<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, 1997 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 0-20103
---------------------------------------------------
Wells Real Estate Fund IV, L.P.
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1915128
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3885 Holcomb Bridge Road, Norcross, Georgia 30092
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 449-7800
-----------------------
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ------
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Form 10-Q
---------
Wells Real Estate Fund IV, L.P.
-------------------------------
INDEX
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<TABLE>
<CAPTION>
Page No.
--------
PART 1. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets - September 30, 1997
and December 31, 1996................................................ 3
Statements of Income for the Three Months and Nine Months
Ended September 30, 1997 and 1996.................................... 4
Statement of Partners' Capital for the Year Ended
December 31, 1996 and the Nine Months Ended
September 30, 1997................................................... 5
Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996............................. 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................................................... 14
</TABLE>
2
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WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
Assets September 30, 1997 December 31, 1996
------ ------------------ -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $10,329,330 $10,631,324
Cash and cash equivalents 166,809 156,177
Due from affiliates 214,495 215,934
----------- -----------
Total assets $10,710,634 $11,003,435
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable and accrued
expenses $ 18 $ 4,500
Partnership distributions payable 244,642 230,967
----------- -----------
Total liabilities 244,660 235,467
----------- -----------
Partners' capital:
Limited partners
Class A - 1,322,909 units outstanding 10,465,974 10,767,968
Class B - 38,551 units outstanding 0 0
----------- -----------
Total partners' capital 10,465,974 10,767,968
----------- -----------
Total liabilities and partners' capital $10,710,634 $11,003,435
=========== ===========
</TABLE>
See accompanying condensed notes to financial statements.
3
<PAGE>
WELLS REAL ESTATE FUND IV, L.P.
(a Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 1997 Sept 30, 1996 Sept 30, 1997 Sept 30,1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Equity in income of joint ventures (Note 2) $136,799 $134,486 $454,407 $416,143
Interest income 2,659 2,022 7,451 6,833
-------- -------- -------- --------
139,458 136,508 461,858 422,976
-------- -------- -------- --------
Expenses:
Legal and accounting 1,492 621 17,434 21,513
Computer costs 3,068 1,404 7,762 3,236
Partnership administration 7,954 7,355 28,830 35,422
Amortization 0 0 0 1,042
-------- -------- -------- --------
12,514 9,380 54,026 61,213
-------- -------- -------- --------
Net income $126,944 $127,128 $407,832 $361,763
======== ======== ======== ========
Net income allocated to Class A
Limited Partners $126,944 $127,128 $407,832 $361,763
Net loss allocated to Class B
Limited Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A
Limited Partner unit $ 0.10 $ 0.10 $ 0.31 $ 0.27
Net loss per Class B
Limited Partner unit $ 0 $ 0 $ 0 $ 0
Cash distribution per Class A
Limited Partner unit $ 0.18 $ 0.18 $ 0.53 $ 0.51
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996
AND NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Limited Partners
-----------------------------------------------------------------
Class A Class B Total
------- ------- Partners'
Units Amount Units Amount Capital
----- ------ ----- ------ -------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 1,322,909 $ 11,184,893 38,551 $ 0 $11,184,893
--------- ----------- ------ ------------ -----------
Net income 0 482,495 0 0 482,495
Partnership distributions 0 (899,420) 0 0 (899,420)
--------- ----------- ------ ------------ -----------
BALANCE, December 31, 1996 1,322,909 10,767,968 38,551 0 10,767,968
--------- ----------- ------ ------------ -----------
Net income 0 407,832 0 0 407,832
Partnership distributions 0 (709,826) 0 0 (709,826)
--------- ----------- ------ ------------ -----------
BALANCE, September 30, 1997 1,322,909 $10,465,974 38,551 $ 0 $10,465,974
========= =========== ====== ============ ===========
</TABLE>
See accompanying condensed notes to financial statements.
5
<PAGE>
WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Sept 30, 1997 Sept 30, 1996
-------------- ----------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 407,832 $ 361,763
--------- ---------
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint ventures (454,407) (416,143)
Amortization of organization costs 0 1,042
Changes in assets and liabilities:
Accounts Payable (4,482) 219
--------- ---------
Total Adjustments (458,889) (414,882)
--------- ---------
Net cash used in
operating activities (51,057) (53,119)
--------- ---------
Cash flow from investing activities:
Distributions received from joint ventures 757,840 713,495
Cash flow used in financing activities:
Partnership distributions paid (696,151) (654,238)
--------- ---------
Net increase in cash and cash
equivalents 10,632 6,138
Cash and cash equivalents, beginning of year 156,177 148,494
--------- ---------
Cash and cash equivalents, end of period $ 166,809 $ 154,632
========= =========
</TABLE>
See accompanying condensed notes to financial statements.
6
<PAGE>
WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
Condensed Notes to Financial Statements
September 30, 1997
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) General
-------
Wells Real Estate Fund IV, L.P. (the "Partnership") is a Georgia public
limited partnership having Leo F. Wells, III and Wells Partners, L.P., as
General Partners. The Partnership was formed on October 25, 1990, for the
purpose of acquiring, developing, constructing, owning, operating,
improving, leasing and otherwise managing for investment purposes
income-producing commercial properties.
On March 4, 1991, the Partnership commenced an offering of up to $25,000,000
of Class A or Class B limited partnership units ($10.00 per unit) pursuant
to a Registration Statement on Form S-11 under the Securities Act of 1933.
The Partnership did not commence active operations until it received and
accepted subscriptions for 125,000 units which occurred on May 13, 1991. The
offering was terminated on February 29, 1992, at which time the Partnership
had obtained total contributions of $13,614,652 representing subscriptions
from 1,285 Limited Partners.
The Partnership owns interests in properties through its equity ownership in
the following two joint ventures: (i) Fund III and Fund IV Associates, a
joint venture between the Partnership and Wells Real Estate Fund III, L.P. (
the "Fund III - Fund IV Joint Venture"); and (ii) Fund IV and Fund V
Associates, a joint venture between the Partnership and Wells Real Estate
Fund V, L.P. (the "Fund IV - Fund V Joint Venture").
As of September 30, 1997, the Partnership owned interests in the following
properties through its ownership of the foregoing joint ventures: (i) a
retail shopping center located in Stockbridge, Georgia, southeast of Atlanta
(the "Stockbridge Village Shopping Center"), which is owned by the Fund III
- Fund IV Joint Venture; (ii) a two-story office building located in
Richmond, Virginia (the "G.E. Building/Richmond"), which is owned by the
Fund III - Fund IV Joint Venture; (iii) two substantially identical
two-story office buildings located in Clayton County, Georgia (the "Medical
Center Project"), which are owned by the Fund IV - Fund V Joint Venture, and
(iv) a four-story office building located in Jacksonville, Florida (the "IBM
Jacksonville Project"), which is owned by the Fund IV - Fund V Joint
Venture. All of the foregoing properties were acquired on an all cash basis.
For further information regarding these joint ventures and properties, refer
to the Partnership's Form 10-K for the year ended December 31, 1996.
(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 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,
7
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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,
1996.
(2) Investment in Joint Ventures
----------------------------
The Partnership owns interests in four properties as of September 30, 1997,
through ownership in two 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 further information, refer to Form 10-K of the
Partnership for the year ended December 31, 1996.
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, within the meaning of Section
27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of
1934, including discussion and analysis of the financial condition of the
Partnership, anticipated capital expenditures required to complete certain
projects, amounts of cash distributions anticipated to be distributed to
Limited Partners in the future and certain other matters. Readers of this
Report should be aware that there are various factors that could cause
actual results to differ materially from any forward-looking statement made
in 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
- ---------------------------------------------------------
(a) General
- -----------
As of September 30, 1997, the developed properties owned by the Partnership
were 94.74% occupied, as compared to 83.81% as of September 30, 1996.
Gross revenues of the Partnership were $139,458 for the three months ended
September 30, 1997, and $461,858 for the nine months ended September 30,
1997, as compared to $136,508 for the three months ended September 30, 1996,
and $422,976 for the nine months ended September 30, 1996. This increase in
gross revenues was due primarily to an increase in income from joint
ventures, which was primarily due to increased common area maintenance
reimbursements at the IBM Jacksonville Property which reduced expenses at
the property. Expenses increased from $9,380 for the three months ended
September 30, 1996, to $12,514 for the three months ended September 30,
1997, but decreased from $61,213 for the nine months ended September 30,
1996, to $54,026 for the same period in 1997, due primarily to the timing of
the payment of accounting fees, and savings in printing and postage expense.
8
<PAGE>
As a result, net income increased for the nine months ended September 30,
1997, as compared to the same period in 1996.
The Partnership's net cash used in operating activities decreased slightly
for 1997 as compared to 1996 due to increased net income in 1997.
Distributions received from joint ventures increased more than distributions
paid to limited partners in 1997, as compared to 1996. As a result cash and
cash equivalents increased to $166,809 for the nine months ended September
30, 1997, as compared to $154,632 for the same period in 1996.
The Partnership made cash distributions to the Limited Partners holding
Class A Units of $.18 per Unit for the three months ended September 30, 1997
and 1996. No cash distributions were made to the Limited Partners holding
Class B Units or to the General Partners. The Partnership's distributions
paid and payable through the third quarter of 1997 have been paid from net
cash from operations and from distributions received from its equity
investment in joint ventures, and the Partnership anticipates that
distributions will continue to be paid on a quarterly basis from such
sources.
The Partnership is unaware of any known demands, commitments, events or
capital expenditures other than that which is required from the normal
operations of its properties that will result in the Partnership's liquidity
increasing or decreasing in any material way. The Partnership expects to
meet liquidity requirements and budget demands through cash flow from
operations.
9
<PAGE>
Property Operations
- -------------------
As of September 30, 1997, the Partnership owned interests in the following
properties through joint ventures:
IBM Jacksonville /Fund IV - Fund V Joint Venture
- ------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 1997 Sept 30, 1996 Sept 30, 1997 Sept 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 365,993 $ 365,992 $1,098,106 $1,097,977
Expenses:
Depreciation 79,545 79,296 238,550 237,888
Management and leasing expenses 51,852 43,977 139,614 137,731
Other operating expenses 177,786 138,511 278,460 324,912
---------- ---------- ---------- ----------
309,183 261,784 656,624 700,531
---------- ---------- ---------- ----------
Net income $ 56,810 $ 104,208 $ 441,482 $ 397,446
========== ========== ========== ==========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 37.7% 38.1% 37.7% 38.1%
Cash Distributed to the Partnership $ 70,443 $ 70,962 $ 244,140 $ 221,586
Net Income Allocated to the Partnership $ 21,461 $ 39,730 $ 167,165 $ 151,526
</TABLE>
Rental income for the IBM Jacksonville remained relatively stable in 1997 as
compared to 1996. Operating expenses decreased in 1997 primarily due to timing
differences in the billing of common area maintenance reimbursements to tenants.
Cash distributions increased for the nine months ended September 30, 1997 over
1996 due primarily to decreased expenses. Cash fundings to the Joint Venture for
construction were contributed by Wells Fund V which increased Wells Fund V's
ownership interest and decreased the Partnership's ownership interest in the
Fund IV - Fund V Joint Venture.
10
<PAGE>
The Medical Center Property/Fund IV - Fund V Joint Venture
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 1997 Sept 30, 1996 Sept 30, 1997 Sept 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 108,458 $ 105,470 $ 296,207 $ 316,050
Interest income 2,448 3,727 7,371 9,468
--------- --------- --------- ---------
110,906 109,197 303,578 325,518
Expenses:
Depreciation 41,305 39,882 122,440 119,646
Management and leasing expenses 14,056 13,227 43,753 38,108
Other operating expenses 39,007 44,985 121,059 175,017
--------- --------- --------- ---------
94,368 98,094 287,252 332,771
--------- --------- --------- ---------
Net income (loss) $ 16,538 $ 11,103 $ 16,326 $ (7,253)
========= ========= ========= =========
Occupied % 81.18% 69% 81.18% 69%
Partnership's Ownership % 37.7% 38.1% 37.7% 38.1%
Cash Distributed to the Partnership $ 15,984 $ 21,159 $ 48,613 $ 46,492
Net Income (Loss) Allocated to the Partnership $ 6,248 $ 4,233 $ 6,164 $ (2,765)
</TABLE>
Rental income decreased in 1997 as compared to 1996 due primarily to adjustments
to the straight line rent calculation due to tenant move-in/move-out. Leases are
being actively pursued on the remaining 5,600 rentable square feet of vacant
space. Expenses decreased in 1997 as compared to 1996 levels due primarily to a
timing difference in operating expense billings to tenants.
Cash distributions and net income allocated to the Partnership have increased
over prior year levels due primarily to decreased operating expenditures of the
project. Cash fundings to the Joint Venture for construction were contributed by
Wells Fund V which increased Wells Fund V's ownership interest and decreased the
Partnership's ownership interest in the Fund IV - Fund V Joint Venture.
11
<PAGE>
The Stockbridge Village Shopping Center / Fund III - Fund IV Joint Venture
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 1997 Sept 30, 1996 Sept 30, 1997 Sept 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 276,979 $ 271,532 $ 825,016 $ 809,874
Interest Income 3,040 3,526 9,157 10,218
--------- --------- --------- ---------
280,019 275,058 834,173 820,092
Expenses:
Depreciation 84,747 84,747 254,241 254,243
Management and leasing expenses 25,648 24,114 81,085 75,434
Other operating expenses (11,004) 26,243 57,259 74,605
--------- --------- --------- ---------
99,391 135,104 392,585 404,282
--------- --------- --------- ---------
Net income $ 180,628 $ 139,954 $ 441,588 $ 415,810
========= ========= ========= =========
Occupied % 93% 93% 93% 93%
Partnership's Ownership % 42.7% 42.7% 42.7% 42.7%
Cash Distributed to the Partnership $ 114,095 $ 100,912 $ 304,908 $ 301,020
Net Income Allocated to the Partnership $ 77,098 $ 59,737 $ 188,485 $ 177,482
</TABLE>
Rental income increased for the three and the nine months ended September 30,
1997, as compared to the same periods in 1996, due to lease renewals at
increased rental rates. Expenses of the property decreased from $404,282 in 1996
to $392,585 in 1997 due primarily to timing differences in billing tenant
expense reimbursements.
12
<PAGE>
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 1997 Sept 30, 1996 Sept 30, 1997 Sept 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 131,857 131,857 $ 395,569 $ 395,569
Expenses:
Depreciation 49,056 49,056 147,168 147,162
Management and leasing expenses 10,031 9,965 29,961 29,895
Other operating expenses (2,183) 708 1,509 7,890
--------- --------- --------- ---------
56,904 59,729 178,638 184,947
--------- --------- --------- ---------
Net income $ 74,953 $ 72,128 $ 216,931 $ 210,622
========= ========= ========= =========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 42.7% 42.7% 42.7% 42.7%
Cash Distribution to Partnership $ 53,973 $ 51,544 $ 158,740 $ 152,693
Net Income Allocated to the Partnership $ 31,993 $ 30,787 $ 92,594 $ 89,901
</TABLE>
Rental income remained constant for 1997 and 1996. Total expenses decreased in
1997 as compared to 1996, and accordingly, net income increased in 1997, as
compared to 1996, due primarily to a decrease in the cost of property insurance.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6(b). No reports on Form 8-K were filed during the third quarter of 1997.
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 IV, L.P.
(Registrant)
Dated: November 10, 1997 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., the General
Partner of Wells Partners, L.P.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 166,809
<SECURITIES> 10,329,330
<RECEIVABLES> 214,495
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,710,634
<CURRENT-LIABILITIES> 244,660
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,465,974
<TOTAL-LIABILITY-AND-EQUITY> 10,710,634
<SALES> 0
<TOTAL-REVENUES> 461,858
<CGS> 0
<TOTAL-COSTS> 54,026
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 407,832
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 407,832
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0
</TABLE>
