<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, 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.)
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 ______
---
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Form 10-Q
---------
Wells Real Estate Fund IV, L.P.
-------------------------------
INDEX
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 2000
and December 31, 1999...................................... 3
Statements of Income for the Three Months
Ended March 31, 2000 and 1999.............................. 4
Statement of Partners' Capital for the Year Ended
December 31, 1999 and the Three Months Ended
March 31, 2000............................................. 5
Statements of Cash Flows for the Three
Months Ended March 31, 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
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WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
Balance Sheets
<TABLE>
<CAPTION>
Assets March 31, 2000 December 31, 1999
------ -------------- -----------------
<S> <C> <C>
Investment in joint ventures (Note 2) $9,390,524 $9,463,148
Cash and cash equivalents 35,653 45,573
Due from affiliates 184,217 249,852
---------- ----------
Total assets $9,610,394 $9,758,573
========== ==========
Liabilities and Partners' Capital
---------------------------------
Liabilities:
Partnership distributions payable 209,373 268,242
---------- ----------
Total liabilities 209,373 268,242
---------- ----------
Partners' capital:
Limited partners
Class A - 1,322,909 units outstanding 9,401,021 9,490,331
Class B - 38,551 units outstanding 0 0
---------- ----------
Total partners' capital 9,401,021 9,490,331
---------- ----------
Total liabilities and $9,610,394 $9,758,573
partners' capital ========== ==========
</TABLE>
See accompanying condensed notes to financial statements.
3
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WELLS REAL ESTATE FUND IV, L.P.
(a Georgia Public Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenues:
Interest income $ 699 $ 1,627
Equity in income of joint
ventures (Note 2) 139,907 175,731
-------- --------
140,606 177,358
------- --------
Expenses:
Legal and accounting 12,782 9,240
Computer costs 1,867 2,820
Partnership administration 9,123 16,250
------- --------
23,772 28,310
-------- --------
Net income $116,834 $149,048
======== ========
Net income allocated to Class A
Limited Partners $116,834 $149,048
Net loss allocated to Class B
Limited Partners $ 0 $ 0
Net income per Class A Limited
Partner Unit $ 0.09 $ 0.11
Net loss per Class B Limited Partner
Unit $ 0 $ 0
Cash distribution per Class A
Limited Partner Unit $ 0.16 $ 0.20
</TABLE>
See accompanying condensed notes to financial statements.
4
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WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1999
AND THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Limited Partners
------------------------------------------------ Total
Class A Class B 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, March 31, 1999 1,322,909 9,490,331 38,551 0 9,490,331
Net income 0 116,834 0 0 116,834
Partnership distributions 0 (206,144) 0 0 (206,144)
--------- ---------- ------ ------ ----------
BALANCE, March 31, 2000 1,322,909 $9,401,021 38,551 $0 $9,401,021
========= ========== ====== ====== ==========
</TABLE>
See accompanying condensed notes to financial statements.
5
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WELLS REAL ESTATE FUND IV, L.P.
(A Georgia Public Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 116,834 $ 149,048
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in income of joint ventures (139,907) (175,731)
Changes in assets and liabilities:
Accounts payable 0 46,436
--------- ---------
Total Adjustments (139,907) (129,295)
--------- ---------
Net cash provided by (used in)
operating activities (23,073) 19,753
--------- ---------
Cash flow from investing activities:
Investment in joint ventures (16,686) (33,727)
Distributions received from joint ventures 294,853 266,930
--------- ---------
Net cash provided by investing activities 278,167 233,203
--------- ---------
Cash flow from in financing activities:
Partnership distributions paid (265,014) (247,839)
--------- ---------
Net (decrease) increase in cash and cash
equivalents (9,920) 5,117
Cash and cash equivalents, beginning of year 45,573 102,960
--------- ---------
Cash and cash equivalents, end of period $ 35,653 $ 108,077
========= =========
</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, 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 March 31, 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
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
7
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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 March 31, 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 March 31, 2000, the properties owned by the Partnership were 95% occupied
as compared to 97% for March 31, 1999.
Gross revenues of the Partnership were $140,606 for the three months ended March
31, 2000, and $177,358 for the three months ended March 31, 1999. This decrease
in gross revenues was due primarily to 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 properties had extra repair and
maintenance expense. Expenses decreased slightly from $28,310 for the three
months ended March 31, 1999 to $23,772 for the three months ended March 31,
2000, due to decreased partnership administrative expenses partially offset by
an increase in legal and accounting expense. As a result, net income decreased
to $116,834 for the three months ended March 31, 2000, as compared to $149,048
the same period ended March 31, 1999.
8
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Cash and cash equivalents decreased at the end of the period due to decreased
net income and an additional investment in joint ventures for the period ending
March 31, 2000.
The Partnership made cash distributions to the Limited Partners holding Class A
Units of $.16 per Unit for the three months ended March 31, 2000, as compared to
distributions of $.20 per Class A Unit for the three months ended March 31,
1999. 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 2000 have been paid from net cash from
operations and from distributions received from its equity investment in joint
ventures.
General Electric has elected not to renew its current lease for the G.E.
Building, which expired March 31, 2000. Management had begun efforts to market
and lease this building to one or more new tenants. At the current time, the
estimated cost of refurbishments, tenant improvements and building maintenance
is anticipated to be approximately $1,250,000, which may vary significantly
depending upon the ultimate tenant or tenants actually obtained for this
property. It is likely that these costs will be required to be funded out of
cash from operations of the Partnership and Wells Fund III, which is likely to
cause a substantial reduction in distributions payable to Limited Partners in
the year 2000.
9
<PAGE>
Property Operations
- -------------------
As of March 31, 2000, 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, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $360,380 $364,385
-------- --------
Expenses:
Depreciation 80,193 79,524
Management & leasing expenses 46,102 49,785
Other operating expenses 152,976 114,977
-------- --------
279,271 244,286
-------- --------
Net income $ 81,109 $120,099
======== ========
Occupied % 93.5% 93.5%
Partnership Ownership % in the
Fund IV - Fund V Joint Venture 37.7% 37.6%
Cash Distribution to Partnership $ 61,459 $ 82,224
Net Income Allocated to the
Partnership $ 30,551 $ 45,127
</TABLE>
Rental income for the IBM Jacksonville Property remained relatively stable in
2000, as compared to 1999. Operating expenses increased in 2000 due to repairs
and maintenance on the irrigation system and on the parking lot lighting on the
property. Cash distributions decreased for 2000 compared to 1999 due to capital
improvements funded from cash flow. The Partnership contributed cash fundings to
the Joint Venture for tenant improvements and this increased the ownership
interest in the Fund IV - Fund V Joint Venture.
10
<PAGE>
The Village Overlook Property/Fund IV - Fund V Joint Venture
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $135,151 $144,578
Interest Income 1,131 575
-------- --------
136,282 145,153
-------- --------
Expenses:
Depreciation 46,057 44,524
Management & leasing expenses 9,759 17,773
Other operating expenses 74,685 45,404
-------- --------
130,501 107,701
-------- --------
Net income $ 5,781 $ 37,452
======== ========
Occupied % 82% 92%
Partnership Ownership %
Fund IV - Fund V Joint Venture 37.7% 37.6%
Cash Distribution to Partnership $ 13,695 $ 27,490
Net income allocated to the Partnership $ 2,178 $ 14,073
</TABLE>
Rental income and management and leasing expenses decreased in 2000, as compared
to 1999, due primarily to a decrease in the occupancy level of the property.
Operating expenses increased in 2000, over 1999 due to extraordinary repairs and
maintenance of the common area floor space. Cash distributions decreased for
2000, compared to 1999, due to capital improvements 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.
11
<PAGE>
The G.E. Building/Richmond / Fund III - Fund IV Joint Venture
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenues:
Rental Income $131,856 $131,856
-------- --------
Expenses:
Depreciation 49,056 49,059
Management & leasing expenses 10,179 10,095
Other operating expenses 4,147 1,245
-------- --------
63,382 60,399
-------- --------
Net income $ 68,474 $ 71,457
======== ========
Occupied % 100% 100%
Partnership Ownership % 42.8% 42.8%
Cash Distribution to Partnership $ 54,230 $ 54,284
Net Income allocated to the Partnership $ 29,299 $ 30,524
</TABLE>
Rental income has remained constant for 2000 and 1999. Net income and cash
distributions generated from the G.E. Building decreased in the first quarter of
2000, as compared to the same period for 1999, due primarily to an increase in
travel expenses related to re-leasing this building.
G.E. has decided not to renew their lease which expires March 31, 2000.
Management had begun its efforts during the 3rd quarter of 1999, to lease the
building to one or more tenants. At this time, the cost for new tenant buildout
and building maintenance is anticipated to be approximately $1,250,000.
12
<PAGE>
The Stockbridge Village Shopping Center / Fund III - Fund IV Joint Venture
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenues:
Rental income $309,108 $325,170
Interest income 3,400 3,500
-------- --------
312,508 328,670
-------- --------
Expenses:
Depreciation 89,043 88,184
Management & leasing expenses 34,972 33,184
Other operating expenses 6,482 17,338
-------- --------
130,497 138,706
-------- --------
Net income $182,011 $189,964
======== ========
Occupied % 98% 100%
Partnership Ownership % 42.8% 42.8%
Cash Distribution to Partnership $ 99,834 $119,544
Net Income allocated to the
Partnership $ 77,879 $ 81,155
</TABLE>
Rental income decreased in 2000, as compared to 1999, due to two leases which
expired and were not renewed. Other operating expenses decreased due primarily
to differences in the adjustment for prior year common area maintenance billing
to tenants and decreased expenditures for roof repairs in 2000. 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.
13
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PART II - OTHER INFORMATION
Item 6(b). No reports on Form 8-K were filed during the first 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: May 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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 35,653
<SECURITIES> 0
<RECEIVABLES> 184,217
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,610,394
<CURRENT-LIABILITIES> 209,373
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,401,021
<TOTAL-LIABILITY-AND-EQUITY> 9,610,394
<SALES> 0
<TOTAL-REVENUES> 140,606
<CGS> 0
<TOTAL-COSTS> 23,772
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 116,834
<INCOME-TAX> 116,834
<INCOME-CONTINUING> 116,834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,834
<EPS-BASIC> .09
<EPS-DILUTED> 0
</TABLE>
