<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, 1998 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
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Wells Real Estate Fund IV, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1915128
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(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, 1998
and December 31, 1997.................................... 3
Statements of Income for the Three Months
Ended March 31, 1998 and 1997............................ 4
Statement of Partners' Capital for the Year Ended
December 31, 1997 and the Three Months Ended
March 31, 1998........................................... 5
Statements of Cash Flows for the Three
Months Ended March 31, 1998 and 1997..................... 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, 1998 December 31, 1997
------ -------------- -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $10,130,363 $10,201,623
Cash and cash equivalents 145,655 163,903
Due from affiliates 213,414 212,709
----------- -----------
Total assets $10,489,432 $10,578,235
=========== ===========
Liabilities and Partners' Capital
----------------------------------
Liabilities:
Accounts payable and accrued
expenses $ 22,543 $ 0
Partnership distributions payable 222,513 243,467
----------- -----------
Total liabilities 245,056 243,467
----------- -----------
Partners' capital:
Limited partners
Class A - 1,322,909 units outstanding 10,244,376 10,334,768
Class B - 38,551 units outstanding 0 0
----------- -----------
Total partners' capital 10,244,376 10,334,768
----------- -----------
Total liabilities and partners' capital $10,489,432 $10,578,235
=========== ===========
</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, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Interest income $ 2,449 $ 2,111
Equity in income of joint ventures
(Note 2) 144,522 138,611
-------- -------
146,971 140,722
Expenses:
Legal and accounting 4,771 9,954
Computer costs 1,986 3,043
Partnership administration 8,366 10,785
-------- -------
15,123 23,782
-------- -------
Net income $131,848 $116,940
======== ========
Net income allocated to Class A
Limited Partners $131,848 $116,940
Net loss allocated to Class B
Limited Partners $ 0 $ 0
Net income per Class A Limited
Partner Unit $ 0.10 $ 0.09
Net loss per Class B Limited Partner
Unit $ 0 $ 0
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, 1997
AND THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
LIMITED PARTNERS
--------------------------------------------------------
CLASS A CLASS B TOTAL
------- ------- PARTNERS'
UNITS AMOUNT UNITS AMOUNT CAPITAL
--------- ------------- ------------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 1,322,909 $10,767,968 38,551 $0 $10,767,968
--------- ----------- ------ -- -----------
Net income 0 519,907 0 0 519,907
Partnership distributions 0 (953,107) 0 0 (953,107)
--------- ----------- ------ -- -----------
BALANCE, December 31, 1997 1,322,909 10,334,768 38,551 0 10,334,768
--------- ----------- ------ -- -----------
Net income 0 131,848 0 0 131,848
Partnership distributions 0 (222,240) 0 0 (222,240)
--------- ----------- ------ -- -----------
BALANCE, March 31, 1998 1,322,909 $10,244,376 38,551 $0 $10,244,376
========= =========== ====== == ===========
</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, 1998 March 31, 1997
--------------- --------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 131,849 $ 116,940
--------- ---------
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint ventures (144,523) (138,611)
Amortization of organization costs 0 0
Changes in assets and liabilities:
Accounts payable (89) (4,500)
--------- ---------
Total Adjustments (144,612) (143,111)
--------- ---------
Net cash used in
operating activities (12,763) (26,171)
--------- ---------
Cash flow from investing activities:
Distributions received from joint ventures 237,708 240,934
Cash flow from financing activities:
Partnership distributions paid (243,193) (230,900)
--------- ---------
Net decrease in cash and cash
equivalents (18,248) (16,137)
Cash and cash equivalents, beginning of year 163,903 156,177
--------- ---------
Cash and cash equivalents, end of period $ 145,655 $ 140,040
========= =========
</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, 1998
(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 March 31, 1998, 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, 1997.
(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
7
<PAGE>
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, 1997.
(2) Investment in Joint Ventures
----------------------------
The Partnership owns interests in four properties as of March 31, 1998,
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, 1997.
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 $146,972 for the three months ended
March 31, 1998, and $140,722 for the three months ended March 31, 1997, with
an overall occupancy rate of 94.74% for both years. This increase in gross
revenues was due primarily to increased renewal rental rate. Expenses
decreased from $23,782 for the three months ended March 31, 1997 to $15,123
for the three months ended March 31, 1998, due to decreased legal and
accounting expenses, as well as, a decrease in partnership administrative
expense. As a result, net income increased for the three months ended March
31, 1998, as compared to the same period ended March 31, 1997.
Cash and cash equivalents increased due to increased revenue for the period
ending March 31, 1998. The Partnership distributes cash available less
reserves, and as a result, the level of cash remains relatively stable.
8
<PAGE>
The Partnership made cash distributions to the Limited Partners holding Class
A Units of $.17 per Unit for the three months ended March 31, 1998, as
compared to distributions of $.17 per Class A Unit for the three months ended
March 31, 1997. 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 1998 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.
Recent Accounting Pronouncements
--------------------------------
Statement of Financial Accounting Standards (SFAF) No. 130, "Reporting
Comprehensive Income", requires certain transactions (e.g., unrealized
gains/losses on available for sale securities) that are not reflected in net
income to be displayed as other comprehensive income. The Statement also
requires an entity to report total comprehensive income (i.e., net income plus
other comprehensive income) for every period in which an income statement is
presented. SFAS No. 130 is effective for annual and interim periods beginning
after December 13, 1997. None of the transactions required to be reported in
other comprehensive income pertain to the Partnership; consequently, adoption
of this statement had no impact on the partnership's disclosures.
The General Partners have verified that all operational computer systems are
year 2000 compliant. This includes systems supporting accounting, property
management and investor services. Also, as part of this review, all building
control systems have been verified as compliant. The current line of business
applications are based on compliant operating systems and database servers.
All of these products are scheduled for additional upgrades before the year
2000. Therefore, it is not anticipated that the year 2000 will have
significant impact on operations.
9
<PAGE>
Property Operations
-------------------
As of March 31, 1998, the Partnership owned interests in the following
properties through joint ventures:
IBM Jacksonville /Fund IV - Fund V Joint Venture
------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $365,992 $366,121
Expenses:
Depreciation 79,524 79,494
Management & leasing expenses 46,676 43,365
Other operating expenses 105,360 105,483
-------- --------
231,560 228,342
-------- --------
Net income $134,432 $137,779
======== ========
Occupied % 100% 100%
Partnership Ownership % in the
Fund IV - Fund V Joint Venture 37.6% 37.8%
Cash Distribution to Partnership $ 75,214 $ 77,718
Net Income Allocated to the
Partnership $ 50,594 $ 52,283
</TABLE>
Rental income for the Jacksonville Project remained relatively stable in
1998, as compared to 1997 figures. Operating expenses increased slightly
in 1998 due to increased management and leasing expenses. Cash
distributions remained relatively stable for 1998 and 1997. Wells Fund V
contributed cash fundings to the Joint Venture for construction, which
decreased the Partnership's ownership interest and increased Wells Fund V'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
--------------------------------------
March 31, 1998 March 31, 1997
--------------- ---------------------
<S> <C> <C>
Revenues:
Rental Income $117,327 $ 88,568
Interest Income 1,947 2,639
-------- --------
119,274 91,207
-------- --------
Expenses:
Depreciation 44,524 39,822
Management & leasing expenses 14,796 11,665
Other operating expenses 47,676 45,416
-------- --------
106,996 96,903
-------- --------
Net income (loss) $ 12,278 $(5,696)
======== ========
Occupied % 81% 61%
Partnership Ownership %
Fund IV - Fund V Joint Venture 37.6% 37.8%
Cash Distribution to Partnership $ 24,142 $ 14,857
Net income (loss) allocated to the
Partnership $ 4,621 $(2,160)
</TABLE>
Rental income, expenses and cash distributions increased in 1998, over 1997,
due primarily to an increase in the occupancy level of the project and a
correction of an error in the straight-line rent in 1997. Wells Fund V
contributed cash fundings to the Joint Venture for construction, which
decreased the Partnership's ownership interest and increased Wells Fund V'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
-------------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $285,364 $273,737
Interest Income 1,965 3,643
-------- --------
287,329 277,380
-------- --------
Expenses:
Depreciation 84,747 84,747
Management & leasing expenses 28,463 30,336
Other operating expenses 21,708 24,418
-------- --------
134,918 139,501
-------- --------
Net income $152,411 $137,879
======== ========
Occupied % 93% 93%
Partnership Ownership % 42.7% 42.7%
Cash Distribution to Partnership $123,483 $ 99,318
Net Income allocated to the
Partnership $ 64,835 $ 58,852
</TABLE>
Rental income and net income increased in 1998, as compared to 1997, due
primarily to increased rental renewal rates coupled with a slight decrease
in expenses.
12
<PAGE>
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
--------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $131,856 $131,856
Expenses:
Depreciation 49,053 49,056
Management & leasing expenses 10,014 9,965
Other operating expenses 15,455 3,403
-------- --------
74,522 62,424
-------- --------
Net income (loss) $ 57,334 $ 69,432
======== ========
Occupied % 100% 100%
Partnership Ownership % 42.7% 42.7%
Cash Distribution to Partnership $ 47,101 $ 51,193
Net Income (Loss) allocated to the
Partnership $ 24,472 $ 29,636
</TABLE>
Rental income has remained constant for 1996 through 1998. Net income and
cash distributions generated from the G.E. Building decreased in the first
quarter of 1998, as compared to the same period for 1997, due primarily to
an increase in expenses resulting from extraordinary roof repairs.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6(b). No reports on Form 8-K were filed during the first quarter of
1998.
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 11, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 145,655
<SECURITIES> 10,130,363
<RECEIVABLES> 213,414
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,489,432
<CURRENT-LIABILITIES> 245,056
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,244,376
<TOTAL-LIABILITY-AND-EQUITY> 10,489,432
<SALES> 0
<TOTAL-REVENUES> 146,971
<CGS> 0
<TOTAL-COSTS> 15,123
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 131,848
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,848
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
