<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, 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
----------------------------------------------------------
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
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 1998
and December 31, 1997.......................................... 3
Statements of Income for the Three Months and Nine Months
Ended September 30, 1998 and 1997.............................. 4
Statement of Partners' Capital for the Year Ended
December 31, 1997 and the Nine Months Ended
September 30, 1998............................................. 5
Statements of Cash Flows for the Nine
Months Ended September 30, 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
</TABLE>
2
<PAGE>
WELLS REAL ESTATE FUND IV, L.P.
(A GEORGIA PUBLIC LIMITED PARTNERSHIP)
BALANCE SHEETS
<TABLE>
<CAPTION>
Assets September 30, 1998 December 31, 1997
------ ------------------ -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $ 9,952,500 $10,201,623
Cash and cash equivalents 123,965 163,903
Accounts receivable 88 0
Due from affiliates 228,137 212,709
----------- -----------
Total assets $10,304,690 $10,578,235
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Partnership distributions payable $ 251,736 $ 243,467
------------ -----------
Total liabilities 251,736 243,467
------------ -----------
Partners' capital:
Limited partners
Class A - 1,322,909 units 10,052,954 10,334,768
outstanding
Class B - 38,551 units outstanding 0 0
------------ -----------
Total partners' capital 10,052,954 10,334,768
------------ -----------
Total liabilities and partners' capital $ 10,304,690 $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 Nine Months Ended
---------------------------- ---------------------------
Sept 30, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30,1997
------------- ------------- ---------------------------
<S> <C> <C> <C> <C>
Revenues:
Equity in income of joint ventures (Note 2) $135,860 $136,799 $486,992 $454,407
Interest income 2,304 2,659 6,167 7,451
-------- -------- -------- --------
138,164 139,458 493,159 461,858
-------- -------- -------- --------
Expenses:
Legal and accounting 472 1,492 13,389 17,434
Computer costs 2,325 3,068 6,149 7,762
Partnership administration 14,348 7,954 33,475 28,830
-------- -------- -------- --------
17,145 12,514 53,013 54,026
-------- -------- -------- --------
Net income $121,019 $126,944 $440,146 $407,832
======== ======== ======== ========
Net income allocated to Class A
Limited Partners $121,019 $126,944 $440,146 $407,832
Net loss allocated to Class B
Limited Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A
Limited Partner unit $ 0.09 $ 0.10 $ 0.33 $ 0.31
Net loss per Class B
Limited Partner unit $ 0 $ 0 $ 0 $ 0
Cash distribution per Class A
Limited Partner unit $ 0.19 $ 0.18 $ 0.55 $ 0.53
</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 NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Limited Patrners Total
------------------------------------------------
Class A Class B 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 0 440,146 0 0 440,146
Partnership distributions 0 (721,960) 0 0 (721,960)
--------- ----------- ------ ------- -----------
BALANCE, SEPTEMBER 30, 1998 1,322,909 $10,052,954 38,551 $ 0 $10,052,954
========= =========== ====== ======= ===========
</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, 1998 Sept 30, 1997
-------------- --------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 440,146 $ 407,832
--------- ---------
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint ventures (486,992) (454,407)
Changes in assets and liabilities:
Accounts Receivable (88) 0
Accounts Payable 0 (4,482)
--------- ---------
Total Adjustments (487,080) (458,889)
--------- ---------
Net cash used in
operating activities (46,934) (51,057)
--------- ---------
Cash flow from investing activities:
Investment in Joint Venture (44,089) 0
Distributions received from joint ventures 764,775 757,840
--------- ---------
Net cash provided by investing activities 720,686 757,840
--------- ---------
Cash flow used in financing activities:
Partnership distributions paid (713,690) (696,151)
--------- ---------
Net increase (decrease) in cash and cash
equivalents (39,938) 10,632
Cash and cash equivalents, beginning of year 163,903 156,177
--------- ---------
Cash and cash equivalents, end of period $ 123,965 $ 166,809
========= =========
</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, 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 September 30, 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
independent accountants, but in the opinion of the General Partners, the
statements for the unaudited
7
<PAGE>
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 September 30, 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
- -----------
As of September 30, 1998, the properties owned by the Fund IV Partnership were
94.86% occupied, as compared to 94.74% as of September 30, 1997.
Gross revenues of the Partnership were $138,164 for the three months ended
September 30, 1998, and $493,159 for the nine months ended September 30, 1998,
as compared to $139,458 for the three months ended September 30, 1997, and
$461,858 for the nine months ended September 30, 1997. This increase in gross
revenues, for the 9 months ended September 30, 1998, was due primarily to a
slight increase in income from joint ventures, which was primarily due to
increased rental renewal rates and increased occupancy at the Stockbridge
Property. However, this increase was offset by extraordinary parking lot
repairs at the Stockbridge Property during the third quarter of 1998, which
caused a slight decrease in revenues for that period, as compared to the three
months ended September 30, 1997. Total expenses decreased slightly for the nine
month period of 1998, as compared to 1997, but increased for the three
8
<PAGE>
month period of 1998, due to increased administrative expenses. As a result,
net income increased to $440,146 for the nine months ended September 30, 1998,
as compared to $407,832 for the same period of 1997, but decreased to $121,019
for the quarter ended 1998, as compared to $126,944 for the same period of
1997.
The Partnership's net cash used in operating activities decreased slightly for
1998, as compared to 1997, due to increased net income in 1998. Distributions
received from joint ventures increased as well as distributions paid to limited
partners in 1998, as compared to 1997. As a result cash and cash equivalents
decreased to $123,965 as of September 30, 1998, as compared to $166,809 for the
same period in 1997.
The Partnership made cash distributions to the Limited Partners holding Class A
Units of $.19 per Unit for the three months ended September 30, 1998 and $.18
per unit for the three months ended September 30, 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 third
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.
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.
Recent Accounting Pronouncements
--------------------------------
Statement of Financial Accounting Standard (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.
9
<PAGE>
Property Operations
- -------------------
As of September 30, 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 Nine Months Ended
------------------ ------------------
Sept 30, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues: $ 366,140 $ 365,993 $ 1,098,028 $1,098,106
Rental Income -------- -------- --------- ----------
Expenses: 79,524 79,545 238,572 238,550
Depreciation 45,762 51,852 144,239 139,614
Management & leasing expenses 154,576 177,786 252,853 278,460
Other operating expenses -------- -------- --------- ----------
279,862 309,183 635,664 656,624
-------- -------- --------- ----------
$ 86,278 $ 56,810 $ 462,364 $ 441,482
Net income ======== ======== ========= ==========
94% 100% 94% 100%
Occupied %
37.6% 37.7% 37.6% 37.7%
Partnership's Ownership %
$ 70,244 $ 70,443 $ 240,363 $ 244,140
Cash Distribution to Partnership
Net Income Allocated to the $ 32,454 $ 21,461 $ 173,996 $ 167,165
Partnership
</TABLE>
Rental income for the IBM Jacksonville remained relatively stable in 1998,
as compared to 1997 while occupancy has decreased. Per their lease, IBM has
vacated approximately 5,700 square feet, but are paying an increased rental
rate on their remaining space. Operating expenses decreased slightly in
1998, due primarily to differences in prior year estimate of common area
maintenance billing to tenants which have been recorded in 1998. Cash
distributions remained relatively stable for 1998 and 1997. Wells Fund V
contributed cash fundings to the Joint Venture for construction, which
slightly 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, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues: $128,171 $108,458 $364,210 $296,207
Rental income 5,769 2,448 10,288 7,371
Interest income -------- -------- -------- --------
133,940 110,906 374,498 303,578
-------- -------- -------- --------
Expenses: 44,525 41,305 133,573 122,440
Depreciation 15,819 14,056 46,489 43,753
Management & leasing expenses 53,244 39,007 133,715 121,059
Other operating expenses -------- -------- -------- --------
113,588 94,368 313,777 287,252
-------- -------- -------- --------
$ 20,352 $ 16,538 $ 60,721 $ 16,326
Net income (loss) ======== ======== ======== ========
82% 82% 82% 82%
Occupied %
37.6% 37.7% 37.6% 37.7%
Partnership's Ownership %
$ 27,435 $ 15,984 $ 81,835 $ 48,613
Cash Distribution to Partnership
Net Income (Loss) Allocated to the $ 7,655 $ 6,248 $ 22,848 $ 6,164
Partnership
</TABLE>
Rental income, expenses and cash distributions increased for the nine months
ended September 30, 1998, over the same period in 1997, due primarily to an
increase in occupancy level of the property in the second quarter of 1997 and an
adjustment to the straight line rent in 1997. Expenses increased in 1998, as
compared to 1997, due primarily to the increased occupancy over the nine months
ended September 30, 1998. Wells Fund V contributed cash fundings to the Joint
Venture for construction, which 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, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $312,855 $276,979 $898,740 $825,016
Interest Income 2,425 3,040 6,355 9,157
-------- -------- -------- --------
315,280 280,019 905,095 834,173
-------- -------- -------- --------
Expenses:
Depreciation 87,501 84,747 258,368 254,241
Management and leasing expenses 29,558 25,648 84,381 81,085
Other operating expenses 44,681 (11,004) 83,314 57,259
-------- -------- -------- --------
161,740 99,391 426,063 392,585
-------- -------- -------- --------
Net income $153,540 $180,628 $479,032 $441,588
======== ======== ======== ========
Occupied % 97% 93% 97% 93%
Partnership's Ownership % 42.7% 42.7% 42.7% 42.7%
Cash Distributed to the Partnership $101,505 $114,095 $302,222 $304,908
Net Income Allocated to the Partnership $ 65,536 $ 77,098 $204,467 $188,485
</TABLE>
Rental income increased for the three and nine months ended September 30, 1998,
as compared to the same periods in 1997, due to rental renewal rates and
increased occupancy. Expenses of the property increased from $392,585 in 1997
to $426,063 in 1998, due primarily to increased expenses in parking lot repairs.
12
<PAGE>
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 1998 Sept 30, 1997 Sept 30, 1998 Sept 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $131,857 $131,857 $395,569 $395,569
-------- -------- -------- --------
Expenses:
Depreciation 49,056 49,056 147,162 147,168
Management and leasing expenses 10,095 10,031 30,204 29,961
Other operating expenses 1,918 (2,183) 17,470 1,509
-------- -------- -------- --------
61,069 56,904 194,836 178,638
-------- -------- -------- --------
Net income $ 70,788 $ 74,953 $200,733 $216,931
======== ======== ======== ========
Occupied % 100% 100% 100% 100%
Partnership's Ownership % 42.7% 42.7% 42.7% 42.7%
Cash Distribution to Partnership $ 53,953 $ 53,973 $155,785 $158,740
Net Income Allocated to the Partnership $ 30,215 $ 31,992 $ 85,680 $ 92,593
</TABLE>
Rental income remained constant for 1998 and 1997. Net income and cash
distributions generated from the G.E. Building decreased for the nine months
ended September 30, 1998, as compared to the same period in 1997, due to
increased expenses in the first quarter of 1998 for extraordinary roof repairs.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6(b). No reports on Form 8-K were filed during the third 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: November 10, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 123,965
<SECURITIES> 9,952,500
<RECEIVABLES> 228,225
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,304,690
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,304,690
<CURRENT-LIABILITIES> 251,736
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,052,954
<TOTAL-LIABILITY-AND-EQUITY> 10,304,690
<SALES> 0
<TOTAL-REVENUES> 493,159
<CGS> 0
<TOTAL-COSTS> 53,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53,013
<INCOME-TAX> 53,013
<INCOME-CONTINUING> 53,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,013
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0
</TABLE>
