<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 June 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
--- ---
<PAGE>
Form 10-Q
---------
Wells Real Estate Fund IV, L.P.
-------------------------------
INDEX
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Page No.
--------
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1997
and December 31, 1996............................ 3
Statements of Income for the Three Months
and Six Months Ended June 30, 1997
and 1996......................................... 4
Statement of Partners' Capital for the Year
Ended December 31, 1996 and the Six Months
Ended June 30, 1997.............................. 5
Statements of Cash Flows for the Six
Months Ended June 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
2
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WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
BALANCE SHEETS
Assets June 30, 1997 December 31, 1996
------ ------------- -----------------
Investment in joint ventures (Note 2) $10,447,026 $10,631,324
Cash and cash equivalents 161,383 156,177
Due from affiliates 219,716 215,934
----------- -----------
Total assets $10,828,125 $11,003,435
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Accounts payable and accrued expenses $ 682 $ 4,500
Partnership distribution payable 243,773 230,967
----------- -----------
Total liabilities 244,455 235,467
----------- -----------
Partners' capital:
Limited partners
Class A - 1,322,909 units outstanding 10,583,670 10,767,968
Class B - 38,551 units outstanding 0 0
----------- -----------
Total partners' capital 10,583,670 10,767,968
----------- -----------
Total liabilities and partners' capital $10,828,125 $11,003,435
=========== ===========
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 Six Months Ended
----------------------------------- -----------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Interest income $ 2,681 $ 2,252 $ 4,792 $ 4,811
Equity in income of joint
ventures (Note 2) 178,997 148,202 317,608 281,657
-------- -------- -------- --------
181,678 150,454 322,400 286,468
Expenses:
Legal and accounting 5,988 17,500 15,942 20,892
Computer costs 1,651 1,045 4,694 1,832
Partnership administration 10,091 12,921 20,876 28,067
Amortization of 0 0 0 1,042
organization costs -------- -------- -------- --------
17,730 31,467 41,512 51,833
-------- -------- -------- --------
Net income $163,948 $118,987 $280,888 $234,635
======== ======== ======== ========
Net income allocated to Class A
Limited Partners $163,948 $118,987 $280,888 $234,635
Net loss allocated to Class B Limited
Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A Limited
Partner Unit $ 0.12 $ 0.09 $ 0.21 $ 0.18
Net loss per Class B Limited Partner $ 0 $ 0 $ 0 $ 0
Unit
Cash distribution per Class A Limited
Partner Unit $ 0.18 $ 0.16 $ 0.35 $ 0.33
</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 SIX MONTHS ENDED JUNE 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 1,332,909 $10,767,968 38,551 0 $10,767,968
========= =========== ====== == ===========
Net income 0 280,888 0 0 280,888
Partnership distributions 0 (465,186) 0 0 (465,186)
--------- ----------- ------ -- -----------
BALANCE, JUNE 30, 1997 1,322,909 $10,583,670 38,551 $0 $10,583,670
========= =========== ====== == ===========
</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>
Six Months Ended
---------------------------------
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 280,888 $ 234,635
--------- ---------
Adjustments to reconcile net income to net
cash used in operating activities: (317,608) (281,657)
Equity in income of joint venture
Amortization of organization costs 0 1,042
Changes in assets and liabilities:
Accounts Payable (3,818) 0
Due to Affiliates (895) 0
--------- ---------
Total Adjustments (322,321) (280,615)
--------- ---------
Net cash used in operating
activities (41,433) (45,980)
--------- ---------
Cash flow from investing activities:
Distributions received from joint ventures 499,019 483,456
Cash flow used in financing activities:
Partnership distributions paid (452,380) (443,613)
--------- ---------
Net increase (decrease) in cash
and cash equivalents 5,206 (6,137)
Cash and cash equivalents, beginning of year 156,177 148,494
--------- ---------
Cash and cash equivalents, end of period $ 161,383 $ 142,357
========= =========
</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
June 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 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 June 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 are 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.
7
<PAGE>
(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 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 interests in four properties as of June 30, 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 $181,678 for the three months ended
June 30, 1997, and $322,400 for the six months ended June 30, 1997, as
compared to $150,454 for the three months ended June 30, 1996, and $286,468
for the six months ended June 30, 1996. This increase in gross revenues was
due to a slight increase in income from joint ventures, which was primarily
8
<PAGE>
due to increased common area maintenance reimbursements at the IBM
Jacksonville Property which reduced expenses at the property. Expenses
decreased from $31,467 for the three months ended June 30, 1996, to $17,730
for the three months ended June 30, 1997, and from $51,833 for the six months
ended June 30, 1996, to $41,512 for the same period in 1997, due primarily to
the timing of the payment of accounting fees. As a result, net income
increased for both the three months and six months ended June 30, 1997, as
compared to the same periods ended June 30, 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 $161,383 for June 30, 1997, as compared to $142,357 for June 30,
1996.
The Partnership made cash distributions to the Limited Partners holding
Class A Units of $.18 per Unit for the three months ended June 30, 1997
compared to $0.16 for the three months ended June 30, 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 second 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 June 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 Six Months Ended
------------------------------ ------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental Income $382,492 $365,993 $748,613 $731,985
Expenses:
Depreciation 79,511 79,296 159,005 158,592
Management & leasing expenses 44,397 49,778 87,762 93,754
Other operating expenses 11,691 66,121 117,174 186,401
-------- -------- -------- --------
135,599 195,195 363,941 438,747
-------- -------- -------- --------
Net income $246,893 $170,798 $384,672 $293,238
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % in the
Fund IV - Fund V Joint Venture 37.8% 38.1% 37.8% 38.1%
Cash Distribution to Partnership $ 95,979 $ 77,286 $173,697 $150,624
Net Income Allocated to the
Partnership $ 93,421 $ 65,116 $145,704 $111,796
</TABLE>
The increase in rental income and decrease in operating and leasing expenses
over 1996 levels were the result of timing differences in the billing of tenant
CAM Charges. 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 Six Months Ended
------------------------------ ------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 99,181 $105,394 $187,749 $210,580
Interest income 2,284 2,665 4,923 5,741
-------- -------- -------- --------
101,465 108,059 192,672 216,321
-------- -------- -------- --------
Expenses:
Depreciation 41,313 39,882 81,135 79,764
Management & leasing expenses 18,032 13,839 29,697 24,881
Other operating expenses 36,636 71,245 82,052 130,032
-------- -------- -------- --------
95,981 124,966 192,884 234,677
-------- -------- -------- --------
Net income loss $ 5,484 $(16,907) $ (212) $(18,356)
======== ======== ======== ========
Occupied % 61% 69% 82% 69%
Partnership's Ownership % in the
Fund IV - Fund V Joint Venture 37.8% 38.1% 37.8% 38.1%
Cash Distribution to Partnership $ 17,772 $ 10,481 $ 32,629 $ 25,333
Net Income (Loss) Allocated to the
Partnership $ 2,076 $ (6,446) $ (84) $ (6,998)
</TABLE>
Rental income decreased in 1997 as compared to 1996 due primarily to
adjustments to the straight line rent calculation. Leases are being
actively pursued on the remaining 6,700 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 Six Months Ended
------------------------------ ------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $274,300 $269,887 $548,037 $538,342
Interest income 2,474 3,079 6,117 6,692
-------- -------- -------- --------
276,774 272,966 554,154 545,034
-------- -------- -------- --------
Expenses:
Depreciation 84,747 84,748 169,494 169,496
Management & leasing expenses 25,101 24,166 55,437 51,320
Other operating expenses 43,845 2,970 68,263 48,362
-------- -------- -------- --------
153,693 131,884 293,194 269,178
-------- -------- -------- --------
Net income $123,081 $141,082 $260,960 $275,856
======== ======== ======== ========
Occupied % 93% 93% 93% 93%
Partnership's Ownership % 42.7% 42.7% 42.7% 42.7%
Cash Distribution to Partnership $ 91,495 $101,403 $190,813 $200,108
Net Income Allocated to the
Partnership $ 52,535 $ 60,219 $111,387 $117,745
</TABLE>
Rental income increased for the three and the six months ended June 30, 1997, as
compared to the same periods in 1996, due to rental rate increases. Expenses of
the property increased from $269,178 in 1996 to $293,194 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 Six Months Ended
------------------------------ ------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $131,856 $131,856 $263,712 $263,712
Expenses:
Depreciation 49,056 49,053 98,112 98,106
Management & leasing expenses 9,965 9,965 19,930 19,930
Other operating expenses 289 4,162 3,692 7,182
-------- -------- -------- --------
59,310 63,180 121,734 125,218
-------- -------- -------- --------
Net income loss $ 72,546 $ 68,676 $141,978 $138,494
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % in the
Fund IV - Fund V Joint Venture 42.7% 42.7% 42.7% 42.7%
Cash Distribution to Partnership $ 53,574 $ 50,868 $104,767 $101,149
Net Income (Loss) Allocated to the
Partnership $ 30,965 $ 29,314 $ 60,601 $ 59,114
</TABLE>
Rental income remained constant for 1997 and 1996. Total expenses decreased in
1997 as compared 1996 due primarily to a decrease in the cost of property
insurance, and accordingly, net income increased in 1997, as compared to 1996.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6(b). No reports on Form 8-K were filed during the second 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: August 8, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 161,383
<SECURITIES> 10,447,026
<RECEIVABLES> 219,716
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,828,125
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,583,670
<TOTAL-LIABILITY-AND-EQUITY> 10,828,125
<SALES> 0
<TOTAL-REVENUES> 322,400
<CGS> 0
<TOTAL-COSTS> 41,512
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 280,888
<INCOME-TAX> 280,888
<INCOME-CONTINUING> 280,888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 280,888
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
