<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 March 31, 1997 or
-------------------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission file number 0-20103
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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
----- -----
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund IV, L.P.
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INDEX
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Page No.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1997
and December 31, 1996......................................3
Statements of Income for the Three Months
Ended March 31, 1997 and 1996............................. 4
Statement of Partners' Capital for the Year Ended
December 31, 1996 the Three Months Ended
March 31, 1997............................................ 5
Statements of Cash Flows for the Three
Months Ended March 31, 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
2
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WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets March 31, 1997 December 31, 1996
- ---------------------------------------- --------------- -----------------
<S> <C> <C>
Investment in joint ventures (Note2) $10,526,850 $10,631,324
Cash and cash equivalents 140,040 156,177
Due from affiliates 218,085 215,934
----------- -----------
Total assets $10,884,975 $11,003,435
=========== ===========
Liabilities and Partners' Capital
- ----------------------------------------
Liabilities:
Accounts payable and accrued
expenses $ 0 $ 4,500
Partnership distribution payable 221,481 230,967
----------- -----------
Total liabilities 221,481 235,467
----------- -----------
Partners' capital:
Limited partners
Class A - 1,322,909 units
outstanding 10,663,494 10,767,968
Class B - 38,551 units
outstanding 0 0
----------- -----------
10,663,494 10,767,968
Total partners' capital ----------- -----------
Total liabilities and
partners' capital $10,884,975 $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
------------------------------
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Revenues:
Equity in income of joint $ 2,111 $ 2,559
ventures (Note 2)
Interest income 138,611 133,455
140,722 136,014
-------- --------
Expenses:
Legal and accounting 9,954 3,391
Computer costs 3,043 787
Partnership administration 10,785 15,146
Amortization of organization 0 1,042
costs -------- --------
23,782 20,366
-------- --------
Net income $116,940 $115,648
======== ========
Net income allocated to Class A Limited
Partners $116,940 $115,648
Net loss allocated to Class B Limited
Partners $ 0 $ 0
Net income per Class A Limited Partner $0.09 $0.09
Unit
Net loss per Class B Limited Partner $ 0 $ 0
Unit
Cash distribution per Class A Limited
Partner Unit $0.17 $0.17
</TABLE>
See accompanying condensed notes to financial statements.
4
<PAGE>
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THREE MONTHS ENDED MARCH 31, 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, 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 1,332,909 $10,767,968 38,551 0 $10,767,968
========= =========== ====== == ===========
Net income 0 116,940 0 0 116,940
Partnership distributions 0 (221,414) 0 0 (221,414)
----------- ------ -----------
BALANCE, MARCH 31, 1997 1,322,909 $10,663,494 38,551 $0 $10,663,494
========= =========== ====== == ===========
</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>
Three Months Ended
--------------------------------
March 31, 1997 March 31, 1996
--------------- ---------------
Cash flow from operating activities:
<S> <C> <C>
Net income $ 116,940 $ 115,649
--------- ---------
Adjustments to reconcile net
earnings to net
cash used in operating activities:
Equity in income of joint ventures (138,611) (133,455)
Distributions received from
joint ventures 240,934 236,281
Partnership distributions paid (230,900) (223,000)
Amortization of organization
costs 0 1,042
Changes in assets and
liabilities:
Decrease in accounts payable (4,500) 0
--------- ---------
Total Adjustments (133,077) (119,132)
Net cash used in operating
activities (16,137) (3,483)
Net decrease in cash and cash
equivalents (16,137) (3,483)
Cash and cash equivalents, 156,177 148,494
beginning of year --------- ---------
Cash and cash equivalents, end of
period $ 140,040 $ 145,011
========= =========
</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
March 31, 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 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 March 31, 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 is
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 Wells Real Estate Fund IV, L.P. (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
7
<PAGE>
statements. These quarterly statements have not been examined by independent
accountants, but in the opinion of the General Partners, the statements for
the unaudited interim periods presented include all adjustments, which are of
a normal and recurring nature, necessary to present a fair presentation of the
results for such periods. For further information, refer to the financial
statements and footnotes included in the Partnership's Form 10-K for the year
ended December 31, 1996.
(2) Investment in Joint Ventures
----------------------------
The Partnership owns an interest in four properties as of March 31, 1997. 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
- -----------
Gross revenues of the Partnership were $140,722 for the three months ended
March 31, 1997, as compared to $136,014 for the three months ended March 31,
1996. This increase in gross revenues was due to a slight increase in equity
in income of 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 slightly from $20,366 for the
three months ended March 31, 1996, to $23,782 for the three months ended March
31, 1997. As a result, net income remained relatively stable for the three
months ended March 31, 1997, as compared to the same period ended March 31,
1996.
8
<PAGE>
The Partnership's net cash used in operating activites increase for 1996
compared to 1995 was offset by a slight increase in net income; and therefore,
cash and cash equivalents remained relatively stable for the periods ending
March 31, 1997 and 1996. The Partnership distributes cash available less
reserves, and as a result, the level of cash remains stable.
The Partnership made cash distributions to the Limited Partners holding Class
A Units of $.17 per Unit for the three months ended March 31, 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 first 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 expects to meet
liquidity requirements and budget demands through cash flow from operations.
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 March 31, 1997, the Partnership owned interests in the following
properties through joint ventures:
The Stockbridge Village Shopping Center / Fund III - Fund IV Joint Venture
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Revenues:
Rental Income $ 273,737 $ 268,455
Interest Income 3,643 3,613
------- -------
$ 277,380 272,068
------- -------
Expenses:
Depreciation 84,747 84,748
Management & leasing expenses 30,336 27,154
Other operating expenses 24,418 25,392
------- -------
139,501 137,294
------- -------
Net income $ 137,879 $ 137,774
======= =======
Occupied % 93% 93%
Partnership's Ownership % in
Fund III - Fund IV 42.7% 42.7%
Cash Distribution to Partnership $ 99,318 $ 98,705
Net Income Allocated to the
Partnership $ 58,852 $ 57,526
</TABLE>
Rental income and net income increased in 1997, as compared to 1996, due
primarily to increased rental rates offset partially by a slight increase in
expenses.
10
<PAGE>
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Revenues:
Rental Income $ 131,856 $ 131,856
Expenses:
Depreciation 49,056 49,053
Management & leasing expenses 9,965 9,965
Other operating expenses 3,403 3,020
------- -------
62,424 62,038
------- -------
Net income $ 69,432 $ 69,818
======= =======
Occupied % 100% 100%
Partnership's Ownership % in
Fund III - Fund IV 42.7% 42.7%
Cash Distribution to Partnership $ 51,193 $ 50,281
Net Income Allocated to the
Partnership $ 29,636 $ 29,801
</TABLE>
Rental income remained constant for 1997 and 1996. Expenses, net income and cash
distributions from the G.E. Building remained relatively stable in 1997 as
compared to 1996.
11
<PAGE>
IBM Jacksonville /Fund IV - Fund V Joint Venture
------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Revenues:
Rental Income $ 366,121 $ 365,992
Expenses:
Depreciation 79,494 79,296
Management & leasing expenses 43,365 43,976
Other operating expenses 105,483 120,280
------- -------
228,342 243,552
------- -------
Net income $ 137,779 $ 122,440
======= =======
Occupied % 100% 100%
Partnership's Ownership % in the
Fund IV - Fund V Joint Venture 37.8% 38.1%
Cash Distribution to Partnership $ 77,718 $ 73,338
Net Income Allocated to the
Partnership $ 52,283 $ 46,680
</TABLE>
Rental Income for the Jacksonville Project remained steady in 1997 as
compared to 1996 figures. Operating expenses decreased in 1997 primarily
due to common area maintenance reimbursements collected from existing
tenants. These collections resulted in a 12.5% increase in net income for
the project. Cash distributions remained relatively stable for 1997 and
1996. Cash fundings to the Joint Venture for construction were contributed
by the Wells Fund V which decreased the Partnership's ownership interest
and increased Wells Fund V's ownership interest in the Fund IV-Fund V Joint
Venture.
12
<PAGE>
The Medical Center /Fund IV - Fund V Joint Venture
--------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
-----------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Revenues:
Rental Income $88,568 $105,186
Interest Income 2,639 3,076
------- --------
91,207 108,262
------- --------
Expenses:
Depreciation 39,822 39,882
Management & leasing expenses 11,665 11,042
Other operating expenses 45,416 58,787
------- --------
$96,903 $109,711
------- --------
Net loss $(5,696) $ (1,449)
======= ========
Occupied % 61% 68%
Partnership's Ownership % in the
Fund IV - Fund V Joint Venture 37.8% 38.1%
Cash Distribution to Partnership $14,857 $ 14,852
Net loss Allocated to the
Partnership $(2,160) $ (552)
</TABLE>
Rental income for the Medical Center Project decreased in 1997 over 1996
due primarily to a decrease in the occupancy level of the project and an
adjustment in the straight-line rent. The reduction of expenses in 1997
over 1996 levels was primarily a result of the decrease in occupancy. Cash
distributions remained relatively stable for 1996 and 1997. Cash fundings
to the Joint Venture for construction were contributed by Wells Fund V
which decreased the Partnership's ownership interest and increased Wells
Fund V's ownership interest in the Fund IV - Fund V Joint Venture.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6(b). No reports on Form 8-K were filed during the first 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: May 13, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 140,00
<SECURITIES> 10,526,850
<RECEIVABLES> 218,085
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,884,975
<CURRENT-LIABILITIES> 221,482
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,663,493
<TOTAL-LIABILITY-AND-EQUITY> 10,884,975
<SALES> 0
<TOTAL-REVENUES> 140,722
<CGS> 0
<TOTAL-COSTS> 23,782
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 116,940
<INCOME-TAX> 116,940
<INCOME-CONTINUING> 116,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,940
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
