<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, 2000 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.)
6200 The Corners Parkway, Suite 250, Norcross, Georgia 30092
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(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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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - September 30, 2000
and December 31, 1999 .................................................. 3
Statements of Income for the Three Months and Nine Months
Ended September 30, 2000 and 1999....................................... 4
Statement of Partners' Capital for the Year Ended
December 31, 1999 and the Nine Months Ended
September 30, 2000...................................................... 5
Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and 1999................................ 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, 2000 December 31, 1999
------ ------------------ -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $ 9,275,154 $ 9,463,148
Cash and cash equivalents 121,991 45,573
Due from affiliates 179,071 249,852
----------- -----------
Total assets $ 9,576,216 $ 9,758,573
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Partnership distributions payable 3,003 268,242
----------- -----------
Total liabilities 3,003 268,242
----------- -----------
Partners' capital:
Limited partners
Class A - 1,322,909 units outstanding 9,573,213 9,490,331
Class B - 38,551 units outstanding 0 0
----------- -----------
Total partners' capital 9,573,213 9,490,331
----------- -----------
Total liabilities and partners' capital $ 9,576,216 $ 9,758,573
=========== ===========
</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, 2000 Sept 30, 1999 Sept 30, 2000 Sept 30,1999
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Equity in income of joint ventures (Note 2) $102,355 $135,099 $341,331 $515,807
Interest income 3,070 282 4,281 980
-------- -------- -------- --------
105,425 135,381 345,612 516,787
-------- -------- -------- --------
Expenses:
Legal and accounting 450 200 15,975 12,932
Computer costs 1,954 2,558 6,847 8,010
Partnership administration 8,488 10,044 33,764 38,224
-------- -------- -------- --------
10,892 12,802 56,586 59,166
-------- -------- -------- --------
Net income $ 94,533 $122,579 $289,026 $457,621
======== ======== ======== ========
Net income allocated to Class A
Limited Partners $ 94,533 $122,579 $289,026 $457,621
Net loss allocated to Class B
Limited Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A
Limited Partner unit $ 0.07 $ 0.09 $ 0.22 $ 0.35
Net loss per Class B
Limited Partner unit $ 0 $ 0 $ 0 $ 0
Cash distribution per Class A
Limited Partner unit $ 0.00 $ 0.20 $ 0.00 $ 0.60
</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, 1999
AND NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Limited Partners
------------------------------------
Class A Class B Total
------- ------- Partners'
Units Amount Units Amount Capital
--------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 1,322,909 9,939,003 38,551 0 9,939,003
Net income 0 608,712 0 0 608,712
Partnership
distributions 0 (1,057,384) 0 0 (1,057,384)
--------- ----------- ------ ----- -----------
BALANCE, December 31, 1999 1,322,909 9,490,331 38,551 0 9,490,331
Net income 0 289,026 0 0 289,026
Partnership
distributions 0 (206,144) 0 0 (206,144)
--------- ----------- ------ ----- -----------
BALANCE, September 30, 2000 1,322,909 $ 9,573,213 38,551 $ 0 $ 9,573,213
========= =========== ====== ===== ===========
</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, 2000 Sept 30, 1999
------------- -------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 289,026 $ 457,621
--------- ---------
Adjustments to reconcile net income to net cash
used in operating activities:
Equity in income of joint ventures (341,331) (515,807)
Changes in assets and liabilities:
Accounts payable 0 (4,244)
--------- ---------
Total Adjustments (341,331) (520,051)
--------- ---------
Net cash used in
operating activities (52,305) (62,430)
--------- ---------
Cash flow from investing activities:
Investment in Joint venture (117,776) (65,371)
Distributions received from joint ventures 717,882 871,030
--------- ---------
Net cash provided by investing activities 600,106 805,659
--------- ---------
Cash flow used in financing activities:
Partnership distributions paid (471,383) (772,073)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 76,418 (28,844)
Cash and cash equivalents, beginning of year 45,573 102,960
--------- ---------
Cash and cash equivalents, end of period $ 121,991 $ 74,116
========= =========
</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, 2000
(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, 2000, 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 "Village Overlook Property", formerly the "Medical
Center Building"), 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 Building"), 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, 1999.
7
<PAGE>
(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, 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, 1999.
(2) Investment in Joint Ventures
----------------------------
The Partnership owns interests in four properties as of September 30, 2000,
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, 1999.
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, 2000, the properties owned by the Partnership were 78.6%
occupied as compared to 91.7% as of September 30, 1999. Gross revenues of the
Partnership were $105,425 for the three months ended September 30, 2000, and
$345,612 for the nine months ended September 30, 2000, as compared to $135,381
for the three months ended September 30, 1999 and $516,787 for the nine months
ended September 30, 1999. This decrease in revenues was due primarily to General
Electric not renewing its
8
<PAGE>
lease which expired March 31, 2000 and extra repair and maintenance expense
during the first half of the year at the Village Overlook and IBM Jacksonville
Properties. Interest income increased due to the reserving of distributions to
fund new tenant buildout at the GE Property.
Expenses of the Partnership remained relatively stable.
The Partnership's increase in cash and cash equivalents from $74,116 as of
September 30, 1999, to $121,991 as of September 30, 2000, is the result of
reserving second quarter distributions to limited partners partially offset by
additional investment in the Fund III - Fund IV Joint Venture.
There were no cash distributions to Limited Partners holding Class A Units for
the second and third quarters of 2000, as compared to distributions of $0.20 per
unit for the third quarter of 1999. No cash distributions were made to Limited
Partners holding Class B Units or the General Partners for the three months
ended September 30, 2000 and 1999. Substantially, all cash generated from the
operations of properties owned by the Partnership is being reserved to fund the
required tenant improvements and refurbishments at the G.E. Building. G.E.'s
lease expired March 31, 2000 and as of October 4, 2000, the entire building has
been leased to the Reciprocal Group for a term of eight years with occupancy
expected in early February, 2001. The cost for new tenant buildout and building
maintenance is anticipated to be approximately $1,270,000, and will be funded by
the Partnership and Wells Fund III. As of September 30, 2000, the Partnership
has funded $117,776 toward these costs.
9
<PAGE>
Property Operations
-------------------
As of September 30, 2000, 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 Nine Months Ended
------------------ -----------------
Sept 30, 2000 Sept 30, 1999 Sept 30, 2000 Sept 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $320,538 $310,697 $948,778 $957,747
Interest Income 374 2,800 4,742 9,100
-------- -------- -------- --------
320,912 313,497 953,520 966,847
-------- -------- -------- --------
Expenses:
Depreciation 91,254 89,214 270,814 266,524
Management and leasing expenses 28,315 28,163 93,239 90,813
Other operating expenses (7,916) 16,059 13,779 13,316
-------- -------- -------- --------
111,653 133,436 377,832 370,653
-------- -------- -------- --------
Net income $209,259 $180,061 $575,688 $596,194
======== ======== ======== ========
Occupied % 98% 95% 98% 95%
Partnership's Ownership % 42.8% 42.8% 42.8% 42.8%
Cash Distributed to the Partnership $130,101 $115,752 $346,568 $369,857
Net income allocated to the Partnership $ 89,538 $ 77,045 $246,327 $254,974
</TABLE>
Rental income decreased in 2000, as compared to 1999, due to two leases which
expired in the third quarter of 1999 and were not renewed which decreased the
occupancy percentage in 1999. One of the unoccupied spaces has been released in
the first quarter of 2000. Other operating expenses decreased for the three
months ended September 30, 2000, as compared to the same period in 1999, due
primarily to timing differences in the adjustment for prior year common area
maintenance billings to tenants. Tenants are billed an estimated amount for the
current year common area maintenance which is then reconciled the following year
and the difference billed to the tenant.
Cash distributions are lower in 2000, as compared to 1999, due primarily to
capitalized tenant improvements of $29,000 in early 2000 and the decrease in
rental income.
10
<PAGE>
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
-------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 2000 Sept 30, 1999 Sept 30, 2000 Sept 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 0 $131,857 $ 131,856 $395,569
-------- -------- --------- --------
Expenses:
Depreciation 49,053 49,053 147,168 147,165
Management and leasing expenses 0 10,178 10,179 30,452
Other operating expenses 40,976 (44) 88,098 3,314
-------- -------- --------- --------
90,032 59,187 245,445 180,931
-------- -------- --------- --------
Net income $(90,032) $ 72,670 $(113,589) $214,638
======== ======== ========= ========
Occupied % 0% 100% 0% 100%
Partnership's Ownership % 42.8% 42.8% 42.8% 42.8%
Cash Distribution to Partnership $(14,770) $ 56,024 $ 18,309 $165,408
Net Income allocated to the Partnership $(38,523) $ 31,095 $ (48,603) $ 91,789
</TABLE>
Rental income, net income and cash distributions generated from the G.E.
Building decreased in the second and third quarters of 2000, as compared to
1999, due primarily to G.E.'s lease expiration on March 31, 2000. Other
operating expense has increased due to the fact that G.E. no longer pays for the
buildings operating costs such as property taxes, electricity and various other
expenses. As of October 4, 2000, the entire building has been leased to the
Reciprocal Group for a term of eight years with occupancy expected in early
February, 2001. At this time, the cost for new tenant buildout and building
maintenance is anticipated to be approximately $1,270,000, of which the
Partnership has funded $117,776 as of September 30, 2000.
11
<PAGE>
IBM Jacksonville /Fund IV - Fund V Joint Venture
------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 2000 Sept 30, 1999 Sept 30, 2000 Sept 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental Income $358,046 $370,168 $1,079,990 $1,110,650
-------- -------- ---------- ----------
Expenses:
Depreciation 80,193 80,089 240,579 239,137
Management & leasing expenses 61,518 51,529 153,636 156,428
Other operating expenses 99,869 113,362 367,588 282,384
-------- -------- ---------- ----------
241,580 244,980 761,803 677,949
-------- -------- ---------- ----------
Net income $116,466 $125,188 $ 318,187 $ 432,701
======== ======== ========== ==========
Occupied % 94% 94% 94% 94%
Partnership's Ownership % 37.7% 37.6% 37.7% 37.6%
Cash Distribution to Partnership $ 83,887 $ 84,349 $ 230,794 $ 269,606
Net Income allocated to the
Partnership $ 43,869 $ 47,039 $ 119,851 $ 162,585
</TABLE>
Rental income decreased in 2000 as compared to 1999, even though occupancy
remained the same due to holdover rent from 1998 received in 1999 from a
tenant subleasing space from IBM. Operating expenses increased in 2000, due
to substantial increase in the areas of repairs and maintenance of the
irrigation system, the parking lot lighting and some common areas in the
building during the second quarter of 2000, but decreased for the three
months ended September 30, 2000. Net income decreased for the nine months
ended September 30, 2000, as compared to the same period in 1999, due
primarily to increased repairs and maintenance costs. Cash distributions
decreased for 2000 compared to 1999, due to capital improvements funded
from cash flow and decreased net income. The Partnership contributed cash
fundings to the Joint Venture for tenant improvements and this increased
the Partnership's ownership interest in the Fund IV - Fund V Joint Venture.
12
<PAGE>
The Village Overlook Property (formerly The Medical Center Property)/Fund IV -
------------------------------------------------------------------------------
Fund V Joint Venture
--------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept 30, 2000 Sept 30, 1999 Sept 30, 2000 Sept 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $137,937 $ 75,057 $419,036 $340,741
Interest income 3,568 4,224 7,038 7,203
-------- -------- -------- --------
141,505 79,281 426,074 347,944
-------- -------- -------- --------
Expenses:
Depreciation 46,907 44,871 139,965 133,919
Management & leasing expenses 13,872 8,609 45,499 40,496
Other operating expenses 60,894 79,241 177,809 156,341
-------- -------- -------- --------
121,673 132,721 363,273 330,756
-------- -------- -------- --------
Net income (loss) $ 19,832 $(53,440) $ 62,801 $ 17,188
======== ======== ======== ========
Occupied % 80% 62% 80% 62%
Partnership's Ownership % 37.7% 37.6% 37.7% 37.6%
Cash Distribution to Partnership $ 4,854 $ 0 $ 51,431 $ 51,685
Net Income (Loss) Allocated to the
Partnership $ 7,471 $(20,080) $ 23,656 $ 6,458
</TABLE>
Rental income for the Village Overlook Property increased in 2000, over 1999,
due primarily to an increase in the occupancy level of the property. Operating
expenses increased for the nine months ended September 30, 2000, over the same
period in 1999, due to a substantial increase in repairs and maintenance costs
associated with common area floor space. Net income increased for the nine
months ended September 30, 2000, as compared to the same period in 1999, due
primarily to the increase in rental income. Rental income increased for the
three months ended September 30, 2000, as compared to the same period in 1999,
due to the increased occupancy level of the property. Total expenses decreased
for the three month period ended September 30, 2000, as compared to the same
period for 1999 due largely to the decrease in operating expenses. Cash
distributions and net income allocated to the Partnership increased for the
three month period increased for the period ended September 30, 2000, over the
same period in 1999.
Even though net income increased, cash distributions remained stable for the
nine months ended September 30, 2000, as compared to the same period in 1999.
This was due to capital improvements being funded from cash flow. The
Partnership contributed cash fundings to the Joint Venture for tenant
improvements and this increased its 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 third quarter of 2000.
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, 2000 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
