<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, 2000 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 0-20103
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Wells Real Estate Fund IV, L.P.
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(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.)
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
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(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 - June 30, 2000
and December 31, 1999 .................................... 3
Statements of Income for the Three Months and Six Months
Ended June 30, 2000 and 1999 ............................. 4
Statement of Partners' Capital for the Year Ended
December 31, 1999 and the Six Months Ended June 30, 2000.. 5
Statements of Cash Flows for the Six Months Ended June 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
2
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WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
Assets June 30, 2000 December 31, 1999
---------------------------------------- ------------------------------------ --------------------------
<S> <C> <C>
Investment in joint ventures (Note 2) $9,275,779 $9,463,148
Cash and cash equivalents 37,617 45,573
Due from affiliates 168,815 249,852
---------- ----------
Total assets $9,482,211 $9,758,573
========== ==========
Liabilities and Partners' Capital
---------------------------------
<S> <C> <C>
Liabilities:
Partnership distributions payable 3,531 268,242
---------- ----------
Total liabilities 3,531 268,242
---------- ----------
Partners' capital:
Limited partners
Class A - 1,322,909 units outstanding 9,478,680 9,490,331
Class B - 38,551 units outstanding 0 0
---------- ----------
Total partners' capital 9,478,680 9,490,331
---------- ----------
Total liabilities and partners' capital $9,482,211 $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 Six Months Ended
----------------------------------------- ---------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------- -------------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Interest income $ 511 $ 0 $ 1,211 $ 698
Equity in earnings of joint
ventures (Note 2) 99,069 204,977 238,976 380,708
------- -------- -------- --------
99,580 204,977 240,187 381,406
------- -------- -------- --------
Expenses:
Legal & accounting 2,743 3,492 15,525 12,732
Computer costs 3,026 2,632 4,893 5,452
Partnership administration 16,153 12,859 25,276 28,180
------- -------- -------- --------
21,922 18,983 45,694 46,364
------- -------- -------- --------
Net income $77,658 $185,994 $194,493 $335,042
======= ======== ======== ========
Net income allocated to Class
A Limited Partners $77,658 $185,994 $194,493 $335,042
Net loss allocated to Class B
Limited Partners $ 0 $ 0 $ 0 $ 0
Net income per Class A Limited
Partner Unit $ .06 $ .14 $ 0.15 $ 0.25
Net loss per Class B
Limited Partner Unit $ 0.00 $ 0.00 $ 0.00 $ 0.00
Cash distribution per Class A
Limited Partner Unit $ 0.00 $ 0.19 $ 0.16 $ 0.40
</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 SIX MONTHS ENDED JUNE 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 0 194,493 0 0 194,493
Partnership distributions 0 (206,144) 0 0 (206,144)
--------- ----------- ------ -- ----------
BALANCE, June 30, 2000 1,322,909 $ 9,478,680 38,551 $0 $ 9,478,680
========= =========== ====== == ===========
</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, 2000 June 30, 1999
--------------- ---------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 194,493 $ 335,042
--------- ---------
Adjustments to reconcile net income to net cash
used in by operating activities:
Equity in income of joint ventures (238,976) (380,708)
Changes in assets and liabilities:
Accounts payable 0 (4,244)
Due to affiliates 0 0
---------- ---------
Total adjustments (238,976) (384,952)
---------- ---------
Net cash used in operating activities (44,483) (49,910)
---------- ---------
Cash flow from investing activities:
Investment in joint ventures (16,686) (51,290)
Distributions received from joint ventures 524,069 550,471
---------- ---------
Net cash provided by investing activities 507,383 499,181
---------- ---------
Cash flow from in financing activities:
Partnership distributions paid (470,856) (506,126)
--------- ---------
Net decrease in cash and cash equivalents (7,956) (56,855)
Cash and cash equivalents, beginning of year 45,573 102,960
--------- ---------
Cash and cash equivalents, end of period $ 37,617 $ 46,105
========= =========
</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, 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 June 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"), 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 Property"), 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.
(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
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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 June 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 June 30, 2000, the properties owned by the Partnership were 78.8% occupied
as compared to 91.2% for June 30, 1999.
Gross revenues of the Partnership were $240,187 for the six months ended June
30, 2000, and $381,406 for the six months ended June 30, 1999. This decrease in
gross revenues was due primarily to General Electric not renewing its lease,
which expired March 31, 2000 and a decreased equity in joint ventures primarily
at the Village Overlook Property and the IBM Jacksonville Property. Occupancy is
down at Village Overlook and both Village Overlook and the IBM properties had
extra repair and maintenance expense. Expenses decreased slightly from $46,364
for the six months ended June 30, 1999 to $45,694 for the six months ended June
30, 2000, due to decreased partnership administrative expenses partially
8
<PAGE>
offset by an increase in legal and accounting expense. As a result, net income
decreased to $194,493 for the six months ended June 30, 2000, as compared to
$335,042 the same period ended June 30, 1999.
Cash and cash equivalents decreased at the end of the as a result of receiving
less distribution from joint ventures.
There were no cash distributions to Limited Partners holding Class A Units for
the second quarter of 2000, as compared to distributions of $0.19 per unit for
the second quarter of 1999. No cash distributions were made to Limited Partners
holding Class B Units or the General Partners for the three months ended June
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 management is currently in negotiations with a new
tenant to lease the building. The cost for new tenant buildout and building
maintenance is anticipated to be approximately $1,250,000 and will be funded by
the Partnership and Wells Fund III.
9
<PAGE>
Property Operations
-------------------
As of June 30, 2000, the Partnership owned interests in the following properties
through joint ventures:
The Stockbridge Village Shopping Center / Fund III - Fund IV Joint Venture
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------------- ------------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------- -------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $319,132 $321,880 $628,240 $647,050
Interest income 968 2,800 4,368 6,300
-------- -------- -------- --------
320,100 324,680 632,608 653,350
-------- -------- -------- --------
Expenses:
Depreciation 90,517 89,126 179,560 177,310
Management & leasing expenses 29,952 29,466 64,924 62,650
Other operating expenses 15,213 (20,081) 21,695 (2,743)
-------- -------- -------- --------
135,682 98,511 266,179 237,217
-------- -------- -------- --------
Net income $184,418 $226,169 $366,429 $416,133
======== ======== ======== ========
Occupied Percentage 98% 100% 98% 100%
Partnership Ownership Percentage 42.8% 42.8% 42.8% 42.8%
Cash distributed to the Partnership $116,633 $134,561 $216,467 $254,105
Net income allocated to the
Partnership $ 78,910 $ 96,774 $156,789 $177,929
</TABLE>
Rental income decrease in 2000, as compared to 1999, due to two leases which
expired and were not renewed. One of the unoccupied spaces has been released in
the first quarter of 2000. Other operating expenses increased due primarily to
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 paid of $29,000 in early 2000 and the decrease
in rental income and increase in other operating expenses.
10
<PAGE>
The G.E. Building/Richmond-Fund III-Fund IV Joint Venture
---------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------------- -------------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------- -------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 0 $131,856 $131,856 $263,712
Expenses:
Depreciation 49,056 49,053 98,112 98,112
Management & leasing expenses 0 10,179 10,179 20,274
Other operating expenses 42,975 2,113 47,122 3,358
-------- -------- -------- --------
92,031 61,345 155,413 121,744
-------- -------- -------- --------
Net income $(92,031) $ 70,511 $(23,557) $141,968
======== ======== ======== ========
Occupied Percentage 0% 100.0% 0% 100.0%
Partnership Ownership Percentage 42.8% 42.8% 42.8% 42.8%
Cash distributed to the Partnership $(21,151) $ 55,100 $ 33,079 $109,384
Net income allocated to the
Partnership $(39,379) $ 30,170 $(10,080) $ 60,694
</TABLE>
Rental income, net income and cash distributions generated from the G.E.
Building decreased in the second quarter 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.
Management is currently in negotiations to lease the building to a tenant. At
this time, the cost for new tenant buildout and building maintenance is
anticipated to be approximately $1,250,000.
11
<PAGE>
IBM Jacksonville /Fund IV - Fund V Joint Venture
------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ --------------------------------
June 30, 2000 June 30, 1999 June 30,2000 June 30,1999
-------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Rental Income $361,564 $376,096 $721,944 $740,482
Expenses:
Depreciation 80,193 79,524 160,386 159,048
Management & leasing expenses 46,016 55,114 92,118 104,899
Other operating expenses 114,743 54,045 267,719 169,022
-------- -------- -------- --------
240,952 188,683 520,223 432,969
-------- -------- -------- --------
Net income $120,612 $187,413 $201,721 $307,513
======== ======== ======== ========
Occupied Percentage 94% 94% 94% 94%
Partnership Ownership Percentage 37.7% 37.6% 37.7% 37.6%
Cash Distribution to Partnership $ 85,448 $103,033 $146,907 $185,257
Net Income Allocated to the
Partnership $ 45,431 $ 70,420 $ 75,982 $115,547
</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. Net
income allocated to the Partnership decreased for the six months ended June 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/Fund IV - Fund V Joint Venture
------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ --------------------------------
June 30, 2000 June 30, 1999 June 30,2000 June 30, 1999
-------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Rental Income $145,948 $121,106 $281,099 $265,684
Interest Income 2,339 2,404 3,470 2,979
-------- -------- -------- --------
148,287 123,510 284,569 268,663
-------- -------- -------- --------
Expenses:
Depreciation 47,001 44,524 93,058 89,048
Management & leasing expenses 11,844 14,114 31,627 31,887
Other operating expenses 52,254 31,696 116,915 77,100
-------- -------- -------- --------
111,099 90,334 241,600 198,035
-------- -------- -------- --------
Net income $ 37,188 $ 33,176 $ 42,969 $ 70,628
======== ======== ======== ========
Occupied Percentage 82% 50% 82% 50%
Partnership Ownership Percentage 37.7% 37.6% 37.7% 37.6%
Cash Distribution to Partnership $ 32,882 $ 27,865 $ 46,577 $ 55,355
Net Income Allocated to the
Partnership $ 14,007 $ 12,466 $ 16,185 $ 26,538
</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 in 2000 over 1999 due to a substantial increase in repairs
and maintenance costs associated with common area floor space. As a result of
these expenses, net income decreased for the six months ended June 30, 2000, as
compared to the same period in 1999. 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 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 second 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: August 11, 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
