<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2000 or
-------------------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------------- ------------------------
Commission file number 0-18407
-----------------------------------------------------
Wells Real Estate Fund III, L.P.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1800833
------------------------------ ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6200 The Corners Parkway, Suite 250, Norcross, Georgia 30092
----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
-----------------------------
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-----
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund III, L.P.
--------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 2000
and December 31, 1999.................................................. 3
Statements of Income for the Three Months and Nine Months
Ended September 30, 2000 and 1999...................................... 4
Statement of Partner's Capital for the
Nine Months Ended September 30, 2000
and the Year Ended December 31, 1999................................... 5
Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and 1999............................... 6
Condensed Notes to Financial Statements................................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................................................. 8
PART II. OTHER INFORMATION................................................................. 16
</TABLE>
2
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets September 30, 2000 December 31, 1999
------ ------------------ ------------------
<S> <C> <C>
Real estate, at cost:
Land $ 576,350 $ 576,350
Building and improvements, less accumulated
depreciation of $1,140,733 in 2000 and
$1,012,443 in 1999 2,426,945 2,531,644
----------- -----------
Total real estate 3,003,295 3,107,994
----------- -----------
Cash and cash equivalents 240,794 128,536
Investment in joint ventures (Note 2) 10,974,628 11,369,590
Due from affiliates 242,718 318,763
Accounts receivable 10,430 14,489
Prepaid expenses and other assets 21,134 22,916
----------- -----------
Total assets $14,492,999 $14,962,288
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable $ 1,157 $ 5,478
Partnership distributions payable 6,768 435,375
----------- -----------
Total liabilities 7,925 440,853
----------- -----------
Partners' capital:
Limited Partners:
Class A - 19,635,965 units outstanding 14,485,074 14,521,435
Class B - 2,544,540 units outstanding 0 0
----------- -----------
Total partners' capital 14,485,074 14,521,435
----------- -----------
Total liabilities and partners' capital $14,492,999 $14,962,288
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements
3
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------------- -------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30,1999
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $145,683 $138,090 $430,089 $410,250
Equity in income of
joint ventures (Note 2) 50,068 135,083 238,171 453,390
Interest income 6,083 36 6,083 23
-------- -------- -------- --------
201,834 273,209 674,343 863,663
-------- -------- -------- --------
Expenses:
Management and leasing
fees 38,444 18,747 57,705 53,972
Operating costs - rental
property 32,589 23,777 119,605 82,735
Depreciation and
Amortization 42,764 40,444 128,290 121,329
Legal and Accounting 500 199 14,700 12,846
Computer costs 1,154 2,158 5,247 5,327
Partnership administration 10,435 11,376 41,597 43,043
-------- -------- -------- --------
125,886 96,699 367,144 319,252
-------- -------- -------- --------
Net income $ 75,948 $176,510 $307,199 $544,411
======== ======== ======== ========
Net income allocated to
General Partners $ 0 $ 0 $ 0 $ 0
Net income allocated to
Class A Limited Partners $ 75,948 $176,510 $307,199 $544,411
Net loss allocated to Class
B Limited Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A
Limited Partner Unit $ 0.004 $ 0.01 $ 0.02 $ 0.03
Net loss per Class B Limited
Partner Unit $ 0 $ 0 $ 0 $ 0
Cash distribution per Class A
Limited Partner Unit $ 0.00 $ 0.02 $ 0.00 $ 0.06
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Limited Partners
----------------------------------------------
Class A Class B Total
------------------------ ------------------- Partners'
Units Amounts Units Amounts Capital
---------- ------------ --------- -------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 19,635,965 $15,420,884 2,544,540 0 $15,420,884
Net income 0 674,443 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
Net income 0 307,199 0 0 307,199
Partnership distributions 0 (343,560) 0 0 (343,560)
---------- ----------- --------- -------- -----------
BALANCE, September 30, 2000 19,635,965 $14,485,074 2,544,540 $ 0 $14,485,074
========== =========== ========= ======== ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 307,199 $ 544,411
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in income of joint ventures (238,171) (453,390)
Depreciation and amortization 128,290 121,329
Changes in assets and liabilities:
Accounts receivable 4,059 (3,531)
Prepaids and other assets 1,782 (200)
Accounts payable (4,321) 14,037
Due to affiliates 0 (7,966)
--------- -----------
Net cash provided by operating activities 198,838 214,690
--------- -----------
Cash flow from investing activities:
Investment in real estate (23,591) 0
Investment in joint ventures (135,166) 0
Distributions received from joint ventures 844,343 1,025,985
--------- -----------
Net cash provided by investing activities 685,586 1,025,985
Cash flow from financing activities:
Partnership distributions paid (772,166) (1,236,205)
--------- -----------
Net increase in cash and cash equivalents 112,258 4,470
Cash and cash equivalents, beginning of year 128,536 156,648
--------- -----------
Cash and cash equivalents, end of period $ 240,794 $ 161,118
========= ===========
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND III, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
------------
Wells Real Estate Fund III, L.P. (the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Capital, Inc., a
Georgia corporation, as General Partners. The Partnership was formed on
July 31, 1988, for the purpose of acquiring, developing, constructing,
owning, operating, improving, leasing and otherwise managing for investment
purposes income-producing commercial properties.
On October 24, 1988, the Partnership commenced a public offering of its
limited partnership units pursuant to a Registration Statement filed on
Form S-11 under the Securities Act of 1933. The Partnership terminated its
offering on October 23, 1990, and received gross proceeds of $22,206,319
representing subscriptions from 2,700 Limited Partners, composed of two
classes of limited partnership interests, Class A and Class B limited
partnership units.
The Partnership owns interests in properties through equity ownership in
the following joint ventures: (i) The Fund II - Fund III Joint Venture,
(ii) The Fund II, III, VI and VII Associates Joint Venture and (iii) The
Fund III - Fund IV Joint Venture.
As of September 30, 2000, the Partnership owned interest in the following
properties: (i) the Greenville Property, an office building in Greenville,
North Carolina, owned by the Partnership, (ii) Boeing at the Atrium, an
office building in Houston, Texas, owned by Fund II - Fund III Joint
Venture, (iii) the Brookwood Grill, a restaurant located in Roswell,
Georgia, owned by Fund II - Fund III Joint Venture, (iv) the Stockbridge
Village Shopping Center, a retail shopping center located in Stockbridge,
Georgia, southeast of Atlanta, owned by Fund III - Fund IV Joint Venture,
(v) the G.E. Office Building located in Richmond, Virginia, owned by Fund
III - Fund IV Joint Venture, and (vi) Holcomb Bridge Road, an office/retail
center in Roswell, Georgia, owned by Fund II, III, VI and VII Joint
Venture. All of the foregoing properties were acquired on an all cash
basis.
(b) Basis of Presentation
--------------------------
The financial statements of the Partnership have been prepared in
accordance with instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These quarterly statements
have not been examined by independent accountants, but in
7
<PAGE>
the opinion of the General Partners, the statements for the unaudited
interim periods presented include all adjustments, which are of a normal
and recurring nature, necessary to present a fair presentation of the
results for such periods. For further information, refer to the financial
statements and footnotes included in the Partnership's Form 10-K for the
year ended December 31, 1999.
(2) Investment in Joint Ventures
----------------------------
The Partnership owns interest in six properties as of September 30, 2000,
through ownership in four joint ventures.
The Partnership does not have control over the operations of the joint
ventures; however, it does exercise significant influence. Accordingly,
investment in joint ventures is recorded on the equity method.
For a description of the joint ventures and properties owned by the
Partnership, please refer to the Partnership's Form 10-K for the year ended
December 31, 1999.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
The following discussion and analysis should be read in conjunction with
the accompanying financial statements of the Partnership and notes thereto.
This Report contains forward-looking statements, with the meaning of
Section 27A of the Securities Act of 1993 and 21E of the Securities
Exchange Act of 1934, including discussion and analysis of the financial
condition of the Partnership, anticipated capital expenditures required to
complete certain projects, amounts of cash distributions anticipated to be
distributed to Limited Partners in the future and certain other matters.
Readers of this Report should be aware that there are various factors that
could cause actual results to differ materially from any forward-looking
statement made in the Report, which include construction costs which may
exceed estimates, construction delays, lease-up risks, inability to obtain
new tenants upon the expiration of existing leases, and the potential need
to fund tenant improvements or other capital expenditures out of operating
cash flow.
Results of Operations and Changes in Financial Conditions
---------------------------------------------------------
General
-------
As of September 30, 2000, the properties owned by the Partnership were 86%
occupied as compared to 94% as of September 30, 1999. Gross revenues of
the Partnership were $674,343 for the nine months ended September 30, 2000,
as compared to $863,663 for the nine months ended September 30, 1999. The
decrease in revenues is primarily due to lower occupancy rates and the
vacancy of the G.E. Building.
8
<PAGE>
Expenses of the Partnership increased to $367,144 for the nine months ended
September 30, 2000, from $319,252 for the nine months ended September 30,
1999. The increase in expenses was due primarily to the decrease in common
area maintenance reimbursements. As a result, net income decreased to
$307,199 from $544,411 for the nine months ended September 30, 2000 and
1999, respectively.
Net cash provided by operating activities decreased from $214,690 to
$198,838 for the nine months ended September 30, 1999 and 2000,
respectively, primarily to decrease in net income. Net cash provided by
investing activities decreased primarily due to capitalized tenant
improvements paid in early 2000 at the Partnership and Joint Venture
levels. Investment in joint ventures and Investment in real estate
increased due to construction costs. Cash flow from financing activities
decreased as distributions to limited partners was reserved for the second
quarter of 2000. As a result cash and cash equivalents increased to
$240,794 for the end of the period as compared to $128,536 at December 31,
1999.
There were no cash distributions accrued to Limited Partners holding Class
A Units for the third quarter of 2000, as compared to distributions of
$0.02 per unit for the third quarter of 1999. No cash distributions were
made to Limited Partners holding Class B Units or the General Partners for
the three months ended September 30, 2000 and 1999. Substantially all cash
generated from the operations of properties owned by the Partnership is
being reserved to fund the required tenant improvements and refurbishments
at the G.E. Building. G.E.'s lease expired March 31, 2000. As of October 4,
2000, the entire building has been leased to The Reciprocal Group for a
term of eight years with occupancy expected in early February, 2001. The
cost for new tenant buildout and building maintenance is anticipated to be
approximately $1,270,000, and will be funded by the Partnership and Wells
Fund IV. As of September 30, 2000, the Partnership has funded $135,166
toward these costs.
At this time, two properties are being marketed for sale. CB Richard Ellis
is marketing the sale of 880 Holcomb Bridge, and Brookwood Grill. The
Partnership's goal is to have these properties sold by the end of 2002. As
the properties are sold, all proceeds will be returned to the Limited
Partners in accordance with the Partnership's prospectus. Management
estimates that the fair market value of each of the properties exceeds the
carrying value of the corresponding real estate assets; consequently, no
impairment loss has been recorded. In the event that the net sales proceeds
are less than the carrying value of the property sold, the Partnership
would recognize a loss on the sale. Management is not contractually or
financially obligated to sell any of its properties, and it is management's
current intent to fully realize the Partnership's investment in real
estate. The success of the Partnership's future operations and the ability
to realize investment in its assets will be dependent on the Partnership's
ability to maintain rental rates, occupancy, and an appropriate level of
operating expenses in future years. Management believes that the steps that
it is taking will enable the Partnership to realize its investment in its
assets.
9
<PAGE>
Property Operations
-------------------
As of September 30, 2000, the Partnership owned interests in the following
properties:
The Greenville Property - Fund III
---------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------- ----------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $145,683 $138,090 $430,089 $410,250
-------- -------- -------- --------
Expenses:
Depreciation 42,764 40,442 128,290 121,327
Management and leasing
expenses 38,444 18,747 57,705 53,972
Other operating expenses 32,589 23,777 119,605 82,737
-------- -------- -------- --------
113,797 82,966 305,600 258,036
-------- -------- -------- --------
Net income $ 31,886 $ 55,124 $124,489 $152,214
======== ======== ======== ========
Occupied % 86.4% 78.5% 86.4% 78.5%
Partnership's Ownership % 100% 100% 100% 100%
Cash generated to the
Partnership $162,048 $ 98,884 $263,437 $283,497
Net income generated to the
Partnership $ 31,886 $ 55,124 $124,489 $152,214
</TABLE>
Rental income increased for the three months and nine months ended September 30,
2000, as compared to the same periods in 1999, due to the increase in occupancy
from 78.5% to 86.4%. Other operating expenses increased for 2000, as compared to
1999, due primarily to differences in the adjustment for prior year common area
maintenance billings to tenants. Tenants are billed an estimated amount for the
current year common area maintenance which is then reconciled the following year
and the differences billed to the tenant. As a result of the increased expenses,
net income decreased in 2000, as compared to 1999.
10
<PAGE>
Boeing at The Atrium/Fund II and Fund III Joint Venture
-------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------------- ---------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 367,536 $367,536 $1,101,248 $1,102,608
--------- -------- ---------- ----------
Expenses:
Depreciation 221,010 216,930 656,230 650,790
Management and leasing
expenses 45,748 45,060 139,286 134,703
Other operating expenses 226,070 185,397 544,643 498,892
--------- -------- ---------- ----------
492,828 447,387 1,340,159 1,284,385
--------- -------- ---------- ----------
Net (loss) $(125,292) $(79,851) $ (238,911) $ (181,777)
========= ======== ========== ==========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 38.7% 38.7% 38.7% 38.7%
Cash distributions to the
Partnership $ 47,350 $ 65,387 $ 165,883 $ 204,309
Net loss allocated
to the Partnership $ (48,488) $(30,903) $ (92,459) $ (70,348)
</TABLE>
Rental income remained stable for the three months and nine months ended
September 30, 2000, as compared to the same periods in 1999. Net income and cash
distributions have decreased for the three months and nine months period, as
compared to the same period in 1999, due primarily to increased expenditures in
electricity, HVAC repairs, plumbing repairs, and glass maintenance in the
building.
11
<PAGE>
The Brookwood Grill Property/Fund II and Fund III Joint Venture
---------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------------- ---------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 56,188 $56,188 $168,613 $168,563
Equity income of
joint venture 12,668 23,307 45,986 62,611
-------- ------- -------- --------
68,856 79,495 214,599 231,174
-------- ------- -------- --------
Expenses:
Depreciation 13,503 13,503 40,509 40,509
Management and leasing
expenses 6,878 6,704 18,909 23,387
Other operating expenses (11,256) 2,467 69 8,797
-------- ------- -------- --------
9,125 22,674 59,487 72,693
-------- ------- -------- --------
Net income $ 59,731 $56,821 $155,112 $158,481
======== ======= ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 37.7% 37.7% 37.7% 37.7%
Cash distributions to the
Partnership $ 41,163 $35,993 $114,549 $105,696
Net income allocated to the
Partnership $ 22,489 $21,393 $ 58,400 $ 59,668
</TABLE>
Although rental income remained relatively stable, total revenues decreased for
the three month and nine month periods ended September 30, 2000, as compared to
the same periods in 1999, due to the decreased equity in income from the Fund
II, III, VI, and VII Joint Venture, as the Holcomb Bridge Road property
decreased its occupancy rate during the third quarter of this year.
Operating expenses decreased for the three months and nine months ended
September 30, 2000, as compared to the same periods in 1999, due to 2000
property tax reimbursement being charged to the tenant in the third quarter of
2000, instead of being charged in the fourth quarter in 1999.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the county.
The Partnership's goal is to have this property sold by the end of 2002.
12
<PAGE>
Holcomb Bridge Road Property/Fund II, III, VI, VII Joint Venture
----------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
Sept 30, 2000 Sept 30, 1999 Sept 30, 2000 Sept 30, 1999
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $214,051 $213,028 $658,907 $670,852
-------- -------- -------- --------
Expenses:
Depreciation 104,129 79,605 312,389 277,862
Management & leasing expenses 28,099 22,263 85,165 93,200
Other operating expenses 29,194 14,889 70,302 39,670
-------- -------- -------- --------
161,422 116,757 467,856 410,732
-------- -------- -------- --------
Net income $ 52,629 $ 96,271 $191,051 $260,120
======== ======== ======== ========
Occupied % 92% 94% 92% 94%
Partnership's Ownership % 9.1% 9.1% 9.1% 9.1%
Cash Distribution to Fund II-Fund III Joint
Venture $ 41,546 $ 41,093 $132,952 $122,693
Net Income allocated to the
Fund II-Fund III Joint Venture $ 12,668 $ 23,307 $ 45,986 $ 62,611
</TABLE>
* The Partnership holds a 37.61% ownership in the Fund II - Fund III Joint
Venture.
Rental income decreased for the nine months ended September 30, 2000, as
compared to the same period in 1999, due to decreased occupancy. Other operating
expenses increased for the three months and nine months ended September 30,
2000, as compared to the same periods in 1999 due to appraisal fees for this
property which is currently being marketed for sale a decrease in common area
maintenance reimbursements from tenants. Monthly common area maintenance
billings were increased in 1999 to offset 1998 underpayment. Tenants are billed
an estimated amount for the current year common area maintenance which is then
reconciled the following year and the difference billed to the tenant.
Cash distributions to the Partnership increased for the three months period and
nine months ended September 30, 2000, as compared to the same period in 1999
even though there is a decrease in net income this year due to lease acquisition
fees and procurement fees paid in 1999.
This property is currently being marketed for sale by CB Richard Ellis. The
marketing piece is being broadly distributed to investors throughout the county.
The Partnership's goal is to have this property sold by the end of 2002.
13
<PAGE>
The G.E. Building/Richmond-Fund III-Fund IV Joint Venture
---------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------------- ---------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 0 $131,857 $ 131,856 $395,569
-------- -------- --------- --------
Expenses:
Depreciation 49,056 49,053 147,168 147,165
Management and leasing
expenses 0 10,178 10,179 30,452
Other operating expenses 40,976 (44) 88,098 3,314
-------- -------- --------- --------
90,032 59,187 245,445 180,931
-------- -------- --------- --------
Net income $(90,032) $ 72,670 $(113,589) $214,638
======== ======== ========= ========
Occupied % 0% 100% 0% 100%
Partnership's Ownership % 57.2% 57.2% 57.2% 57.2%
Cash distribution to the
Partnership $(19,748) $ 74,909 $ 24,481 $221,376
Net income allocated to the
Partnership $(51,509) $ 41,575 $ (64,986) $122,849
</TABLE>
Rental income, net income and cash distributions generated from the G.E.
Building decreased in the second and third quarters of 2000, as compared to the
same periods in 1999, due primarily to G.E.'s lease expiration on March 31,
2000. Other operating expenses have increased due to the fact that G.E. no
longer reimburses for the buildings operating costs such as property taxes,
electricity and various other expenses. As of October 4, 2000, the entire
building has been leased to The Reciprocal Group for a term of eight years with
occupancy expected in early February, 2001. At this time, the cost for new
tenant buildout and building maintenance is anticipated to be approximately
$1,270,000, of which the Partnership has funded $135,166.
14
<PAGE>
The Stockbridge Village Shopping Center Property/Fund III-Fund IV Joint Venture
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------------- ---------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $320,538 $310,697 $948,778 $957,747
Interest income 374 2,800 4,742 9,100
-------- -------- -------- --------
320,912 313,497 953,520 966,847
-------- -------- -------- --------
Expenses:
Depreciation 91,254 89,214 270,814 266,524
Management and leasing
expenses 28,315 28,163 93,239 90,813
Other operating expenses (7,916) 16,059 13,779 13,316
-------- -------- -------- --------
111,653 133,436 377,832 370,653
-------- -------- -------- --------
Net income $209,259 $180,061 $575,688 $596,194
======== ======== ======== ========
Occupied % 98% 95% 98% 95%
Partnership's Ownership % 57.2% 57.2% 57.2% 57.2%
Cash distributed to the
Partnership $173,955 $154,770 $463,391 $494,973
Net income allocated to the
Partnership $119,721 $103,016 $329,361 $341,220
</TABLE>
Rental income decreased in 2000, as compared to 1999, due to two leases which
expired in the third quarter of 1999 and were not renewed which decreased the
occupancy percentage in 1999. One of the unoccupied spaces has been released in
the first quarter of 2000. Other operating expenses decreased for the three
months ended September 30, 2000, as compared to the same period in 1999, due
primarily to timing differences in the adjustment for prior year common area
maintenance billings to tenants. Tenants are billed an estimated amount for the
current year common area maintenance which is then reconciled the following year
and the difference billed to the tenant.
Cash distributions are lower in 2000, as compared to 1999, due primarily to
capitalized tenant improvements of $29,000 in early 2000 and the decrease in
rental income.
15
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6(b). No reports on Form 8-K were filed during the third quarter of 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WELLS REAL ESTATE FUND III, L.P.
(Registrant)
Dated: November 10, 2000 By: /s/Leo F. Wells, III
--------------------
Leo F. Wells, III, as Individual
General Partner and as President,
Sole Director and Chief Financial
Officer of Wells Capital, Inc.
16
