate the Partnership for a six-month period not to be
reduced below 1% of Limited Partners' capital contributions. As set forth
above, in order to fund a portion of the tenant improvements at The Atrium, the
General Partners have used $218,706 of the Partnership's working capital
reserves to reduce the balance below this minimum amount, rather than funding
the tenant improvements out of operating cash flow, which would have the effect
of reducing cash flow distributions to Limited Partners.
The Partnership's net cash provided by operating activities decreased to
$271,433 in 1999, as compared to $333,229 in 1998 due to fluctuations in
receivables and payables. The increase in 1998 as compared to $264,289 in 1997
is due primarily to increased net income as occupancy increased at the Atrium
and the Holcomb Bridge Road Property. Net cash provided by investing activities
increased in 1999 as compared 1998 and in 1998 as compared to 1997 due to
decreased investment in joint ventures and increased distributions from joint
ventures each year. Net cash used in financing activities increased in 1998
from 1997 and in 1999 from 1998 as distributions to limited partners increased.
As a result, cash and cash equivalents have decreased to $128,536 in 1999 from
$156,648 in 1998 and $216,961 in 1997.
The Partnership's distributions paid and payable through the fourth quarter of
1999 have been paid from net cash from operations and a return of capital. The
Partnership anticipates that distributions will likely continue to be paid on a
quarterly basis from Net Cash from Operations for the year 2000, but will be
substantially reduced due to vacancy at the G.E. Building and the cost necessary
to lease up the property as previously discussed.
The Partnership is unaware of any additional demands, commitments, events or
capital expenditures other than the vacancy and leasing costs at the G.E.
Building and 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.
19
<PAGE>
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 should 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.
Year 2000 Compliance
- --------------------
The Partnership made the transition into the year 2000 without any information
systems, business operations or facilities related system problems. Management
believes that there are no other Y2K related issues that may require disclosure.
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
--------------------
There were no disagreements with the Partnership's accountants or other
reportable events during 1999.
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 6200 The
Corners Parkway, Suite 250, Norcross, Georgia 30092. Leo F. Wells, III is the
sole Director and the President of Capital.
Leo F. Wells, III. Mr. Wells is a resident of Atlanta, Georgia, is 56 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
20
<PAGE>
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, 1999:
<TABLE>
<CAPTION>
( A ) ( B ) ( C )
Name of Individual or Number in Capacities in which served Form of
Group Compensation Cash Compensation
<S> <C> <C>
Wells Management Company, Inc. Property Manager-Management and $215,168 (1)
Leasing Fees
Wells Capital, Inc. General Partner - Partnership
Cash Flow Distributions -0-
Leo F. Wells, III General Partner - Partnership
Cash Flow Distributions -0-
- ------------------------------------------------------------------------------------------------------
</TABLE>
(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 1999 but not
actually paid until January, 2000.
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 28, 2000:
21
<PAGE>
<TABLE>
<CAPTION>
(2) (3)
(1) Name and Address of Amount and Nature of (4)
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- --------------- -------------------- ----------------
<S> <C> <C> <C>
Class A Units Leo F. Wells, III 11,158.79 Units Less than 1%
(IRA, 401 (k) and
Profit Sharing)
Class B Units Leo F. Wells, III 1,750.00 Units Less than 1%
(401 (k))
</TABLE>
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 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 ended December 31, 1999, the General Partners
received no cash distributions. The General Partners 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, 1999, Wells Management Company, Inc's compensation
totaled $215,168 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.
22
<PAGE>
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 totaling 100% of their capital contributions plus a 6% cumulative
return on their adjusted capital contributions. During 1999, no real estate
commissions were paid to the General Partners.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) 1. The Financial Statements are contained on pages F-2 through F-32 of this
Annual Report on Form 10-K, and the list of the Financial Statements
contained herein is set forth on page F-1, which is hereby incorporated
by reference.
(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.
(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 year of
1999.
(c) The Exhibits filed in response to Item 601 of Regulation S-K are listed
on the Exhibit Index attached hereto.
24
<PAGE>
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 27/th/ day of March,
2000.
Wells Real Estate Fund III
(Registrant)
By: /s/ Leo F. Wells, III
--------------------------
Leo F. Wells, III
Individual General Partner and as President
and Chief Financial Officer 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, 2000
- ----------------------- and Sole Director of
Leo F. Wells, III Wells Capital, Inc., the
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.
25
<PAGE>
INDEX TO THE FINANCIAL STATEMENTS
----------------------------------
Financial Statements Page
- -------------------- ----
Independent Auditor's Report F-2
Balance Sheets as of December 31, 1999 and 1998 F-3
Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997 F-4
Statements of Partners' Capital for the Years Ended
December 31, 1999, 1998 and 1997 F-5
Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 F-6
Notes to Financial Statements for
December 31, 1999, 1998 and 1997. F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund III, L.P.:
We have audited the accompanying balance sheets of WELLS REAL ESTATE FUND III,
L.P. (a Georgia public limited partnership) as of December 31, 1999 and 1998 and
the related statements of income, partners' capital, and cash flows for each of
the three years in the period ended December 31, 1999. 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 those
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 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, 1999 and 1998 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
Our audits were 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 as of December 31, 1999 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.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 20, 2000
F-2
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
REAL ESTATE ASSETS, at cost:
Land $ 576,350 $ 576,350
Building and improvements, less accumulated depreciation of
$1,096,423 and $931,559 at December 31, 1999 and 1998,
respectively 2,531,644 2,668,658
--------------- ---------------
Total real estate assets 3,107,994 3,245,008
INVESTMENT IN JOINT VENTURES 11,369,590 12,132,961
CASH AND CASH EQUIVALENTS 128,536 156,648
DUE FROM AFFILIATES 318,763 334,162
ACCOUNTS RECEIVABLE 14,489 8,000
PREPAID EXPENSES AND OTHER ASSETS 22,916 24,157
--------------- ---------------
Total assets $14,962,288 $15,900,936
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 5,478 $ 13,362
Partnership distributions payable 435,375 458,724
Due to affiliates 0 7,966
--------------- ---------------
Total liabilities 440,853 480,052
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Limited partners:
Class A--19,635,965 units 14,521,435 15,420,884
Class B--2,544,540 units 0 0
--------------- ---------------
Total partners' capital 14,521,435 15,420,884
--------------- ---------------
Total liabilities and partners' capital $14,962,288 $15,900,936
=============== ===============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES:
Rental income $ 554,956 $ 562,951 $571,555
Equity in income of joint ventures 581,745 534,627 267,156
Interest income 58 1,524 11,347
-------------- -------------- --------------
1,136,759 1,099,102 850,058
-------------- -------------- --------------
EXPENSES:
Depreciation 164,864 160,038 158,308
Operating costs, net of reimbursements 87,886 72,816 125,810
Partnership administration 69,937 74,328 57,312
Management and leasing fees 74,807 81,424 71,075
Legal and accounting 22,979 22,742 42,562
Bad debt expense 0 31,188 0
Computer costs 6,874 7,559 9,767
-------------- -------------- --------------
427,347 450,095 464,834
-------------- -------------- --------------
NET INCOME $ 709,412 $ 649,007 $385,224
============== ============== ==============
NET INCOME ALLOCATED TO CLASS A LIMITED PARTNERS $ 674,433 $ 608,058 $385,224
============== ============== ==============
NET INCOME ALLOCATED TO CLASS B LIMITED PARTNERS $ 34,979 $ 40,949 $ 0
============== ============== ==============
NET INCOME PER CLASS A LIMITED PARTNER UNIT $ 0.03 $ 0.03 $ 0.02
============== ============== ==============
NET INCOME PER CLASS B LIMITED PARTNER UNIT $ 0.01 $ 0.02 $ 0.00
============== ============== ==============
CASH DISTRIBUTION PER CLASS A LIMITED PARTNER UNIT $ 0.08 $ 0.08 $ 0.04
============== ============== ==============
CASH DISTRIBUTION PER CLASS B LIMITED PARTNER UNIT $ 0.01 $ 0.02 $ 0.00
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
Limited Partners Total
-------------------------------------------------------
Class A Class B Partners'
--------------------------- ---------------------------
Units Amount Units Amount Capital
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 19,635,965 $16,743,131 2,544,540 $ 0 $16,743,131
Net income 0 385,224 0 0 385,224
Partnership distributions 0 (744,650) 0 0 (744,650)
------------- ------------- ------------- ------------- -------------
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 0 674,433 0 34,979 709,412
Partnership distributions 0 (1,573,882) 0 (34,979) (1,608,861)
------------- ------------- ------------- ------------- -------------
BALANCE, December 31, 1999 19,635,965 $14,521,435 2,544,540 $ 0 $14,521,435
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 709,412 $ 649,007 $ 385,224
------------- ------------- -------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in income of joint ventures (581,745) (534,627) (267,156)
Depreciation 164,864 160,038 158,308
Changes in assets and liabilities:
Accounts receivable (6,489) 54,621 5,169
Prepaid expenses and other assets 1,241 (6,167) 6,110
Accounts payable and accrued expenses (7,884) 5,827 (15,406)
Due to affiliates (7,966) 4,530 (7,960)
------------- ------------- -------------
Total adjustments (437,979) (315,778) (120,935)
------------- ------------- -------------
Net cash provided by operating activities 271,433 333,229 264,289
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate (27,850) (34,616) 0
Investment in joint ventures 0 (59,205) (659,810)
Distributions received from joint ventures 1,360,515 1,250,374 942,318
------------- ------------- -------------
Net cash provided by investing activities 1,332,665 1,156,553 282,508
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners in excess of accumulated earnings (973,626) (1,056,213) (267,191)
Distributions to partners from accumulated earnings (658,584) (493,882) (404,963)
------------- ------------- -------------
Net cash used in financing activities (1,632,210) (1,550,095) (672,154)
------------- ------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (28,112) (60,313) (125,357)
CASH AND CASH EQUIVALENTS, beginning of year 156,648 216,961 342,318
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 128,536 $ 156,648 $ 216,961
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997
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 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. A majority vote on any of the
above described matters will bind the Partnership without the concurrence of
the general partners. 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 directly owns an office building in Greenville, North
Carolina. 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 of Nassau Bay ("The Atrium"), a four-story
office building located in metropolitan 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 in Roswell, Georgia.
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.
The carrying values of real estate are based on management's current intent
to hold the real estate assets as long-term investments. The success of the
Partnership's future operations and the ability to realize the investment in
its assets will be dependent on the Partnership's ability to maintain rental
rates, occupancy, and an appropriate level of operating expenses in future
years. Management believes that the steps that it is taking will enable the
Partnership to realize its investment in its assets.
F-7
<PAGE>
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 shares 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 are paid first to limited partners holding Class A
units until they have received an 8% per annum 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% per annum return on their adjusted capital contributions, as
defined. If any cash available for distribution remains, the general partners
receive an amount equal to 10% of total net cash from operations distributed.
Thereafter, amounts are distributed 10% to the general partners and 90% to
the limited partners.
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, as defined
. To all general partners until they have received 100% of their capital
contributions, as defined
. Thereafter, 85% to the limited partners and 15% to the general
partners
Allocation of Net Income, Net Loss, and Gain on Sale
Net income is defined as net income recognized by the Partnership, excluding
deductions for depreciation and amortization. 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, and amortization 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
F-8
<PAGE>
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 and amortization 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 cost less accumulated depreciation.
Major improvements and betterments are capitalized when they extend the
useful life of the related asset. All repairs and maintenance are expensed as
incurred.
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 amounts of real estate assets may not be recoverable, management
assesses the recoverability of real estate assets 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, 1999.
Depreciation for buildings and improvements is calculated using the straight-
line method over 25 years.
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 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. Cash is paid
from the joint ventures to the Partnership quarterly.
Cash 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.
F-9
<PAGE>
Per Unit Data
Net income per unit with respect to the Partnership for the years ended
December 31, 1999, 1998, and 1997 is computed based on the average number of
units outstanding during the period.
2. RELATED-PARTY TRANSACTIONS
Due from affiliates at December 31, 1999 and 1998 represents the
Partnership's share of cash to be distributed from its joint venture
investments for the fourth quarters of 1999 and 1998, respectively, as
follows:
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Fund III and IV Associates $232,157 $233,680
Fund II and III Associates--The Atrium 39,092 53,054
Fund II and III Associates--Brookwood Grill 47,514 47,428
-------------- --------------
$318,763 $334,162
============== ==============
</TABLE>
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 management and leasing fees and lease acquisition
costs, both directly and at the joint venture level, of $215,168, $183,589,
and $194,174, for the years ended December 31, 1999, 1998, and 1997,
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 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.
F-10
<PAGE>
3. INVESTMENT IN JOINT VENTURES
The Partnership's investment and percentage ownership in the joint ventures
at December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------- -------------------------------
Amount Percent Amount Percent
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Fund III and IV Associates $ 6,993,642 57% $ 7,330,542 57%
Fund II and III Associates-- The Atrium 3,212,263 39 3,569,416 39
Fund II and III Associates-- Brookwood
Grill 1,163,685 38 1,233,003 38
--------------- ---------------
$11,369,590 $12,132,961
=============== ===============
</TABLE>
The following is a rollforward of the Partnership's investment in joint
ventures for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Investment in joint ventures, beginning of year $12,132,961 $12,807,576
Equity in income of joint ventures 581,745 534,627
Contributions to joint ventures 0 59,205
Distributions from joint ventures (1,345,116) (1,268,447)
--------------- ---------------
Investment in joint ventures, end of year $11,369,590 $12,132,961
--------------- ---------------
</TABLE>
Fund II and III Associates
On April 3, 1989, the Partnership entered into a joint venture agreement with
the 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. In
1991, the 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 1.5 acres of the 880 Property and is currently operating as
the Brookwood Grill restaurant ("Fund II and III Associates--Brookwood
Grill"). The remaining 4.3 acres of the 880 Property were transferred at cost
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 $1,406,591 and $1,507,807 at December 31, 1999 and 1998,
respectively, which represented a 24% interest for each year.
The Atrium was fully occupied from inception through June 1996, at which time
the previous tenant's lease expired. In March 1997, a lease was signed with a
new tenant for the entire building and the new tenant began paying rent in
May 1997. The lease term is for five years with an option to renew for an
additional five years. There is no-cause cancellation provision at the end of
the first three-year period. If this no-cause cancellation is exercised, the
tenant would be required to pay unamortized, up-front tenant improvement
costs. The cost of completing the required tenant improvements and outside
broker commissions was funded out of reserves and contributions by the
Partnership and Fund II and II-OW.
F-11
<PAGE>
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, 1999 and 1998
Assets
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Real estate assets, at cost:
Land $1,504,743 $ 1,504,743
Building and improvements, less accumulated depreciation of 7,093,742 7,938,061
$6,301,682 in 1999 and $5,433,962 in 1998
--------------- ---------------
Total real estate assets 8,598,485 9,442,804
Cash and cash equivalents 89,170 128,882
Accounts receivable 30,018 18,114
Prepaid expenses and other assets 213,143 302,888
--------------- ---------------
Total assets $8,930,816 $ 9,892,688
=============== ===============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 1,801 $ 4,587
Partnership distributions payable 101,012 137,224
--------------- ---------------
Total liabilities 102,813 141,811
--------------- ---------------
Partners' capital:
Fund II and II-OW 5,615,740 6,181,461
Wells Real Estate Fund III 3,212,263 3,569,416
--------------- ---------------
Total partners' capital 8,828,003 9,750,877
--------------- ---------------
Total liabilities and partners' capital $8,930,816 $9,892,688
=============== ===============
</TABLE>
F-12
<PAGE>
Fund II and III Associates--The Atrium
(A Georgia Joint Venture)
Statements of Loss
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C>
Revenues:
Rental income $1,470,144 $1,470,144 $ 924,769
Interest income 0 0 2,617
Other income 4,000 13,280 8,638
-------------- ------------- ------------
1,474,144 1,483,424 936,024
-------------- ------------- ------------
Expenses:
Depreciation 867,720 866,778 795,829
Operating costs, net of reimbursements 692,066 699,550 614,932
Management and leasing fees 179,762 186,102 111,576
Partnership administration 23,278 11,095 27,325
Legal and accounting 5,250 3,310 17,408
Computer costs 0 0 107
Loss on real estate assets 0 0 181,684
-------------- ------------ ------------
1,768,076 1,766,835 1,748,861
-------------- ------------ ------------
Net loss $ (293,932) $ (283,411) $ (812,837)
============== ============ ============
Net loss allocated to Fund II and II-OW $ (180,180) $ (173,731) $ (509,625)
============== ============ ============
Net loss allocated to Wells Real Estate Fund III $ (113,752) $ (109,680) $ (303,212)
============== ============ ============
</TABLE>
Fund II and III Associates--The Atrium
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Fund II Wells Real Total
and Estate Partners'
II-OW Fund III Capital
---------- ---------- -----------
<S> <C> <C> <C>
Balance, December 31, 1996 $6,985,561 $3,663,946 $10,649,507
Net loss (509,625) (303,212) (812,837)
Partnership contributions 409,495 659,810 1,069,305
Partnership distributions (124,481) (85,283) (209,764)
---------- ---------- -----------
Balance, December 31, 1997 6,760,950 3,935,261 10,696,211
Net loss (173,731) (109,680) (283,411)
Partnership distributions (405,758) (256,165) (661,923)
---------- ---------- ----------
Balance, December 31, 1998 6,181,461 3,569,416 9,750,877
Net loss (180,180) (113,752) (293,932)
Partnership distributions (385,541) (243,401) (628,942)
---------- ---------- -----------
Balance, December 31, 1999 $5,615,740 $3,212,263 $ 8,828,003
========== ========== ===========
</TABLE>
F-13
<PAGE>
Fund II and III Associates--The Atrium
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(293,932) $(283,411) $ (812,837)
--------- --------- ----------
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 867,720 866,778 795,829
Loss on real estate assets 0 0 181,684
Changes in assets and liabilities:
Accounts receivable (11,904) 836 (18,950)
Prepaid expenses and other assets 89,745 89,745 (357,417)
Accounts payable (2,786) (146,779) (37,394)
Due to affiliates 0 (3,829) 3,829
--------- -------- -----------
Total adjustments 942,775 806,751 567,581
--------- -------- -----------
Net cash provided by (used in) operating
activities 648,843 523,340 (245,256)
--------- -------- -----------
Cash flows from investing activities:
Investment in real estate assets (23,401) 0 (932,156)
--------- -------- -----------
Cash flows from financing activities:
Contributions from joint venture partners 0 0 1,069,305
Distributions to joint venture partners (665,154) (675,743) (58,720)
--------- -------- -----------
Net cash (used in) provided by financing
activities (665,154) (675,743) 1,010,585
--------- --------- -----------
Net decrease in cash and cash equivalents (39,712) (152,403) (166,827)
Cash and cash equivalents, beginning of year 128,882 281,285 448,112
--------- -------- -----------
Cash and cash equivalents, end of year $ 89,170 $ 128,882 $ 281,285
========= ========= ===========
</TABLE>
F-14
<PAGE>
Following are the financial statements for Fund II and III
Associates--Brookwood Grill:
Fund II and III Associates--Brookwood Grill
(A Georgia Joint Venture)
Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
Assets
1999 1998
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $ 745,223 $ 745,223
Building and improvements, less accumulated depreciation of
$383,745 in 1999 and $329,731 in 1998 889,068 943,082
---------- ----------
Total real estate assets 1,634,291 1,688,305
Investment in joint venture 1,406,591 1,507,807
Cash and cash equivalents 65,627 73,956
Due from affiliate 60,193 50,479
Accounts receivable 41,060 67,018
Prepaid expenses and other assets 11,912 17,480
---------- ----------
Total assets $3,219,674 $3,405,045
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 0 $ 1,200
Due to affiliate 2,405 3,894
Partnership distributions payable 126,201 124,772
---------- ----------
Total liabilities 128,606 129,866
---------- ----------
Partners' capital:
Fund II and II-OW 1,927,383 2,042,176
Wells Real Estate Fund III 1,163,685 1,233,003
---------- ----------
Total partners' capital 3,091,068 3,275,179
---------- ----------
Total liabilities and partners' capital $3,219,674 $3,405,045
========== ==========
</TABLE>
F-15
<PAGE>
Fund II and III Associates--Brookwood Grill
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Revenues:
Rental income $224,801 $225,100 $225,106
Equity in income of joint venture 81,669 78,791 27,213
-------- -------- --------
306,470 303,891 252,319
-------- -------- --------
Expenses:
Operating costs, net of reimbursements (11,565) (31,540) 15,233
Depreciation 54,014 54,014 54,014
Management and leasing fees 30,096 23,348 28,464
Partnership administration 5,853 3,708 3,875
Legal and accounting 5,252 3,200 4,672
Computer costs 0 0 107
-------- -------- --------
83,650 52,730 106,365
-------- -------- --------
Net income $222,820 $251,161 $145,954
======== ======== ========
Net income allocated to Fund II and II-OW $138,928 $156,599 $ 91,002
======== ======== ========
Net income allocated to Wells Real Estate Fund III $ 83,892 $ 94,562 $ 54,952
======== ======== ========
</TABLE>
Fund II and III Associates--Brookwood Grill
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Fund II Wells Real Total
and Estate Partners'
II-OW Fund III Capital
---------- ---------- ---------
<S> <C> <C> <C>
Balance, December 31, 1996 $2,256,114 $1,362,190 $3,618,304
Net income 91,002 54,952 145,954
Partnership distributions (190,653) (115,125) (305,778)
---------- ---------- ----------
Balance, December 31, 1997 2,156,463 1,302,017 3,458,480
Net income 156,599 94,562 251,161
Partnership distributions (270,886) (163,576) (434,462)
---------- ---------- ----------
Balance, December 31, 1998 2,042,176 1,233,003 3,275,179
Net income 138,928 83,892 222,820
Partnership distributions (253,721) (153,210) (406,931)
---------- ---------- ----------
Balance, December 31, 1999 $1,927,383 $1,163,685 $3,091,068
========== ========== ==========
</TABLE>
F-16
<PAGE>
Fund II and III Associates--Brookwood Grill
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 222,820 $ 251,161 $ 145,954
---------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 54,014 54,014 54,014
Equity in income of joint venture (81,669) (78,791) (27,213)
Changes in assets and liabilities:
Accounts receivable 25,958 22,739 24,229
Prepaid expenses and other assets 5,568 5,568 5,568
Accounts payable (1,200) (2,679) (16,161)
Due to affiliates (1,489) (1,487) (1,163)
---------- --------- ---------
Total adjustments 1,182 (636) 39,274
---------- --------- ---------
Net cash provided by operating activities 224,002 250,525 185,228
---------- --------- ---------
Cash flows from investing activities:
Distributions received from joint venture 173,171 160,812 89,622
---------- --------- ---------
Cash flows from financing activities:
Distributions to joint venture partners (405,502) (391,702) (229,631)
---------- --------- ---------
Net (decrease) increase in cash and cash equivalents (8,329) 19,635 45,219
Cash and cash equivalents, beginning of year 73,956 54,321 9,102
---------- --------- ---------
Cash and cash equivalents, end of year $ 65,627 $ 73,956 $ 54,321
========== ========= =========
</TABLE>
Fund II, III, VI, and VII Associates
On January 1, 1995, the Fund II and III Associates joint venture entered into a
joint venture agreement with Wells Real Estate Fund VI, L.P. ("Fund VI") and
Wells Real Estate Fund VII, L.P. ("Fund VII"). The joint venture, Fund II, III,
VI, and VII Associates, 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. During 1998, 1997, and 1996, Fund VI and
Fund VII made contributions to the joint venture. Ownership percentage
interests were recompleted accordingly. Development was substantially completed
in 1996 on two retail and office buildings containing a total of approximately
49,500 square feet.
F-17
<PAGE>
The following are the financial statements for Fund II, III, VI, and VII
Associates:
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
Assets
1999 1998
---------- ----------
<S> <C> <C>
Real estate assets, at cost:
Land $1,325,242 $1,325,242
Building and improvements, less accumulated depreciation of
$1,299,227 in 1999 and $884,062 in 1998 4,418,932 4,773,062
Construction in progress 0 41,263
---------- ----------
Total real estate assets 5,744,174 6,139,567
Cash and cash equivalents 189,404 308,788
Accounts receivable 162,464 111,460
Prepaid expenses and other assets 213,443 233,965
---------- ----------
Total assets $6,309,485 $6,793,780
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 87,926 $ 192,072
Partnership distributions payable 250,075 209,716
---------- ----------
338,001 401,788
---------- ----------
Partners' capital:
Fund II and III Associates 1,406,591 1,507,807
Wells Real Estate Fund VI 1,569,430 1,682,380
Wells Real Estate Fund VII 2,995,463 3,201,805
---------- ----------
Total partners' capital 5,971,484 6,391,992
---------- ----------
Total liabilities and partners' capital $6,309,485 $6,793,780
========== ==========
</TABLE>
F-18
<PAGE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Revenues:
Rental income $953,952 $872,978 $679,268
Other income 23,843 36,000 0
-------- -------- --------
977,795 908,978 679,268
-------- -------- --------
Expenses:
Depreciation 415,165 376,290 325,974
Operating costs, net of reimbursements 68,691 85,983 122,261
Management and leasing fees 129,798 97,701 99,834
Legal and accounting 4,952 6,509 4,885
Partnership administration 19,891 14,926 17,321
Computer costs 0 0 228
-------- -------- --------
638,497 581,409 570,503
-------- -------- --------
Net income $339,298 $327,569 $108,765
======== ======== ========
Net income allocated to Fund II and III Associates $ 81,669 $ 78,791 $ 27,213
======== ======== ========
Net income allocated to Wells Real Estate Fund VI $ 91,135 $ 87,914 $ 28,409
======== ======== ========
Net income allocated to Wells Real Estate Fund VII $166,494 $160,864 $ 53,143
======== ======== ========
</TABLE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Fund II Wells Wells Real Total
and III Real Estate Estate Partners'
Associates Fund VI Fund VII Capital
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $1,690,244 $1,759,947 $3,292,551 $6,742,742
Partnership contributions 0 116,675 121,576 238,251
Partnership distributions (109,242) (115,220) (214,414) (438,876)
Net income 27,213 28,409 53,143 108,765
------------ ------------- ------------- ------------
Balance, December 31, 1997 1,608,215 1,789,811 3,252,856 6,650,882
Partnership contributions 0 4,600 154,049 158,649
Partnership distributions (179,199) (199,945) (365,964) (745,108)
Net income 78,791 87,914 160,864 327,569
------------ ------------- ------------- ------------
Balance, December 31, 1998 1,507,807 1,682,380 3,201,805 6,391,992
Partnership distributions (182,885) (204,085) (372,836) (759,806)
Net income 81,669 91,135 166,494 339,298
------------ ------------- ------------- ------------
Balance, December 31, 1999 $1,406,591 $1,569,430 $2,995,463 $5,971,484
============ ============= ============= ============
</TABLE>
F-19
<PAGE>
Fund II, III, VI, and VII Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 339,298 $ 327,569 $ 108,765
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 415,165 376,290 325,974
Changes in assets and liabilities:
Accounts receivable (51,004) (56,936) 12,810
Prepaid expenses and other assets 20,522 35,603 (123,748)
Accounts payable and accrued expenses (104,146) 21,296 (34,194)
--------- --------- ---------
Total adjustments 280,537 376,253 180,842
--------- --------- ---------
Net cash provided by operating activities 619,835 703,822 289,607
--------- --------- ---------
Cash flows from investing activities:
Investment in real estate (19,772) (102,122) (620,059)
--------- --------- ---------
Cash flows from financing activities:
Contributions from joint venture partners 0 154,996 230,699
Distributions to joint venture partners (719,447) (667,299) (356,559)
--------- --------- ---------
Net cash used in financing activities (719,447) (512,303) (125,860)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents (119,384) 89,397 (456,312)
Cash and cash equivalents, beginning of year 308,788 219,391 675,703
--------- --------- ---------
Cash and cash equivalents, end of year $ 189,404 $ 308,788 $ 219,391
========= ========= =========
Supplemental disclosure of noncash activities:
Deferred project costs contributed to joint venture $ 0 $ 3,653 $ 7,552
========= ========= =========
</TABLE>
Fund 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 the Stockbridge
Village Shopping Center in Stockbridge, Georgia. In addition, in July 1992,
Fund III and IV Associates purchased the G.E. Lighting National Customer Center
in Richmond, Virginia.
F-20
<PAGE>
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, 1999 and 1998
<TABLE>
<CAPTION>
Assets
1999 1998
----------- -----------
<S> <C> <C>
Real estate assets, at cost:
Land $ 3,331,775 $ 3,331,775
Building and improvements, less accumulated depreciation of
$3,422,583 in 1999 and $2,870,627 in 1998 8,792,931 9,320,016
----------- -----------
Total real estate assets 12,124,706 12,651,791
Cash and cash equivalents 310,609 336,958
Accounts receivable 171,047 173,633
Prepaid expenses and other assets 65,213 74,533
----------- -----------
Total assets $12,671,575 $13,236,915
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 33,759 $ 38,139
Partnership distributions payable 405,782 407,701
Due to affiliates 7,878 1,512
----------- -----------
Total liabilities 447,419 447,352
----------- -----------
Partners' capital:
Wells Real Estate Fund III 6,993,642 7,330,542
Wells Real Estate Fund IV 5,230,514 5,459,021
----------- -----------
Total partners' capital 12,224,156 12,789,563
----------- -----------
Total liabilities and partners' capital $12,671,575 $13,236,915
=========== ===========
</TABLE>
F-21
<PAGE>
Fund III and IV Associates
(A Georgia Joint Venture)
Statements of Income
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rental income $ 1,795,247 $ 1,749,842 $ 1,640,663
Interest income 11,790 9,368 12,308
----------- ----------- -----------
1,807,037 1,759,210 1,652,971
----------- ----------- -----------
Expenses:
Depreciation 551,956 542,363 535,209
Management and leasing fees 158,520 154,881 146,013
Operating costs, net of reimbursements (21,669) 62,863 36,973
Property administration 40,357 27,546 21,735
Legal and accounting 9,163 12,420 13,797
----------- ----------- -----------
738,327 800,073 753,727
----------- ----------- -----------
Net income $ 1,068,710 $ 959,137 $ 899,244
=========== =========== ===========
Net income allocated to Wells Real Estate Fund III $ 611,605 $ 549,745 $ 515,416
=========== =========== ===========
Net income allocated to Wells Real Estate Fund IV $ 457,105 $ 409,392 $ 383,828
=========== =========== ===========
</TABLE>
Fund III and IV Associates
(A Georgia Joint Venture)
Statements of Partners' Capital
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
Wells Real Wells Real Total
Estate Estate Partners'
Fund III Fund IV Capital
----------- ----------- -----------
<S> <C> <C> <C>
Balance, December 31, 1996 $ 7,899,938 $ 5,883,048 $13,782,986
Net income 515,416 383,828 899,244
Partnership distributions (845,056) (629,309) (1,474,365)
----------- ----------- -----------
Balance, December 31, 1997 7,570,298 5,637,567 13,207,865
Net income 549,745 409,392 959,137
Partnership contributions 59,205 44,090 103,295
Partnership distributions (848,706) (632,028) (1,480,734)
----------- ----------- -----------
Balance, December 31, 1998 7,330,542 5,459,021 12,789,563
Net income 611,605 457,105 1,068,710
Partnership contributions 0 23,280 23,280
Partnership distributions (948,505) (708,892) (1,657,397)
----------- ----------- -----------
Balance, December 31, 1999 $ 6,993,642 $ 5,230,514 $12,224,156
=========== =========== ===========
</TABLE>
F-22
<PAGE>
Fund III and IV Associates
(A Georgia Joint Venture)
Statements of Cash Flows
for the Years Ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,068,710 $ 959,137 $ 899,244
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 551,956 542,363 535,209
Changes in assets and liabilities:
Accounts receivable 2,586 33,590 40,344
Prepaid expenses and other assets 9,320 (31,628) (6,674)
Accounts payable (4,380) 1,967 (3,550)
Due to affiliates 6,366 (5,427) 921
----------- ----------- -----------
Total adjustments 565,848 540,865 566,250
----------- ----------- -----------
Net cash provided by operating activities 1,634,558 1,500,002 1,465,494
----------- ----------- -----------
Cash flows from investing activities:
Investment in real estate (24,871) (111,383) 0
----------- ----------- -----------
Cash flows from financing activities:
Contributions from joint venture partners 23,280 103,295 0
Distributions to joint venture partners (1,659,316) (1,461,150) (1,457,201)
----------- ----------- -----------
Net cash used in financing activities (1,636,036) (1,357,855) (1,457,201)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (26,349) 30,764 8,293
Cash and cash equivalents, beginning of year 336,958 306,194 297,901
----------- ----------- -----------
Cash and cash equivalents, end of year $ 310,609 $ 336,958 $ 306,194
=========== =========== ===========
</TABLE>
4. INCOME TAX BASIS NET INCOME AND PARTNERS' CAPITAL
The Partnership's income tax basis net income for the years ended December
31, 1999, 1998, and 1997 is calculated as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Financial statement net income $ 709,412 $ 649,007 $ 385,224
Increase (decrease) in net income resulting from:
Depreciation expense for financial reporting purposes in
excess of amounts for income tax purposes 364,072 353,230 320,502
Rental income recognized for income tax purposes in excess of
amounts for financial reporting purposes 23,693 45,896 9,634
Expenses deductible when paid for income tax purposes, accrued
for financial reporting purposes (8,929) (1,014) (6,871)
Fixed asset retirement in excess of amounts for income tax
purposes 0 0 (7,064)
Other 999 960 6,213
----------- ----------- -----------
Income tax basis net income $ 1,089,247 $ 1,048,079 $ 707,638
=========== =========== ===========
</TABLE>
F-23
<PAGE>
The Partnership's income tax basis partners' capital at December 31, 1999, 1998,
and 1997 is computed as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Financial statement partners' capital $ 14,521,435 $ 15,420,884 $ 16,383,705
Increase (decrease) in partners' capital resulting from:
Depreciation expense for financial reporting purposes
in excess of amounts for income tax purposes 1,360,924 996,852 643,622
Capitalization of syndication costs for income tax purposes,
which are accounted for as cost of capital for financial
reporting purposes 2,624,555 2,624,555 2,624,555
Accumulated rental income accrued for financial reporting
purposes in excess of amounts for income tax purposes (214,347) (238,040) (283,936)
Accumulated expenses deductible when paid for income tax
purposes, accrued for financial reporting purposes 111,458 120,387 121,401
Partnership's distribution payable 435,375 458,724 396,991
Other (732) (1,731) (2,691)
------------ ------------ ------------
Income tax basis partners' capital $ 18,838,668 $ 19,381,631 $ 19,883,647
============ ============ ============
</TABLE>
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, 1999 is as follows:
Year ending December 31:
2000 $2,017,610
2001 1,558,136
2002 886,269
2003 418,482
2004 370,333
Thereafter 2,711,656
-----------
$ 7,962,486
===========
Four tenants contributed approximately 23%, 19%, 14%, and 12% of revenues. In
addition, two tenants will contribute approximately 49% and 16% 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, 1999 is as follows:
Year ending December 31:
2000 $1,476,960
2001 1,488,000
2002 550,721
----------
$3,515,681
==========
One tenant at the Atrium contributed 100% of rental income for the year ended
December 31, 1999 and will contribute 100% of future minimum rental income.
F-24
<PAGE>
The future minimum rental income due Fund II and III Associates--Brookwood Grill
under noncancelable operating leases at December 31, 1999 is as follows:
Year ending December 31:
2000 $ 249,550
2001 249,550
2002 25,995
---------
$ 525,095
=========
One tenant contributed 100% of rental income for the year ended December 31,
1999 and will contribute 100% 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, 1999 is as follows:
Year ending December 31:
2000 $ 901,595
2001 847,296
2002 469,628
2003 197,540
2004 175,331
Thereafter 149,157
----------
$2,740,547
==========
Three tenants contributed approximately 13%, 13%, and 11% of rental income for
the year ended December 31, 1999. In addition, four tenants will contribute
approximately 29%, 14%, 14%, and 11% of future minimum rental income.
The future minimum rental income due Fund III and IV Associates under
noncancelable operating leases at December 31, 1999 is as follows:
Year ending December 31:
2000 $1,366,588
2001 1,205,853
2002 987,163
2003 684,719
2004 620,139
Thereafter 4,716,703
----------
$9,581,165
==========
Two tenants contributed approximately 31% and 27% of rental income for the year
ended December 31, 1999. In addition, one tenant will contribute approximately
71% of future minimum rental income.
F-25
<PAGE>
6. QUARTERLY RESULTS (UNAUDITED)
Presented below is a summary of the unaudited quarterly financial
information for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 Quarters Ended
-------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $277,769 $312,685 $273,209 $273,096
Net income 148,919 218,982 176,510 165,001
Net income allocated to Class A limited partners 148,919 218,982 176,510 130,022
Net income allocated to Class B limited partners 0 0 0 34,979
Net income per Class A limited partner unit $ 0.01 $ 0.01 $ 0.01 $ 0.00
Net income per Class B limited partner unit 0.00 0.00 0.00 0.01
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 0.01
<CAPTION>
1998 Quarters Ended
-------------------------------------------------------------
March 31 June 30 September 30 December 31
--------- -------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues $255,657 $285,440 $270,116 $287,889
Net income 145,730 162,589 185,563 155,125
Net income allocated to Class A limited partners 145,730 162,589 185,563 114,176
Net income allocated to Class B limited partners 0 0 0 40,949
Net income per Class A limited partner unit $ 0.01 $ 0.01 $ 0.01 $ 0.00
Net income per Class B limited partner unit 0.00 0.00 0.00 0.02
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
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against the Partnership or the Company. In
the normal course of business, the Partnership or the Company may become
subject to such litigation or claims.
F-26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wells Real Estate Fund II,
Wells Real Estate Fund II-OW, and
Wells Real Estate Fund III, L.P.:
We have audited the accompanying balance sheets of THE ATRIUM BUILDING as of
December 31, 1999 and 1998 and the related statements of loss, partners'
capital, and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the building's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 The Atrium Building as of
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States.
Atlanta, Georgia
January 20, 2000
F-27
<PAGE>
THE ATRIUM BUILDING
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
------------ ------------
<S> <C> <C>
REAL ESTATE ASSETS:
Land $1,504,743 $1,504,743
Building and improvements, less accumulated depreciation of
$6,301,681 in 1999 and $5,433,962 in 1998 7,070,342 7,938,061
Construction in progress 23,400 0
------------ -----------
Total real estate assets 8,598,485 9,442,804
CASH AND CASH EQUIVALENTS 89,170 128,882
ACCOUNTS RECEIVABLE 30,018 18,114
PREPAID AND OTHER ASSETS 213,143 302,888
------------ -----------
Total assets $8,930,816 $9,892,688
============ ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Distributions payable to partners $ 101,012 $ 137,224
Accounts payable 1,801 4,587
------------ -----------
Total liabilities 102,813 141,811
------------ -----------
COMMITMENTS AND CONTINGENCIES (Note 4)
PARTNERS' CAPITAL:
Wells Real Estate Fund II 5,162,262 5,697,944
Wells Real Estate Fund II-OW 453,477 483,517
Wells Real Estate Fund III, L.P. 3,212,264 3,569,416
------------ -----------
Total partners' capital 8,828,003 9,750,877
------------ -----------
Total liabilities and partners' capital $8,930,816 $9,892,688
============ ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-28
<PAGE>
THE ATRIUM BUILDING
STATEMENTS OF LOSS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
REVENUES:
Rental income $1,470,144 $1,470,144 $ 924,769
---------- ---------- ----------
EXPENSES:
Depreciation 867,719 866,778 795,829
Operating costs, net of reimbursements 801,090 697,365 812,686
Management and leasing fees 90,018 186,102 111,576
Legal and accounting 5,250 3,310 17,408
Computer costs 0 0 107
---------- ---------- ----------
1,764,077 1,753,555 1,737,606
---------- ---------- ----------
NET LOSS $ (293,933) $ (283,411) $ (812,837)
========== ========== ==========
NET LOSS ALLOCATED TO WELLS REAL ESTATE FUND II $ (170,613) $ (164,506) $ (482,564)
========== ========== ==========
NET LOSS ALLOCATED TO WELLS REAL ESTATE FUND II-OW $ (9,568) $ (9,225) $ (27,061)
========== ========== ==========
NET LOSS ALLOCATED TO WELLS REAL ESTATE FUND III, L.P. $ (113,752) $ (109,680) $ (303,212)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-29
<PAGE>
THE ATRIUM BUILDING
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
Wells Real Wells Real Wells Real Total
Estate Estate Estate Partners'
Fund II Fund II-OW Fund III, Capital
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 $6,459,347 $526,214 $3,663,945 $10,649,506
Net loss (482,564) (27,061) (303,212) (812,837)
Contributions 387,750 21,745 659,810 1,069,305
Distributions (117,871) (6,610) (85,283) (209,764)
----------- ----------- ----------- -----------
BALANCE, December 31, 1997 6,246,662 514,288 3,935,260 10,696,210
Net loss (164,506) (9,225) (109,680) (283,411)
Distributions (384,212) (21,546) (256,164) (661,922)
----------- ----------- ----------- -----------
BALANCE, December 31, 1998 5,697,944 483,517 3,569,416 9,750,877
Net loss (170,613) (9,568) (113,752) (293,933)
Distributions (365,069) (20,472) (243,400) (628,941)
----------- ----------- ----------- -----------
BALANCE, December 31, 1999 $5,162,262 $453,477 $3,212,264 $ 8,828,003
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-30
<PAGE>
THE ATRIUM BUILDING
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(293,933) $(283,411) $ (812,837)
--------- --------- ----------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation 867,719 866,778 795,829
Loss on real estate assets 0 0 181,684
Changes in assets and liabilities:
Accounts receivable (11,904) 836 (18,950)
Prepaid expenses and other assets 89,745 89,745 (357,417)
Accounts payable (2,786) (146,779) (37,394)
Due to affiliates 0 (3,829) 3,829
--------- --------- ----------
Total adjustments 942,774 806,751 567,581
--------- --------- ----------
Net cash provided by (used in) operating
activities 648,841 523,340 (245,256)
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate assets (23,400) 0 (932,156)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from partners 0 0 1,069,305
Distributions paid to partners (665,153) (675,743) (58,720)
--------- --------- ----------
Net cash (used in) provided by financing activities (665,153) (675,743) 1,010,585
--------- --------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (39,712) (152,403) (166,827)
CASH AND CASH EQUIVALENTS, beginning of year 128,882 281,285 448,112
--------- --------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 89,170 $ 128,882 $ 281,285
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-31
<PAGE>
THE ATRIUM BUILDING
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Atrium Building ("Atrium") is a four-story office building located in
Houston, Harris County, Texas. The building is owned by Fund II and III
Associates, a joint venture between Wells Real Estate Fund II ("Fund II"),
Wells Real Estate Fund II-OW ("Fund II-OW"), and Wells Real Estate Fund
III, L.P. ("Fund III). Fund II owns 59% of Atrium, Fund II-OW owns 3% of
Atrium, and Fund III owns 38% of Atrium at December 31, 1999. Allocation of
net loss and distributions are made in accordance with ownership
percentages.
Use of Estimates
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.
Income Taxes
Atrium is not deemed to be a taxable entity for federal income tax
purposes.
Real Estate Assets
Real estate assets are stated at cost, less accumulated depreciation. Major
improvements and betterments are capitalized when they extend the useful
life of the related asset. All repairs and maintenance are expensed as
incurred.
Management continually monitors events and changes in circumstances which
could indicate that carrying amounts of real estate assets may not be
recoverable. When events or changes in circumstances are present which
indicate that the carrying amounts of real estate assets may not be
recoverable, management assesses the recoverability of real estate assets
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 Atrium as of December 31,
1999.
Depreciation is calculated using the straight-line method over 25 years.
Revenue Recognition
The lease on Atrium is classified as an operating lease, and the related
rental income is recognized on a straight-line basis over the term of the
lease.
F-32
<PAGE>
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 leases.
Cash and Cash Equivalents
For the purposes of the statements of cash flows, Atrium 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.
2. RENTAL INCOME
The future minimum rental income due to Atrium under noncancelable
operating leases at December 31, 1999 is as follows:
Year ending December 31:
2000 $1,476,960
2001 1,408,000
2002 550,722
----------
$3,435,682
----------
One tenant contributed 100% of rental income for the year ended December
31, 1999 and represents 100% of the future minimum rental income above.
3. RELATED-PARTY TRANSACTIONS
Fund II and II-OW and Fund III entered into a property management agreement
with Wells Management Company, Inc. ("Wells Management"), an affiliate of
Fund II and II-OW and Fund III. In consideration for supervising the
management of Atrium, Fund II and II-OW and Fund III 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.
Atrium incurred management and leasing fees of $90,018, $186,102, and
$111,576 for the years ended December 31, 1999, 1998, and 1997,
respectively, which were paid to Wells Management.
4. COMMITMENTS AND CONTINGENCIES
Management, after consultation with legal counsel, is not aware of any
significant litigation or claims against Atrium or its partners. In the
normal course of business, Atrium or its partners may become subject to
such litigation or claims.
F-33
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Initial Cost
-----------------------------
Cost of
Buildings and Capitalized
Description Ownership Encumbrances Land Improvements Improvements Land
- -------------------------------- --------- ------------ ---------- ----------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
THE ATRIUM AT NASSAU BAY (a) 39% None $1,367,000 $10,983,000 $ 2,484,733 $1,504,743
GREENVILLE PROJECT (b) 100 None 529,977 0 3,674,440 576,350
880 PROPERTY--BROOKWOOD GRILL (c) 38 None 523,319 0 1,494,717 745,223
STOCKBRIDGE VILLAGE (d) 57 None 2,551,645 0 7,885,370 2,758,193
G.E. LIGHTING NATIONAL CUSTOMER
CENTER (e) 57 None 529,546 4,158,223 422,504 573,582
880 PROPERTY (f) 9 None 1,325,242 0 5,718,159 1,325,242
----------- ------------- ------------ ----------
Total $6,826,729 $15,141,223 $21,679,923 $7,483,333
=========== ============= ============ ==========
<CAPTION>
Gross Amount at Which Carried at December 31, 1999
--------------------------------------------------
Life on Which
Buildings and Construction Accumulated Date of Date Depreciation
Description Improvements in Progress Total Depreciation Construction Acquired Is Computed (g)
- -------------------------------- ------------- ------------ ----------- ------------ ------------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
THE ATRIUM AT NASSAU BAY (a) $13,306,590 $23,400 $14,834,733 $ 6,236,248 1988 04/03/89 12 to 25 years
GREENVILLE PROJECT (b) 3,628,067 0 4,204,417 1,096,423 1990 06/30/90 20 to 25 years
880 PROPERTY--BROOKWOOD GRILL (c) 1,272,813 0 2,018,036 383,745 1991 03/27/91 20 to 25 years
STOCKBRIDGE VILLAGE (d) 7,678,822 0 10,437,015 2,228,074 1991 04/04/91 20 to 25 years
G.E. LIGHTING NATIONAL CUSTOMER
CENTER (e) 4,536,691 0 5,110,273 1,194,511 1991 07/01/92 20 to 25 years
880 PROPERTY (f) 5,718,159 0 7,043,401 1,299,227 1996 01/31/90 20 to 25 years
------------- --------- ----------- ------------
Total $36,141,142 $23,400 $43,647,875 $12,438,228
============= ========= =========== ============
</TABLE>
(a) The Atrium at Nassau Bay is a four-story office building located
in Houston, Texas. It is owned by Fund II and III Associates.
(b) The Greenville Project is a two-story office building located in
Greenville, North Carolina, owned entirely by the Partnership.
(c) The 880 Property--Brookwood Grill is a 7,440-square-foot
restaurant located in Fulton County, Georgia. It is owned by Fund
II and III Associates.
(d) Stockbridge Village is a 13.62-acre retail shopping center
located in Stockbridge, Georgia. It is owned by Fund III and IV
Associates.
(e) The G.E. Lighting National Customer Center is a 43,000-square-
foot office building located in Richmond, Virginia. It is owned
by Fund III and IV Associates.
(f) The 880 Property is an office-retail shopping center located in
Roswell, Georgia. It is owned by Fund II, III, VI, and VII
Associates.
(g) Depreciation lives used for buildings were 40 years through
September 1995, changed to 25 years thereafter. Depreciation
lives used for land improvements are 12 to 20 years.
S-1
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
SCHEDULE III--REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
----------- ------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1996 $42,081,600 $ 6,662,165
1997 additions 1,546,767 1,869,334
1997 deductions (262,725) (81,041)
----------- ------------
BALANCE AT DECEMBER 31, 1997 43,365,642 8,450,458
1998 additions 251,771 1,999,481
BALANCE AT DECEMBER 31, 1998 43,617,413 10,449,939
1999 additions 30,462 1,988,289
----------- ------------
BALANCE AT DECEMBER 31, 1999 $43,647,875 $12,438,228
=========== ============
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
-------------
(Wells Real Estate Fund III, L.P.)
The following documents are filed as exhibits to this report. Those exhibits
previously filed and incorporated herein by reference are identified below by an
asterisk. For each such asterisked exhibit, there is shown below the
description of the previous filing. Exhibits which are not required for this
report are omitted.
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*4(a) Agreement of Limited Partnership of N/A
Real Estate Fund III, L.P.
(Registration Statement of Wells Real
Estate Fund III, L.P., Exhibit B to the
Prospectus, File No. 33-24063)
*4(b) Amendment to Agreement of Limited N/A
Partnership of Wells Real Estate
Fund III, L.P. (Exhibit 4(a) to
Post-Effective Amendment No. 1 to
Registration Statement of Wells Real
Estate Fund III, L.P., File No.
33-24063)
*4(c) Second Amendment to Agreement of N/A
Limited Partnership of Wells Real
Estate Fund III, L.P. (Exhibit 4(a)
to Post-Effective Amendment No. 5
to Registration Statement of Wells
Real Estate Fund III, L.P., File No.
33-24063)
*4(d) Third Amendment to Agreement of N/A
Limited Partnership of Wells Real
Estate Fund III, L.P. (Exhibit to
Post-Effective Amendment No. 7 to
Registration Statement of Wells Real
Estate Fund III, L.P., File No.
33-24063)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(a) Management Agreement between Registrant N/A
and Wells Management Company, Inc. (Exhibit
to Form 10-K of Wells Real Estate Fund III,
L.P. for the fiscal year ended December 31,
1990, File No. 0-18407)
*10(b) Leasing and Tenant Coordination Agreement N/A
between Registrant and Wells Management
Company, Inc. (Exhibit to Form 10-K of
Wells Real Estate Fund III, L.P. for the
fiscal year ended December 31, 1990, File
No. 0-18407)
*10(c) Purchase Agreement for the Acquisition N/A
of the Atrium at Nassau Bay dated
March 1, 1989 (Exhibit 10(i) to Form 10-K
of Wells Real Estate Fund II for the
fiscal year ended December 31, 1990,
File No. 0-16518)
*10(d) Joint Venture Agreement of Fund II and N/A
Fund III Associates dated March 1,
1989 (Exhibit to Post-Effective
Amendment No. 2 to Registration
Statement of Wells Real Estate Fund
III, L.P., File No. 33-24063)
*10(e) First Amendment to Joint Venture Agreement N/A
of Fund II and Fund III Associates dated
April 1, 1989 (Exhibit 10(k) to Form 10-K
of Wells Real Estate Fund II for the
fiscal year ended December 31, 1990,
File No. 0-16518)
*10(f) Leases with Lockheed Engineering and N/A
Sciences Company, Inc. (Exhibit 10(l)
to Form 10-K of Wells Real Estate Fund
II for the fiscal year ended
December 31, 1990, File No. 0-16518)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(g) Custodial Agency Agreement between N/A
Registrant and Citizens and Southern
Trust Company (Georgia), National
Association dated January 1, 1990
(Exhibit to Post-Effective
Amendment No. 5 to Registration
Statement of Wells Real Estate Fund
III, L.P., File No. 33-24063)
*10(h) Purchase Agreement for the Acquisition N/A
of the Greenville Property dated
April 10, 1990 (Exhibit to Form 10-K of
Wells Real Estate Fund III, L.P. for the
fiscal year ended December 31, 1990, File
No. 0-18407)
*10(i) Development Agreement with ADEVCO N/A
Corporation dated June 15, 1990 (Exhibit
to Form 10-K of Wells Real Estate Fund III,
L.P. for the fiscal year ended December 31,
1990, File No. 0-18407)
*10(j) Construction Contract with McDevitt N/A
& Street Company dated May 31, 1990 (Exhibit
to Form 10-K of Wells Real Estate Fund III,
L.P. for the fiscal year ended December 31,
1990, File No. 0-18407)
*10(k) Lease with International Business N/A
Machines Corporation dated May 15,
1990 (Exhibit to Form 10-K of Wells Real
Estate Fund III, L.P. for the fiscal year
ended December 31, 1990, File No. 0-18407)
*10(l) Amended and Restated Joint Venture N/A
Agreement of Fund II and Fund III Associates
(Exhibit 10(o) to Form 10-K of Wells Real
Estate Fund II for the fiscal year ended
December 31, 1991, File No. 0-16518)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(m) Land and Building Lease Agreement between N/A
Fund II and Fund II-OW and Brookwood Grill
of Roswell, Inc. (Exhibit 10(p) to Form
10-K of Wells Real Estate Fund II for the
fiscal year ended December 31, 1991, File
No. 0-16518)
*10(n) Assignment and Assumption of Lease dated N/A
September 20, 1991 between Fund II and
Fund II-OW and Fund II and Fund III
Associates (Exhibit 10(q) to Form 10-K
of Wells Real Estate Fund II for the
fiscal year ended December 31, 1991,
File No. 0-16518)
*10(o) Fund III and Fund IV Associates Joint N/A
Venture Agreement dated March 27, 1991
(Exhibit 10(g) to Post-Effective Amendment
No. 1 to Registration Statement of Wells
Real Estate Fund IV, L.P. and Wells Real
Estate Fund V, L.P., File No. 33-37830)
*10(p) Agreement of Purchase and Sale dated N/A
October 31, 1990 between 675 Industrial
Park, Ltd. and The Vlass-Fotos Group, Inc.
(Exhibit 10(h) to Post-Effective Amendment
No. 1 to Registration Statement of Wells
Real Estate Fund IV, L.P. and Wells Real
Estate Fund V, L.P., File No. 33-37830)
*10(q) Lease dated January 31, 1991 between The N/A
Vlass-Fotos Group, Inc. and The Kroger Co.
(Exhibit 10(i) to Post-Effective Amendment
No. 1 to Registration Statement of Wells
Real Estate Fund IV, L.P. and Wells Real
Estate Fund V, L.P., File No. 33-37830)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(r) Lease Agreement dated January 31, 1991 N/A
between The Vlass-Fotos Group, Inc. and
The Kroger Co. (Exhibit 10(j) to Post-
Effective Amendment No. 1 to Registration
Statement of Wells Real Estate Fund IV,
L.P. and Wells Real Estate Fund V, L.P.,
File No. 33-37830)
*10(s) First Amendment to Lease dated April 3, N/A
1991 between The Vlass-Fotos Group, Inc.
and The Kroger Co. (Exhibit 10(k) to Post-
Effective Amendment No. 1 to Registration
Statement of Wells Real Estate Fund IV,
L.P. and Wells Real Estate Fund V, L.P.,
File No. 33-37830)
*10(t) First Amendment to Lease Agreement dated N/A
April 3, 1991 between The Vlass-Fotos
Group, Inc. and The Kroger Co. (Exhibit
10(l) to Post-Effective Amendment No. 1
to Registration Statement of Wells Real
Estate Fund IV, L.P. and Wells Real Estate
Fund V, L.P., File No. 33-37830)
*10(u) Development Agreement dated April 4, 1991 N/A
between Fund III and Fund IV Associates
and The Vlass-Fotos Group, Inc. (Exhibit
10(m) to Post-Effective Amendment No. 1 to
Registration Statement of Wells Real Estate
Fund IV, L.P. and Wells Real Estate Fund V,
L.P., File No. 33-37830)
*10(v) First Amendment to Joint Venture Agreement N/A
of Fund III and IV Associates dated July 1,
1992 (Exhibit to Form 10-K of Wells Real
Estate Fund III, L.P. for the fiscal year
ended December 31, 1992, File No. 0-18407)
<PAGE>
Exhibit Sequential
Number Description of Document Page Number
- ------- ----------------------- -----------
*10(w) Agreement for the Purchase and Sale of N/A
Property between Rowe Properties-Markel,
L.P. and Fund III and Fund IV Associates
and Addendum to Agreement for the Purchase
and Sale of Property (Exhibit to Form 10-K
of Wells Real Estate Fund III, L.P. for
the fiscal year ended December 31, 1992,
File No. 0-18407)
*10(x) Office Lease with G.E. Lighting, Rider N/A
No. 1 to Lease, Addendum of Lease, Second
Addendum of Lease, Third Amendment of Lease
and Fourth Amendment to Office Lease
(Exhibit to Form 10-K of Wells Real Estate
Fund III, L.P. for the fiscal year ended
December 31, 1992, File No.
0-18407)
*10(y) Amended and Restated Custodial Agency N/A
Agreement between Wells Real Estate Fund
III, L.P. and NationsBank of Georgia, N.A.
dated April 1, 1994 (Exhibit to Form 10-K
of Wells Real Estate Fund III, L.P. for
the fiscal year ended December 31, 1994,
File No. 0-18407)
*10(z) Joint Venture Agreement of Fund II, III, N/A
VI and VII Associates (Exhibit to Form
10-K of Wells Real Estate Fund VI, L.P.
for the fiscal year ended December 31,
File No. 0-23656)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 128,536
<SECURITIES> 11,369,590
<RECEIVABLES> 333,252
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,916
<PP&E> 4,204,417
<DEPRECIATION> 1,096,423
<TOTAL-ASSETS> 14,962,288
<CURRENT-LIABILITIES> 440,853
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,521,435
<TOTAL-LIABILITY-AND-EQUITY> 14,962,288
<SALES> 0
<TOTAL-REVENUES> 1,136,759
<CGS> 0
<TOTAL-COSTS> 427,347
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 709,412
<INCOME-TAX> 709,412
<INCOME-CONTINUING> 709,412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 709,412
<EPS-BASIC> .03
<EPS-DILUTED> 0
</TABLE>
